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Online Sales Boost Profit At Tesco

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Tesco has published interim results for 2020/21, covering the six months ended 29th August.

Group sales reached £26.7bn, up from £25bn in the same period in the previous year.  Pre-tax profit was £551m, up 28.7% on 2019.

Tesco said:

Throughout the COVID-19 crisis, we have been guided by four key priorities: providing food for all, safety for everyone, supporting our colleagues and supporting our communities.  As a result, our 440,000 colleagues have been able to make a significant and lasting contribution towards keeping their nations fed.  At the same time, we have invested in value for customers and continued to make strategic progress as the business moves beyond the turnaround:

Customer satisfaction

  • Adapted offer to major shifts in customer buying habits; in UK, food sales up 9.2%, clothing down (17.2)%, GM down (0.3)%
  • Online delivery capacity more than doubled to reach 1.5m slots a week, including serving 674,000 vulnerable customers
  • c.90% of customers rating store safety highly; >1.1m customers more loyal to Tesco vs. pre-COVID6
  • ‘Aldi Price Match’ launched in March and then extended to >500 lines; switching gains from Aldi for first time in a decade7
  • Rewarding loyal customers through exclusive deals with extension of Clubcard Prices to c.2,000 products
  • Brand net promoter score up 2pts; recognised as ‘Brand of the Year’ in Marketing Week Masters Awards last month
  • Resilient Booker performance: Retail sales up 22%; Catering sales down (12)% - an improvement from 1Q driven by doubling of market share and benefit of Best Food Logistics

Cash profitability

  • Response to COVID-19 leading to £(533)m 1H UK costs as we prioritise customer and colleague safety
  • Retail operating profit before exceptional items and amortisation of acquired intangibles4 of £1,192m, +4.4%, margin 4.2%;
    • UK & ROI volume and business rates relief offset COVID-19 costs; CE held back by COVID-19 costs and new Hungarian tax
      • UK & ROI  £1,133m,  +6.4%,  margin 4.3%
      • Central Europe £59m,     (23.4)%,  margin 3.0%    
  • Bank operating loss before exceptional items £(155)m driven by provision for potential bad debts and reduced income; continue to expect operating loss of £(175)m-£(200)m this year; capital ratios and liquidity remain strong
  • Retail EBITDA8 £1,994m, +4.1% higher YoY

Cash flow

  • Retail free cash flow5 of £554m; stable YoY exc. £(148)m relating to buyback of five UK stores and lower property proceeds
  • Interim dividend 3.20p; 35% of last year’s full year dividend, in line with policy
  • Net debt5 of £(12.5)bn, down £0.1bn year-on-year

Sales of businesses in Thailand, Malaysia and Poland progressing well

  • £8.2bn9 sale of Thailand and Malaysia businesses approved by shareholders in May; regulatory approval and completion expected by the end of the calendar year, to be followed immediately by shareholder meeting to approve c.£5bn capital return and £2.5bn one-off contribution to eliminate pension funding deficit
  • Sale of Polish business to Salling Group A/S agreed in June; completion expected Spring 2021
  • Imran Nawaz to join Board as CFO in April 2021 – as separately announced this morning 

Ken Murphy, Chief Executive:

“The first half of this year has tested our business in ways we had never imagined, and our colleagues have risen brilliantly to every challenge, acting in the best interests of our customers and local communities throughout.  I would like to thank all our colleagues for their amazing contribution and I am delighted and proud to be part of such an incredible team.

We are absolutely committed to continuing to invest in value for customers and safety for all in these uncertain times.

Tesco is a great business with many strategic advantages.  I'm excited by the range of opportunities we have to use those advantages to create further value for our customers and, in doing so, create value for all of our other stakeholders.”

Source : Tesco

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07 October 2020

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