Preliminary Results 2016/17

12 April 2017

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Growth in sales2, volume, profit3 and cash4

  • Group sales2 up 4.3% to £49.9bn
  • UK like-for-like sales6 up 0.9% - first reported full-year growth since 2009/10; UK food LFL up 1.3%
  • Positive volume growth in both UK & ROI and International
  • Group operating profit before exceptional items3 up 30% to £1,280m; UK & ROI up 60% to £803m
  • Step up in Group operating margin3 from 1.8% to 2.3%; on track for 3.5-4.0% ambition by 2019/20
  • Retail operating cash flow4 up 9% to £2.3bn
  • Net debt4,5 of £(3.7)bn, down 27%; £1.9bn of debt repaid within the year
  • Statutory revenue up 3.7% to £55.9bn; PBT down year-on-year after £(235)m exceptional charge booked post year-end following our agreement with SFO and FCA7

Six strategic drivers guiding our actions

  • Brand health8 at strongest level in five years
    • Further improvement in core offer, including c.£300m investment in seven exclusive fresh food brands in March 2016, contributing to sustained market outperformance in fresh food
    • Price of typical basket down 6% since Sept 2014; promotional participation down to 32%
    • Most improved food retailer for quality perception; record rating for staff helpfulness at 80%
    • Availability at record high; simpler range with 24% net reduction over two years
  • Cost savings of £226m already achieved towards £1.5bn medium-term target; FY savings of £455m
  • Generated £2.3bn retail operating cash; £0.4bn underlying working capital9 inflow
  • More efficient mix across channels & products; improved service model in 1,500 stores
  • Released £0.5bn value10 from property; 1.0m sq. ft. space re-purposed; 16 stores re-purchased
  • Innovated to remove 14bn calories from soft drinks in two years; food donations up 148% as FareShare FoodCloud now in all large UK stores; PayQwiq digital wallet used once every 5 seconds

1. The Group has defined and outlined the purpose of its alternative performance measures, including its headline measures, in the Glossary on page 52.

2. Group sales exclude VAT and fuel. Sales growth shown on a comparable days basis.

3. Excludes exceptional items by virtue of their size and nature in order to reflect management’s view of the performance of the Group.

4. Net debt and retail operating cash flow exclude the impact of Tesco Bank, in order to provide further analysis of the retail cash flow statement.

5. Net debt includes both continuing and discontinued operations.

6. 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 at constant foreign exchange rates.

7. SFO and FCA are acronyms for the Serious Fraud Office and the Financial Conduct Authority respectively.

8. As per YouGov BrandIndex, February 2017.

9. Working capital excluding the impact of exceptional items.

10. Value released from property relates to gross proceeds from property disposals in the year.