Key Performance Indicators
We operate a balanced scorecard approach to managing the business that is known internally within the Group as our ‘Steering Wheel’. This unites the Group’s resources and in particular focuses the efforts of our staff around our customers, people, operations, finance and the community. Its prime focus is as a management tool for the company so that there is appropriate balance in the trade-offs that need to be made all the time between the main levers of management – such as operations measures, financial measures or delivery of customer metrics.
It therefore enables the business to be operated and monitored on a balanced basis with due regard to the needs of all stakeholders. For the owners of the business, it is simply based around the philosophy that if we look after customers well and operate efficiently and effectively then shareholders’ interests will always be best served by the inevitable outputs of those – growth in sales, profits and returns.
 |
2009 | 2008 |
|---|---|---|
| Sales growth | |
|
| Change in group sales over the year (including value added tax) | 15.1% | 11.1% |
| UK sales growth | 9.5% | 6.7% |
| International sales growth | 30.6% | 25.3% |
| International sales growth (at constant exchange rates) | 13.6% | 22.5% |
| Retailing services sales growth | 11% | – |
| Profit before tax | £2,954m | £2,803m |
| Underlying profit before tax | £3,128m | £2,846m |
| Trading margin | |
|
| UK trading margin | 6.2% | 5.9% |
| International trading margin (excluding the United states) | 5.3% | 5.6%† |
| Trading margin is calculated from the trading profit expressed as a percentage of Group revenue (sales excluding value added tax). It is a measure of profit generation from sales and is a comparable performance measure with other companies. This is how much we made from trade in our stores, taking account of the cost of the products sold, wages and salaries, expenses associated with running the stores, depots and head office, and the cost of depreciation of the assets used to generate the profits. Trading profit is stated after adjusting operating profit for the impact of IAS 19, IAS 32 and IAS 39 (principally pension costs and the marking to market of financial instruments). It also excludes the non-cash elements of IAS 17 ‘Leases’, relating to the impact of annual uplifts in rents and rent-free periods, and the IFRS 3 amortisation charge on intangible assets arising on the acquisition of Tesco Personal Finance (TPF). | |
|
| Net cash inflow/(outflow) | £1,601m | £801m |
| Net cash inflow is the cash received less cash spent during the financial period, after financing activities | |
|
| Capital expenditure | £4.7bn | £3.9bn |
| This is the amount invested in purchasing fixed assets | |
|
| UK | £2.6bn | £2.3bn |
| International | £2.1bn | £1.6bn |
| Net borrowings and gearing | |
|
| Net borrowings | £9.6bn | £6.2bn |
| Gearing | 74% | 52% |
| Return on capital employed (ROCE) | 13.0%‡ | 12.9%** |
| ROCE is calculated as profit before interest less tax divided by the average of net assets plus net debt plus dividend creditor less net assets held for sale. ROCE is a relative profit measurement that not only incorporates the funds shareholders have invested, but also funds invested by banks and other lenders, and therefore shows the productivity of the assets of the Group. | |
|
| Underlying diluted earnings per share | 28.92p§ | 27.02p |
| Underlying diluted earnings per share is the calculation of profit after tax and minority interest divided by the diluted weighted average number of shares in issue during the year. It is the amount which could be paid out on each share if the Company decided to distribute all its profits as dividends instead of retaining some for future expansion. | |
|
* All 2009 KPIs are for 53 weeks to 28 February 2009 unless otherwise stated.
† International trading margins rose by 15 basis points excluding the impact of consolidating the China business.
‡ Excluding acquisitions of TPF and Homever, India start-up costs, and after adjusting for assets held for sale.
** Using a ‘normalised’ tax rate before start-up costs in the US and Tesco Direct, and excludes the impact of foreign exchange in equity and our acquisition of a majority share of Dobbies.
§ Underlying diluted earnings per share grew by 7% on a statutory basis.
