Tesco pays first final dividend for four years as profits soar

Britain’s largest supermarket stays tight-lipped on discount venture

Tesco has posted a surge in annual profits as it hailed a year of “strong progress” after more than two straight years of rising sales and the completion of its £3.7 billion Booker deal.

The UK’s biggest supermarket reported a 28.4% jump in underlying operating profits to £1.64bn for the year to February 24.

Tesco notched up like-for-like sales growth of 2.2% in the UK after a 2.3% rise in the final three months – marking its ninth quarter of growth in a row.

Chief executive Dave Lewis said the group was on track to deliver at least £200 million of annual cost savings after sealing its takeover of wholesaler Booker.

The group also declared its first year-end dividend since 2014, with a final payout of 2p taking the full-year total to 3p.

Mr Lewis said: “This has been another year of strong progress, with the ninth consecutive quarter of growth.

“I am delighted to have completed our merger with Booker, and we are moving quickly to deliver synergies and access new growth.”

The results also showed that on a bottom-line basis, pre-tax profits leapt to £1.3bn from £145m after one-off costs weighed on the previous year’s result.

Tesco also gave some insight into its plans following the Booker takeover, confirming it has started offering Booker catering supply ranges in its Tesco stores

Mr Lewis refused to comment on reports the group is looking at launching a discount chain to face off the threat from German players Aldi and Lidl.

Its full-year results showed general merchandise and non-food sales remained under pressure over the year, falling by 0.4% amid a tough retail market, although shopper demand remained robust for food, with sales up 2.9% as it kept a lid on price rises.

“We have worked hard with our supplier partners throughout the year to mitigate price increases wherever possible, and made a significant investment in the first half to further hold back inflation and protect customers,” the group said.

Inflation has eased back over the year – it is down by 0.8% for food ranges – but Tesco said pressure on prices remains.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “Tesco is enjoying a renaissance, and its turnaround plan is literally paying dividends to shareholders.”

Tesco shares closed 15.1p up at 225.4p. Shares in online fashion firm Asos have slumped as worries over higherthan-expected spending plans overshadowed surging half-year profits.

Shares tumbled as much as 12% in morning trading despite reporting a 10% rise in pre-tax profits to £29.9 million for the six months to February 28.

However, investors baulked at plans to spend up to £250m boosting its infrastructure to support sales growth.

CEO Nick Beighton said the business was investing in anticipation of increasing net sales to £4 billion.

Bloomberg. Picture: Tesco is enjoying a “renaissance” after reporting another strong year.