Tesco Group trading profit down

08 Oct '12

4 min read

“We continue to act decisively to tackle challenges and seize opportunities across the Group. In April, I set out our plans to 'Build a Better Tesco' in the UK. We have been hard at work and I am encouraged by our customers’ initial responses to the changes we have made – but there is much more to be done. I am pleased that the team is in place, highly focused and energised, and I want to thank them for everything they have done.

“The external environment continues to present challenges all over the world. Whilst our businesses in Asia and Europe have continued to do a great job for customers, our financial performance there reflects the tough economic backdrop and particularly the regulatory changes in South Korea. That we have gained or held market share in the majority of markets is a testimony to the skill of our teams across the Group.

“We have made some important strategic changes which have fundamentally altered our approach to capital allocation. First, significantly reducing space growth in the UK and focusing on improving the performance of our existing stores – and second, investing in online to enable Tesco to take a leadership role in the digital revolution: playing our part in shaping the future of retailing.

“It is in serving the changing needs of customers, as Tesco has done over many years, that we will create more value for shareholders."

Group sales, including VAT, increased by 1.4% to £36.0bn. At constant exchange rates, sales also increased by 3.2% (including petrol) and 3.7% (excluding petrol).

Group trading profit was £1,587m, down (10.5)% on last year, reflecting the significant investment in the shopping trip for customers in the UK, as announced earlier this year. Underlying profit before tax declined by (8.5)% to £1,759m. Group profit before tax declined by (11.6)% to £1,662m.

The results of our business in Japan have been classified as discontinued operations, in line with our previously announced agreement with Aeon, under which we will exit the market.

Net finance costs increased to £172m, from £97m last year, driven in part by the revaluation of the liability relating to the purchase of the minority interest in our Korean business in July 2011, which reduced net finance costs by £35m in the first half last year. Underlying net interest costs also increased to £173m, mainly driven by pre-financing of debt which was retired in September and reduced capitalised interest.

Tesco

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