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Amended: Tesco To Overhaul UK Business As Full-year Profit Rises Slightly - Update

Correction from Source: Tesco, in a revised statement, changed the dividend to 10.13p per share, from 14.76p as stated earlier. Accordingly, our article stands corrected as follows:

Tesco Plc. (TSCO.L) on Wednesday announced a 1 billion-pound investment to improve its U.K. business, as the British retailer reported a marginal rise in profit for the year.

In order to set right the business in its major market, the retailer will add more staff for existing stores, initially in fresh food departments. New space additions in 2012/13 will be 38 percent lower than in 2011/12. Capital expenditure in the UK will also reduce, despite additional investment in existing space and online.

The stores will feature featuring warmer colours, better lighting, improved sightlines across the store and clearer, less functional signage. After successful trials, the company will refresh or refit 430 stores in 2012/13.

The company is planning significant improvements across all of its dotcom businesses and will increase its capital investment in this area to around 150 million pounds in 2012/13.

For the 52 weeks ended February 25, Group trading profit grew 1.3 percent to 3.8 billion pounds as International business increased 17.7 percent to 1.1 billion pounds, but UK business dropped 1 percent to 2.5 billion pounds.

The trading profit included two one-time items related to Hungary sales tax and an increase in provisions in Tesco Bank relating to payment protection insurance. Excluding these one-off events, Group trading profit increased by 5.2 percent.

Pre-tax profit advanced to 3.84 billion pounds from 3.64 billion pounds. After some adjustments, underlying profit before tax from continuing operations grew 1.6 percent to 3.92 billion pounds. Revenue, excluding Value Added Tax, grew 6.8 percent to 64.54 billion pounds from 60.46 billion pounds in the prior year. Group sales, including VAT, increased by 7.4 percent.

In the U.K, where the retailer generates most of its revenues, sales grew 6.2 percent at 47.36 billion pounds, amid difficult trading conditions. Like for like sales, excluding VAT and petrol, slipped 0.6 percent.

International sales increased 9.5 percent to 23.64 billion pounds. Like for like sales, excluding petrol and Japan, grew 1.6 percent.

Tesco noted that United States losses were reduced by 17.7 percent and the business is on track for further significant reduction in current year.

The company said the initiatives listed today for a better Tesco will translate to combined revenue and capital investment of over 1 billion pounds, including the 2012/13 incremental element of the investment of about 500 million pounds announced into core pricing in October last year. Tesco has almost completed the migration of Tesco Bank systems and the business is now ready for further growth. Further, at Fresh & Easy, losses have fallen for the first time and the business is expected to reach breakeven during the 2013/14 financial year. The company's board approved a final dividend of 10.13 pence per share.

Looking ahead, Philip Clarke, CEO, said, "...the diversity of the Group, combined with improving performance in a number of key businesses - such as Fresh & Easy and Tesco Bank - mean that we remain confident of making modest progress this year despite the substantial planned revenue investment in the UK business."

TSCO.L is currently trading at 334.60 pence, up 6.30 pence or 1.92 percent, on a volume of 2.33 million shares.

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by RTT Staff Writer

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