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Tesco Reports Strong Half-Year Performance

Tesco curved sign 725 x 500

Tesco PLC has published interim 2020/21 results, advising of a strong first-half performance leading to an increased full-year profit outlook.

 Headline measures1,2:H1 21/22H1 20/21Change at
actual rate

Change at
constant rate

   Group sales (exc. VAT, exc. fuel)3£27,331m£26,652m2.6%3.0%
   Adjusted operating profit4£1,458m£1,037m40.6%41.0%
     -     Retail£1,386m£1,192m16.3%16.6%
     -     Tesco Bank£72m£(155)m146.5%146.5%
    Retail free cash flow5£1,543m£797m93.6% 
    Net debt2,5£(10.2)bn£(12.5)bndown 18.5% 
    Adjusted diluted EPS611.22p7.29p54.0% 
    Interim dividend per share3.20p3.20p  - 
Statutory measures: 
    Revenue (exc. VAT, inc. fuel)£30.4bn£28.7bn5.9% 
    Operating profit£1,304m£1,007m29.5% 
    Profit before tax£1,143m£551m107.4% 
    Diluted EPS10.70p4.06p163.5%


A strong first half leading to an upgrade in full year profit expectations:

  • Elevated sales continued into first half; Group Retail 1-yr LFL7 sales growth includes UK market outperformance and sharp recovery of Booker catering; 2-yr LFL reflects strong performance throughout pandemic across all businesses:
   1-yr LFL sales1.2%(2.6)%11.0%2.4%1.4%2.3%
   2-yr LFL sales8.9%12.2%9.1%9.1%0.3%8.4%
  • Total adjusted retail operating profit4 £1,386m, +16.6% at constant rates
    • UK & ROI adjusted operating profit £1,318m, +16.5% due to higher sales and lower COVID-19 costs, part offset by YoY effect of last year’s £249m business rates relief (repaid in H2 last year)
    • Central Europe adjusted operating profit £68m, +18.6% due to lower COVID-19 costs & higher YoY mall income
  • Bank adjusted operating profit £72m, returning to profit following last year’s increase in potential bad debt provision
  • Retail free cash flow5 £1,543m, +93.6% inc. higher profit, lower pension contribution & c.£400m working capital phasing
  • Net debt2,5 reduced by +£1.7bn since February reflecting strong cash flow
  • Adjusted diluted EPS6 11.22p, +54.0% reflecting higher retail profits and return to profitability for Tesco Bank
  • Interim dividend of 3.20p, in line with prior year; aligned to policy at 35% of last year’s full year dividend
  • Strong first half performance leading to increased full year profit expectations: adjusted retail operating profit now expected to be between £2.5bn and £2.6bn

Strengthening our customer proposition:

  • Grown UK market share; Customer satisfaction improving across all areas
  • ‘Aldi Price Match’ expanded to c.650 products, Clubcard Prices now in Express stores and unbeatable Low Everyday Prices relaunched on 1,600 products
  • Strengthened digital platform: online LFL sales +2.3% (2-yr LFL: +74.1%) with market share maintained; now over 20m Clubcard households including 6.6m app users; on-demand grocery delivery trials progressing well
  • Group net zero own operations climate goal accelerated to 2035; new 2050 scope 3 target announced; soft plastic recycling now in all UK large stores; ambitious health commitments launched across UK, Central Europe & Booker

Creating long-term, sustainable value for all Tesco stakeholders:

  • Strategic priorities and multi-year performance framework set out
  • Aim to drive top and bottom line growth and generate between £1.4bn and £1.8bn retail free cash flow per year
  • Capital allocation framework refreshed
  • £500m share buyback announced

Ken Murphy, Chief Executive:

“We’ve had a strong six months; sales and profit have grown ahead of expectations, and we’ve outperformed the market.  This was a strong team effort and I would particularly like to recognise and thank our colleagues who continue to do an incredible job in difficult times.  I’m really pleased with our progress as we increased customer satisfaction and grew market share leading to a strong financial performance.  With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset.

Against a backdrop of profound change, Tesco has many unique advantages.  The scale and reach of our store estate and online operations are unmatched in the UK.  Our ability to reward loyalty through Clubcard enhances our relationship with customers.  Our world-class food retail expertise combined with our strong supplier partnerships ensures we can offer our customers great value and quality, removing reasons to shop elsewhere.  Together, these strengths mean that Tesco can anticipate and respond to changes in the market, meeting customers’ needs better than anyone.

Today, we are sharing the strategic priorities that will enable us to build on these advantages to stay competitive, accelerate growth and generate between £1.4bn and £1.8bn retail free cash flow per year.  These priorities will ensure we do the basics brilliantly, operate as efficiently as possible and grow our business by building unbeatable digital, convenience and loyalty platforms.

We are committed to creating value for all stakeholders in our business.  Our commitments to the communities we serve and society more broadly are reflected in our new purpose: serving customers, communities and the planet a little better every day.  For shareholders, our strong performance to date and our confidence in our ability to generate cash in the coming years has enabled us to announce the start of a buyback programme that will balance the maintenance of a strong capital structure with returning surplus cash.”


As a result of our strong first half performance, we have increased our adjusted retail operating profit expectations for this financial year to between £2.5bn and £2.6bn.  Although we do not yet know how the external environment and consumer behaviour will evolve in the second half, we have assumed that some of the elevated sales fall away and that we will continue to invest in our customer offer.

We now expect Tesco Bank to deliver adjusted operating profit of at least £120m for this financial year.  This expectation remains highly dependent on the economic outlook.

Source : Tesco PLC

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06 October 2021

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