Tesco profits jumps as turnaround nearly completed

Statutory pre-tax profit rose to £1.67bn as revenue pushed up 11.2% to £63.9bn and group like-for-like sales were 1.4% higher, with UK LFL sales up 1.7%.

LFL sales at wholesaler Booker, which was acquired last year, were up 11.1% during the period and Tesco said it was "well on track" to meet its target of around £200m synergies per year by the end of the third year.

The supermarket chain lifted its dividend per share to 5.77p from 3p the year before.

Chief executive Dave Lewis said: "After four years we have met or are about to meet the vast majority of our turnaround goals. I'm very confident that we will complete the journey in 2019/20.

"I’m delighted with the broad-based improvement across the business. We have restored our competitiveness for customers - including through the introduction of ‘Exclusively at Tesco’ - and rebuilt a sustainable base of profitability.

"The full year margin of 3.45% represents clear progress and the second half level of 3.79%, even before the benefit of Booker, puts us comfortably in the aspirational range we set four years ago.

"I’m pleased that we are able to accelerate the recovery in the dividend as a result of our continued capital discipline and strong improvement in cash profitability."

At 0825 BST, the shares were up 0.5% at 235p.

Neil Wilson, chief market analyst at Markets.com, said: "Full year numbers were better than expected, with margins now approaching a mightily impressive 4%. Booker is a big plus but across the board this was a strong year for Britain’s biggest retailer.

"Certainly Dave Lewis and co have executed a hugely impressive turnaround, but we must also note the largely benign conditions of the last year for supermarkets with gently rising inflation and the newish phenomenon of real wage growth allowing people to spend a little more on groceries."

Laith Khalaf, senior analyst at Hargreaves Lansdown, said Lewis deserves a round of applause for what he’s achieved at Tesco.

"He took over a business that was reeling from the inroads made by Aldi and Lidl into the UK supermarket sector, and one of the first things on his plate was dealing with an accounting blunder.

"Five years down the road and the supermarket’s rebuilt profits and dividends, and gathered consistent sales momentum in its core UK business. Margins are much healthier and look set to meet Lewis margin target of around 4% in the coming financial year. That may be lower than the 6% of so enjoyed before 2013, but reflects the leaner pickings from the sector, thanks to the arrival of Aldi and Lidl.

"The Booker takeover raised some quizzical eyebrows, but it’s proved to be a nice little earner for Tesco, with the costs of integration coming in much lower than originally planned. Meanwhile a recently struck alliance with the French supermarket chain Carrefour will help amplify Tesco’s already considerable welly when it comes to negotiating prices with suppliers."