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Tesco preliminary results 2011/12

Tesco has reported preliminary results for the 52 weeks ended 25 February 2012, announcing that it has achieved record Group profits and has commenced a £1billion investment in its UK operations.

The full release can be viewed in the Industry Articles section of our website - www.insightdiy.co.uk/articles.asp

Financial headlines:

• Group sales up 7.4% to £72.0bn*, up 5.9% exc. petrol
• Statutory profit before tax up 5.3% to £3.8bn; Underlying profit before tax up 1.6% to £3.9bn
• Group trading profit up 1.3% to £3.8bn – UK down (1.0)% to £2.5bn; International up 17.7% to £1.1bn
• Underlying diluted EPS growth of 2.1%**; dividend per share growth of 2.1%
• Increase in return on capital employed to 13.3%; 2014/15 14.6% target maintained
• Financial strategy to put increased focus on delivering sustainable business growth, improving returns and higher level of cash generation
• Reducing Group capital expenditure from £3.8bn in 2011/12 to £3.3bn in 2012/13

Business update:
• UK plan being implemented, beginning with recruitment and training of over 8,000 new staff in existing stores – part of 20,000 net new jobs over two years
• UK net new space growth to reduce by 38%, with renewed focus on existing portfolio reflected in a comprehensive Refresh programme, starting with 430 stores in 2012/13
• Internet investment increasing rapidly across the Group – new Tesco Direct website launched
• Recognised as best retailer in the Carbon Disclosure Project’s Global 500 Index

UK Plan – Building a Better Tesco:
• £1bn commitment this year to improve the shopping trip for customers – including c.£0.4bn of capital investment – focused on six key elements:

1. Service & Staff – more staff for existing stores, initially in fresh food departments
2. Stores & Formats – faster store Refresh programme; introducing warmer look and feel
3. Price & Value – better prices and promotions, more personalised offers
4. Range & Quality – better ranges, starting with re-launching the Tesco brands
5. Brand & Marketing – better, clearer, more relevant communication with customers
6. Clicks & Bricks – Click & Collect roll out, transforming range and online presence

Philip Clarke – Chief Executive
“The last few months have seen us drive a faster pace of change in Tesco, particularly in the UK, reflecting our determined focus on the immediate objectives for the Group that were set out last April.

This pace of change will accelerate further over the next twelve months. We have already taken important steps to renew and strengthen management in the UK and across the Group in key areas, to support this programme of change.

“Whilst our International business is delivering excellent growth, contributing £1.1 billion of profit to the Group, we fully recognise that we need to raise our game in the UK. As a result, we are committing over £1 billion to make the UK shopping trip better for customers: more staff giving improved service instore; refreshed stores that are better and easier places to shop; lower prices and even more value from an improved product range. As we improve the shopping trip for our customers, it will follow that our sales growth and financial performance will improve too.

“These are decisive steps and this cost investment – as we have already announced – will constrain our near-term profitability. We are also focusing our lower overall capital expenditure more into our existing stores and in building our online businesses. We are adapting our UK capital plans so that we have the right store base for the future, to underpin the returns that create long term value for our shareholders.

Together these steps are the right things to do both to improve the shopping trip for customers and to secure a return to profitable growth in the UK.”

Source : Tesco Plc
www.tescoplc.com

18 April 2012
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