Tesco interim operating profit more than halves

For the 26 weeks ended 29 August, operating profit before exceptional items fell to £354m from £779m, as revenue declined to £23.9bn from £24.3bn.

Still, the figure was ahead of expectations and shares managed to shake off early losses, trading up 2.6% to 197.15p by 1020 BST. Analysts at Barclays had estimated operating profit would come in at £320m.

Pre-tax profit came in at £74m compared with a £19m loss in the first half of last year. Like-for-like sales in the UK were down 1.1%, but this marked an improvement from a 1.3% drop in the first quarter.

The company said it had concluded its portfolio review and the Dunnhumby data business would be retained.

Chief executive Dave Lewis said: "We have delivered an unprecedented level of change in our business over the last twelve months and it is working. The first half results show sustained improvement across a broad range of key indicators.

“In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment. Our transformation programme in Europe has accelerated growth and reduced operating expenses, and in Asia, we have gained market share in challenging economic conditions.”

The company reiterated its full-year outlook but cautioned that markets remained challenging. It did not propose a dividend, as widely expected by the market.

Richard Hunter, head of equities at Hargreaves Lansdown, said: “Tesco still needs some assistance in the bagging area, but nonetheless looks much healthier than a year ago.”