REG - Tesco PLC - Interim Results 2024/25
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RNS Number : 7549G Tesco PLC 03 October 2024
Interim Results 2024/25
strong customer offer delivers volume growth and market share gains.
Performance highlights (on a continuing operations basis)(1,2) H1 24/25 H1 23/24 Change at actual rates Change at constant rates
Group sales (exc. VAT, exc. fuel)(3) £31,463m £30,401m 3.5% 4.0%
Adjusted operating profit(4) £1,649m £1,426m 15.6% 15.8%
- Retail £1,555m £1,417m 9.7% 10.0%
- Tesco Bank(*, 1) £94m £9m n/m(9) n/m
Retail free cash flow(5) £1,261m £1,368m (7.8)%
Net debt(5,6) £(9,676)m £(9,888)m 2.1%
Adjusted diluted EPS(4) 14.45p 11.68p 23.7%
Interim dividend per share(6) 4.25p 3.85p 10.4%
Statutory measures (on a continuing operations basis)(1)
Revenue (exc. VAT, inc. fuel) £34,773m £33,801m 2.9%
Operating profit £1,612m £1,426m 13.0%
Profit before tax £1,392m £1,161m 19.9%
Retail cash generated from operating activities £1,943m £2,068m (6.0)%
Diluted EPS 14.62p 12.25p 19.3%
Statutory measures (including discontinued operations)(1)
Revenue (exc. VAT, inc. fuel) £35,180m £34,149m 3.1%
Profit after tax £1,051m £929m 13.1%
Diluted EPS 15.03p 12.83p 17.1%
Ken Murphy, Chief Executive
"We've been working really hard to offer our customers the best possible
value, quality, and service and they are shopping more at Tesco as a result.
We have lowered prices on thousands of lines, launched or improved over 860
products in partnership with our suppliers and growers, and our customer
satisfaction scores continue to improve across a broad range of measures.
The combination of price, quality and innovation means we are as competitive
as we have ever been, and we have been the cheapest full-line grocer for
nearly two years. Our strong UK and ROI market share gains across the last
year demonstrate our continued momentum. I want to say a big thank you to
all my Tesco colleagues for their hard work serving customers so well. As we
approach the Christmas season, we are looking forward to sharing the quality
of our festive food with customers, and can't wait for them to taste it.
We are in good shape, with volume growth delivering strong financial
performance. This builds on our track record of delivery for all our
stakeholders. Our strong momentum allows us to continue to focus on value,
quality, innovation, and the broader customer experience, whilst investing in
growth opportunities in a disciplined, returns-focused way."
Volume-driven growth delivering strong financial performance and cash returns:
• Improved customer satisfaction driving strong market share gains in UK +62bps,
with ROI +88bps
• Volume-driven sales growth, with Retail LFL(7) sales up 2.9%; growth across UK
+4.0%, ROI +4.7% and CE +0.6%
• Booker LFL sales down (1.9)%, reflecting a decline in the tobacco market and
Best Food Logistics volumes
• Retail adjusted operating profit(4) up 10.0% at constant rates to £1,555m
with progress in both UK & ROI and Central Europe; statutory operating
profit(1) £1,612m, up 13.0%
• Tesco Bank adjusted operating profit from continuing operations of £94m
includes £42m of non-recurring benefits, mainly due to upfront income
recognition from a new five-year pet insurance agreement
• Adjusted diluted EPS(1,4) up 23.7% to 14.45p, driven by higher adjusted
operating profit, lower net finance costs and the benefit of our ongoing share
buyback programme; statutory diluted EPS on a continuing operations basis up
19.3% to 14.62p
• Continued strong retail free cash flow(5) of £1,261m in the first half
compared to £1,368m in the first half of last year, reflecting a lower
benefit from working capital and higher tax paid; net debt(5,6) down 2.1% to
£(9,676)m
(* Comparatives have been re-presented to disclose banking operations as a
discontinued operation. Total Tesco Bank adjusted operating profit including
discontinued operations was £188m1. Tesco Bank results included in the
table above and within the segmental review of performance refer only to the
retained Tesco Bank business, i.e. insurance and money services, unless
otherwise stated. Further footnotes can be found on page 4.)
Improving customer satisfaction through relentless focus on quality, service
and price:
• Continued net switching gains for 19 consecutive four-week periods in the UK
and 22 in ROI
• Powerful value combination of Aldi Price Match on >700 lines, Low Everyday
Prices on >1,000 lines and >8,000 Clubcard Prices deals each week,
meaning we have now been the cheapest full-line grocer since November 2022
• Additional hours invested in stores, the equivalent of more than 2,000 extra
colleague roles year-on-year, helping us deliver market-leading availability
• Investing in product quality, innovation and sustainability, launching 282 new
products and improving 580
• #1 position in the Advantage supplier survey for ninth year in a row
• Winner at the Grocer Gold Awards 2024 with accolades including Finest being
named 'Own Label Range of the Year' and Tesco winning 'Grocer 33 Price Award'
and, for the 10th year running, 'Britain's Favourite Supermarket'
Further progress in high-returning future growth and digital capability:
• Clubcard sales penetration up in all markets year-on-year: UK 82%, ROI 85%,
Central Europe 87%; further personalisation, with 4.9m customers receiving
'Clubcard Challenges' tailored to their shopping habits
• Expanding retail media channel via the Tesco Media and Insight Platform;
growth in active advertisers, campaigns per advertiser and spend per campaign
• On track to open new chilled distribution centre in Aylesford in Summer 2025,
leveraging robotic automation to streamline operations, improve efficiency and
support our commitment to deliver a seamless shopping experience for customers
• Investing in capital-light Booker catering capacity: new catering hubs in
Eccles, Charlton and Enfield allow us to better service growing demand for
delivery
• ROI 'fresh first' refresh programme and product innovation driving market
outperformance and share gains
Investing further for colleagues, communities, and the planet:
• Largest ever increase in store colleague pay and improved parental and
wellbeing offerings, culminating in standout colleague satisfaction results
and winning 'Employer of the Year (Retailer)' at the Grocer Gold Awards 2024
• Continuation of Stronger Starts, our grant programme to help children have a
stronger start in life through healthy food and physical activities, awarding
funding of more than £9m to date to over 8,000 projects
• Further support for communities, donating c.2.5m meals per month; in the half
reaching 220m meals donated since the start of our partnership with FareShare;
food donation bags rolled out across all large stores
• Progress towards ambitious climate change targets; announcing a further
renewable energy Power Purchase Agreement (PPA) in Scotland, contributing to
our target to source 60% of electricity demand via PPA or onsite generation by
2030
CAPITAL RETURN PROGRAMME.
• Share buyback programme remains a critical driver of shareholder returns,
reflecting strength of our balance sheet and confidence in delivering strong
future cash flows
• In April, announced commitment to buy back £1bn worth of shares over the
following twelve months, including £250m funded by the special dividend paid
by Tesco Bank in August 2023
• £575m worth of shares purchased in first half; on track to complete the £1bn
buyback by April 2025
• £2.4bn worth of shares purchased since launch of capital return programme in
October 2021
• Sale of banking operations due to complete before end of calendar year;
intention remains to return majority of proceeds via incremental share buyback
following completion
OUTLOOK.
The significant investments we are making in value, quality and service across
the Group have delivered volume growth ahead of our expectations in the first
half. Due to this strong performance, we now expect to deliver around
£2.9bn retail adjusted operating profit for the 2024/25 financial year
(previously 'at least £2.8bn'). We continue to expect to generate retail
free cash flow within our medium-term guidance range of £1.4bn to £1.8bn.
We now expect an adjusted operating profit contribution from the retained
Tesco Bank business of around £120m for the 2024/25 financial year, including
the £42m non-recurring benefit described above. On an ongoing basis, we
continue to expect an adjusted operating profit contribution of between £80m
to £100m per year, including strategic partnership income from Barclays.
STRATEGIC PRIORITIES.
Our strategic priorities ensure that we focus on offering great value, quality
and convenience whilst rewarding loyalty. Through our colleagues, our reach
and our supplier relationships, we are well-placed to serve our customers
wherever, whenever and however they need us. Our strategy guides us to deliver
top-line growth, grow profit and generate cash and in doing so, deliver for
all our stakeholders.
1) Magnetic Value for Customers - Re-defining value to become the customer's
favourite
• Value front and centre, with prices cut on over 2,850 products by an average
of around 9% in the UK over the half and Clubcard Prices saving customers up
to £385 off their annual grocery bill
• Overall brand perception in UK increased by +596bps year-on-year, stepping
forward across all drivers, including impression (+1,058bps), value (+650bps)
and satisfaction (+446bps)
• Enhancing quality credentials through taste-led innovation across the range,
irrespective of budget; includes exciting dinner for tonight launches, such as
Root & Soul's modern vegetarian dishes, and Pinch, a new range of Indian
ready meals
• Finest volumes up +14.9% YoY with over 20m customers shopping Finest in the
half, recognising our investments in quality; new Finest products include a
new Finest Sourdough range, and we relaunched our Finest Dine In proposition
• Winning combination from Booker of improved availability, further progress in
customer satisfaction scores and great value, with Everyday Low Prices on over
700 catering products held until January 2025
• In Central Europe, customers continue to respond well to our targeted value
investments, with prices cut on at least 1,500 products in each market
2) I Love my Tesco Clubcard - Creating a competitive advantage through our
powerful digital capability
• Unrivalled Clubcard reach with now over 23m Clubcard households in the UK;
group-wide Tesco app users at 16.3m with visits to the app up year-on-year
• Largest and most generous supermarket Reward Partner scheme, including
'Clubcard Moments' offers, such as '3 months of Disney+ on us' during the
summer, with 11.5m free codes made available to customers via the Tesco app
• Dedicated Tesco Media and Insight Platform team mobilised; partnerships agreed
with WPP and Publicis to leverage our combined expertise and reach across a
broader pool of advertisers
• Surpassed 4,000 digital in-store screens; over 7,600 campaigns delivered in
the first half, with 91 brands participating in our 'Summer of Sport' event
3) Easily the Most Convenient - Serving customers wherever, whenever and
however they want to be served
• Opened 44 stores across the Group; 26 in the UK, 7 in ROI and 11 in Central
Europe, and refreshed a further 182
• AI-powered range curation tool through partnership with dunnhumby, enabling
improved tailoring of store offer to local shopping habits
• UK online customer satisfaction up +11pts YoY and new record number of
Delivery Saver subscribers at 727k, up +12% YoY
• Tesco Whoosh delivering strong order and basket size growth, with active
customers up +19.8% in the half
• Launched Tesco Marketplace; now offering over 150,000 products across
categories including garden, home and pet care
• Integrated a further 397 net new Booker retail partners, taking the total
outlets to 7,787 across Premier, Londis, Budgens and Family Shopper
4) Save to Invest - Significant opportunities to simplify, become more
productive and reduce costs
• On track to deliver £500m efficiency savings target for the 2024/25 financial
year, with a c.£260m contribution in the half
• Continued progress across all areas, including goods & services not for
resale, operations, property and central overheads
• End-to-end review of stock flow from suppliers to store, optimising waste
performance and improving availability
• Simplifying in-store routines, such as optimising the checkout model whilst
minimising queueing times for customers, and refining replenishment routines
• Taking further action to reduce stock loss, including anti-push out technology
and additional security gates
GROUP REVIEW OF PERFORMANCE.
On a continuing operations basis(1)
The results of our banking operations have been treated as discontinued
following the announcement of our proposed sale to Barclays. As such, Tesco
Bank results included in the table below and within the segmental review of
performance section, refer only to the retained Tesco Bank business, i.e.
insurance and money services, unless otherwise stated.
26 weeks ended 24 August 2024(2)(,6) H1 24/25 H1 23/24 Change at Change at constant rates
actual rates
Sales (exc. VAT, exc. fuel)(3) £31,463m £30,401m 3.5% 4.0%
Fuel £3,310m £3,400m (2.7)% (2.5)%
Revenue (exc. VAT, inc. fuel) £34,773m £33,801m 2.9% 3.3%
Adjusted operating profit(4) £1,649m £1,426m 15.6% 15.8%
Adjusting items £(37)m -
Statutory operating profit £1,612m £1,426m 13.0%
Net finance costs £(218)m £(269)m
Joint ventures and associates £(2)m £4m
Statutory profit before tax £1,392m £1,161m 19.9%
Taxation £(370)m £(274)m
Statutory profit after tax £1,022m £887m 15.2%
Adjusted diluted EPS(4) 14.45p 11.68p 23.7%
Statutory diluted EPS 14.62p 12.25p 19.3%
Interim dividend per share(6) 4.25p 3.85p 10.4%
Net debt(5,6) £(9,676)m £(9,888)m 2.1%
Retail free cash flow(5) £1,261m £1,368m (7.8)%
Capex(8) £530m £523m 1.3%
Sales(3) increased by 4.0% at constant rates, including a strong contribution
from volume growth, driven by our ongoing investments in value, quality and
service. Sales inflation returned to more normalised levels as cost
inflation headwinds eased. We continued to work with our supplier partners
to lower prices for customers as quickly as possible. Revenue increased by
3.3% at constant rates, including a (2.5)% decline in fuel sales.
Adjusted operating profit(4) increased by 15.8% at constant rates, primarily
driven by our retail operations, where strong volume growth and a c.£260m
contribution from Save to Invest more than offset further investments in the
customer offer and colleague pay. Adjusted operating profit from the
retained Tesco Bank business was £94m, up from £9m in the prior year. The
current year includes £42m of non-recurring items, including the accounting
for upfront commission income on the signing of a new five-year pet insurance
contract. The prior year included a £(24)m impact from a movement in
insurance reserves. The year-on-year growth excluding these items was driven
by strong underlying performance in the insurance business.
Statutory operating profit improved by 13.0% year-on-year, as the strong
adjusted operating profit performance described above was partially offset by
lower gains on property transactions in the half.
Net finance costs were £51m lower year-on-year, due to higher interest earned
on cash, short-term deposits and money market funds, and favourable non-cash
mark-to-market movements on certain derivative financial instruments. The
higher tax charge this year was mainly driven by higher profit and a higher
statutory tax rate versus last year.
Adjusted diluted EPS(4) grew by 23.7%. This was driven mainly by higher
retail adjusted operating profit and the year-on-year increase in Tesco Bank
adjusted operating profit described above. Our EPS growth also continues to
benefit from a reduction in share count as a result of our ongoing share
buyback programme. We have announced an interim dividend of 4.25 pence per
ordinary share, in line with our policy to pay 35% of the prior full-year
dividend.
We generated £1,261m of retail free cash flow(5), including a net £169m
working capital inflow. Net debt(5,6) reduced by £88m since February
2024. Strong retail free cash flow generation offset cash returned to
shareholders via dividends and our ongoing share buyback programme. Lease
liabilities decreased by £79m since February 2024, primarily driven by the
overall reducing nature of our lease liability. The net debt/EBITDA ratio
was 2.1 times at the end of the first half.
Further commentary on these metrics can be found below and a full income
statement can be found on page 16.
Notes:
1. The performance of our banking operations has been
presented as a discontinued operation with comparatives also restated. The
retained business (insurance and money services) has been presented on a
continuing operations basis and therefore within headline performance
measures. Further details on discontinued operations can be found in Note 6,
starting on page 29.
2. The Group has defined and outlined the purpose of its
alternative performance measures, including its performance highlights, in the
Glossary starting on page 43.
3. Group sales exclude VAT and fuel. Sales change shown on a
comparable days basis for Central Europe.
4. Adjusted operating profit and adjusted diluted EPS exclude
adjusting items.
5. Net debt and retail free cash flow exclude Tesco Bank.
6. All measures apart from net debt and dividend per share are
shown on a continuing operations basis unless otherwise stated. Further
information on net debt can be found in Note 18, starting on page 41.
7. Like-for-like (LFL) is a measure of growth in group sales
from stores that have been open for at least a year and online sales (at
constant exchange rates, excluding VAT and fuel).
8. Capex excludes additions arising from business
combinations, property buybacks (typically stores) and other store
purchases. Refer to page 45 for further details.
9. Not meaningful (n/m)
Segmental review of performance:
Sales performance:
(exc. VAT, exc. Fuel)(3,6)
On a continuing operations basis(1) Sales LFL sales change(7) Total sales change at actual rates Total sales change at constant rates
(£m)
- UK 22,845 4.0% 4.7% 4.7%
- ROI 1,449 4.7% 3.6% 5.6%
- Booker 4,623 (1.9)% (1.7)% (1.7)%
UK & ROI 28,917 3.1% 3.6% 3.7%
Central Europe 2,027 0.6% (4.2)% 0.9%
Retail 30,944 2.9% 3.0% 3.5%
Tesco Bank 519 46.6% 46.6%
Group sales 31,463 3.5% 4.0%
Fuel 3,310 (2.8)% (2.7)% (2.5)%
Group revenue 34,773 2.9% 3.3%
Further information on sales performance is included in the appendices
starting on page 50.
Adjusted operating profit(4,6) performance:
Profit
(£m)
On a continuing operations basis(1) Change at actual rates Change at constant rates Margin % at actual rates Margin % change at actual rates
UK & ROI 1,506 9.8% 10.0% 4.7% 29 bps
Central Europe 49 6.5% 8.7% 2.3% 26 bps
Retail 1,555 9.7% 10.0% 4.5% 30 bps
Tesco Bank 94 n/m n/m 18.1% n/m
Group 1,649 15.6% 15.8% 4.7% 52 bps
Further information on operating profit performance is included in Note 2
starting on page 22.
UK & ROI OVERVIEW:
In the UK, Republic of Ireland (ROI) and Booker, like-for-like sales increased
by 3.1%. Volume growth was particularly strong in the UK and ROI, and we
delivered market share and switching gains in every period in the first
half. Sales inflation stabilised at more normalised levels as inflationary
pressures from global commodities continued to ease. We invested further in
lowering prices across everyday grocery lines and in an even stronger
promotional offering over key seasonal events. The Booker like-for-like
sales decline results from further growth in core retail and catering being
offset by the continued tobacco market decline and weakness in some areas of
the fast-food market serviced by Best Food Logistics.
UK & ROI adjusted operating profit was £1,506m, up 10.0% at constant
rates, driven by strong retail volume growth and the ongoing delivery of our
Save to Invest programme, which helped to offset continued operating cost
inflation, particularly related to colleague pay awards.
UK - Growing volumes and market share through relentless focus on quality,
service and value:
Like-for-like sales grew by 4.0%, driven by a strong performance across stores
and online. Volume growth was ahead of our expectations, and we grew
consistently ahead of the market.
Overall market share grew by +62bps year-on-year to 27.8%, our highest market
share level since January 2022, with a particularly strong performance in our
large stores. We have now delivered 15 consecutive four-week periods of
market share gains and 19 consecutive four-week periods of switching gains.
Overall brand perception increased by +596bps year-on-year, stepping forward
across all drivers, including impression (+1,058bps), value (+650bps) and
satisfaction (+446bps).
Food sales grew by 4.9%, including a particularly strong volume performance in
fresh food, driven by our ongoing investments in product quality and
innovation. We launched 282 new products, including our Root & Soul
range of modern vegetarian dishes, and improved a further 580, including our
Taste Shack and Finest Dine In ranges. Finest sales continued to grow
particularly strongly, with volumes up 14.9% year-on-year and over 20 million
customers shopping Finest in the half.
We have now been the cheapest of the full-line grocers since November 2022 and
we further strengthened our position in the half. Over 2,850 products were
cheaper at the end of the half than at the start, with an average reduction of
around 9%.
Home and Clothing sales grew by 0.3%, which includes a (1.3)ppts drag from the
transition to our new partnership with The Entertainer. The partnership,
which offers customers an even stronger range of toys in our stores, means we
no longer recognise toy sales, and instead earn commission income. The
transition will complete in the second half of the year as planned in around
750 UK stores. Excluding this impact, Home and Clothing sales grew by 1.6%,
primarily driven by a strong clothing performance, where we continue to grow
ahead of the broader store-based clothing market.
Sales grew across both large and convenience store formats, by 4.2% and 0.5%
respectively. In our large stores, we invested in an even stronger
promotional offer over key seasonal events, including our 'Summer of Sport'
campaign. We had more colleagues on the shop floor year-on-year, delivering
market-leading availability, and resulting in a three-year-high net promoter
score. Convenience sales, which include a higher proportion of
food-on-the-go, were impacted by poor weather in the half and the ongoing
decline in the tobacco market.
Online sales grew by 9.3%, driven primarily by volume growth, including a
c.2ppts contribution from Tesco Whoosh. Overall average orders per week were
up 9.3% year-on-year to 1.3 million and we continued to improve the proportion
of 'perfect orders', leading to a further step-up in customer satisfaction
scores. Online sales participation increased slightly to 13.5% of total UK
sales. Tesco Whoosh, our rapid delivery service, is now available in 1,460
stores, with average basket size and average orders per store continuing to
grow, and already high customer satisfaction scores seeing further
improvement.
Online performance H1 24/25 YoY change
Sales inc. VAT £3.3bn 9.3%
Orders per week 1.29m 9.3%
Basket size* £108 4.4%
Online % of UK total sales 13.5% 0.6ppts
* Excludes Tesco Whoosh
In June, we introduced Tesco Marketplace, offering customers an even broader
range of products from our specially selected partners. We are now offering
over 150,000 products across categories including garden, homeware, pet care
and toys, with a strong pipeline of further sellers being added over the
coming months.
ROI - Ongoing volume growth driving strong market share gains:
Like-for-like sales grew by 4.7% in the half, driven by our ongoing
investments in product quality and innovation, and our extensive refresh
programme, which we rolled out to a further eleven stores. Total sales grew
by 5.6% at constant rates, including a 0.9ppts contribution from new stores,
driven by the opening of four new large stores and three new Tesco Express
stores in the half.
Food sales grew by 5.4%, which includes a strong contribution from fresh food
volume growth as we continue to invest in product quality and innovation
across the range. These investments culminated in us winning eight gold
medals at the 2024 'Monde Selection Awards'.
Non-food sales declined by (0.8)%, which includes a (1.4)ppts impact from the
transition to our new partnership with The Entertainer, as in the UK.
Excluding toys, non-food sales grew by 0.6%.
We have now gained market share in ROI for 31 consecutive four-week periods,
taking our share to 23.5% at the end of the first half, up +88bps
year-on-year. Clubcard sales penetration stepped up by a further 5ppts
year-on-year to 85.3%.
BOOKER - Growth across core catering and retail following strong performance
last year:
Sales LFL
£m
Core retail 1,657 0.6%
Core catering* 1,350 1.7%
Tobacco 888 (7.3)%
Best Food Logistics 728 (6.6)%
Total Booker 4,623 (1.9)%
* Includes sales to small businesses and sales from Venus Wine and Spirit
Merchants PLC, which was acquired in June 2024 and so is excluded from LFL
growth.
Overall like-for-like sales declined by (1.9)%, reflecting the continuing
decline in the tobacco market and weakness in parts of the fast-food market
serviced by Best Food Logistics, whilst the core retail and catering
businesses continue to deliver growth against a challenging market backdrop.
Core retail sales increased by 0.6% year-on-year, driven by a further 397 net
new retail partners for our symbol brands (Premier, Londis, Budgens and Family
Shopper). The independent convenience sector is seeing some trading
softness, with some customers switching to larger store formats. Booker's
symbol brands in contrast performed strongly, with sales up 3.1%, supported by
a further improvement in availability. Our Premier brand was awarded the
'Symbol/Franchise Retailer of the Year' at the Grocer Gold Awards 2024.
Core catering sales increased by 1.7%, primarily driven by stronger volumes,
as customers responded well to an extension of our Everyday Low Prices
campaign, with prices locked on over 700 products until January 2025.
Customer satisfaction levels remained high at c.86%, and availability improved
even further to c.98% in the half.
In June, we acquired Venus Wine and Spirit Merchants PLC, a specialist wine
and spirits merchant, offering our on-trade catering customers an even larger
selection of spirits, wines, lagers, ciders and ales. The integration is
progressing well, and we are continuing to expand the customer base.
CENTRAL EUROPE - Ongoing improvement in trading trajectory as market
challenges start to ease:
Like-for-like sales grew by 0.6%, primarily driven by volume growth,
reflecting a gradual recovery in customer sentiment in the region as
customers' disposable incomes started to recover following a period of
significant inflationary pressures. Food sales grew by 0.9% year-on-year,
including a particularly strong performance in fresh food. Customers
responded well to our targeted value investments, including price cuts on at
least 1,500 products in each market.
Non-food sales declined by (1.7)%, which includes an impact from market-wide
availability challenges in clothing, and wetter weather in the second quarter,
which was partly offset by an increase in the proportion of full price sales
year-on-year.
Central Europe adjusted operating profit was £49m, an increase of 8.7%
year-on-year at constant rates, primarily driven by volume growth and further
progress in our Save to Invest programme. We continue to expect an ongoing
recovery in adjusted operating profit in the region.
TESCO BANK:
Our banking operations (credit cards, loans and savings), which are due to be
sold to Barclays Bank UK PLC, are treated as discontinued operations within
these results. Our headline performance measures include those business
lines which are being retained and are therefore treated as continuing
operations, i.e. insurance, ATMs, travel money and gift cards.
The breakdown of our overall performance between continuing and discontinued
operations is shown in the table below.
H1 24/25 H1 23/24 YoY change
Revenue £926m £702m 31.9%
Continuing operations* £519m £354m 46.6%
Discontinued operations £407m £348m 17.0%
Adjusted operating profit £188m £65m 189.2%
Continuing operations* £94m £9m n/m
Discontinued operations £94m £56m 67.9%
* Includes revenue of £33m (H1 23/24: £33m) and net investment income in
adjusted operating profit of £9m (H1 23/24: £3m) associated with banking
operations which will cease following completion of the proposed sale to
Barclays.
Continuing operations revenue grew by 46.6%, primarily driven by strong growth
in the insurance business due to high levels of renewals and new business
volumes, and the accounting impact of signing a new five-year pet insurance
agreement.
Adjusted operating profit on a continuing operations basis was £94m, compared
to £9m in the prior year. The first half performance included a £42m
non-recurring benefit, including the £33m accounting impact of upfront
commission income on the signing of a new pet insurance agreement and £9m
income on banking deposits with the Bank of England, which will cease
following completion of the proposed sale to Barclays. In addition, the
prior year included a £(24)m impact from a movement in insurance reserves.
The remaining adjusted operating profit growth mostly reflects a strong
performance in motor and home insurance. Adjusted operating profit from
discontinued operations was £94m, compared to £56m in the prior year,
primarily driven by favourable movements in expected credit losses due to
recent improvements in the economic outlook.
We expect the transaction to complete by the end of this calendar year. On
an ongoing basis, we expect an adjusted operating profit contribution of
between £80m to £100m per year. For the 24/25 financial year, we now
expect a contribution from the retained Tesco Bank business of around £120m,
which includes the £42m of non-recurring benefit described above.
Adjusting items:
H1 24/25 H1 23/24
£m £m
Property transactions 7 24
Amortisation of acquired intangible assets (38) (37)
Other* (6) 13
Total adjusting items in statutory operating profit (continuing operations) (37) -
Net finance income 51 18
Tax (2) 23
Total adjusting items (continuing operations) 12 41
Adjusting items (discontinued operations) (41) -
Total adjusting items (29) 41
* Other includes the gain on disposal of Booker's Ritter-Courivaud Limited
subsidiary in the prior year.
Adjusting items are excluded from our adjusted operating profit performance by
virtue of their size and nature, to provide a helpful perspective of the
year-on-year performance of the Group's ongoing business. Total adjusting
items in statutory operating profit from continuing operations resulted in a
net charge of £(37)m, compared to net nil in the prior year.
Property transactions of £7m relates primarily to the sale of surplus
properties. In the prior year, property transactions represented net income
of £24m. We continue to present £(38)m of amortisation of acquired
intangible assets, principally relating to the merger with Booker, as an
adjusting item.
Adjusting items in net finance income and tax are set out below. Adjusting
items in discontinued operations of £(41)m primarily relates to fair value
remeasurement of assets of the disposal group, associated with the sale of our
banking operations to Barclays.
Further detail on adjusting items can be found in Note 3, starting on page 27
and on discontinued operations in Note 6, starting on page 29.
Net finance costs:
On a continuing operations basis H1 24/25 H1 23/24
£m £m
Net interest costs (77) (100)
Net finance expenses from insurance contracts (6) (4)
Finance charges payable on lease liabilities (186) (183)
Net finance costs before adjusting items (269) (287)
Fair value remeasurements of financial instruments 66 28
Net pension finance income / (costs) (15) (10)
Adjusting items in net finance costs 51 18
Net finance costs (218) (269)
Net finance costs before adjusting items were £(269)m, £18m lower
year-on-year due to higher interest earned on cash, short-term deposits and
money market funds. Within adjusting items, fair value remeasurements of
financial instruments led to a credit of £66m compared to a £28m credit in
the prior year, largely driven by non-cash mark-to-market movements on certain
derivative financial instruments that are not hedge accounted.
Further detail on finance income and costs can be found in Note 4 on page 28,
as well as further detail on the adjusting items in Note 3, starting on page
27.
Group tax:
On a continuing operations basis H1 24/25 H1 23/24
£m £m
Tax on adjusted profit (368) (297)
Tax on adjusting items (2) 23
Tax on profit (370) (274)
Tax on adjusted Group profit was £(368)m, £(71)m higher than last year,
primarily due to higher profit and the full year impact of the increase in the
UK corporation tax rate from 19% to 25%, effective from 1 April 2023.
The prior year £23m adjusting credit relates to the release of a tax
provision, following a settlement relating to our exit from the Gain Land
Associate in China in February 2020.
The effective tax rate on adjusted Group profit was 26.7%, higher than the
current UK statutory rate of 25%, primarily due to the depreciation of assets
which do not qualify for tax relief. We continue to expect our effective tax
rate to be around 27% in the current year.
Earnings per share:
On a continuing operations basis H1 24/25 H1 23/24 YoY change
Adjusted diluted EPS 14.45p 11.68p 23.7%
Statutory diluted EPS 14.62p 12.25p 19.3%
Statutory basic EPS 14.76p 12.34p 19.6%
On a total basis, including discontinued operations
Statutory diluted EPS 15.03p 12.83p 17.1%
Statutory basic EPS 15.18p 12.93p 17.4%
Adjusted diluted EPS was 14.45p, 23.7% higher year-on-year, mainly due to an
increase in adjusted operating profit, the benefit of our ongoing share
buyback programme and a reduction in net finance costs.
Statutory diluted EPS was 14.62p, 19.3% higher year-on-year, as the adjusted
operating profit performance was partially offset by lower profits generated
on property transactions and higher favourable non-cash mark-to-market
movements on financial instruments.
On a total basis, including discontinued operations, statutory diluted EPS was
15.03p, 17.1% higher year-on-year.
Dividend:
The interim dividend has been set at 4.25 pence per ordinary share, in line
with our policy of setting the interim dividend at 35% of the prior full-year
dividend.
The interim dividend will be paid on 22 November 2024 to shareholders who are
on the register of members at close of business on 11 October 2024 (the Record
Date). Shareholders may elect to reinvest their dividend in the Dividend
Reinvestment Plan (DRIP). The last date for receipt of DRIP elections and
revocations will be 1 November 2024.
Summary of total indebtedness (excludes Tesco Bank):
Aug-24 Feb-24 Movement
£m £m £m
Net debt before lease liabilities (2,135) (2,144) 9
Lease liabilities (7,541) (7,620) 79
Net debt (9,676) (9,764) 88
Pension deficit, IAS 19 basis (post-tax) (320) (493) 173
Total indebtedness (9,996) (10,257) 261
Net debt / EBITDA 2.1x 2.2x
Total indebtedness ratio 2.2x 2.4x
Net debt was £(9,676)m, a reduction of £88m versus year end, predominantly
driven by strong retail free cash flow generation of £1,261m which exceeded
the cash outflows relating to our ongoing share buyback programme of £(575)m
and last year's final dividend of £(575)m. Lease liabilities of £(7,541)m
were £79m lower compared to year end, driven by the overall reducing nature
of our lease liability, partially offset by the impact of rent reviews and new
stores.
Total indebtedness was £(9,996)m, a decrease of £261m versus year end. In
addition to the net debt impacts described above, the IAS 19 pension deficit
(post-tax) decreased by £173m to £(320)m, reflecting movements in market
conditions which impact discount rate assumptions and can have a volatile
effect on the IAS 19 position. The trustees of each pension scheme,
including the main Tesco Pension Scheme, are required to calculate the net
funding surplus/deficit on the basis of Technical Provisions in accordance
with regulations and guidance issued by the relevant regulator. On this
basis, the main UK scheme continues to be in surplus.
We had strong levels of liquidity at the end of the first half, including
£3.1 billion of cash and highly liquid short-term deposits and money market
investments. In addition, our £2.5 billion committed revolving credit
facility remained undrawn and is in place until at least October 2026, with
one remaining one-year extension option available.
Our Net debt to EBITDA ratio was 2.1 times at the end of the first half, below
our target range of 2.8 to 2.3 times. The total indebtedness ratio was 2.2
times compared to 2.4 times at year-end.
Fixed charge cover was 3.9 times at the end of the first half, which is an
improvement since year end, primarily due to an increase in Retail EBITDA.
Summary retail free cash flow:
The following table reconciles Group adjusted operating profit to retail free
cash flow. Further details are included in Note 2, starting on page 22.
On a continuing operations basis H1 24/25 H1 23/24
£m £m
Adjusted operating profit 1,649 1,426
Less: Tesco Bank adjusted operating (profit) / loss (94) (9)
Retail adjusted operating profit 1,555 1,417
Add back: Depreciation and amortisation 819 790
Other reconciling items 22 18
Pensions (14) (13)
Decrease in working capital 169 368
Retail cash generated from operations before adjusting items 2,551 2,580
Cash capex (594) (595)
Net interest (244) (273)
- Interest related to Net debt before lease liabilities (58) (91)
- Interest related to lease liabilities (186) (182)
Tax paid (176) (38)
Dividends received 2 6
Repayment of capital element of obligations under leases (295) (306)
Own shares purchased for share schemes 17 (6)
Retail free cash flow 1,261 1,368
Memo (not included in retail free cash flow definition):
- Special dividend received from Tesco Bank - 250
- Net acquisitions and disposals (50) 7
- Property buybacks, store purchases and disposal proceeds (14) (3)
- Cash impact of adjusting items (52) (87)
We delivered strong retail free cash flow of £1,261m, driven by the retail
adjusted operating profit performance and including a further benefit from
working capital. This is £(107)m lower than last year, primarily reflecting
lower working capital benefits and higher tax paid.
Our total working capital inflow was £169m, reflecting the strong volume
performance in the half, leading to higher trade balances. The higher
working capital benefit last year primarily reflects a higher level of cost
inflation, which has normalised in the current year.
Net interest paid was £29m lower year-on-year, due to higher interest earned
on cash balances, short-term deposits and money market funds.
Tax paid was £(138)m higher year-on-year, mainly due to no longer benefiting
from tax relief related to the £2.5bn one-off pension contribution made in
2021, which was fully utilised in the prior year, and the impact of higher
retail adjusted operating profit year-on-year.
Within the memo lines shown, the net £(50)m outflow relating to acquisitions
and disposals primarily relates to Booker's acquisition of Venus Wine and
Spirit Merchants PLC. The cash impact of adjusting items of £(52)m relates
to operational restructuring changes as part of our Save to Invest programme,
which were provided for at the end of the prior financial year.
Capital expenditure and space:
UK & ROI Central Europe Tesco Bank Group
H1 24/25 H1 23/24 H1 24/25 H1 23/24 H1 24/25 H1* 23/24 H1 24/25 H1 23/24
Capex £494m £465m £33m £43m £3m £15m £530m £523m
Openings (k sq ft) 116 81 44 49 - - 160 130
Closures (k sq ft) (35) (117) - (14) - - (35) (131)
Repurposed (k sq ft) - - (107) (149) - - (107) (149)
Net space change (k sq ft) 81 (36) (63) (114) - - 18 (150)
The data above excludes space relating to franchise stores. A full breakdown
of space by segment is included in the appendices starting on page 50.
* Includes £13m relating to the banking operations disposal group,
classified as held for sale in February 2024.
Capital expenditure shown in the table above reflects expenditure on ongoing
business activities across the Group, excluding property buybacks and store
purchases.
Our capital expenditure in the first half was £530m, which was broadly in
line with last year. We continue to prioritise investments in high returning
areas, including automation in parts of our distribution network and
developing our digital platforms, in addition to continued investment in our
store estate.
In the first half, we opened a total of 44 stores across the Group and
refreshed a further 182 stores. In the UK, we opened one superstore, 19
Tesco Express stores and six One Stop stores and in ROI we opened four new
large stores and three Tesco Express stores. In Central Europe, we opened
eleven new convenience stores.
We continue to expect full year capital expenditure of around £1.4bn.
Statutory capital expenditure for the first half was £0.6bn.
Further details of current space can be found in the appendices starting on
page 50.
Contacts.
Investor Relations: Chris Griffith 01707 940 900
Andrew Gwynn 01707 942 409
Media: Christine Heffernan 0330 6780 639
Teneo 0207 4203 143
This document is available at www.tescoplc.com/interims2024
(http://www.tescoplc.com/interims2024) .
A webcast including a Q&A will be held today at 9.00am for investors and
analysts and will be available on our website at www.tescoplc.com/interims2024
(http://www.tescoplc.com/interims2024) . This will be available for playback
after the event. All presentation materials, including a transcript, will be
made available on our website.
We will report our Q3 & Christmas Trading statement on 9 January 2025.
Sources.
• UK market share based on Kantar Total Grocers Total Till Roll on 12-week
rolling basis to 1 September 2024.
• UK Kantar net switching gains 12-week rolling basis to 1 September 2024.
• ROI market share based on Kantar Total Till Roll on 12-week rolling basis to 1
September 2024.
• ROI Kantar net switching gains 12-week rolling basis to 1 September 2024.
• 'Full-line grocers' refers to Tesco, Sainsbury's, Asda and Morrisons.
• UK Price index is an internal measure calculated using the retail selling
price of each item on a per unit or unit of measure basis. Competitor retail
selling prices are collected weekly by a third party. The price index includes
price cut promotions and is weighted by sales to reflect customer importance.
• Clubcard Prices saving of up to £385 is based on the top 25% of Tesco
Clubcard members and large stores sales between 1 September 2023 and 30 August
2024. Tesco Clubcard Price savings versus regular Tesco price.
• Customer satisfaction and Brand Perception based on YoY changes in YouGov
BrandIndex scores for the 12 weeks ended 25 August 2024.
• Availability based on Multi channel tracker. 3 period rolling data. Responses
to: "I Can Get What I Want".
• Number of new Booker retail partners is net of openings and closures.
• Brand NPS is based on BASIS Global Brand Tracker. 3 period rolling data.
Responses to the question: "How likely is it that you would recommend the
following company to a friend or colleague as a place to shop?"
• Colleague satisfaction based on Every Voice Matters colleague engagement
survey result for July 2024. Refers to responses of agreement to 'I would
recommend Tesco as a great place to work'.
Additional Disclosures.
Principal Risks and Uncertainties.
The principal risks and uncertainties faced by the Group remain those as set
out on pages 30 to 37 of our Annual Report and Financial Statements 2024:
cyber security; data privacy; climate change; technology; responsible
sourcing; health and safety; product safety and food integrity; people;
financial performance; customer; regulatory and compliance; Tesco Bank;
geopolitics and other global events; security of supply; and competition and
markets.
Statement of Directors' Responsibilities.
The Directors are responsible for preparing the Interim Results for the
26-week period ended 24 August 2024 in accordance with applicable law,
regulations and accounting standards. Each of the Directors confirm that to
the best of their knowledge the condensed consolidated interim financial
statements have been prepared in accordance with IAS 34: 'Interim Financial
Reporting', as adopted by the European Union and that the interim management
report includes a true and fair review of the information required by DTR
4.2.7R and DTR 4.2.8R, namely:
• an indication of the important events that have occurred during the first 26
weeks of the financial year and their impact on the condensed consolidated
interim financial statements, and a description of the principal risks and
uncertainties for the remainder of the financial year; and
• material related party transactions in the first 26 weeks of the year and any
material changes in the related party transactions described in the last
annual report.
The Directors of Tesco PLC are listed on pages 52 to 54 of the Tesco PLC
Annual Report and Financial Statements 2024.
A list of current directors is maintained on the Tesco PLC website at:
www.tescoplc.com (http://www.tescoplc.com) .
By order of the Board Directors
Gerry Murphy - Non-executive Chairman
Ken Murphy - Group Chief Executive
Imran Nawaz - Chief Financial Officer
Melissa Bethell*
Bertrand Bodson*
Dame Carolyn Fairbairn*
Thierry Garnier*
Stewart Gilliland*
Alison Platt*
Caroline Silver*
Karen Whitworth*
*Independent Non-executive Directors
2 October 2024
Disclaimer.
Certain statements made in this document are forward-looking statements. For
example, statements regarding future financial performance, market trends and
our product pipeline are forward-looking statements. Phrases such as "aim",
"plan", "intend", "should", "anticipate", "well-placed", "believe",
"estimate", "expect", "target", "consider" and similar expressions are
generally intended to identify forward-looking statements. Forward-looking
statements are based on current expectations and assumptions and are subject
to a number of known and unknown risks, uncertainties and other important
factors that could cause actual results or events to differ materially from
what is expressed or implied by those statements. Many factors may cause
actual results, performance or achievements of Tesco to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Important factors that could cause
actual results, performance or achievements of Tesco to differ materially from
the expectations of Tesco include, among other things, general business and
economic conditions globally, industry trends, competition, changes in
government and other regulation and policy, including in relation to the
environment, health and safety and taxation, labour relations and work
stoppages, interest rates and currency fluctuations, changes in its business
strategy, political and economic uncertainty, including as a result of global
pandemics. As such, undue reliance should not be placed on forward-looking
statements. Any forward-looking statement is based on information available to
Tesco as of the date of the statement. All written or oral forward-looking
statements attributable to Tesco are qualified by this caution. Other than in
accordance with legal and regulatory obligations, Tesco undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
Group income statement
26 weeks ended 26 weeks ended
24 August 2024 26 August 2023 (restated*)
Notes Before adjusting Adjusting Total Before adjusting Adjusting Total
Items items £m Items items £m
£m (Note 3) £m (Note 3)
£m £m
Continuing operations
Revenue from sale of goods and services 34,432 - 34,432 33,578 - 33,578
Insurance revenue 341 - 341 223 - 223
Revenue 2 34,773 - 34,773 33,801 - 33,801
Cost of sales (31,751) (5) (31,756) (31,123) 5 (31,118)
Insurance service expenses (272) - (272) (206) - (206)
Net expenses from reinsurance contracts held (30) - (30) (27) - (27)
Gross profit/(loss) 2,720 (5) 2,715 2,445 5 2,450
Administrative expenses (1,071) (32) (1,103) (1,019) (5) (1,024)
Operating profit/(loss) 2 1,649 (37) 1,612 1,426 - 1,426
Share of post-tax profit/(loss) of joint ventures and associates (2) - (2) 4 - 4
Finance income 4 132 - 132 131 - 131
Finance costs 4 (401) 51 (350) (418) 18 (400)
Profit/(loss) before tax from continuing operations 1,378 14 1,392 1,143 18 1,161
Taxation 5 (368) (2) (370) (297) 23 (274)
Profit/(loss) for the period from continuing operations 1,010 12 1,022 846 41 887
Discontinued operations
Profit/(loss) for the period from discontinued operations 6 70 (41) 29 42 - 42
Profit/(loss) for the period 1,080 (29) 1,051 888 41 929
Attributable to:
Owners of the parent 1,080 (29) 1,051 886 41 927
Non-controlling interests - - - 2 - 2
1,080 (29) 1,051 888 41 929
Earnings per share from continuing and discontinued operations
Basic 8 15.18p 12.93p
Diluted 8 15.03p 12.83p
Earnings per share from continuing operations
Basic 8 14.76p 12.34p
Diluted 8 14.62p 12.25p
* Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
The notes on pages 21 to 42 form part of this condensed consolidated financial
information.
Group statement of comprehensive income/(loss)
Notes 26 weeks ended 24 August 2024 26 weeks ended 26 August 2023 (restated*)
£m
£m
Items that will not be reclassified to the Group income statement
Change in fair value of financial assets at fair value through other - (1)
comprehensive income
Remeasurements of defined benefit pension schemes 16 252 213
Net fair value gains/(losses) on inventory cash flow hedges (33) (15)
Tax on items that will not be reclassified (59) (49)
160 148
Items that may subsequently be reclassified to the Group income statement
Change in fair value of financial assets at fair value through other 13 (5)
comprehensive income
Currency translation differences:
Retranslation of net assets of overseas subsidiaries, joint ventures and (22) (73)
associates, net of hedging instruments
Gains/(losses) on cash flow hedges:
Net fair value gains/(losses) 27 16
Reclassified and reported in the Group income statement (36) (25)
Finance income/(expenses) from insurance contracts issued (3) 4
Finance income/(expenses) from reinsurance contracts held 1 (2)
Tax on items that may be reclassified - (8)
(20) (93)
Total other comprehensive income/(loss) for the period 140 55
Profit/(loss) for the period 1,051 929
Total comprehensive income/(loss) for the period 1,191 984
Attributable to:
Owners of the parent 1,191 980
Non-controlling interests - 4
Total comprehensive income/(loss) for the period 1,191 984
Total comprehensive income/(loss) attributable to owners of the parent arising
from:
Continuing operations 1,162 938
Discontinued operations 6 29 42
1,191 980
* Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
The notes on pages 21 to 42 form part of this condensed consolidated financial
information.
Group balance sheet
Notes 24 August 24 February 26 August
2024 2024 2023
£m £m £m
Non-current assets
Goodwill and other intangible assets 5,116 5,066 5,367
Property, plant and equipment 9 17,136 17,221 16,790
Right of use assets 10 5,434 5,478 5,522
Investment property 23 24 25
Investments in joint ventures and associates 100 102 97
Other investments 817 1,546 1,360
Trade and other receivables 119 36 68
Loans and advances to customers - - 3,362
Reinsurance contract assets 14 122 125 110
Derivative financial instruments 789 781 851
Post-employment benefit surplus 16 42 22 22
Deferred tax assets 39 32 76
29,737 30,433 33,650
Current assets
Other investments 166 206 325
Inventories 2,964 2,635 2,856
Trade and other receivables 1,264 1,349 1,283
Loans and advances to customers - - 4,060
Derivative financial instruments 10 55 71
Current tax assets 10 110 16
Short-term investments 11 1,912 2,128 2,692
Cash and cash equivalents 11 3,310 2,340 2,526
9,636 8,823 13,829
Assets of the disposal group and non-current assets classified as held for 6 8,185 7,783 141
sale
17,821 16,606 13,970
Current liabilities
Trade and other payables (10,884) (10,264) (10,591)
Borrowings 13 (1,516) (1,536) (2,017)
Lease liabilities 10 (607) (584) (593)
Provisions (259) (306) (278)
Insurance contract liabilities 14 (584) (526) (498)
Customer deposits and deposits from banks (582) (108) (4,860)
Derivative financial instruments (51) (25) (64)
Current tax liabilities (24) (1) (57)
(14,507) (13,350) (18,958)
Liabilities of the disposal group classified as held for sale 6 (7,512) (7,122) -
Net current liabilities (4,198) (3,866) (4,988)
Non-current liabilities
Trade and other payables (47) (39) (67)
Borrowings 13 (5,580) (5,683) (5,911)
Lease liabilities 10 (6,935) (7,038) (7,116)
Provisions (172) (175) (195)
Customer deposits and deposits from banks (175) (800) (2,465)
Derivative financial instruments (210) (241) (329)
Post-employment benefit deficit 16 (426) (657) (200)
Deferred tax liabilities (415) (269) (322)
(13,960) (14,902) (16,605)
Net assets 11,579 11,665 12,057
Equity
Share capital 17 433 445 451
Share premium 5,165 5,165 5,165
Other reserves 17 3,002 3,131 3,018
Retained earnings 2,985 2,930 3,430
Equity attributable to owners of the parent 11,585 11,671 12,064
Non-controlling interests (6) (6) (7)
Total equity 11,579 11,665 12,057
The notes on pages 21 to 42 form part of this condensed consolidated financial
information.
These unaudited condensed consolidated interim financial statements for the 26
weeks ended 24 August 2024 were approved by the Board on 2 October 2024.
Group statement of changes in equity
Share Share Other reserves Retained earnings Total Non-controlling interests Total
Capital Premium (Note 17) £m £m £m Equity
£m £m £m £m
Notes
At 24 February 2024 445 5,165 3,131 2,930 11,671 (6) 11,665
Profit/(loss) for the period - - - 1,051 1,051 - 1,051
Other comprehensive income/(loss)
Retranslation of net assets of overseas subsidiaries, joint ventures and - - (22) - (22) - (22)
associates, net of hedging instruments
Change in fair value of financial assets at fair value through other - - - 13 13 - 13
comprehensive income
Remeasurements of defined benefit pension schemes 16 - - - 252 252 - 252
Gains/(losses) on cash flow hedges - - (6) - (6) - (6)
Cash flow hedges reclassified and reported in the Group income statement - - (36) - (36) - (36)
Finance income/(expenses) from insurance contracts issued - - (3) - (3) - (3)
Finance income/(expenses) from reinsurance contracts held - - 1 - 1 - 1
Tax relating to components of other comprehensive income - - 5 (64) (59) - (59)
Total other comprehensive income/(loss) - - (61) 201 140 - 140
Total comprehensive income/(loss) - - (61) 1,252 1,191 - 1,191
Inventory cash flow hedge movements
(Gains)/losses transferred to the cost of inventory - - 9 - 9 - 9
Total inventory cash flow hedge movements - - 9 - 9 - 9
Transactions with owners
Own shares purchased for cancellation 17 - - (746) - (746) - (746)
Own shares cancelled 17 (12) - 587 (575) - - -
Own shares purchased for share schemes - - (101) - (101) - (101)
Share-based payments - - 183 (46) 137 - 137
Dividends 7 - - - (576) (576) - (576)
Total transactions with owners (12) - (77) (1,197) (1,286) - (1,286)
At 24 August 2024 433 5,165 3,002 2,985 11,585 (6) 11,579
Share Share Other reserves Retained earnings Total Non-controlling interests Total
Capital Premium (Note 17) £m £m £m Equity
£m £m £m £m
At 25 February 2023 463 5,165 3,139 3,469 12,236 (11) 12,225
Profit/(loss) for the period - - - 927 927 2 929
Other comprehensive income/(loss)
Retranslation of net assets of overseas subsidiaries, joint ventures and - - (73) - (73) - (73)
associates, net of hedging instruments
Change in fair value of financial assets at fair value through other - - - (6) (6) - (6)
comprehensive income
Remeasurements of defined benefit pension schemes 16 - - - 213 213 - 213
Gains/(losses) on cash flow hedges - - (1) - (1) 2 1
Cash flow hedges reclassified and reported in the Group income statement - - (25) - (25) - (25)
Finance income/(expenses) from insurance contracts issued - - 4 - 4 - 4
Finance income/(expenses) from reinsurance contracts held - - (2) - (2) - (2)
Tax relating to components of other comprehensive income - - (8) (49) (57) - (57)
Total other comprehensive income/(loss) - - (105) 158 53 2 55
Total comprehensive income/(loss) - - (105) 1,085 980 4 984
Transfer from hedging reserve to retained earnings - - 44 (44) - - -
Inventory cash flow hedge movements
(Gains)/losses transferred to the cost of inventory - - 47 - 47 - 47
Total inventory cash flow hedge movements - - 47 - 47 - 47
Transactions with owners
Own shares purchased for cancellation 17 - - (752) - (752) - (752)
Own shares cancelled 17 (12) - 515 (503) - - -
Own shares purchased for share schemes - - (47) - (47) - (47)
Share-based payments - - 177 (67) 110 - 110
Dividends 7 - - - (510) (510) - (510)
Total transactions with owners (12) - (107) (1,080) (1,199) - (1,199)
At 26 August 2023 451 5,165 3,018 3,430 12,064 (7) 12,057
The notes on pages 21 to 42 form part of this condensed consolidated financial
information.
Group cash flow statement
Notes 26 weeks ended 24 August 2024 26 weeks ended 26 August 2023
£m (restated(a))
£m
Cash flows generated from/(used in) operating activities
Operating profit/(loss) of continuing operations 1,612 1,426
Operating profit/(loss) of discontinued operations 40 56
Depreciation and amortisation 866 850
(Profit)/loss arising on sale of property, plant and equipment, investment (3) 2
property, intangible assets, assets classified as held for sale and early
termination of leases
(Profit)/loss arising on sale of subsidiaries - (12)
Net remeasurement (gain)/loss on non-current assets held for sale 44 (16)
Defined benefit pension scheme payments 16 (14) (13)
Share-based payments 19 13
Fair value movements included in operating profit/(loss) 10 38
Retail (increase)/decrease in inventories (328) (364)
Retail (increase)/decrease in trade and other receivables (35) (39)
Retail increase/(decrease) in trade and other payables 533 764
Retail increase/(decrease) in provisions (48) (81)
Retail (increase)/decrease in working capital 122 280
Tesco Bank (increase)/decrease in loans and advances to customers (355) (480)
Tesco Bank (increase)/decrease in trade, reinsurance and other receivables 1 26
Tesco Bank increase/(decrease) in customer and bank deposits, trade, insurance 274 583
and other payables
Tesco Bank increase/(decrease) in provisions (3) (2)
Tesco Bank (increase)/decrease in working capital (83) 127
Cash generated from/(used in) operations 2,613 2,751
Interest paid (389) (394)
Corporation tax paid (181) (45)
Net cash generated from/(used in) operating activities 2,043 2,312
Cash flows generated from/(used in) investing activities
Proceeds from sale of property, plant and equipment, investment property, 16 34
intangible assets and assets classified as held for sale
Purchase of property, plant and equipment, investment property and other (480) (499)
long-term assets
Purchase of intangible assets (141) (138)
Disposal of subsidiaries, net of cash disposed - 15
Acquisition of subsidiaries, net of cash acquired (46) -
Investments in joint ventures and associates (6) (5)
Decrease in short-term investments((b)) 1,180 725
Increase in short-term investments((b)) (964) (1,801)
Proceeds from sale of other investments 866 83
Purchase of other investments (91) (87)
Dividends received from joint ventures and associates 2 6
Interest received 136 114
Cash inflows from derivative financial instruments 27 3
Cash outflows from derivative financial instruments - (15)
Net cash generated from/(used in) investing activities 499 (1,565)
Cash flows generated from/(used in) financing activities
Own shares purchased for cancellation 17 (575) (503)
Own shares purchased for share schemes, net of cash received from employees 17 (6)
Repayment of capital element of obligations under leases (297) (308)
Cash outflows exceeding the incremental increase in assets in a property (14) (15)
buyback
Increase in borrowings 342 982
Repayment of borrowings (622) (97)
Cash inflows from derivative financial instruments 438 68
Cash outflows from derivative financial instruments (404) (66)
Dividends paid to equity owners 7 (575) (509)
Net cash generated from/(used in) financing activities (1,690) (454)
Net increase/(decrease) in cash and cash equivalents 852 293
Cash and cash equivalents at the beginning of the period 1,874 1,565
Effect of foreign exchange rate changes (8) (9)
Cash and cash equivalents, including cash held in the disposal group at the 2,718 1,849
end of the period
Less: Cash held in the disposal group 6 (381) -
Cash and cash equivalents at the end of the period 11 2,337 1,849
(a) Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
(b) Comparative net (investments in)/proceeds from sale of short-term
investments has been re-presented on a gross basis as increase and decrease in
short-term investments.
The notes on pages 21 to 42 form part of this condensed consolidated financial
information.
Note 1 Basis of preparation
These unaudited condensed consolidated interim financial statements have been
prepared in accordance with the Disclosure Guidance and Transparency Rules of
the UK Financial Conduct Authority, and with IAS 34 'Interim Financial
Reporting' under UK-adopted international accounting standards. Unless
otherwise stated, the accounting policies applied, and the judgements,
estimates and assumptions made in applying these policies, are consistent with
those used in preparing the Annual Report and Financial Statements 2024. The
financial period represents the 26 weeks ended 24 August 2024 (prior financial
period 26 weeks ended 26 August 2023, prior financial year 52 weeks ended 24
February 2024).
These condensed consolidated interim financial statements for the current
period and prior financial periods do not constitute statutory accounts as
defined in section 434 of the Companies Act 2006. A copy of the statutory
accounts for the prior financial year has been filed with the Registrar of
Companies. The auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying the report and did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
The Directors have, at the time of approving the condensed consolidated
interim financial statements, a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future, which reflects a period of 18 months from the date of approval of the
condensed consolidated interim financial statements, and have concluded that
there are no material uncertainties relating to going concern. The Directors
have therefore continued to adopt the going concern basis in preparing the
condensed consolidated interim financial statements. Further information on
the Group's strong liquidity position is given in the Group review of
performance, Summary of total indebtedness section.
Adoption of new IFRSs
Standards, interpretations and amendments effective in the current financial
year have not had a material impact on the condensed consolidated interim
financial statements.
The Group has not applied any other standards, interpretations or amendments
that have been issued but are not yet effective. The impact of the following
is still under assessment:
- IFRS 18 'Presentation and disclosure in financial statements', which
will become effective in the consolidated Group financial statements for the
financial year ending 26 February 2028, subject to UK endorsement.
Other standards, interpretations and amendments issued but not yet effective
are not expected to have a material impact.
Alternative performance measures (APMs)
In the reporting of financial information, the Directors have adopted various
APMs. Refer to the Glossary for a full list of the Group's APMs, including
comprehensive definitions, their purpose, reconciliations to IFRS measures and
details of any changes to APMs.
Note 2 Segmental reporting
The Group's operating segments are determined based on the Group's
organisational structure and internal reporting to the Chief Operating
Decision Maker (CODM). The CODM has been determined to be the Group Chief
Executive, with support from the Executive Committee, as the function
primarily responsible for the allocation of resources to segments and
assessment of performance of the segments.
The principal activities of the Group are presented in the following
reportable segments:
- Retailing and associated activities (Retail) in:
- UK & ROI - the United Kingdom and Republic of Ireland; and
- Central Europe - Czech Republic, Hungary and Slovakia.
- Retail banking, insurance and money services through Tesco Bank in the UK
(Tesco Bank).
In February 2024, the Board announced the sale of the Group's banking
operation ('Banking operations'), which has been consequently classified as a
discontinued operation. Refer to Note 6 for further details. The remaining
insurance business and money services are included within continuing
operations. Both continuing and discontinued elements remain within the Tesco
Bank segment, reflecting the Group's organisational structure and internal
reporting to the CODM at the half year reporting date.
The CODM uses adjusted operating profit, as reviewed at periodic Executive
Committee meetings, as the key measure of the segments' results as it
reflects the segments' trading performance that aids comparability over time
for the financial year under evaluation. Adjusted operating profit is a
consistent measure within the Group as defined within the Glossary. Refer to
Note 3 for adjusting items. Inter-segment revenue is not material.
Income statement
The segment results and the reconciliation of the segment measures to the
respective statutory items included in the Group income statement are as
follows:
26 weeks ended 24 August 2024 UK & ROI Central Total Tesco Total segments at Foreign exchange Exclude: Continuing operations at
At constant exchange rates
£m
Europe
Retail
Bank
constant
£m
Banking operations
actual
£m
£m
£m
exchange
£m
exchange
£m
£m
Revenue 32,175 2,189 34,364 926 35,290 (110) (407) 34,773
Less: Fuel sales (3,233) (80) (3,313) - (3,313) 3 - (3,310)
Sales 28,942 2,109 31,051 926 31,977 (107) (407) 31,463
Adjusted operating profit 1,508 50 1,558 188 1,746 (3) (94) 1,649
Adjusting items (Note 3) (33) - (33) (58) (91) - 54 (37)
Operating profit 1,475 50 1,525 130 1,655 (3) (40) 1,612
Adjusted operating margin 4.7% 2.3% 4.5% 20.3% 4.9% 23.1% 4.7%
Tesco Bank segmental revenue of £926m (26 weeks ended 26 August 2023: £702m)
comprises continuing interest income of £46m (26 weeks ended 26 August 2023:
£41m), fees and commissions income of £132m (26 weeks ended 26 August 2023:
£90m), insurance revenue of £341m (26 weeks ended 26 August 2023: £223m)
and revenue within the discontinued Banking operations of £407m (26 weeks
ended 26 August 2023: £348m).
26 weeks ended 24 August 2024 UK & ROI Central Total Tesco Total Exclude: Continuing operations at actual exchange
At actual exchange rates
£m
Europe
Retail
Bank
Banking operations
£m
£m
£m
£m segments
£m
£m
Revenue 32,149 2,105 34,254 926 35,180 (407) 34,773
Less: Fuel sales (3,232) (78) (3,310) - (3,310) - (3,310)
Sales 28,917 2,027 30,944 926 31,870 (407) 31,463
Adjusted operating profit 1,506 49 1,555 188 1,743 (94) 1,649
Adjusting items (Note 3) (33) - (33) (58) (91) 54 (37)
Operating profit 1,473 49 1,522 130 1,652 (40) 1,612
Adjusted operating margin 4.7% 2.3% 4.5% 20.3% 5.0% 23.1% 4.7%
Share of post-tax profit/(loss) of joint ventures and associates (2)
Finance income 132
Finance costs (350)
Profit before tax 1,392
26 weeks ended 26 August 2023 UK & ROI Central Total Tesco Total Exclude: Continuing operations at
At actual exchange rates
£m Europe Retail Bank segments Banking Actual
£m £m £m £m operations* exchange*
£m £m
Revenue 31,226 2,221 33,447 702 34,149 (348) 33,801
Less: Fuel sales (3,313) (87) (3,400) - (3,400) - (3,400)
Sales 27,913 2,134 30,047 702 30,749 (348) 30,401
Adjusted operating profit 1,371 46 1,417 65 1,482 (56) 1,426
Adjusting items (Note 3) (16) 16 - - - - -
Operating profit 1,355 62 1,417 65 1,482 (56) 1,426
Adjusted operating margin 4.4% 2.1% 4.2% 9.3% 4.3% 16.1% 4.2%
Share of post-tax profit/(loss) of joint ventures and associates 4
Finance income 131
Finance costs (400)
Profit before tax 1,161
* Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
Balance sheet
The following tables show segment net assets and net debt (cash and cash
equivalents, short-term investments, joint venture loans, bank and other
borrowings, lease liabilities, derivative financial instruments and net debt
of the disposal group). Lease liabilities, joint venture loans and interest
receivables have been allocated to each segment. All other components of net
debt are not allocated to segments, reflecting how these balances are managed.
Intercompany transactions have been eliminated other than intercompany
transactions with Tesco Bank in net debt. Balances in relation to the
discontinued Banking operations have been included in the Tesco Bank segment
for both current and prior periods.
At 24 August 2024 UK & ROI Central Tesco Bank Unallocated Total
£m
Europe
£m
£m
£m
£m
Goodwill and other intangible assets 4,766 32 318 - 5,116
Property, plant and equipment and investment property 15,651 1,449 59 - 17,159
Right of use assets 4,990 443 1 - 5,434
Non-current assets held for sale 39 62 - - 101
Net assets of the disposal group excluding net debt((a)) - - 743 - 743
Net debt (including Tesco Bank)((b)) (6,853) (575) 740 (2,248) (8,936)
Other net assets/(liabilities) (7,291) (322) (425) - (8,038)
Total net assets 11,302 1,089 1,436 (2,248) 11,579
(a) Excludes £(171)m (24 February 2024: £(182)m, 26 August 2023: £nil) of
net debt items within the Tesco Bank segment relating to the Banking
operations disposal group.
(b) Refer to Note 18.
At 24 February 2024 UK & ROI Central Tesco Bank Unallocated Total
£m
Europe
£m
£m
£m
£m
Goodwill and other intangible assets 4,713 33 320 - 5,066
Property, plant and equipment and investment property 15,707 1,475 63 - 17,245
Right of use assets 5,038 439 1 - 5,478
Non-current assets held for sale 23 62 - - 85
Net assets of the disposal group excluding net debt((a)) - - 758 - 758
Net debt (including Tesco Bank)((b)) (6,926) (575) (102) (2,263) (9,866)
Other net assets/(liabilities) (7,101) (300) 300 - (7,101)
Total net assets 11,454 1,134 1,340 (2,263) 11,665
Refer to previous table for footnotes.
At 26 August 2023 UK & ROI Central Tesco Bank Unallocated Total
£m
Europe
£m
£m
£m
£m
Goodwill and other intangible assets 4,715 34 618 - 5,367
Property, plant and equipment and investment property 15,272 1,473 70 - 16,815
Right of use assets 5,073 439 10 - 5,522
Non-current assets classified as held for sale 24 117 - - 141
Net debt (including Tesco Bank)((b)) (7,000) (558) 127 (2,330) (9,761)
Other net assets/(liabilities) (6,824) (349) 1,146 - (6,027)
Total net assets 11,260 1,156 1,971 (2,330) 12,057
Refer to previous table for footnotes.
Other segment information
The tables below show the Group's total capital expenditure, depreciation and
amortisation, and impairment (loss)/reversal on financial assets, reconciled
to continuing operations:
26 weeks ended 24 August 2024 UK & ROI Central Tesco Total Exclude: Banking operations Continuing operations
£m
Europe
Bank
£m
£m
£m
£m segments
£m
Capital expenditure (including acquisitions through business combinations):
Property, plant and equipment((a)) 395 28 - 423 - 423
Goodwill and other intangible assets((b)) 182 4 9 195 (6) 189
Depreciation and amortisation:
Property, plant and equipment (413) (42) (4) (459) - (459)
Right of use assets (246) (23) - (269) - (269)
Other intangible assets (128) (5) (5) (138) - (138)
Impairment((c)):
(Loss)/reversal on financial assets 2 - (15) (13) 15 2
(a) Includes £1m (26 weeks ended 26 August 2023: £nil) of property, plant
and equipment acquired through business combinations.
(b) Includes £56m (26 weeks ended 26 August 2023: £nil) of goodwill and
other intangible assets acquired through business combinations.
(c) Excludes impairment of other non-current assets.
26 weeks ended 26 August 2023 UK & ROI Central Tesco Total Exclude: Banking operations((d)) Continuing operations((d))
£m
Europe
Bank
£m
£m
£m
£m segments
£m
Capital expenditure (including acquisitions through business combinations):
Property, plant and equipment((a)) 381 38 3 422 (1) 421
Goodwill and other intangible assets((b)) 118 5 12 135 (12) 123
Depreciation and amortisation:
Property, plant and equipment (397) (42) (5) (444) 1 (443)
Right of use assets (247) (22) (1) (270) 1 (269)
Other intangible assets (113) (6) (17) (136) 14 (122)
Impairment((c)):
(Loss)/reversal on financial assets - (1) (33) (34) 33 (1)
(a)-(c) Refer to previous table for footnotes.
(d) Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
Cash flow statement
The following tables provide further analysis of the Group cash flow
statement, including a split of cash flows between Retail continuing
operations, and Tesco Bank continuing and discontinued operations.
Tesco Bank
Retail Continuing Discontinued Tesco
operations operations Group
26 weeks ended 24 August 2024 Before adjusting Adjusting Retail Before adjusting items Adjusting items Total Total Total
Total
£m
£m
£m
£m
items items
£m £m
£m £m
Operating profit/(loss) 1,555 (33) 1,522 94 (4) 90 40 1,652
Depreciation and amortisation 819 38 857 9 - 9 - 866
ATM net income (4) - (4) 4 - 4 - -
(Profit)/loss arising on sale of property, plant and equipment, investment 7 (10) (3) - - - - (3)
property, intangible assets, assets held for sale and early termination of
leases
Net remeasurement (gain)/loss on non-current assets held for sale - - - - - - 44 44
Defined benefit pension scheme payments (14) - (14) - - - - (14)
Share-based payments 19 - 19 (2) - (2) 2 19
Fair value movements included in operating profit/(loss) - - - (3) - (3) 13 10
Cash flows generated from/(used in) operations excluding working capital 2,382 (5) 2,377 102 (4) 98 99 2,574
(Increase)/decrease in working capital 169 (47) 122 (128) 4 (124) 41 39
Cash generated from/(used in) operations 2,551 (52) 2,499 (26) - (26) 140 2,613
Interest paid (380) - (380) (8) - (8) (1) (389)
Corporation tax paid (176) - (176) (5) - (5) - (181)
Net cash generated from/(used in) operating activities* 1,995 (52) 1,943 (39) - (39) 139 2,043
Proceeds from sale of property, plant and equipment, investment property, 1 15 16 - - - - 16
intangible assets and assets classified as held for sale
Purchase of property, plant and equipment, investment property and other (16) - (16) - - - - (16)
long-term assets - property buybacks and store purchases
Purchase of property, plant and equipment, investment property and other (464) - (464) - - - - (464)
long-term assets - other capital expenditure
Purchase of intangible assets (130) - (130) (5) - (5) (6) (141)
Acquisition of subsidiaries, net of cash acquired (46) - (46) - - - - (46)
Investments in joint ventures and associates (6) - (6) - - - - (6)
Decrease in short-term investments 1,180 - 1,180 - - - - 1,180
Increase in short-term investments (964) - (964) - - - - (964)
Proceeds from sale of other investments 2 - 2 864 - 864 - 866
Purchase of other investments - - - (91) - (91) - (91)
Dividends received from joint ventures and associates 2 - 2 - - - - 2
Interest received 136 - 136 - - - - 136
Cash inflows from derivative financial instruments - - - 27 - 27 - 27
Net cash generated from/(used in) investing activities* (305) 15 (290) 795 - 795 (6) 499
Own shares purchased for cancellation (575) - (575) - - - - (575)
Own shares purchased for share schemes, net of cash received from employees 17 - 17 - - - - 17
Repayment of capital element of obligations under leases (295) - (295) (1) - (1) (1) (297)
Cash outflows exceeding the incremental increase in assets in a property (14) - (14) - - - - (14)
buyback
Increase in borrowings 342 - 342 - - - - 342
Repayment of borrowings (476) - (476) (146) - (146) - (622)
Cash inflows from derivative financial instruments 437 - 437 1 - 1 - 438
Cash outflows from derivative financial instruments (404) - (404) - - - - (404)
Dividends paid to equity holders (575) - (575) - - - - (575)
Net cash generated from/(used in) financing activities* (1,543) - (1,543) (146) - (146) (1) (1,690)
Net increase/(decrease) in cash and cash equivalents 147 (37) 110 610 - 610 132 852
Cash and cash equivalents at the beginning of the period 1,874
Effect of foreign exchange rate changes (8)
Cash and cash equivalents, including cash held in the disposal group, at the 2,718
end of the period
Less: Cash held in the disposal group (381)
Cash and cash equivalents at the end of the period 2,337
* Refer to page 47 for the reconciliation of the APM: Retail free cash
flow.
Tesco Bank (restated)((a))
Retail Continuing Discontinued operations Total
operations
26 weeks ended 26 August 2023 Before adjusting Adjusting Total Before adjusting items Adjusting items Total Total Total
£m
£m
£m
£m
£m
items items £m
£m £m
Operating profit/(loss) 1,417 - 1,417 9 - 9 56 1,482
Depreciation and amortisation 790 37 827 7 - 7 16 850
ATM net income (5) - (5) 5 - 5 - -
(Profit)/loss arising on sale of property, plant and equipment, investment 10 (8) 2 - - - - 2
property, intangible assets, assets held for sale and early termination of
leases
(Profit)/loss arising on sale of subsidiaries - (12) (12) - - - - (12)
Net remeasurement (gain)/loss on non-current assets held for sale - (16) (16) - - - - (16)
Defined benefit pension scheme payments (13) - (13) - - - - (13)
Share-based payments 13 - 13 (2) - (2) 2 13
Fair value movements included in operating profit/(loss) - - - 7 - 7 31 38
Cash flows generated from operations excluding working capital 2,212 1 2,213 26 - 26 105 2,344
(Increase)/decrease in working capital 368 (88) 280 52 (1) 51 76 407
Cash generated from/(used in) operations 2,580 (87) 2,493 78 (1) 77 181 2,751
Interest paid (387) - (387) (7) - (7) - (394)
Corporation tax paid (38) - (38) (7) - (7) - (45)
Net cash generated from/(used in) operating activities((b)) 2,155 (87) 2,068 64 (1) 63 181 2,312
Proceeds from sale of property, plant and equipment, investment property, 2 32 34 - - - - 34
intangible assets and assets classified as held for sale
Purchase of property, plant and equipment, investment property and other (22) - (22) - - - - (22)
long-term assets - property buybacks and store purchases
Purchase of property, plant and equipment, investment property and other (472) - (472) (4) - (4) (1) (477)
long-term assets - other capital expenditure
Purchase of intangible assets (123) - (123) (2) - (2) (13) (138)
Disposal of subsidiaries, net of cash disposed - 15 15 - - - - 15
Investments in joint ventures and associates (5) - (5) - - - - (5)
Decrease in short-term investments((c)) 725 - 725 - - - - 725
Increase in short-term investments((c)) (1,801) - (1,801) - - - - (1,801)
Proceeds from sale of other investments 2 - 2 81 - 81 - 83
Purchase of other investments (5) - (5) (82) - (82) - (87)
Dividends received from joint ventures and associates 6 - 6 - - - - 6
Special dividend received from Tesco Bank 250 - 250 (250) - (250) - -
Interest received 114 - 114 - - - - 114
Cash inflows from derivative financial instruments 3 - 3 - - - - 3
Cash outflows from derivative financial instruments (15) - (15) - - - - (15)
Net cash generated from/(used in) investing activities((b)) (1,341) 47 (1,294) (257) - (257) (14) (1,565)
Own shares purchased for cancellation (503) - (503) - - - - (503)
Own shares purchased for share schemes, net of cash received from employees (6) - (6) - - - - (6)
Repayment of capital element of obligations under leases (306) - (306) (1) - (1) (1) (308)
Cash outflows exceeding the incremental increase in assets in a property (15) - (15) - - - - (15)
buyback
Increase in borrowings 682 - 682 - - - 300 982
Repayment of borrowings (97) - (97) - - - - (97)
Cash inflows from derivative financial instruments 68 - 68 - - - - 68
Cash outflows from derivative financial instruments (66) - (66) - - - - (66)
Dividends paid to equity holders (509) - (509) - - - - (509)
Net cash generated from/(used in) financing activities((b)) (752) - (752) (1) - (1) 299 (454)
Net increase/(decrease) in cash and cash equivalents 62 (40) 22 (194) (1) (195) 466 293
Cash and cash equivalents at the beginning of the period 1,565
Effect of foreign exchange rate changes (9)
Cash and cash equivalents at the end of the period 1,849
(a) Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
(b) Refer to page 47 for the reconciliation of the APM: Retail free cash
flow.
(c) Comparative net (investments in)/proceeds from sale of short-term
investments has been re-presented on a gross basis as increase and decrease in
short-term investments.
Note 3 Adjusting items
Group income statement
Profit/(loss) for the period included the following adjusting items:
26 weeks ended 24 August 2024 Cost of sales Administrative expenses Total adjusting items included within operating profit Finance income/ Taxation Adjusting items included within discontinued operations
£m
£m
£m
£m
(costs) £m
£m Total adjusting items
£m
Property transactions((a)) - 7 7 - (1) - 6
Restructuring((b)) (3) - (3) - 1 - (2)
Amortisation of acquired intangible assets((c)) - (38) (38) - 9 - (29)
Banking operations disposal costs((d)) (2) (1) (3) - 1 - (2)
Net pension finance income/(costs)((e)) - - - (15) 4 - (11)
Fair value remeasurements of financial instruments((e)) - - - 66 (16) - 50
Total adjusting items from continuing operations (5) (32) (37) 51 (2) - 12
Adjusting items relating to discontinued operations((f)) - - - - - (41) (41)
Total (5) (32) (37) 51 (2) (41) (29)
(a) Predominantly relates to the disposal of surplus properties that
generated a profit before tax of £10m (26 weeks ended 26 August 2023: £8m).
(b) Provisions relating to operational restructuring changes announced as
part of 'Save to Invest', a multi-year programme which commenced in June 2022.
The total cost of the programme to date is £(235)m. Future cost savings will
not be reported within adjusting items.
(c) Amortisation of acquired intangibles relates to historical inorganic
business combinations and does not reflect the Group's ongoing trading
performance.
(d) Costs incurred within the continuing Group in relation to the sale of
Banking operations.
(e) Net pension finance costs and fair value remeasurements of financial
instruments are included within adjusting items, as they can fluctuate
significantly due to external market factors that are outside management's
control. Refer to Note 4 for details of finance income and costs.
(f) Refer to Note 6.
26 weeks ended 26 August 2023 Cost of sales Administrative expenses Total adjusting items included within operating profit Finance income/ (costs) Taxation Adjusting items included within discontinued operations
£m
£m
£m
£m
£m
£m
Total adjusting items
£m
Property transactions 2 22 24 - (4) - 20
Restructuring 3 (2) 1 - - - 1
Amortisation of acquired intangible assets - (37) (37) - 9 - (28)
Net pension finance income/(costs) - - - (10) 2 - (8)
Fair value remeasurements of financial instruments - - - 28 (7) - 21
Disposal of China associate in a prior period - - - - 23 - 23
Disposal of subsidiary - 12 12 - - - 12
Total adjusting items from continuing operations 5 (5) - 18 23 - 41
Adjusting items relating to discontinued operations - - - - - - -
Total 5 (5) - 18 23 - 41
Group cash flow statement
The table below shows the impact of adjusting items from continuing operations
on the Group cash flow statement. There were no adjusting cash flows related
to discontinued operations in the current and comparative periods:
Cash flows from Cash flows from Cash flows from
operating activities
investing activities
financing activities
26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks
2024
2023
2024
2023
2024
2023
£m
£m
£m
£m
£m
£m
Property transactions((a)) - - 15 32 - -
Disposal of subsidiaries((b)) - - - 15 - -
Restructuring((c)) (52) (88) - - - -
Total adjusting items from continuing operations (52) (88) 15 47 - -
(a) Property transactions include £2m proceeds (26 weeks ended 26 August
2023: £14m) relating to the sale of stores in Poland in 2021 not included in
the sale of the corporate business.
(b) In the prior period the Group disposed of its Booker subsidiary
Ritter-Courivaud Limited, part of the UK & ROI segment.
(c) Cash outflows predominantly relating to operational restructuring
changes as part of the multi-year 'Save to Invest' programme, which commenced
in June 2022.
Note 4 Finance income and costs
Continuing operations Notes 26 weeks 26 weeks
2024
2023
£m
£m
Finance income
Interest and similar income 124 123
Interest income on other investments 6 6
Finance income on net investment in leases 1 1
Finance income from reinsurance contracts held 1 1
Total finance income 132 131
Finance costs
GBP MTNs and loans (102) (96)
EUR MTNs (46) (55)
USD bonds (9) (9)
Interest expense on lease liabilities (186) (183)
Finance expenses from insurance contracts issued (7) (5)
Other interest costs (51) (70)
Total finance costs before adjusting items (401) (418)
Fair value remeasurements of financial instruments 66 28
Net pension finance costs 16 (15) (10)
Total finance costs (350) (400)
Net finance costs (218) (269)
Note 5 Taxation
Recognised in the Group income statement
Continuing operations 26 weeks 26 weeks
2024
2023
£m
(restated*)
£m
Current tax charge
UK corporation tax 256 171
Overseas tax 39 35
295 206
Deferred tax charge
Origination and reversal of temporary differences 75 68
75 68
Total income tax charge 370 274
Analysed as:
Tax charge/(credit) on adjusted profit 368 297
Tax charge/(credit) on adjusting items 2 (23)
Total income tax charge 370 274
Effective tax rate 26.6% 23.6%
Adjusted effective tax rate 26.7% 26.0%
* Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
The tax charge in the Group income statement is based on management's best
estimate of the full year effective tax rates by geographical unit applied to
half year profits, which is then adjusted for tax on adjusting items arising
in the period to 24 August 2024. The statutory rate of corporation tax has
been applied to the adjusting items, based on the geographical unit of that
item. Refer to Note 3 for further details.
The Group is within the scope of the Organisation for Economic Co-operation
and Development (OECD) Pillar Two model rules. Pillar Two legislation has been
enacted in the UK introducing a global minimum effective tax rate of 15%. The
legislation implements a domestic top-up tax and a multinational top-up tax,
effective for accounting periods starting on or after 31 December 2023. The
Group has applied the exception under IAS 12 to recognising and disclosing
information about deferred tax assets and liabilities related to top-up income
taxes. Under the legislation, the Group is liable to pay a top-up tax for the
difference between its effective tax rate per jurisdiction and the 15% minimum
rate. The Group has performed an assessment of the potential exposure to
Pillar Two income taxes and there is not expected to be a material impact on
the Group's tax charge.
Note 6 Discontinued operations
The following table presents a breakdown of the assets and liabilities of the
disposal group and non-current assets classified as held for sale.
24 August 24 February 26 August 2023
2024 2024
Banking operations Other Total Banking operations Other Total Total
£m
£m
£m
£m
£m
£m £m
Assets of the disposal group 8,084 - 8,084 7,698 - 7,698 -
Non-current assets classified as held for sale* - 101 101 - 85 85 141
Total assets of the disposal group and non-current assets classified as held 8,084 101 8,185 7,698 85 7,783 141
for sale
Liabilities of the disposal group (7,512) - (7,512) (7,122) - (7,122) -
Total net assets of the disposal group and non-current assets classified as 572 101 673 576 85 661 141
held for sale
* Other non-current assets classified as held for sale consist mainly of
properties in the UK and Central Europe (24 February 2024: UK and Central
Europe, 26 August 2023: Central Europe) due to be sold within one year. Due to
the individual nature of each property, fair values are classified as Level 3
within the fair value hierarchy.
Disposal of Banking operations
In February 2024, the Group reached agreement on the terms of a proposed sale
of its banking operations, comprising personal loans, credit cards, customer
deposits, and associated operational capabilities ('Banking operations') for
consideration of £600m. The sale is subject to regulatory approval and is
expected to complete by the end of this calendar year.
The related assets and liabilities have been classified as held for sale in
the Banking operations disposal group within the Tesco Bank segment, with
Group results for the 26 weeks ended 26 August 2023 re-presented to present
Banking operations as a discontinued operation.
Balance sheet of the disposal group
The following table presents a breakdown of the assets and liabilities of the
Banking operations disposal group:
24 August 2024 24 February 2024
£m £m
Loans and advances to customers 8,036 7,669
Derivative financial instruments 34 54
Trade and other receivables 89 47
Cash and cash equivalents 381 346
Excess loss on remeasurement of the disposal group (456) (418)
Assets of the disposal group classified as held for sale 8,084 7,698
Trade and other payables (63) (81)
Borrowings (550) (549)
Provisions (20) (19)
Lease liabilities (16) (17)
Deposits from customers (6,843) (6,440)
Derivative financial instruments (20) (16)
Liabilities of the disposal group classified as held for sale (7,512) (7,122)
Upon classification as held for sale in February 2024, the Group recognised a
loss on remeasuring the disposal group to fair value less costs to sell.
The loss was allocated to goodwill and other assets of the disposal group
within the scope of the measurement requirements of IFRS 5, which were fully
written off. The excess loss remaining was recognised as a reduction in the
total assets of the disposal group, which primarily comprise loans and
advances to customers measured under IFRS 9. Since the classification of the
disposal group as held for sale at February 2024, this excess loss has
increased by £38m to reflect the latest fair value less costs to sell.
Income statement of discontinued operations
26 weeks ended 26 weeks ended
24 August 2024 26 August 2023((a))
£m £m
Revenue 407 348
Operating costs (313) (292)
Adjusted operating profit/(loss) 94 56
Adjusted finance (costs)/income (1) -
Adjusted profit/(loss) before tax 93 56
Taxation (23) (14)
Adjusted profit/(loss) after tax 70 42
Fair value remeasurement of assets of the disposal group((b)) (44) -
Other adjusting items((c)) (10) -
Tax on adjusting items 13 -
Total adjusting items (41) -
Total profit/(loss) after tax of discontinued operations 29 42
(a) Comparatives have been re-presented to disclose Banking operations as a
discontinued operation.
(b) Fair value remeasurement of assets of the disposal group includes £(6)m
remeasurements on non-current assets and £(38)m loss in excess of the
carrying amount of the non-current assets.
(c) Other adjusting items relate to programme costs in order to separate
Banking operations from the remaining business of Tesco Bank, including
professional fees, legal fees, consultancy fees and technology build costs.
Cash flow statement of discontinued operations
26 weeks ended 26 weeks ended
24 August 2024 26 August 2023
£m £m
Net cash flows from operating activities 139 181
Net cash flows from investing activities (6) (14)
Net cash flows from financing activities (1) 299
Net cash flows from discontinued operations 132 466
Expected credit losses (ECLs) of the Banking operations disposal group
The Banking operations disposal group has specific risks in relation to ECLs
on loans and advances to customers. The financial risk for ECLs is that a
retail customer or counterparty to a wholesale transaction will fail to meet
its obligations in accordance with contractually agreed terms and Tesco Bank
will incur losses as a result.
The ECLs calculation and the measurement of significant deterioration in
credit risk both incorporate forward-looking information using a range of
macroeconomic scenarios, with key variables being the Bank of England base
rate, unemployment rate and gross domestic product.
There are four scenarios commissioned from a third-party provider:
Scenario Scenario assumptions Weighting (%)
Base Base rate drops to a little below 5% by end-2024. Unemployment expected to 40%
remain around 4.5% through 2025 before reducing back towards 4.0% over the
remaining years of the forecast. Growth strengthens in 2025 as interest rates
drop back and consumer demand rises.
Upside Geopolitical tensions begin to diminish and increased oil and gas supply to 30%
Europe causes energy prices to drop back (oil to below $70 a barrel, quarterly
average). Inflation falls below the 2% target. Base rate falls more quickly,
with commensurate increases in business confidence which supports job hiring.
Growth is predicted to be at pre-pandemic levels in 2024, accelerating to 3.4%
in 2025.
Downside 1 Disruption to energy supplies and commodities from geopolitical tensions drive 25%
wholesale price rises that are passed on to consumers and cause higher
inflation. Base rate peaks at 6.25% in 2024 and unemployment rises to 5.8% in
early 2025. Economic contraction until mid-2025.
Downside 2 Similar to Downside 1, but inflation remains above target until mid-2028, 5%
Sterling depreciates more markedly against the Dollar. Base rates reach 7.75%
in early 2025 and unemployment peaks at 7.5% in early 2025 (remaining above 6%
until end-2028). Growth declines in 2024 and 2025 before stabilising in 2026.
The economic scenarios used include the following ranges of key indicators:
As at 24 August 2024 (five-year average) Base Upside Downside 1 Downside 2
40%
30%
25%
5%
Bank of England base rate((a)) 3.8% 3.2% 4.8% 6.1%
Gross domestic product((b)) 1.8% 2.3% 1.3% 0.7%
Unemployment rate 4.3% 4.0% 5.2% 6.5%
Unemployment rate peak in year 4.4% 4.1% 5.5% 7.0%
As at 24 February 2024 (five-year average) Base Upside Downside 1 Downside 2
40%
30%
25%
5%
Bank of England base rate((a)) 4.1% 3.5% 5.4% 7.2%
Gross domestic product((b)) 1.5% 2.0% 0.8% 0.1%
Unemployment rate 4.4% 4.0% 5.5% 7.2%
Unemployment rate peak in year 4.4% 4.0% 5.7% 7.5%
As at 26 August 2023 (five-year average) Base Upside Downside 1 Downside 2
40%
30%
25%
5%
Bank of England base rate((a)) 4.7% 3.8% 5.8% 7.2%
Gross domestic product((b)) 1.2% 1.7% 0.6% 0.1%
Unemployment rate 4.2% 3.9% 5.1% 6.5%
Unemployment rate peak in year 4.3% 3.9% 5.3% 6.8%
(a) Simple average.
(b) Annual growth rates.
Key assumptions and sensitivity
The key assumptions to which the Tesco Bank ECL is most sensitive are
macroeconomic factors, probability of default (PD), loss given default (LGD),
PD threshold (staging), and expected lifetime (revolving credit facilities).
The table below sets out the changes in the ECL allowance that would arise
from reasonably possible changes in these assumptions from those used in the
ECL allowance calculations as at 24 August 2024 and excludes specific
management overlays which are discussed further below:
Impact on the loss allowance
Key assumption Reasonably possible change 24 August 24 February 2024 26 August
£m
2024 2023
£m
£m
Closing ECL allowance 395 433 452
Macroeconomic factors (100% weighted) Upside scenario (33) (42) (37)
Base scenario (15) (20) (11)
Downside scenario 1 41 55 40
Downside scenario 2 127 170 110
Probability of default Increase of 10% 29 30 33
Decrease of 10% (29) (29) (32)
Loss given default Increase of 2.5% 10 10 10
Decrease of 2.5% (10) (10) (10)
Probability of default threshold (staging) Increase of 20% (7) (8) (8)
Decrease of 20% 11 13 13
Expected lifetime (revolving credit facility) Increase of 1 year 4 4 4
Decrease of 1 year (5) (5) (6)
In previous periods, certain specific management overlays have been recognised
to address an increased downside risk from a high inflationary environment,
the high cost of borrowing and the cost-of-living crisis. With the reduction
to inflation since February 2024, the management overlay for cost of living
has been removed as the risk is now adequately captured in the underlying
portfolio.
The specific management overlay recognised to address the prevailing downside
risks and ensure the potential impacts of future stress are adequately
provided for, is detailed below.
Overlay Description of adjustment 24 August 24 February 26 August
2024 2024 2023
£m
£m
£m
Underestimation risk Risk that the beneficial impact of recent credit loss trends incorporated into 7 8 56
credit risk models are transitive and may reverse due to the uncertain
economic climate
Cost of living A portion of Tesco Bank's customers may be more impacted by cost-of-living - 20 20
pressures, with deterioration in their ability to repay unsecured lending
balances
Total overlays 7 28 76
Movements in the management overlays above also reflect incorporation over
time of the identified risks into the modelled scenarios.
Note 7 Dividends
26 weeks ended 24 August 2024 26 weeks ended 26 August 2023
Pence/share £m Pence/share £m
Amounts recognised through equity as distributions to owners:
Paid prior financial year final dividend* 8.25 576 7.05 510
(Increase)/decrease in unclaimed dividends - (1) - (1)
Dividends paid in the financial period 575 509
Interim dividend declared for the current period 4.25 291 3.85 274
* Excludes £5m prior financial year final dividend waived (26 August
2023: £6m).
The interim dividend was approved by the Board of Directors on 2 October 2024.
It will be paid on 22 November 2024 to shareholders who are on the Register of
members at close of business on 11 October 2024.
A dividend reinvestment plan (DRIP) is available to shareholders who would
prefer to invest their dividends in the shares of the Company. For those
shareholders electing to receive the DRIP, the last date for receipt of a new
election is 1 November 2024.
Note 8 Earnings/(losses) per share and diluted earnings/(losses) per
share
26 weeks ended 24 August 2024 26 weeks ended 26 August 2023 (restated((a)))
Basic Dilutive share Diluted Basic Dilutive share Diluted
options and awards
options and awards
Profit/(loss) (£m)
Continuing operations((b)) 1,022 - 1,022 885 - 885
Discontinued operations 29 - 29 42 - 42
Total 1,051 - 1,051 927 - 927
Weighted average number of shares (millions) 6,922 70 6,992 7,172 54 7,226
Earnings/(losses) per share (pence)
Continuing operations 14.76 (0.14) 14.62 12.34 (0.09) 12.25
Discontinued operations 0.42 (0.01) 0.41 0.59 (0.01) 0.58
Total 15.18 (0.15) 15.03 12.93 (0.10) 12.83
(a) Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
(b) Excludes profits attributable to non-controlling interests of £nil (26
weeks ended 26 August 2023: £2m).
APM: Adjusted diluted earnings per share
Continuing operations Notes 26 weeks 26 weeks
2024
2023
(restated((a)))
Profit before tax (£m) 1,392 1,161
Exclude: Adjusting items (£m) 3 (14) (18)
Adjusted profit before tax (£m) 1,378 1,143
Adjusted profit before tax attributable to the owners of the parent (£m)((b)) 1,378 1,141
Taxation on adjusted profit before tax attributable to the owners of the (368) (297)
parent (£m)
Adjusted profit after tax attributable to the owners of the parent (£m) 1,010 844
Basic weighted average number of shares (millions) 6,922 7,172
Adjusted basic earnings per share (pence) 14.59 11.77
Diluted weighted average number of shares (millions) 6,992 7,226
Adjusted diluted earnings per share (pence) 14.45 11.68
(a) Comparatives have been re-presented to disclose Banking operations as a
discontinued operation. Refer to Note 6.
(b) Excludes profit before tax attributable to non-controlling interests of
£nil (26 weeks ended 26 August 2023: £2m).
Note 9 Property, plant and equipment
24 August 2024 26 August 2023
Land and Other((a)) Total Land and Other((a)) Total
buildings
£m
buildings
£m
£m £m
£m £m
Net carrying value
Opening balance 14,997 2,224 17,221 14,870 1,992 16,862
Foreign currency translation (15) (4) (19) (81) (13) (94)
Additions((b)) 158 264 422 144 278 422
Acquired through business combinations - 1 1 - - -
Reclassification 3 (2) 1 3 (3) -
Transfers (to)/from assets classified as held for sale (18) - (18) 56 2 58
Disposals (11) (2) (13) (8) (6) (14)
Depreciation charge for the period (230) (229) (459) (221) (223) (444)
Closing balance 14,884 2,252 17,136 14,763 2,027 16,790
Construction in progress included above((c)) 114 247 361 86 244 330
(a) Other assets consist of fixtures and fittings with a net carrying value
of £1,713m (24 February 2024: £1,679m, 26 August 2023: £1,529m), office
equipment with a net carrying value of £235m (24 February 2024: £234m, 26
August 2023: £199m) and motor vehicles with a net carrying value of £304m
(24 February 2024: £311m, 26 August 2023: £299m).
(b) Includes £25m (24 February 2024: £107m, 26 August 2023: £34m)
relating to property buyback and store purchase transactions.
(c) Construction in progress does not include land.
Commitments for capital expenditure contracted for, but not incurred, at 24
August 2024 were £358m (24 February 2024: £160m, 26 August 2023: £279m),
principally relating to store development and distribution investment.
At each reporting date, the Group reviews the carrying amounts of its
non-current assets to determine whether there is any indication of impairment
loss or impairment reversal. The Group has concluded there are no such
indicators during the 26 weeks ended 24 August 2024 (26 weeks ended 26 August
2023: £nil).
Note 10 Leases
Group as lessee
Right of use assets
24 August 2024 26 August 2023
Land and Other Total Land and Other Total
buildings
£m
£m
buildings
£m
£m
£m
£m
Net carrying value
Opening balance 5,365 113 5,478 5,387 113 5,500
Additions (including sale and leaseback transactions) 87 31 118 126 9 135
Acquired through business combinations 5 - 5 - - -
Depreciation charge for the period (251) (18) (269) (252) (18) (270)
Other movements* 102 - 102 156 1 157
Closing balance 5,308 126 5,434 5,417 105 5,522
* Other movements include lease terminations, modifications and
reassessments, foreign exchange, reclassifications between asset classes and
entering into finance subleases.
Lease liabilities
The following table shows the discounted lease liabilities included in the
Group balance sheet and the contractual undiscounted lease payments:
24 August 24 February 26 August
2024 2024 2023
£m
£m
£m
Current 607 584 593
Non-current 6,935 7,038 7,116
Total lease liabilities 7,542 7,622 7,709
Total undiscounted lease payments 10,570 10,757 10,800
A reconciliation of the Group's opening to closing lease liabilities balance
is presented in Note 18.
Note 11 Cash and cash equivalents and short-term investments
Cash and cash equivalents
24 August 24 February 26 August
2024 2024 2023
£m
£m
£m
Cash at bank and on hand 3,223 2,300 2,470
Short-term deposits 87 40 56
Cash and cash equivalents in the Group balance sheet 3,310 2,340 2,526
Bank overdrafts (973) (812) (677)
Cash and cash equivalents in the Group cash flow statement 2,337 1,528 1,849
Short-term investments
24 August 24 February 26 August
2024 2024 2023
£m
£m
£m
Money market funds, deposits and similar instruments 1,912 2,128 2,692
Cash and cash equivalents include £28m (24 February 2024: £30m, 26 August
2023: £28m) of restricted amounts mainly relating to unclaimed dividends, the
Group's pension schemes and employee benefit trusts.
Note 12 Commercial income
Below are the commercial income balances included within inventories and trade
and other receivables, or netted against trade and other payables.
24 August 24 February 26 August
2024 2024 2023
£m
£m
£m
Current assets
Inventories (12) (12) (12)
Trade and other receivables
Trade/other receivables 81 86 61
Accrued income 114 136 105
Current liabilities
Trade and other payables 108 138 96
Note 13 Borrowings
Borrowings are classified as current and non-current based on their scheduled
repayment dates. Repayments of principal amounts are classified as current if
the repayment is scheduled to be made within one year of the balance sheet
date. During the 26-weeks ended 24 August 2024, within continuing operations,
the Group made principal repayments of: €473m (26 weeks ended 26 August
2023: £97m) relating to a Euro MTN which matured July 2024; €50m partial
repayment on the Euro 2047 MTN; principal repayments on amortising secured
debt of £27m; and Tesco Bank repaid Senior MREL Notes of £146m. In addition,
there has been a £350m (26 weeks ended 26 August 2023: £982m) bond issuance,
maturing in May 2034.
Current
24 August 24 February 26 August
2024 2024 2023
£m
£m
£m
Bank loans and overdrafts 998 838 704
Borrowings* 518 698 1,313
1,516 1,536 2,017
Non-current
24 August 24 February 26 August
2024 2024 2023
£m
£m
£m
Borrowings* 5,580 5,683 5,911
* £nil of current (24 February 2024: £nil, 26 August 2023: £139m) and
£nil of non-current borrowings (24 February 2024: £143m, 26 August 2023:
£299m) relate to borrowings issued by Tesco Bank.
Borrowing facilities
The Group has a £2.5bn undrawn committed facility available at 24 August 2024
(24 February 2024: £2.5bn, 26 August 2023: £2.5bn), in respect of which all
conditions precedent had been met as at that date, consisting of a syndicated
revolving credit facility expiring in more than two years. The cost of the
facility is linked to three ESG targets and incurs commitment fees at market
rates which would provide funding at floating rates.
In addition, Tesco Bank has a separate £200m committed repurchase facility,
maturing on 26 October 2024.
There were no withdrawals from either facility during the financial period to
24 August 2024 (26 weeks ended 26 August 2023: £nil).
Note 14 Insurance
Balances in this note relate to the Group's subsidiary, Tesco Underwriting
Limited (TU), part of the Tesco Bank segment.
Insurance contract liabilities and reinsurance contract assets
The breakdown of portfolios and groups of insurance contracts issued and
reinsurance contracts held is set out in the table below:
At 24 August 2024 At 24 February 2024 At 26 August 2023
Insurance contract liabilities Reinsurance contracts held Net (liabilities)/ Insurance contract liabilities Reinsurance contracts held Net (liabilities)/ Insurance contract liabilities Reinsurance contracts held Net (liabilities)/
£m £m assets £m £m assets £m £m assets
£m £m £m
(Liabilities)/assets for remaining coverage (326) (274) (600) (260) (178) (438) (260) (190) (450)
(Liabilities)/assets for incurred claims (258) 396 138 (266) 303 37 (238) 300 62
(584) 122 (462) (526) 125 (401) (498) 110 (388)
Contracts measured under PAA (440) 68 (372) (364) 62 (302) (312) 43 (269)
Contracts not measured under PAA* (144) 54 (90) (162) 63 (99) (186) 67 (119)
(584) 122 (462) (526) 125 (401) (498) 110 (388)
* Contracts not measured under the premium allocation approach (PAA) are
measured using the general measurement model.
Measurement components of insurance contract liabilities and reinsurance
contract assets are set out in the table below. The estimate of the present
value of future cash flows is adjusted for events since the actuarial
valuation:
At 24 August 2024 At 24 February 2024 At 26 August 2023
Present value of future cash flows Present value of future cash flows Present value of future cash flows
£m Risk adjustment £m Risk adjustment £m Risk adjustment
£m £m £m
CSM Total CSM Total CSM Total
£m £m £m £m £m £m
Insurance contract liabilities (495) (18) (71) (584) (437) (16) (73) (526) (401) (17) (80) (498)
Reinsurance contract assets 89 6 27 122 95 6 24 125 74 7 29 110
Net (liabilities)/assets (406) (12) (44) (462) (342) (10) (49) (401) (327) (10) (51) (388)
Note 15 Financial instruments
At 24 August 2024 and 24 February 2024, the tables below exclude the assets
and liabilities of the Banking operations disposal group classified as held
for sale.
The expected maturity of financial assets and liabilities is not considered to
be materially different to their current and non-current classification.
Fair value of financial assets and liabilities measured at amortised cost
The table excludes cash and cash equivalents, short-term investments, trade
receivables/payables, other receivables/payables, accruals and deposits from
banks where the carrying values approximate fair value. The levels in the
table refer to the fair value measurement hierarchy.
24 August 2024 24 February 2024 26 August 2023
Level Carrying Fair Carrying Fair Carrying Fair
value
value((a))
value
value((a))
value
value((a))
£m
£m
£m
£m
£m
£m
Financial assets measured at amortised cost
Loans and advances to customers((b)) 3 - - - - 7,422 7,385
Investment securities at amortised cost((c)) 1 and 2 197 209 1,033 838 1,030 1,025
Joint ventures and associates loan receivables((d)) 2 96 107 96 97 106 110
Financial liabilities measured at amortised cost
Borrowings
Amortised cost((e)) 1 (5,079) (4,871) (5,067) (4,794) (5,238) (4,829)
Bonds in fair value hedge relationships 1 (2,017) (2,067) (2,152) (2,211) (2,690) (2,729)
Customer deposits((b)) 3 - - - - (6,342) (6,205)
(a) Refer to the fair value measurement section below for details on Level 2
and 3 valuation methodology.
(b) In February 2024 loans and advances to customers and customer deposits
were transferred to the Banking operations disposal group classified as held
for sale. Refer to Note 6 for further details.
(c) Investment securities held by Tesco Bank have been wound down as part of
the preparation for the disposal of Banking operations. Refer to Note 2.
(d) Joint ventures and associates loan receivables carrying amounts of £96m
(24 February 2024: £96m, 26 August 2023: £106m) are presented in the Group
balance sheet net of deferred profits of £nil (24 February 2024: £nil, 26
August 2023: £38m) historically arising from the sale of property assets to
joint ventures.
(e) Comparative fair values as at 26 August 2023 have been restated from
£(5,480)m to £(4,829)m for a revision in the fair value methodology applied
to certain index-linked bonds, with no impact on their carrying values.
Fair value measurement by level of fair value hierarchy
The following tables present the Group's financial assets and liabilities that
are measured at fair value, by level of fair value hierarchy:
- quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1);
- inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2); and
- inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs) (Level 3).
Level 2 assets and liabilities are valued by discounting future cash flows
using externally sourced market yield curves, including interest rate curves
and foreign exchange rates from highly liquid markets. Refer to the Level 3
instruments section below for details on Level 3 valuation methodology.
At 24 August 2024 Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
Assets
Investments at fair value through other comprehensive income 751 - 19 770
Short-term investments at fair value through profit or loss 949 - - 949
Cash and cash equivalents at fair value through profit or loss - 63 - 63
Investments at fair value through profit or loss - - 16 16
Derivative financial instruments:
Interest rate swaps - - 11 11
Cross-currency swaps - - 141 141
Index-linked swaps - - 636 636
Foreign currency forward contracts - 11 - 11
Total assets 1,700 74 823 2,597
Liabilities
Derivative financial instruments:
Interest rate swaps - - (88) (88)
Cross-currency swaps - - (130) (130)
Foreign currency forward contracts - (38) - (38)
Diesel forward contracts - (5) - (5)
Total liabilities - (43) (218) (261)
Net assets 1,700 31 605 2,336
At 24 February 2024 Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
Assets
Investments at fair value through other comprehensive income 682 - 19 701
Short-term investments at fair value through profit or loss 889 - - 889
Cash and cash equivalents at fair value through profit or loss - 35 - 35
Investments at fair value through profit or loss - - 18 18
Derivative financial instruments:
Interest rate swaps - 29 15 44
Cross-currency swaps - - 182 182
Index-linked swaps - - 583 583
Foreign currency forward contracts - 25 - 25
Diesel forward contracts - 2 - 2
Total assets 1,571 91 817 2,479
Liabilities
Derivative financial instruments:
Interest rate swaps - (9) (96) (105)
Cross-currency swaps - - (139) (139)
Foreign currency forward contracts - (20) - (20)
Diesel forward contracts - (2) - (2)
Total liabilities - (31) (235) (266)
Net assets 1,571 60 582 2,213
At 26 August 2023 Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
Assets
Investments at fair value through other comprehensive income 616 - 18 634
Short-term investments at fair value through profit or loss 1,055 - - 1,055
Cash and cash equivalents at fair value through profit or loss - 55 - 55
Investments at fair value through profit or loss - 20 1 21
Derivative financial instruments:
Interest rate swaps - 128 - 128
Cross-currency swaps - - 174 174
Index-linked swaps - - 590 590
Foreign currency forward contracts - 28 - 28
Diesel forward contracts - 2 - 2
Total assets 1,671 233 783 2,687
Liabilities
Derivative financial instruments:
Interest rate swaps - (20) (163) (183)
Cross-currency swaps - - (162) (162)
Foreign currency forward contracts - (45) - (45)
Diesel forward contracts - (3) - (3)
Total liabilities - (68) (325) (393)
Net assets 1,671 165 458 2,294
During the period, there were no transfers (26 weeks ended 26 August 2023: no
transfers) between Level 1 and Level 2 fair value measurements.
Level 3 instruments
The valuation techniques and significant unobservable inputs are unchanged in
the period from that described in Note 26 of the Annual Report and Financial
Statements 2024.
The following table presents the changes in Level 3 instruments:
26 weeks ended 26 weeks ended
24 August 2024 26 August 2023
Uncollateralised derivatives Unlisted Uncollateralised derivatives Unlisted
£m
£m
investments investments
£m
£m
At the beginning of the period 545 37 379 34
Gains/(losses) recognised in finance costs((a)) 36 (1) (56) 1
Gains/(losses) recognised in other comprehensive income not reclassified to - - - (1)
the income statement
Gains/(losses) recognised in other comprehensive income that may subsequently 26 - 15 -
be reclassified to the income statement
Additions - - - 5
Settlements (37) - - -
Transfers of assets/(liabilities) into Level 3((b)) - - 101 -
Transfer of assets/(liabilities) from Level 3((c)) - (1) - (20)
At the end of the period 570 35 439 19
(a) All gains or losses are unrealised.
(b) There were £nil (26 weeks ended 26 August 2023: £nil) transfers of
unlisted investments and £nil of derivative assets (26 weeks ended 26 August
2023: £101m) to Level 3 from Level 2 and £nil (26 weeks ended 26 August
2023: £nil) to Level 3 from Level 1.
(c) There were £nil unlisted investments transferred from Level 3 to Level
2 (26 weeks ended 26 August 2023: £(20)m) and £(1)m transfers from Level 3
to Level 1 (26 weeks ended 26 August 2023: £nil).
Note 16 Post-employment benefits
Pensions
The Group operates a variety of post-employment benefit arrangements, covering
both funded and unfunded defined benefit schemes and defined contribution
schemes.
The principal defined benefit pension plan within the Group is the Tesco PLC
Pension Scheme (the Scheme), a UK scheme closed to future accrual. The latest
triennial actuarial pension funding valuation for the Scheme as at 31 March
2022 using a projected unit credit method showed a funding surplus of £0.9bn.
The Scheme remained in a funding surplus as at 24 August 2024.
On completion of a comprehensive strategic review of the Scheme's long-term
needs, the Trustee has appointed Schroders with effect from 28 June 2024 as
the Scheme's principal Outsourced Chief Investment Officer (OCIO), under an
investment management agreement.
Schroders will work with the Trustee to implement the Scheme's investment
strategy and deliver security for the Scheme's members.
As set out in the Annual Report and Financial Statements 2024, the Group
continues to monitor the Virgin Media vs NTL Pension Trustees court case.
Despite the Court of Appeal recently upholding the earlier decision of the
High Court against Virgin Media, based on the work performed by the Group to
date, it remains appropriate that no adjustment is made to the Group's
condensed consolidated interim financial statements, and we will continue to
keep this matter under review.
IFRIC 14
For schemes in an accounting surplus position, these surpluses are recognised
on the balance sheet in line with IFRIC 14, as the Group has an unconditional
legal right to any future economic benefits by way of future refunds following
a gradual settlement.
Movement in the Group pension surplus/(deficit) during the financial period
Net defined benefit surplus/(deficit)
24 August 2024 24 February 2024 26 August 2023
£m
£m
£m
Opening balance (631) (391) (391)
Current service cost (9) (15) (7)
Finance income/(cost) (15) (18) (10)
Included in the Group income statement (24) (33) (17)
Remeasurement gain/(loss):
Financial assumptions gain/(loss) (74) 720 1,183
Demographic assumptions gain/(loss) (7) 261 219
Experience gain/(loss) (62) (182) (202)
Return on plan assets excluding finance income 395 (1,050) (987)
Included in the Group statement of comprehensive income/(loss) 252 (251) 213
Employer contributions 9 15 7
Additional employer contributions 12 24 11
Benefits paid 2 5 2
Other movements 23 44 20
Closing balance (380) (631) (175)
Withholding tax on surplus((a)) (4) (4) (3)
Closing balance, net of withholding tax (384) (635) (178)
Consisting of:
Schemes in deficit (426) (657) (200)
Schemes in surplus((b)) 42 22 22
Deferred tax asset/(liability)((c)) 102 162 48
Surplus/(deficit) in schemes at the end of the period, net of deferred tax (282) (473) (130)
(a) Recognised through other comprehensive income in remeasurements of
defined benefit pension schemes.
(b) Schemes in surplus in the UK are presented on the balance sheet net of a
25% withholding tax (24 February 2024 and 26 August 2023: 35%).
(c) Including £(4)m deferred tax liability relating to the ROI scheme in
surplus where no withholding tax is applicable (24 February 2024: £(2)m, 26
August 2023: £(2)m).
Scheme principal assumptions
The principal assumptions, on a weighted average basis, used by external
actuaries to value the defined benefit obligation of the Scheme were as
follows:
24 August 24 February 26 August
2024 2024 2023
%
%
%
Discount rate((a)) 5.1 5.1 5.4
Price inflation 2.9 2.9 3.1
Rate of increase in deferred pensions((b)) 2.5 2.5 2.6
Rate of increase in pensions in payment((b))
Benefits accrued before 1 June 2012 2.8 2.8 2.9
Benefits accrued after 1 June 2012 2.5 2.5 2.6
(a) The discount rate for the Scheme is determined by reference to market
yields of high-quality corporate bonds of suitable currency and term to the
Scheme cash flows and extrapolated based on the trend observable in corporate
bond yields.
(b) In excess of any guaranteed minimum pension (GMP) element.
Sensitivity analysis of significant actuarial assumptions
The sensitivity of significant assumptions upon the Scheme defined benefit
obligation is detailed below:
24 August 2024
Financial assumptions - Increase/(decrease) in UK defined benefit obligation Discount rate Inflation rate
£m
£m
Impact of 0.1% increase of the assumption (182) 170
Impact of 0.1% decrease of the assumption 195 (158)
Impact of 1.0% increase of the assumption (1,690) 1,763
Impact of 1.0% decrease of the assumption 2,152 (1,484)
The sensitivities reflect the range of recent assumption movements and
illustrate that the financial assumption sensitivities do not move in a linear
fashion. Movements in the defined benefit obligation from discount rate and
inflation rate changes may be partially offset by movements in assets.
Note 17 Share capital and other reserves
Share capital
26 weeks ended 52 weeks ended
24 August 2024 24 February 2024
Ordinary shares of 6 ⅓p each Ordinary shares of 6 ⅓p each
Number £m Number £m
Allotted, called-up and fully paid:
At the beginning of the financial period 7,038,930,440 445 7,318,341,195 463
Shares cancelled (182,239,776) (12) (279,410,755) (18)
At the end of the financial period 6,856,690,664 433 7,038,930,440 445
No shares were issued during the current or prior financial period in relation
to share options or bonus awards. The holders of Ordinary shares are entitled
to receive dividends as declared from time to time and are entitled to one
vote per share at general meetings of the Company.
Other reserves
The tables below set out the movements in other reserves:
Capital redemption reserve Hedging Translation Own Merger Insurance finance reserve Total
£m
reserve((a))
reserve
shares
£m
£m
held((b)) reserve( £m £m
£m ) £m
At 24 February 2024 61 75 206 (315) 3,090 14 3,131
Other comprehensive income/(loss)
Retranslation of net assets of overseas subsidiaries, joint ventures and - - (22) - - - (22)
associates, net of hedging instruments
Gains/(losses) on cash flow hedges - (6) - - - - (6)
Cash flow hedges reclassified and reported in the Group income statement - (36) - - - - (36)
Finance income/(expenses) from insurance contracts issued - - - - - (3) (3)
Finance income/(expenses) from reinsurance contracts held - - - - - 1 1
Tax relating to components of other comprehensive income - 5 - - - - 5
Total other comprehensive income/(loss) - (37) (22) - - (2) (61)
Inventory cash flow hedge movements
(Gains)/losses transferred to the cost of inventory - 9 - - - - 9
Total inventory cash flow hedge movements - 9 - - - - 9
Transactions with owners
Own shares purchased for cancellation - - - (746) - - (746)
Own shares cancelled 12 - - 575 - - 587
Own shares purchased for share schemes - - - (101) - - (101)
Share-based payments - - - 183 - - 183
Total transactions with owners 12 - - (89) - - (77)
At 24 August 2024 73 47 184 (404) 3,090 12 3,002
(a) Movements in cost of hedging reserve in the 26 weeks ended and balances
as at 24 August 2024 were £nil (24 February 2023: £nil, 26 August 2023:
£nil).
(b) Including 39.9 million shares held by the Employee Benefit Trust (24
February 2024: 70.0 million, 26 August 2023: 52.4 million).
Capital redemption reserve Hedging Translation Own Merger Insurance finance reserve Total
£m
reserve((a))
reserve
shares
£m
£m
held((b)) reserve( £m £m
£m ) £m
At 25 February 2023 43 27 322 (359) 3,090 16 3,139
Other comprehensive income/(loss)
Retranslation of net assets of overseas subsidiaries, joint ventures and - - (73) - - - (73)
associates, net of hedging instruments
Gains/(losses) on cash flow hedges - (1) - - - - (1)
Cash flow hedges reclassified and reported in the Group income statement - (25) - - - - (25)
Finance income/(expenses) from insurance contracts issued - - - - - 4 4
Finance income/(expenses) from reinsurance contracts held - - - - - (2) (2)
Tax relating to components of other comprehensive income - (7) - - - (1) (8)
Total other comprehensive income/(loss) - (33) (73) - - 1 (105)
Transfer from hedging reserve to retained earnings - 44 - - - - 44
Inventory cash flow hedge movements
(Gains)/losses transferred to the cost of inventory - 47 - - - - 47
Total inventory cash flow hedge movements - 47 - - - - 47
Transactions with owners
Own shares purchased for cancellation - - - (752) - - (752)
Own shares cancelled 12 - - 503 - - 515
Own shares purchased for share schemes - - - (47) - - (47)
Share-based payments - - - 177 - - 177
Total transactions with owners 12 - - (119) - - (107)
At 26 August 2023 55 85 249 (478) 3,090 17 3,018
Refer to previous table for footnotes.
Own shares held
The table below presents the reconciliation of own shares purchased for
cancellation between the Group statement of changes in equity and the Group
cash flow statement:
24 August 26 August
2024 2023
Own shares purchased for cancellation £m £m
Included in the Group statement of changes in equity (746) (752)
Outstanding amount recognised as financial liabilities((a)) 171 249
Included in the Group cash flow statement((b)) (575) (503)
(a) Shares to be delivered under a share repurchase agreement with an external
bank, included in other payables.
(b) 182.2 million (26 August 2023: 190.6 million) shares purchased at an
average price of £3.16 per share (26 August 2023: £2.64).
182.2 million (26 August 2023: 190.6 million) shares, representing 2.7% of the
called-up share capital as at 24 August 2024 (26 August 2023: 2.7%), with
total consideration of £575m (26 August 2023: £503m) including expenses of
£3m (26 August 2023: £2m) were cancelled and charged to retained earnings.
Insurance finance reserve
Insurance finance reserve includes the impact of changes in market discount
rates on insurance and reinsurance contract assets and liabilities.
Note 18 Analysis of changes in net debt
The Net debt APM, as defined in the Glossary, excludes the net debt of Tesco
Bank and includes the net debt of Retail discontinued operations. Balances and
movements in respect of the total Group and Tesco Bank are presented to allow
reconciliation between the Group balance sheet and the Group cash flow
statement.
24 August 2024 24 February 2024 26 August 2023
Group Tesco Bank Retail Group Tesco Bank Retail Group Tesco Bank Retail
£m £m £m £m £m £m £m £m £m
Bank and other borrowings, excluding overdrafts((a)) (6,123) (237) (5,886) (6,407) (380) (6,027) (7,251) (676) (6,575)
Lease liabilities (7,542) (1) (7,541) (7,622) (2) (7,620) (7,709) (21) (7,688)
Net financing derivatives 567 - 567 544 (3) 547 429 (7) 436
Share purchase obligations (171) - (171) - - - (249) - (249)
Liabilities from financing activities (13,269) (238) (13,031) (13,485) (385) (13,100) (14,780) (704) (14,076)
Cash and cash equivalents in the balance sheet 3,310 1,149 2,161 2,340 442 1,898 2,526 716 1,810
Overdrafts((b)) (973) - (973) (812) - (812) (677) - (677)
Cash and cash equivalents (including overdrafts) in the cash flow statement 2,337 1,149 1,188 1,528 442 1,086 1,849 716 1,133
Short-term investments 1,912 - 1,912 2,128 - 2,128 2,692 - 2,692
Joint venture loans 96 - 96 96 - 96 106 - 106
Interest and other receivables 17 - 17 23 - 23 23 - 23
Net operating and investing derivatives (29) - (29) 26 23 3 100 115 (15)
Net debt of disposal group (171) (171) - (182) (182) - - - -
Exclude: Share purchase obligations 171 - 171 - - - 249 - 249
Net debt APM (9,676) (9,764) (9,888)
(a) Retail bank and other borrowings is presented net of a £235m
intercompany loan with Tesco Bank (26 August 2023: £235m).
(b) Overdraft balances are included within borrowings in the Group balance
sheet, and within cash and cash equivalents in the Group cash flow statement.
Refer to Note 11.
The tables below set out the movements in liabilities arising from continuing
operations financing activities:
Bank and other borrowings, excluding overdrafts Lease liabilities Net financing derivatives((a)) Share purchase obligations((b)) Liabilities from Group financing activities((c))
£m £m £m £m £m
At 24 February 2024 (6,407) (7,622) 544 - (13,485)
Cash flows arising from financing activities 280 296 (34) 575 1,117
Cash flows arising from operating activities:
Interest paid 188 186 14 - 388
Non-cash movements:
Fair value gains/(losses) (59) - 93 - 34
Foreign exchange 29 4 - - 33
Interest income/(charge) (154) (186) (50) - (390)
Acquisitions and disposals - (5) - - (5)
Lease additions, terminations, modifications and reassessments - (215) - - (215)
Share purchase agreements - - - (746) (746)
At 24 August 2024 (6,123) (7,542) 567 (171) (13,269)
(a) Net financing derivatives comprise those derivatives which hedge the
Group's exposures in respect of lease liabilities and borrowings. Net
operating and investing derivatives, which form part of the Group's Net debt
APM, are not included.
(b) Share purchase obligations form part of the liabilities arising from the
Group's financing activities, but do not form part of Net debt. Cash flows
arising from financing activities exclude £64m (26 weeks ended 26 August
2023: £49m) cash received from employees exercising Save As You Earn (SAYE)
options.
(c) Liabilities from Group financing activities include liabilities from
share purchase obligations of £(171)m (26 August 2023: £(249)m) and exclude
net operating and investing derivatives of £(29)m (26 August 2023: £100m).
Bank and other borrowings, excluding overdrafts Lease liabilities Net financing derivatives((a)) Share purchase obligations((b)) Liabilities from Group financing activities((c))
£m £m £m £m £m
At 25 February 2023 (6,451) (7,727) 472 (55) (13,761)
Cash flows arising from financing activities (885) 308 (2) 558 (21)
Cash flows arising from operating activities:
Interest paid 177 183 34 - 394
Non-cash movements:
Fair value gains/(losses) (18) - (18) - (36)
Foreign exchange 102 25 - - 127
Interest income/(charge) (176) (183) (57) - (416)
Acquisitions and disposals - 1 - - 1
Lease additions, terminations, modifications and reassessments - (316) - - (316)
Share purchase agreements - - - (752) (752)
At 26 August 2023 (7,251) (7,709) 429 (249) (14,780)
Refer to previous table for footnotes.
Note 19 Contingent liabilities
There have been no material changes to the contingent liabilities of the Group
in the period.
Note 20 Events after the reporting period
There were no material events after the reporting period requiring disclosure.
Glossary - Alternative performance measures
Introduction
In the reporting of financial information, the Directors have adopted various
Alternative performance measures (APMs).
These measures are not defined by International Financial Reporting Standards
(IFRS) and therefore may not be directly comparable with other companies'
APMs, including those in the Group's industry. APMs should be considered in
addition to, and are not intended to be a substitute for, or superior to, IFRS
measures.
Purpose
The Directors believe that these APMs assist in providing additional useful
information on the trends, performance and position of the Group. APMs aid
comparability between geographical units or provide measures that are widely
used across the industry. They also aid comparability between reporting
periods; adjusting for certain costs or incomes that derive from events or
transactions that fall within the normal activities of the Group but which, by
virtue of their size or nature, are adjusted, can provide a helpful
alternative perspective on year-on-year trends, performance and position that
aids comparability over time.
The alternative view presented by these APMs is consistent with how management
views the business, and how it is reported internally to the Board and
Executive Committee for performance analysis, planning, reporting,
decision-making and incentive-setting purposes.
Further information on the Group's adjusting items, which is a critical
accounting judgement, can be found in Note 3.
Some of the Group's IFRS measures are translated at constant exchange rates.
Constant exchange rates are the average actual periodic exchange rates for the
previous financial period and are used to eliminate the effects of exchange
rate fluctuations in assessing performance. Actual exchange rates are the
average actual periodic exchange rates for that financial period.
All income statement measures are presented on a continuing operations basis.
There were no changes to the Group's APMs in the period.
Group APMs
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition and purpose
Income statement
Revenue measures
Sales Revenue - Fuel sales - Excludes the impact of fuel sales made at petrol filling stations to
demonstrate the Group's performance in the Retail and financial services
businesses. It removes volatilities outside of the control of management,
associated with the movement in fuel prices.
- This is a key management incentive metric.
- This measure is also presented on a Retail and Tesco Bank basis.
Growth in sales No direct equivalent - Ratio N/A - Growth in sales is a ratio that measures year-on-year movement in
Group sales for continuing operations for 26 weeks. It shows the annual rate
of increase in the Group's sales and is considered a good indicator of how
rapidly the Group's core business is growing.
Like-for-like (LFL) No direct equivalent - Ratio N/A - Like-for-like is a measure of growth in Group online sales and sales
from stores that have been open for at least a year (but excludes prior year
sales of stores closed during the year) at constant foreign exchange rates. It
is a widely used indicator of a retailer's current trading performance and is
important when comparing growth between retailers that have different profiles
of expansion, disposals and closures.
Profit measures
Adjusted operating profit Operating profit from continuing operations((a)) - Adjusting items((b)) - Adjusted operating profit is the headline measure of the Group's
performance, based on operating profit from continuing operations before the
impact of adjusting items. Refer to the APM Purpose section of the Glossary
for further information on adjusting items.
- Amortisation of acquired intangibles is included within adjusting
items because it relates to historical inorganic business combinations and
does not reflect the Group's ongoing trading performance (related revenue and
other costs from acquisitions are not adjusted).
- This is a key management incentive metric.
- This measure is also presented on a Retail basis.
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition and purpose
Adjusted total finance costs Finance costs - Adjusting items((b)) - Adjusting items within finance costs include net pension finance
income/costs and fair value remeasurements on financial instruments. Net
pension finance income/costs are impacted by corporate bond yields, which can
fluctuate significantly and are reset each year based on external market
factors that are outside management's control. Fair value remeasurements are
impacted by changes to credit risk and various market indices, applying to
financial instruments resulting from liability management exercises, which can
fluctuate significantly outside of management's control. This measure helps to
provide an alternative view of year-on-year trends in the Group's finance
costs.
Adjusted profit before tax Profit before tax - Adjusting items((b)) - This measure is the summation of the impact of all adjusting items
on profit before tax. Refer to the APM Purpose section of the Glossary.
Adjusted operating margin No direct equivalent - Ratio N/A - Operating margin is calculated as adjusted operating profit divided
by revenue. Progression in operating margin is an important indicator of the
Group's operating efficiency.
Adjusted diluted earnings Diluted earnings per share from continuing operations - Adjusting items((b)) - This metric shows the adjusted profit after tax from continuing
operations attributable to owners of the parent divided by the weighted
per share average number of ordinary shares in issue during the financial period,
adjusted for the effects of dilutive share options.
Retail EBITDA (earnings before adjusting items, interest, tax, depreciation Retail operating profit from continuing operations((a)) - Adjusting items((b)) - This measure is widely used by analysts, investors and other users of
and amortisation)
the accounts to evaluate comparable profitability of companies, as it excludes
- Depreciation and amortisation the impact of differing capital structures and tax positions, variations in
tangible asset portfolios and differences in identification and recognition of
intangible assets. It is used to derive the Net debt/EBITDA and Total
indebtedness ratios, and Fixed charge cover APMs.
Tax measures
Adjusted effective tax rate Effective tax rate - Adjusting items((b)) - Adjusted effective tax rate is calculated as total income tax
credit/(charge) excluding the tax impact of adjusting items, divided by
adjusted profit before tax. This APM provides an indication of the ongoing tax
rate across the Group.
Balance sheet measures
Net debt No direct equivalent - N/A - Net debt excludes the net debt of Tesco Bank and includes the net
debt of Retail discontinued operations to reflect the net debt obligations of
the Retail business.
- Net debt comprises bank and other borrowings, lease liabilities and
net derivative financial instruments, offset by cash and cash equivalents,
short-term investments, joint venture loans, and interest and other
receivables.
- It is a useful measure of the progress in generating cash and
strengthening of the Group's balance sheet position, and is a measure widely
used by credit rating agencies.
Net debt/EBITDA ratio No direct equivalent - Ratio N/A - Net debt/EBITDA ratio is calculated as Net debt divided by the
rolling 12-month Retail EBITDA. It is a measure of the Group's ability to meet
its payment obligations, showing how long it would take the Group to repay its
current net debt if both net debt and EBITDA remained constant. It is widely
used by analysts and credit rating agencies.
Total indebtedness No direct equivalent - N/A - Total indebtedness is Net debt plus the IAS 19 deficit in any
pension schemes (net of associated deferred tax) to provide an overall view
of the Group's obligations, including the long-term commitments to the Group's
pension schemes. Pension surpluses are not included. It is an important
measure of the long-term obligations of the Group and is a measure widely used
by credit rating agencies.
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition and purpose
Total indebtedness ratio No direct equivalent - Ratio N/A - Total indebtedness ratio is calculated as Total indebtedness divided
by the rolling 12-month Retail EBITDA. It is a measure of the Group's ability
to meet its payment obligations and is widely used by analysts and credit
rating agencies.
Fixed charge cover No direct equivalent - Ratio N/A - Fixed charge cover is calculated as the rolling 12-month Retail
EBITDA divided by the sum of net finance costs (excluding net
pension finance costs, finance charges payable on lease liabilities,
capitalised interest and fair value remeasurements on financial instruments)
and all lease liability payments from continuing operations. It is a measure
of the Group's ability to meet its payment obligations and is widely used by
analysts and credit rating agencies.
Capex Property, plant and equipment, intangible asset, and investment property - Additions relating to property buybacks and store purchases - Capex excludes additions arising from business combinations,
additions, excluding those from business combinations
buybacks of properties (typically stores), purchases of store properties, as
- Additions relating to decommissioning provisions and similar items well as additions relating to decommissioning provisions and similar items.
- Property buybacks and purchases of store properties are variable in
timing, with the number and value of transactions dependent on opportunities
that arise within any given financial year. Excluding property buybacks and
store property purchases therefore gives an alternative view of trends in
capital expenditure in the Group's ongoing trading operations.
- Additions relating to decommissioning provisions and similar items
are adjusted because they do not result in near-term cash outflows.
Cash flow measures
Retail free cash flow No direct equivalent - N/A Retail free cash flow includes:
- Continuing cash flows from operating activities of the Retail
business less adjusting Retail operating cash flows.
- Retail investing cash flows relating to: the purchase of property,
plant and equipment, investment property and other long-term assets (excluding
property buybacks and store purchases); purchase of intangible assets;
dividends received from Tesco Bank (excluding special dividends); dividends
received from joint ventures and associates; and interest received.
- Financing cash flows relating to: market purchase of shares net of
proceeds from shares issued in relation to share schemes; and Retail repayment
of obligations under leases.
- Directors and management believe this provides a view of free cash
flow generated by the Group's Retail trading operations that is more
predictable and comparable over time and reflects the cash available to
shareholders.
- This is a key management incentive metric.
(a) Operating profit is presented on the Group income statement. It is not
defined per IFRS, however, is a generally accepted profit measure.
(b) Refer to Note 3.
APMs: Reconciliation of income statement measures
As the incomes and expenses included in debt APMs are calculated using a
rolling 12-month period, the amounts for the 12 months to 24 August 2024 are
not disclosed in the notes to the condensed consolidated interim financial
statements for the current financial period.
Retail EBITDA
Continuing operations 52 weeks ended 52 weeks ended
24 August 2024 24 February 2024
£m £m
Operating profit 3,007 2,821
Exclude: Adjusting items 45 8
Adjusted operating profit 3,052 2,829
Exclude: Tesco Bank segment adjusted operating profit (271) (148)
Exclude: Tesco Bank adjusted operating profit from discontinued operations 117 79
Retail adjusted operating profit 2,898 2,760
Include: Retail depreciation and amortisation before adjusting items 1,631 1,602
Retail EBITDA 4,529 4,362
APMs: Reconciliation of balance sheet measures
Net debt
Reconciliation from Retail free cash flow to Net debt
Notes 24 August 2024 26 August 2023
£m £m
Opening Net debt 18 (9,764) (10,493)
Retail free cash flow 1,261 1,368
Other cash movements:
Own shares purchased for cancellation 2 (575) (503)
Dividends paid to equity holders 2 (575) (509)
Special dividends received from Tesco Bank 2 - 250
Adjusting items included in operating cash flow activities 2 (52) (87)
Retail repayments of capital element of obligations under leases 2 295 306
Retail interest paid on lease liabilities 186 182
Retail net other interest paid/(received) 58 91
Retail proceeds from sale of property, plant and equipment, investment 2 16 34
property, intangible assets and assets held for sale
Cash outflows attributable to property buybacks and store purchases (30) (37)
Other investing cash movements (50) 7
Non-cash movements in Net debt:
Retail fair value movements (1) (25)
Retail foreign exchange movements 21 81
Retail net interest charge (64) (94)
Retail non-cash movements in lease liabilities (397) (473)
Retail movement in net debt of disposal group - 14
Retail non-cash movement arising from acquisitions and disposals (5) 1
Other non-cash movements - (1)
Closing Net debt 18 (9,676) (9,888)
Net debt/EBITDA and Total indebtedness ratio
Notes 24 August 2024 24 February 2024
£m £m
Net debt 18 9,676 9,764
Retail EBITDA 4,529 4,362
Net debt/EBITDA ratio 2.1 2.2
Net debt 18 9,676 9,764
Add: Defined benefit pension deficit, net of deferred tax 16 320 493
Total indebtedness 9,996 10,257
Retail EBITDA 4,529 4,362
Total indebtedness ratio 2.2 2.4
Fixed charge cover
52 weeks ended 52 weeks ended
24 August 2024 24 February 2024
£m £m
Net finance costs 487 538
Exclude: Net pension finance income/(costs) (23) (18)
Exclude: Fair value remeasurements of financial instruments 76 38
Adjusted total finance costs 540 558
Exclude: Finance charges payable on lease liabilities (376) (373)
Adjusted total finance cost, excluding capitalised interest and finance 164 185
charges payable on lease liabilities
Include: Total lease liability payments 992 1,000
Exclude: Discontinued operations total lease liability payments (3) (3)
1,153 1,182
Retail EBITDA 4,529 4,362
Fixed charge cover (ratio) 3.9 3.7
Capex
Notes 24 August 2024 26 August 2023
£m £m
Property, plant and equipment additions* 9 422 422
Other intangible asset additions* 133 135
Exclude: Additions from property buybacks (22) (34)
Exclude: Additions from store purchases (3) -
Capex 530 523
* Excluding amounts acquired through business combinations.
APMs: Reconciliation of cash flow measures
Notes 26 weeks ended 26 weeks ended
24 August 2024 26 August 2023
£m £m
Cash generated from/(used in) operating activities 2 2,043 2,312
Exclude: Cash (generated from)/used in operating activities in Tesco Bank 2 39 (63)
Exclude: Cash (generated from)/used in operating activities in discontinued 2 (139) (181)
operations
Retail cash generated from/(used in) operating activities 2 1,943 2,068
Exclude: Retail adjusting net cash (generated from)/used in operating 2 52 87
activities
Retail adjusted cash generated from/(used in) operating activities 1,995 2,155
Include the following cash flows generated from/(used in) investing
activities:
Retail purchase of property, plant and equipment, investment property and 2 (464) (472)
other long-term assets - other capital expenditure*
Retail purchase of intangible assets 2 (130) (123)
Dividends received from joint ventures and associates 2 2 6
Retail interest received 2 136 114
Include the following cash flows generated from/(used in) financing
activities:
Own shares purchased for share schemes, net of cash received from employees 2 17 (6)
Retail repayment of capital element of obligations under leases 2 (295) (306)
Retail free cash flow 1,261 1,368
* Excludes property buybacks and store purchases.
Glossary - Other
Expected credit loss (ECL)
Credit loss represents the portion of the debt that a company is unlikely to
recover. The ECL is the projected future losses based on probability-weighted
calculations.
ESG
Environmental, social and governance.
MTN
Medium-term note.
Net promoter score (NPS)
This is a loyalty measure based on a single question requiring a score between
0-10. The NPS is calculated by subtracting the percentage of detractors
(scoring 0-6) from the percentage of promoters (scoring 9-10). This generates
a figure between -100 and 100 which is the NPS.
Independent review report to Tesco PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the 26 weeks ended 24
August 2024 which comprises the Group income statement, the Group statement of
comprehensive income/(loss), the Group balance sheet, the Group statement of
changes in equity, the Group cash flow statement and related notes 1 to 20.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 26 weeks ended 24 August 2024 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, England
2 October 2024
Appendices
Appendix 1
One-year like-for-like sales performance (exc. VAT, exc. fuel)
Like-for-like sales
H1 H2 FY Q1 Q2 HY
2023/24
2024/25
2024/25
2024/25
2023/24 2023/24
UK & ROI 8.4% 6.2% 7.3% 3.6% 2.5% 3.1%
UK 8.7% 6.8% 7.7% 4.6% 3.5% 4.0%
ROI 6.9% 6.7% 6.8% 4.4% 5.1% 4.7%
Booker 7.5% 3.2% 5.4% (1.3)% (2.5)% (1.9)%
Central Europe 0.9% (0.5)% 0.2% 0.6% 0.6% 0.6%
Total Retail 7.8% 5.7% 6.8% 3.4% 2.4% 2.9%
Appendix 2
Total sales performance (exc. VAT, exc. fuel)
Actual rates Constant rates
H1 H2 FY H1 H1 H2 FY H1
2023/24
2023/24
2023/24 2023/24 2024/25 2023/24 2023/24 2024/25
UK & ROI 8.9% 6.3% 7.6% 3.6% 8.8% 6.4% 7.6% 3.7%
UK 9.1% 7.2% 8.1% 4.7% 9.1% 7.2% 8.1% 4.7%
ROI 13.0% 6.1% 9.3% 3.6% 10.0% 7.3% 8.5% 5.6%
Booker 6.9% 2.2% 4.6% (1.7)% 6.9% 2.2% 4.6% (1.7)%
Central Europe 6.7% (0.2)% 3.1% (4.2)% 1.4% (0.1)% 0.6% 0.9%
Total Retail 8.7% 5.8% 7.3% 3.0% 8.2% 5.9% 7.0% 3.5%
Appendix 3
Country detail - Retail
Revenue (exc. VAT, inc. fuel)
Local currency £m Average exchange Closing exchange
(m) rate rate
UK 26,077 26,077 1.0 1.0
ROI 1,701 1,449 1.2 1.2
Booker 4,623 4,623 1.0 1.0
Czech Republic 20,942 710 29.5 29.6
Hungary 324,882 705 460.8 464.7
Slovakia 810 690 1.2 1.2
Appendix 4
UK sales area by size of store
24 August 2024 24 February 2024
Store size (sq. ft.) No. of stores Million sq. ft. % of total No. of stores Million sq. ft. % of total
sq. ft. sq. ft.
0-3,000 2,693 5.8 14.9% 2,675 5.8 14.9%
3,001-20,000 279 2.9 7.5% 279 2.9 7.5%
20,001-40,000 288 8.3 21.3% 288 8.3 21.3%
40,001-60,000 182 8.8 22.6% 182 8.8 22.6%
60,001-80,000 119 8.4 21.6% 119 8.4 21.6%
80,001-100,000 45 3.7 9.5% 45 3.7 9.5%
Over 100,000 8 1.0 2.6% 8 1.0 2.6%
Total* 3,614 38.9 100.0% 3,596 38.9 100.0%
* Excludes Booker and franchise stores.
Appendix 5
Actual Group space - store numbers((a))
2023/24 Openings Closures/ Net gain/ As at 24 Repurposing/
year end
disposals
(reduction)((b)) August 2024 extensions((c))
Large 809 1 (1) - 809 -
Convenience 2,048 19 (3) 16 2,064 -
Dotcom only 6 - - - 6 -
Total Tesco 2,863 20 (4) 16 2,879 -
One Stop((d)) 733 6 (4) 2 735 -
Booker 190 - - - 190 -
UK((d)) 3,786 26 (8) 18 3,804 -
ROI 170 7 - 7 177 -
UK & ROI((d)) 3,956 33 (8) 25 3,981 -
Czech Republic((d)) 184 1 - 1 185 5
Hungary 197 - - - 197 26
Slovakia((d)) 169 10 - 10 179 11
Central Europe((d)) 550 11 - 11 561 42
Group((d)) 4,506 44 (8) 36 4,542 42
UK (One Stop) 317 25 (9) 16 333 -
Czech Republic 119 1 (4) (3) 116 -
Slovakia - - - - - -
Franchise stores 436 26 (13) 13 449 -
Total Group 4,942 70 (21) 49 4,991 42
Actual Group space - '000 sq. ft.((a))
2023/24 Openings Closures/ Repurposing/ Net gain/ As at 24
year end
disposals
extensions((c)) (reduction) August 2024
Large 31,505 10 (16) - (6) 31,499
Convenience 5,455 54 (13) - 41 5,496
Dotcom only 716 - - - - 716
Total Tesco 37,676 64 (29) - 35 37,711
One Stop((d)) 1,208 9 (6) - 3 1,211
Booker 8,094 - - - - 8,094
UK((d)) 46,978 73 (35) - 38 47,016
ROI 3,499 43 - - 43 3,542
UK & ROI((d)) 50,477 116 (35) - 81 50,558
Czech Republic((d)) 4,101 25 - (21) 4 4,105
Hungary 5,372 - - (61) (61) 5,311
Slovakia((d)) 3,213 19 - (25) (6) 3,207
Central Europe((d)) 12,686 44 - (107) (63) 12,623
Group((d)) 63,163 160 (35) (107) 18 63,181
UK (One Stop) 459 29 (12) - 17 476
Czech Republic 108 1 (3) - (2) 106
Slovakia - - - - - -
Franchise stores 567 30 (15) - 15 582
Total Group 63,730 190 (50) (107) 33 63,763
(a) Continuing operations.
(b) The net gain/(reduction) reflects the number of store openings less the
number of store closures/disposals.
(c) Repurposing of retail selling space.
(d) Excludes franchise stores.
Group space forecast to 22 February 2025 - '000 sq. ft.((a))
As at 24 Openings Closures/ disposals Repurposing/ Net gain/ 2024/25
year end
August 2024 extensions((b)) (reduction)((c))
Large 31,499 29 (44) 5 (10) 31,489
Convenience 5,496 120 (22) - 98 5,594
Dotcom only 716 - - - - 716
Total Tesco 37,711 149 (66) 5 88 37,799
One Stop((d)) 1,211 29 (2) - 27 1,238
Booker 8,094 - - - - 8,094
UK((d)) 47,016 178 (68) 5 115 47,131
ROI 3,542 39 - - 39 3,581
UK & ROI((d)) 50,558 217 (68) 5 154 50,712
Czech Republic((d)) 4,105 37 (35) 1 3 4,108
Hungary 5,311 7 - (25) (18) 5,293
Slovakia((d)) 3,207 24 - (14) 10 3,217
Central Europe((d)) 12,623 68 (35) (38) (5) 12,618
Group((d)) 63,181 285 (103) (33) 149 63,330
UK (One Stop) 476 61 - - 61 537
Czech Republic 106 - (1) - (1) 105
Slovakia - - - - - -
Franchise stores 582 61 (1) - 60 642
Total Group 63,763 346 (104) (33) 209 63,972
(a) Continuing operations.
(b) Repurposing of retail selling space.
(c) The net gain/(reduction) reflects the number of store openings less the
number of store closures/disposals and repurposing/extensions.
(d) Excludes franchise stores.
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