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Tesco H1 Profit Surges, Says Turnaround Firmly On Track; Resumes Dividend

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British retailer Tesco Plc (TSCO.L,TSCDY.PK) reported Wednesday significant increase in its first-half profit on lower charges, and higher revenues. The company said its turnaround is firmly on track. Further, Tesco resumed its dividend, for the first time since 2014/15 accounting scandal.

Chief Executive Dave Lewis said, "We are continuing to make strong progress. Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago. Today's announcement that we are resuming our dividend reflects our confidence that we can build on our strong performance to date and in doing so, create long-term, sustainable value for all of our stakeholders."

For the first half, profit before tax surged to 562 million pounds from 71 million last year. Earnings per share climbed to 5.21 pence from 0.42 pence a year ago.

Profit before tax before items was 575 million pounds, compared to 353 million pounds a year ago. Earnings per share before items were 5.46 pence, compared to prior year's 3.19 pence.

Operating profit climbed 71.8 percent from last year to 885 million pounds, and adjusted operating profit grew 27.3 percent to 759 million pounds.

Revenue increased 3.7 percent to 28.3 billion pounds from 27.3 billion pounds a year ago. On a constant currency basis, revenues grew 1.4 percent.

Group sales, excluding VAT and fuel, increased 3.3 percent to 25.2 billion pounds. UK like-for-like sales went up 2.2 percent.

Further, the company announced the restoration of the dividend, citing the improved performance in the business and the Board's confidence in its plans. The interim dividend has been set at 1.0 pence per ordinary share, to be paid on November 24 to shareholders on the register of members at close of business on October 13.

The company anticipates a broadly one-third, two-thirds split between the interim and final dividend and intend to reach targeted cover of around two times earnings in the medium term.

Tesco paid a dividend for the last time in the 2014-15 financial year, before it admitted that it had overstated profits by about 250 million pounds.

Looking ahead, the company said it is making good progress towards the medium-term ambitions shared in October 2016 and remain firmly on track to reduce costs by 1.5 billion pounds, generate 9 billion pounds of retail cash from operations and improve operating margins to between 3.5% and 4.0% by 2019/20.

Regarding its proposed 3.7 billion pounds merger with wholesaler Booker, the company said the merger is currently undergoing an in-depth 'Phase 2' investigation by the Competition and Markets Authority or CMA. Provisional findings are expected to be made public by the CMA by the end of this month, ahead of a final report by the end of this year.

In the morning trading in London, Tesco shares were trading at 187.13 pence, down 1.54 percent.

by RTT Staff Writer

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