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Tesco group trading profit down 6%

Staff writer ▼ | April 17, 2014
Tesco reported for preliminary unaudited results 52 weeks ended February 22, 2014. Group sales, including VAT, increased by 0.3% to 70.9 billion pounds.
TescoTesco reported for preliminary unaudited results 52 weeks ended February 22, 2014. Group sales, including VAT, increased by 0.3% to 70.9 billion pounds.

At constant exchange rates, sales declined by 0.2% including petrol and increased by 0.4% excluding petrol.

Group trading profit was 3,315 million pounds, down 6% on last year, impacted by a weakening UK grocery market in the second half of the year and challenging trading conditions overseas, in part driven by regulatory and political issues. Group trading margin was 5.17%, down 34 basis points.

Underlying profit before tax declined by 6.9% to 3,054 million pounds. Group profit before tax was 2,259 million pounds, after one-off charges totalling 801 million pounds, including 734 million pounds for the impairment of European assets. Despite these charges and a lower contribution from profits/losses on property-related items, Group profit before tax increased by 9.8%, primarily reflecting higher one-off charges last year.

Net finance costs increased slightly to 315 million pounds, from 309 million pounds last year. Capitalised interest reduced by 44 million pounds to 79 million pounds.

Total Group tax has been charged at an effective rate on profit before tax prior to the one-off charges mentioned above of 15.36% last year 17.44%. This reflects the one-off effect of a lower UK corporate tax rate on deferred tax liabilities.

Cash generated from retail operating activities increased by 0.6 billion pounds to 3.5 billion pounds2012/13: 2.9 billion pounds, helped by an improved working capital performance. Net debt was flat year-on-year at 6.6 billion pounds.

As expected, the contribution from property-related items was greater in the second half. The full year profit of 180m is down significantly year-on-year, consistent with our expectations for a more rapid reduction of our sale and leaseback programme.

The Group's net pension deficit after tax has increased from 1.8 billion pounds to 2.6 billion pounds, mainly due to a reduction in real corporate bond yields with a subsequent fall in the discount rate used to measure our liabilities.

Group capital expenditure was 2.7 billion pounds, or 3.9% of sales, a similar level to the prior year on a continuing operations basis. Our capex on new stores fell in Europe and the UK, with a small year-on-year increase in Asia, in line with our disciplined international growth priorities. Our UK capex of 1.6bn included an increase in technology-related spend.

Including the net assets and underlying losses of our existing Chinese business, the pro-forma Group Return on Capital Employed ROCE was 12.1%. This compares to 12.7% last year with the year-on-year change reflecting the Group’s lower trading profit. On a continuing operations basis, prior to the impact of one-off charges, Group ROCE was 13.6%, compared to 14.5% last year.

The Board has approved a maintained final dividend of 10.13p per share, giving a full year dividend of 14.76p. The final dividend will be paid on 4 July 2014 to shareholders on the Register of Members at the close of business on 2 May 2014.