Tesco full-year profits rise 28%
Tesco bucked a grim start to the year for the sector with a 28 per cent surge in annual profit and a punchy revenue growth target for the newly acquired Booker wholesale business.
Shares in Tesco rose as much as 6.5 per cent yesterday after it confirmed targets for cost savings, cash generation and profit margins, and said the integration of Booker, purchased for £4 billion last month, was well underway. The deal will see Tesco expand to provide food to restaurants, bars and smaller grocers, while some £200 million of annual synergies are targeted within three years.
Chief executive Dave Lewis also issued a new target – incremental revenue growth of £2.5 billion from the combined business in the medium term.
He said growth would come from Tesco stores selling Booker goods and vice versa, from new store formats, such as putting Booker’s “Chef Central” professional catering supply business in Tesco stores, and expanded delivery options. There would also be opportunities in Click & Collect, mobile phones and banking.
Tesco remains the largest of Britain’s supermarkets by a clear margin, with a 27.6 per cent share, according to industry data. It is also the fastest growing of Britain’s “big four” along with No 4 Morrisons.
Tesco made an operating profit of £1.644 billion in the year to February 24th – versus guidance of “at least” £1.575 billion. Group sales rose 2.3 per cent to £51 billion.
Mr Lewis joined Tesco in September 2014, leading a fightback after sales were hammered by changing shopping habits, the rise of discounters Aldi and Lidl, and an accounting scandal that plunged the retailer into the worst crisis in its near 100-year history.
Mr Lewis, who joined shortly before the scandal was uncovered, first stabilised Tesco, then got it growing with more competitive prices, streamlined product ranges, better customer service and improved supplier relationships.
“Tesco is paying a final dividend of 2 pence a share, giving a total payout of 3 pence. An interim dividend in October was its first in three years. – Reuters