Tesco on track as chief exec bows out
● Analysts say group has worked hard in face of stiff sector competition
Tesco looks the “best placed” of Britain’s big supermarket operators, one analyst said yesterday, after the retail giant reported steady sales, a rise in pre-tax profits and a sharply higher interim dividend.
The half-year results coincided with the news that chief executive Dave Lewis is to depart having led the group since September 2014. He will be replaced by Boots lifer Ken Murphy after claiming the grocer’s turnaround is “complete”.
Lewis said there was no new job lined up and he intends to take a break from work to decide what to do next.
Tesco revealed that first-half sales were flat at £28.3 billion, with pre-tax profits up 6.7 per cent at £494 million. Group operating profit before exceptional items jumped 25.4 per cent to £1.4bn.
UK and Ireland sales were up 0.1 per cent on a like-forlike basis, but internationally there were falls in sales – with a drop of 3.1 per cent in central Europe and a 1.3 per cent fall in Asia.
Shareholders stand to pocket an interim dividend of 2.65p per share, an increase of 58.7 per cent.
Arlene Ewing, investment manager at Brewin Dolphin, said: “The comparators for Tesco were always going to be tough after a strong performance last year. Yet, there are some encouraging numbers in the update, particularly around cash flow and operating profit – investors will also be pleased with a substantial hike to the interim dividend.
“There will undoubtedly be a period of transition with the arrival of a new CEO, but Tesco is beginning to look the best placed of the large UK supermarket groups following its widescale transformation programme.”
Sophie Lund-yates, equity analyst at Hargreaves Lansdown, noted: “Tesco appears to be in a good position, and has worked hard to fend off rising competition in the sector. Investors will look forward to hearing Ken Murphy’s plans for defending, and expanding, Tesco’s enviable market position in due course.”
At Tesco’s personal finance arm, which recently completed a deal to sell the bulk of its mortgage business to Halifax and cease new mortgage lending, posted a profit before tax from continuing operations of £16.8m, a fall of 71.2 per cent on a year earlier. Underlying profit before tax came in 8 per cent lower at £98.5m.
Mr Lewis said: “My decision to step down as group CEO is a personal one. I believe that the tenure of the CEO should be a finite one and that now is the right time to pass the baton.
“Our turnaround is complete, we have delivered all the metrics we set for ourselves. The leadership team is very strong, our strategy is clear and it is delivering.”
He added: “I’m 54 years old. I’m going to step back and have a think about what I want to do next with my family.”