Tesco profits surge as grocer performs ahead of plan

Tesco, which plans to merge with wholesale giant Booker, delivered an increase in sales and volumes last year, when full-year like-for-likes at the core UK business rose for the first time since 2009/10.

Tesco posted group operating profit before exceptions of £1.3bn, up 29.9% at actual currency rates, on sales ahead 4.3% to £49.9bn.

Statutory pre-tax profit was down 39% to £145m however, reflecting a £235m exceptional charge following the retailer’s deal with the Serious Fraud Office and Financial Conduct Authority in the wake of the accounting scandal.

Like-for-likes at Tesco’s UK division increased 0.9%, and food like-for-likes were up 1.3%.

‘Confident’

Tesco chief executive Dave Lewis struck a bullish tone as he forecast further progress in Tesco’s turnaround.

Lewis said: “We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October.

“We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.

“On top of this, our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing out-of-home food market.”

Tesco made a variety of changes last year which increased its appeal to shoppers. The price of a typical basket has been reduced by 6% since September 2014 and promotional participation fell to 32% as the grocer invested in everyday lower prices.

Lewis said: “Today, our prices are lower, our range is simpler and our service and availability have never been better.

“Our exclusive fresh food brands have strengthened our value proposition and our food quality perception is at its highest level for five years.

“At the same time, we have increased profits, generated more cash and significantly reduced debt.”