Tesco shares suffer despite H1 results buoyed by Booker

● Supermarket reports uplift in UK and Ireland sales for 11th quarter in a row

Britain’s biggest retailer Tesco saw its shares tumble yesterday despite posting an increase in half-year sales and profits as it reaped the rewards from its takeover of wholesaler Booker.

Tesco saw like-for-like sales in the UK and Ireland rise for an 11th consecutive quarter, with a marked improvement to 4.2 per cent over the past three months.

The supermarket group reported a 24.4 per cent uplift in underlying operating profit to £933 million in the 26 weeks to 25 August. It also announced an interim dividend of 1.67p, which is up 67 per cent year-on-year.

Operating profits in the UK and Ireland leapt 47.6 per cent to £685m, £97m of which was linked to Tesco’s £3.7 billion Booker takeover.

However, internationally the group saw operating profits fall, including a 29.1 per cent drop in its Asian markets.

Tesco’s group statutory operating profit fell 6.5 per cent to £819m, as it booked exceptional costs linked to the closure of its non-food online business Tesco Direct.

Chief executive Dave Lewis said: “We have made a good start to the year. The step-up in the second quarter is driven mainly by the UK and Republic of Ireland and delivers our 11th consecutive quarter of growth.

“At the same time, we have made further strategic progress. We completed our merger with Booker in March and are delighted with performance so far.”

The group recently launched new discount store format Jack’s, to rival Aldi and Lidl, which have eaten into the market share of the so-called “big four” supermarkets.

Lewis said progress was “so far, so very good” for first two Jack’s stores, and the group confirmed the launch of two further outlets, both in Merseyside, this week.

It is one of a number of initiatives Lewis has introduced in an effort to retain market dominance,includinganownbrand relaunch and a strategic alliance with Carrefour, which goes live this month.

John Moore, senior investment manager at Brewin Dolphin Scotland, said the Jack’s venture could be a “valuable learning curve” for Tesco. He added: “The renewed focus on its core proposition – rather than some of its associated brands – is welcome and, combined with changes in the balance sheet, should drive the equity value higher in the absence of the discounters redoubling their efforts.

“Although Aldi’s recent announcement of 130 new stores indicates that it will be far from plain sailing.”

Meanwhile, Tesco Bank reported a 24.8 per cent drop in pre-tax profits to £83m, due in part to increased operating expenses. These included a £16.4m fine relating to a fraud incident in 2016 and an additional payment protection insurance charge of £7m.

In August, Gerry Mallon took the role of the Edinburghbased bank’s chief executive, replacing Benny Higgins.

Tesco shares closed down 8.6 per cent at 215p.