Preliminary Results 2013/14

52 weeks ended 22 February 2014 (unaudited)
On a continuing operations basis
2013/14 Growth (Actual exchange rates) Growth (Constant
exchange rates)
Group sales (inc. VAT)* £70,894m 0.3% (0.2)%
Sales growth excluding petrol   0.9% 0.4%
Group trading profit
- UK
- Asia
- Europe
- Tesco Bank
Underlying profit before tax £3,054m (6.9)% (7.7)%
Underlying diluted earnings per share 32.05p (7.3)%** n/a
ROCE (pro-forma inc. China)*** 12.1% (64)bp n/a
Capex £2.7bn 0.9% 0.6%
Statutory profit before tax includes:
- One-off items
(inc. Europe asset impairment of £(734)m)
Statutory profit before tax £2,259m 9.8% n/a
China treated as discontinued, including a charge of £(540)m relating to the write-down of goodwill


Philip Clarke, Chief Executive:

“We are transforming Tesco through a relentless focus on providing the most compelling offer for our customers. Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before. We are determined to lead the industry in this period of change.

Having strengthened the foundations of our business in the UK, we are now accelerating our growth in new channels and investing in sharper prices, improved quality, stronger ranges and better service. Since setting out these plans just seven weeks ago, we have already made a substantial investment in price, launched Clubcard Fuel Save and re-launched our general merchandise ranges across the business. We are going faster with our work to transform our Extra stores to create more compelling destinations and will complete more than 50 in the first half alone.

During the year, we have maintained our focus on cash and capital discipline. We have significantly reduced our new investment in Europe, focusing the majority of our overseas capital on targeted, high-returning investments in Korea, Malaysia and Thailand. We have completed our exit from the U.S. and established partnerships with CRE in China and Tata in India which provide continued access to two of the world’s most exciting markets, consistent with a sustainable level of future investment.”


  • £3.3bn trading profit – year-on-year decline reflects challenges in UK and Europe
  • Final dividend maintained at 10.13p, giving full-year dividend of 14.76p (cover 2.1 times)****
  • UK sales exc. petrol up +0.8%, with lower net new space contribution as planned
  • Strong UK growth in online grocery +11% and Express LFL +1.1%
  • UK LFL inc. VAT, exc. petrol (1.3)% held back by work on the transformation of general merchandise and a weaker and increasingly competitive grocery market in the second half
  • Nearly 300 UK stores refreshed this year - typical sales uplift +3% to +5%
  • Ongoing multichannel focus - grocery home shopping launched in five countries
  • Consistent approach to capital discipline, returns and cash

*Group sales (inc. VAT) exclude the accounting impact of IFRIC 13.
** Underlying diluted EPS growth calculated on a constant tax rate basis; (5.0)% at actual tax rates.
*** From an accounting point of view, our existing business in China has to be treated as a discontinued operation, prior to the planned completion of our partnership with CRE. The pro-forma Group ROCE of 12.1% includes our Chinese business to provide a comparable figure to the previously disclosed 2012/13 figure. It is otherwise calculated on a continuing operations basis, excluding one-off charges. Excluding our Chinese business, Group ROCE for 2013/14 was 13.6%.
**** Dividend cover calculated on underlying diluted EPS on a constant tax rate basis.


Continuing operations2 Group   UK3 Asia Europe Tesco Bank
  TY LY Growth %   TY TY TY TY
  £m  £m      £m £m £m £m


  1. The financial year represents the 52 weeks ended 22 February 2014 (prior financial year 52 weeks ended 23 February 2013). For the UK and the Republic of Ireland, the results are for the 52 weeks ended 22 February 2014 (prior financial year 52 weeks ended 23 February 2013). For all other operations, the results are for the financial year ended 28 February 2014 (prior financial year ended 28 February 2013). All growth rates are calculated at actual exchange rates unless otherwise stated. Statutory numbers include the accounting impact of IFRIC 13 (Customer Loyalty Programmes). All other numbers are shown excluding the accounting impact of IFRIC 13, consistent with internal management reporting. More information can be found in Note 1 to the preliminary consolidated financial information.
  2. Continuing operations exclude the results from our operations in China, the US and Japan which have been treated as discontinued.
  3. The UK segment excludes Tesco Bank, which is reported separately in accordance with IFRS 8 ‘Operating Segments’.
  4. Excludes the accounting impact of IFRIC 13 (Customer Loyalty Programmes). Trading margin is based on revenue excluding the accounting impact of IFRIC 13.
  5. Includes the accounting impact of IFRIC 13 (Customer Loyalty Programmes).
  6. Trading profit excludes profits/losses arising on property-related items and makes the same additional adjustments as our underlying profit measure, except for the impact of non-cash elements of IAS 17 relating to Joint Ventures and Associates, IAS 32 and 39, and the interest element of IAS 19.
  7. Underlying profit excludes the impact of non-cash elements of IAS 17, 19, 32, and 39 (principally the impact of annual uplifts in rents and rent-free periods, pension costs, and the marking to market of financial instruments); the amortisation charge on intangible assets arising on acquisition (Tesco Bank) and acquisition costs, the non-cash impact of IFRIC 13 (Customer Loyalty Programmes), and profits/losses arising on property-related items. It also excludes restructuring and other one-off costs.
  8. Includes both continuing and discontinued operations.
Sales (inc. VAT)4 70,894 70,712 0.3%   48,177 10,947 10,767 1,003
Growth %         (0.1)% 2.7% (0.4)% (1.8)%
UK LFL (exc. Petrol)         (1.3)%      
Revenue (exc. VAT)5 63,557 63,406 0.2%   43,057 10,276 9,221 1,003
Growth %         (0.1)% 2.6% (0.6)% (1.8)%
UK LFL – IFRIC 13 compliant basis (exc. Petrol)         (1.4)%      
Trading profit6 3,315 3,525 (6.0)%   2,191 692 238 194
Growth %         (3.6)% (5.6)% (27.7)% 1.6%
Trading profit margin4 5.17% 5.51% (34)bp   5.03% 6.71% 2.57% 19.34%
Change (basis points)         (18)bp (59)bp (96)bp 63bp
Other underlying profit items:                
– Share of post-tax profits of joint ventures and associates 54 64 (15.6)%          
– Net interest cost (315) (309) (1.9)%          
Underlying profit before tax7 3,054 3,280 (6.9)%    
IAS adjustments (174) (148) (17.6)%          
Restructuring and other one-off costs                
– Impairment of PPE and onerous lease provisions included within cost of sales (734) (161) (355.9)%          
– Impairment of PPE and onerous lease provisions included within profits/losses arising on property-related items 98 (709) 113.8%          
– Impairment of goodwill - (495) n/m          
– Provision for customer redress (63) (115) 45.2%          
– Other restructuring and one-off items (102) (14) (628.6)%          
Other profits/losses arising on property-related items 180 419 (57.0)%          
Statutory profit before tax 2,259 2,057 9.8%          
Dividend per share (pence) 14.76 14.76 0.0%          
  Group   UK Asia Europe Tesco Bank
Capital expenditure (£bn) 2.7 2.7 -   1.6 1.4 0.7 0.7 0.3 0.5 0.1 0.1
Gross space added
(million sq.ft.)
4.0 5.2 (1.2)   1.5 1.5 2.1 2.3 0.4 1.4 n/a n/a
  TY LY YOY Change
Net cashflow from operating activities (£bn)8:      
Retail 3.5 2.9 0.6
Tesco Bank (0.3) (0.1) (0.2)
Group 3.2 2.8 0.4
IFRS pensions liability post-tax (£bn) 2.6 1.8 0.8
Net debt (£bn)8 6.6 6.6 -


It is clear that the pace of change within our industry has accelerated and that uncertainties remain. Regardless of these uncertainties, our overarching priority is delivering the most compelling offer for customers and we are retaining the flexibility to act accordingly. By putting our customers at the heart of our business, we are determined to lead the industry in the new era of retail and in doing so, to create sustainable growth and strong returns.

Our performance in the year was not where we had planned it to be. In the UK, we faced a weaker and increasingly competitive market in the second half. These conditions and the accelerating shift to online retailing particularly affected the performance of our larger stores. Overseas, the difficult trading conditions in Europe and the profit impact of opening hours regulations in Korea persisted from the second half of 2012/13 into the first half of 2013/14. These trends in the international businesses eased in the second half, but the fourth quarter saw the onset of new challenges in Thailand with political unrest, in addition to a weak economy.

We have worked hard to strengthen the foundations of our business over the last two years and our three clear strategic priorities remain unchanged:

  1. Continuing to invest in a strong UK business
  2. Establishing multichannel leadership
  3. Pursuing disciplined international growth

In a difficult and more competitive trading environment, we have continued to invest in a strong UK business in the second year of our ‘Building a Better Tesco’ plan. In February this year, we gave an update on the six parts of our plan and announced that we are accelerating our efforts to deliver the most compelling offer for customers. Since February we have made good progress and have already introduced a number of significant improvements:

  • We have started to deliver on our commitment to lower, more stable prices by cutting prices on the lines that matter most to our customers. So far the price reductions have included milk, eggs, butter, peppers, onions, tomatoes, cucumbers, carrots, chicken and beef mince, with prices coming down by an average of 24% across all of the lines which have been cut.
  • We launched Clubcard Fuel Save across the nation on 12th March. As expected, this initiative will take time to build but already the average saving for our customers is six pence per litre.
  • Our new Spring/Summer general merchandise ranges are now in store, reaching a key milestone in the transformation of these categories.
  • We have begun to accelerate our refresh programme focusing on our larger stores. More than 50 Extra stores will be refreshed in the first half of 2014/15.

These initiatives build on the work already done to strengthen the foundations, with sharper prices, improved quality, stronger ranges and better service. We have significant plans for 2014/15 which will make our offer for customers even more compelling and drive loyalty.

A critical part of delivering the most compelling offer for customers is establishing multichannel leadership. The pace of change in customer behaviour means that this has never been more relevant and our determination has never been greater. In the year we launched grocery home shopping in five countries, opened 579 convenience stores across our markets and sold more than 500,000 Hudls, our first tablet. The completion of Tesco Bank’s product range with the launch of current accounts in the first half will be a key development for our customers.

We have increased our capital discipline throughout the year, in line with our strategic priority of pursuing disciplined international growth. Whilst we continue to allocate capital to the markets where we see the most potential for growth – notably Korea, Malaysia and Thailand – we have committed that Group-wide capex will be no more than £2.5bn per year for at least the next three financial years. In Europe, we have further reduced the level of capex. We will continue to limit capex in this region and focus our efforts on improving our offer for customers in existing stores.

This year has seen us make progress in a number of areas which provide clear evidence of our focus on capital discipline.

First, we concluded our strategic review in the United States with the sale of the substantive part of the Fresh & Easy operating business to Yucaipa.

Second, we announced a partnership with China Resources Enterprise Ltd. (CRE), which will, subject to the usual regulatory approvals, give Tesco a 20% ownership stake in the largest food retail business in China.

Third, we have announced a joint venture with the Tata Group in India to operate and develop the Star Bazaar and Star Daily store formats.

Reflecting the rapidly changing trading environment and the strategic decisions we have made, we have also announced today a number of one-off charges totalling £(801)m, principally relating to asset impairments in Europe. In light of the decline in profits of these businesses we have revised our long-term budgets, resulting in an impairment of £(734)m to the carrying value of our European assets.

As at the half year, and pending the completion of our partnership with CRE, our Chinese business is classified as a discontinued operation. These results include a £(540)m goodwill impairment, prudently reflecting the lower end of a range of independent valuations of the proposed combination. Further details can be found in Note 4, on page 26 of this statement.

The financial framework we laid out last April continues to inform our decisions. Our recent guidance to allocate no more than £2.5bn of capex for each of the next three years moves us to the bottom of our guiderail for capex of 4% down to 3.5% of sales. This in turn helps to underpin the strength of our balance sheet and our focus on cash and capital discipline.


We expect the challenging consumer environment, competitive intensity, and the rapid pace of change in retailing to continue in 2014/15. As outlined at our investor event in February 2014, we are committed to delivering the most compelling offer for customers across all of our channels. In doing this we are focusing on increasing loyalty and improving sales which will lead to sustainable profits and returns over the medium term, consistent with our financial guiderails.


Group sales, including VAT, increased by 0.3% to £70.9bn. At constant exchange rates, sales declined by (0.2)% (including petrol) and increased by 0.4% (excluding petrol).

Group trading profit was £3,315m, down (6.0)% 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 £3,054m. Group profit before tax was £2,259m, after one-off charges totalling £(801)m, including £(734)m 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. Note 2 on page 25 shows the one-off charges included in our statutory profit.

Net finance costs increased slightly to £(315)m, from £(309)m last year. Capitalised interest reduced by £(44)m to £79m.

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 Flow and Balance Sheet. Cash generated from retail operating activities increased by £0.6bn to £3.5bn (2012/13: £2.9bn), helped by an improved working capital performance. Net debt was flat year-on-year at £6.6bn.

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.

Pensions. The Group's net pension deficit after tax has increased from £1.8bn to £2.6bn, 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 £2.7bn, 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.



Whilst our performance in the UK was held back by the difficult and more competitive trading environment, our work to ‘Build a Better Tesco’ has strengthened the foundations of the business. There is much more to do and we are accelerating our investment to deliver the most compelling offer for customers.

  UK Results 2013/14
  £m % growth
UK sales £48,177m (0.1)%
UK revenue (exc. VAT, exc. impact of IFRIC 13) £43,570m 0.0%
UK trading profit £2,191m (3.6)%
Trading margin (trading profit/revenue) 5.03% (18)bp

Total UK sales declined by (0.1)% to just over £48bn. UK trading profit declined by (3.6)% to £2,191m with a lower trading margin of 5.03%, down 18 basis points.

In line with our reduction in new space, the contribution from net new space fell from 2.9% in 2012/13 to 2.1% in 2013/14. With 0.9m* square feet of net new space planned in 2014/15, we expect the contribution from new space to reduce further.

Our transformation work within general merchandise weighed on our like-for-like sales performance across the year as we continue to move away from low margin products such as consumer electronics and migrate to more profitable categories. Our new Spring/Summer general merchandise ranges, anchored around Home, Cook & Dine, Stationery and Party, started to arrive in-store in March.

* Total UK, includes One Stop (inc. franchising) and Dobbies.

  UK LFL Growth 2013/14
  H1 Q3 Q4 H2 FY

**Compliant with IFRIC 13 (customer loyalty programmes)

LFL (inc. VAT, inc. petrol) (0.9)% (3.2)% (3.0)% (3.1)% (2.0)%
LFL (inc. VAT, exc. petrol) (0.5)% (1.4)% (2.9)% (2.2)% (1.3)%
LFL (exc. VAT, exc. petrol) (0.5)% (1.5)% (3.0)% (2.3)% (1.4)%
LFL (exc. VAT, exc. petrol) IFRIC 13** (0.4)% (1.6)% (3.3)% (2.5)% (1.4)%

The grocery market saw further weakness in the period after Christmas, and in February industry food inflation reached its lowest rate since July 2012. These factors contributed to a decline in our sales performance in the fourth quarter, with like-for-like sales excluding VAT and petrol down (3.0)%. Like-for-like sales excluding VAT and petrol for the year were down (1.4)%.

We have continued to invest across the six elements of our ‘Building a Better Tesco’ plan to improve customers' shopping experience.

Service & Staff

We have provided ‘Making Moments Matter’ training to more than 250,000 colleagues, encouraging our teams to deliver better customer service every time.  We have also worked with colleagues to reschedule over 300,000 hours this year, putting the right number of hours in the right departments in store, based on when customers need them most. Together with our productivity programmes, these initiatives have freed more time for colleagues to serve customers.


Whilst this has driven improvements in customer perceptions of service, there is more to do, and we will now focus on service points in store, our fresh food, and our grocery home shopping. Our fishmongers have already benefited from new training to learn about the supply chain, and how to help customers prepare and cook fish at home. In 2014/15 we will extend this type of training to our butchers and fresh produce teams.

Stores & Formats

This year we completed around 300 refreshes, updating our stores to make them more contemporary, improving the shopping environment and making them more compelling for customers. Our approach is based on a detailed understanding of customers’ different shopping missions, helping us to tailor the offer, range and layout of each store. As we said at the half year, the typical refresh store has a sales uplift of between 3% and 5%.

This work is critical, especially for our larger stores which have come under pressure as a result of weaker market conditions, high fuel prices, strong growth in convenience and an accelerating shift to online. In February, we announced plans to accelerate our store refresh programme to 650 stores in 2014/15. The immediate focus is our Extra format with 110 planned for the year ahead.

We have been testing the ingredients for our large destination stores. We introduced our ‘Next Generation’ F&F departments to 104 of our stores this year, with around 140 planned for the year ahead. We will also expand our casual dining offer by opening over 100 Giraffe, Decks and Harris+Hoole outlets next year.

As well as remodelling our stores, we have also trialled an overall reduction of our selling space in two Extra stores this year. We repurposed a total of 41,000 square feet across both stores and introduced new tenants. In Newport we reallocated general merchandise space, introducing discount-department store ‘Original Factory Shop’ and children’s soft-play centre ‘Funky Monkeys’.  At Stockton, we introduced an ‘Xercise4Less’ gym on the mezzanine, and a ‘Funky Monkeys’. We are pleased with these two stores and plan to complete another five similar projects within our Extra format in 2014/15.

We have also trialled a grocery home shopping hub concept in Mansfield Extra, using the capacity of one of our larger stores to fulfil a greater proportion of grocery home shopping orders, including picking some lines directly from our store warehouse. We have plans for a further three similar trials in 2014/15.

We opened 128 Express stores this year and refreshed almost 200, as we work towards being the best, most relevant convenience retailer in town. We plan to open a further 150 Express stores next year and refresh another 450.

Price & Value

With household budgets still under pressure we know that customers are increasingly looking to us to offer the best possible value. Our Price Promise has now been in place for over a year and provides instant reassurance to our customers that on fresh foods, on own-label and on branded products, they will not lose out at Tesco.

Every customer perception measure on price has improved over the last 12 months, but we need to do more. Pricing in the industry is still too volatile and as the industry leader we can help to change this.

We want to help customers navigate what can sometimes feel like a confusing landscape of price cuts, price promotions and special offers. At our investor event in February we described how the promotions we offer will be more focused, more competitive, and more relevant for customers.

We also made a commitment to lower, more stable prices on the products that really matter, with an initial investment of at least £200m. We have already lowered prices by an average of 24% on a range of products including milk, eggs, butter and key salad, vegetable and fresh meat lines, and we are determined to do even more over the months ahead.

Brand & Marketing

Clubcard remains an important part of our brand and has enabled us to deliver more value to our customers with almost 60 million highly-personalised mailings sent out this year. The launch of ‘Clubcard Fuel Save’ last month enables customers to accumulate savings off fuel by scanning their Clubcard when they shop in store or for groceries online. Every purchase made, big or small, qualifies towards savings which can be redeemed automatically at the pump. We are currently trialling a Digital Coupons app in Plymouth, another step towards creating a Digital Clubcard as part of our multichannel offer.

Strengthening our brand is also about finding more ways to connect with customers and communities. Our new social network ‘The Orchard’ invites customers and colleagues to enjoy relevant, valuable offers on Tesco products and services. Since launching at the end of November it already has 60,000 members sharing their opinions and ideas with friends, family and Tesco through social media.

Our ‘Eat Happy Project’ is helping us to engage with local communities and is part of our long-term commitment to help children connect with food, understand where it comes from and make healthy choices. The first initiative – Farm to Fork trails – launched in January and so far 39,000 primary school children have taken part in tours of farms, fisheries and factories. We are inviting every primary school in the UK to take part, with the aim of reaching over a million pupils and their teachers over the next year.

Range & Quality

This year we have made marked improvements to the quality of our own-brand products. Following the re-launch of finest* in October, we have recently completed our work to improve 8,000 products in our core Tesco range. In January we re-launched Healthy Living, with three quarters of its products new or improved and, as a result, increasing overall customer satisfaction.

This year we have also focused on provenance, shortening the supply chain, and ensuring greater control over our food products. We have developed a world-class traceability and DNA testing system and tested over 5,300 products since January 2013. All our own-brand fresh chicken, eggs, milk and butter are now 100% British, and 100% of our beef across fresh, frozen and ready meals is British and Irish. To help build better relationships with farmers we are in the process of offering them two-year contracts – we are the first major retailer to offer two-year direct contracts for beef and lamb farmers right back to the farm gate, and more than 300 have signed up already. This follows the success of our Tesco Sustainable Dairy Group which is now in its seventh year. Earlier this month we increased the price we pay our milk farmers, reflecting our continued commitment to offer them a fair price.

Having made significant improvements to our meat, fish and poultry ranges, improving quality and increasing the level of innovation, we are now focusing our efforts on fresh produce. We have already re-launched our bagged salads and prepared fruits and vegetables, improving quality, packaging and in-store merchandising. We are now sourcing around 65% of our produce centrally for the Group, which enables us to have even greater visibility of our supply chain, delivering a step-change in the customer offer. We are working more closely with dedicated suppliers, ensuring we can guarantee freshness, taste and value every time. In 2014/15 we are also planning to bring a new look and feel to our produce departments and empower our colleagues to deliver great service and advice to our customers through ‘Produce Academies’.

Clicks & Bricks

Our grocery home shopping business continues to grow strongly. We now have over 200,000 delivery saver subscribers and over 260 Click & Collect locations – including our first trials at six London tube stations. We are planning to launch around 50 non-store collection points in 2014/15, as well as adding the service to another 100 stores. We continue to build capability through the automation of ‘goods to person’ at our new Erith facility. This enables us to pick products almost three times faster than in our stores – an improvement on our Crawley and Enfield dotcom-only stores. Our new home shopping vans will be multi-category enabling us to fulfil general merchandise orders and will feature collapsible racking to carry larger items from our new general merchandise range. We will also focus on providing helpful, friendly and personalised customer service at the doorstep, with the roll-out of new training to all customer delivery assistants in 2014/15.

We have also committed to sharper prices this year for our grocery home shopping service, including market-leading delivery pricing and free Grocery Click & Collect. We will continue to focus on our most loyal customers, with a no-risk guarantee and added-value services on our Delivery Saver subscriptions.

The strong top-line growth of online general merchandise and the actions we have taken, such as tightening our stocked range, have reduced the level of financial losses in this business. We now have over 1,750 Click & Collect locations and plan to increase this number significantly. Our product offer on Tesco Direct has grown to over half a million lines, supported by 50 market place ‘Sellers at Tesco’. Clothing online continues to perform strongly, with sales growth of nearly 60% in 2013/14.

This year we launched the Hudl, our very own tablet. It was recently named winner of the ‘ReThink Retail Technology Initiative of the Year’ and we plan to launch a second device later this year. Blinkbox services continue to grow and we launched Blinkbox books last month with hundreds of thousands of books now available to download.


  Asia Results* 2013/14
  Actual rates Constant rates
  £m % growth % growth

*Exc. China, with our subsidiary there now treated as a discontinued operation following our agreement to partner with CRE.

Asia sales £10,947m 2.7% 1.4%
Asia revenue (exc. VAT, exc. impact of IFRIC 13) £10,309m 2.6% 1.4%
Asia trading profit £692m (5.6)% (6.8)%
Trading margin (trading profit/revenue) 6.71% (59)bp (59)bp

Total sales in Asia increased by 1.4% at constant rates and by 2.7% at actual rates, held back by external pressures in both Korea and Thailand. The difficult trading conditions also led to a year-onyear decline in trading profit.

Our business in Korea continues to generate high returns despite the impact on sales from the regulatory restrictions on opening hours. Whilst we annualised the first closures in the second half, the changing patterns of the opening restrictions have continued to impact our stores on a year-on-year basis. As expected, and following an incremental £40m impact in the first half, the effect of the restrictions on our profitability eased in the second half. Our work to refresh seven of our largest stores, including our stores in Dongsuwon and Yuseong, has delivered encouraging results. We also continued to grow our convenience portfolio, with the opening of 71 ‘365 plus’ franchise stores.

In Thailand, like-for-like sales growth remained under pressure reflecting the impact of recessionary conditions on consumers, heightened recently by the political unrest. We implemented a strong plan to improve our offer and address the issues we identified in our ‘Clubpack’ wholesale offer earlier this year. We have focused on improving availability and winning in Bangkok, opening a new composite distribution centre in Khon Kaen and completing seven refresh projects, including our Laksi and Lumlukka stores. Thailand is one of our largest international markets and we have continued to build a strong multichannel business, growing our grocery home shopping service and convenience store offer. Today we have almost 1,400 convenience stores in Thailand.

In Malaysia, our performance has been more resilient. Consumer confidence has fallen as inflationary pressures impact disposable incomes but we have improved our market share year-on-year. We opened two new stores during the year and grew our grocery home shopping business in its first year of operation.

We opened 2.1m square feet of net new space in Asia this year mainly in Thailand and Korea. As indicated in February, going forward the majority of our capital expenditure on new stores will be on high-returning investments in Korea, Malaysia and Thailand. We plan to open 1.2m square feet in these markets in 2014/15, whilst continuing to grow our convenience and grocery home shopping operations.

In the year we announced an exciting partnership with China Resources Enterprise Ltd. (CRE). The partnership will give Tesco a 20% ownership stake in the largest food retail business in China. In addition to contributing our existing Chinese business, we will make a cash contribution of c.£185m to the joint venture and c.£80m to CRE. We will then make a further payment of c.£80m to CRE on the anniversary of the completion. The joint venture, which will be self-funding going forward, will secure significant cost and operational synergies, and will move us more quickly to profitability in China.

As in the first half, the results of our existing business in China have been treated as a discontinued operation. They include a goodwill impairment of £(540)m, prudently reflecting the lower end of a range of independent valuations of the proposed combination carried out in the second half of the year for accounting purposes. These valuations were, as required by the relevant accounting standards, produced on a standalone existing basis for each business. As such, they take no account of the strategic value and significant synergies available.

Last month we announced that we have entered into an agreement with Trent Limited, part of the Tata Group, to form a 50:50 joint venture with Trent Hypermarket Limited (THL) developing our presence in the Indian market. We are investing around £85m into the joint venture recognising the exciting opportunity that the Indian market, and working with Tata, presents.


  Europe Results 2013/14
  Actual rates Constant rates
  £m % growth % growth
Europe sales £10,767m (0.4)% (2.0)%
Europe revenue (exc. VAT, exc. impact of IFRIC 13) £9,267m (0.6)% (2.2)%
Europe trading profit £238m (27.7)% (32.8)%
Trading margin (trading profit/revenue) 2.57% (96)bp (111)bp

In Europe, total sales declined by (2.0)% at constant rates and by (0.4)% at actual rates, including petrol. Conditions have remained challenging, particularly for large stores and this, combined with our decision to invest in a more compelling offer for customers across the region, is reflected in the significant reduction in trading profit for the full year. Our plans in the region have led to improvements in the second half in both our like-for-like sales and profit performance.

Reflecting the year-on-year decline in the profits of our European businesses, we have revised our longterm budgets. These revisions have resulted in the asset impairment of £(734)m to the carrying value of these businesses shown in today’s results.

In Ireland, consumers remain under pressure, reflected in our weaker second-half sales growth. The launch of Price Promise in October helped improve trust in prices with customer perceptions reaching a four-year high. We have also worked hard to emphasise the breadth of our offer and points of differentiation despite intense vouchering activity in the market.

We have taken a common approach to trade through the challenging conditions across our Central European region. We have tailored our plans to provide a more compelling fresh food offer, focusing on seasonal events and leveraging our sourcing scale and supply chain capability. We have also used our strengths in Clubcard and F&F to drive further improvements in our offer for customers. Through the year we have seen these plans deliver a better sales performance across the region giving us confidence that we are doing the right thing for customers.

In Poland, our actions have continued to drive improved trading, resulting in positive like-for-like sales growth in the fourth quarter. Small stores have performed particularly well with very strong like-for-like sales towards the end of the year.

We are making the most of our existing assets in Europe by reallocating and repurposing space in some of our largest stores, dedicating more space to fresh food, clothing and an improved general merchandise offer. Our store in Budaors, Hungary is one of our best examples, with c.50,000 square feet – around a third of the original store space – repurposed to include H&M and Sports Direct in the development.

Our business in Turkey has been affected by strong competition and our relative exposure to large store formats. We have focused the business on its heartland around Izmir and have seen a gradual improvement in like-for-like sales over the year. We have also closed nine loss-making stores, helping to stabilise trading losses. Despite these actions, Turkey remains a focus.

We have significantly reduced new store openings in Europe with just 119,000 square feet of net new space opened this year. As announced in February, we will make little investment in new stores in the region. Any future investment will be focused on less capital intensive opportunities in convenience and grocery home shopping. With the launch of grocery home shopping in Turkey in February, we now offer the service in all of our international markets, with the exception of India.


  Tesco Bank Results 2013/14
  £m % growth
Tesco Bank revenue (exc. VAT, exc. impact of IFRIC 13) £1,003m (1.8)%
Tesco Bank trading profit £194m 1.6%
Tesco Bank trading margin 19.34% 63bp

Tesco Bank’s trading profit was up year-on-year at £194m. Excluding income from the legacy insurance distribution agreement and fair value release, trading profit grew by 19%. The Bank has continued to attract new customers and passed through another important milestone in the year, with over seven million customer accounts now active.

We have seen good growth in our core banking products with customer accounts for credit cards, loans, mortgages and savings up 14%. In its first full year of trading our mortgage product has made good progress with balances reaching £0.7bn. We remain on track to launch current accounts in the first half, completing the Bank’s product suite. We expect the growth in underlying trading profit in 2014/15 to be broadly offset by the investment in current accounts.

This year Tesco Bank customers received around £120m of Clubcard points and we expect the current account launch to further enhance customer loyalty.

Despite challenging market conditions for our insurance business, we have seen a good customer response to new initiatives. In particular, we have seen strong growth in Home Insurance following its re-launch. New polices also grew strongly in the second half of the year driven by our products being available to more customers through price comparison websites and by new products such as Tesco Bank Box Insurance.

Within one-off items, the Bank has made a further increase to the provision for PPI of £(20)m and a provision of £(43)m for customer redress.

The Bank ends the year with strong liquidity and capital ratios. An income statement, balance sheet and cash flow statement for Tesco Bank is available in the investor section of our corporate website – Tesco Bank’s preliminary results are also published today and can be found at

Tesco and Society

Our value ‘we use our scale for good’ is about using our skills and capabilities as a leading global retailer to tackle the issues that matter most to our customers, to our colleagues and to our communities. We have three big ambitions: creating new opportunities for millions of young people, improving health and through this helping to tackle the global obesity crisis, and leading a reduction in global food waste.

These three ambitions, together with our essential responsibilities as a good corporate citizen – trading responsibly, reducing our impact on the environment, being a great employer and supporting local communities – will make us a better, more sustainable business.

The issues we are tackling are complex in nature and making significant progress will not happen overnight. This year we have been gathering the best possible insights to set our long-term strategy and focus on where we can make the biggest difference. We have researched the challenges facing young people, and we have piloted our ‘Healthy Little Differences Tracker’ to monitor the nutritional profile of shopping trips. We have analysed the food waste that we produce through our own operations and identified hotspots across the value chain from farm to fork. We are using this insight to guide our activity.

We will share more details on our work in our second Tesco and Society Report which will be published in May and you can find out more about our ongoing activities at

Supplementary Information

The following supplementary information can be found within our analyst pack, which is available at

  • Group Income Statement
  • Segmental Summary
  • Tesco Bank – Income Statement, Balance Sheet, Cash Flow
  • Group Cash Flow
  • UK Sales Performance
  • International Sales Performance
  • Group Space Summary and Forecast
  • UK New Stores
  • Earnings Per Share


Investor Relations: Chris Griffith 01992 644 800
Press: Tom Hoskin 01992 644 645
  Brunswick 0207 404 5959

This document is available at

A meeting for investors and analysts will be held today at 9.00am at Deutsche Bank, 1 Great Winchester Street, EC2N 2DB. Access will be by invitation only. Presentations from the meeting will be available at

An interview with Philip Clarke, Chief Executive, discussing the Preliminary Results is available now to download in video, audio and transcript form at

Additional Disclosures

Risks and Uncertainties

As with any business, risk assessment and the implementation of mitigating actions and controls are vital to successfully achieving the Group’s strategy. The Tesco Board has overall responsibility for risk management and internal controls within the context of achieving the Group's objectives. The principal risks and uncertainties faced by the Group include:

  • Business and financial strategies
  • Competition and consolidation
  • Reputational risk
  • Performance risk
  • Property
  • Economic, political and regulatory risks
  • Product safety and ethical trading
  • Technology
  • People
  • Treasury, finance and Tesco Bank risks
  • Pension risks
  • Fraud, compliance and control
  • Business continuity and crisis management

Greater detail on these risks and uncertainties will be set out in our 2014 Annual Report, the publication of which will be announced in due course.

Appendix 1 – Segmental Sales Growth Rates*

    Total Sales Growth 2013/14 – Actual Rates**
    Q1 Q2 H1 Q3 Q4 H2 FY
Inc. Petrol Group 1.7% 2.6% 2.0% (0.8)% (2.3)% (1.4)% 0.3%
  International 5.4% 4.5% 4.4% 0.0% (4.6)% (1.9)% 1.1%
  Asia 11.5% 5.7% 7.7% 1.1% (6.1)% (2.0)% 2.7%
  Europe (0.3)% 3.3% 1.2% (1.0)% (3.2)% (1.9)% (0.4)%
  UK 0.1% 2.0% 1.1% (1.2)% (1.2)% (1.2)% (0.1)%
  Tesco Bank (2.3)% (3.8)% (3.1)% 0.9% (1.6)% (0.4)% (1.8)%
Exc. Petrol Group 2.6% 3.0% 2.6% 0.6% (2.3)% (0.7)% 0.9%
  International 5.8% 4.5% 4.5% 0.1% (4.7)% (1.9)% 1.2%
  Asia 11.5% 5.7% 7.7% 1.1% (6.1)% (2.0)% 2.7%
  Europe 0.1% 3.3% 1.3% (1.0)% (3.3)% (1.9)% (0.3)%
  UK 1.0% 2.3% 1.7% 0.9% (1.0)% (0.1)% 0.8%
  Tesco Bank (2.3)% (3.8)% (3.1)% 0.9% (1.6)% (0.4)% (1.8)%
    Total Sales Growth 2013/14 – Constant Rates**
    Q1 Q2 H1 Q3 Q4 H2 FY

* Growth rates shown on a continuing operations basis.
** Quarterly growth rates based on comparable days for the current year and the previous year comparison. Half 1 growth rates based on comparable days for the current year and the previous year comparison for the UK and the Republic of Ireland. All other countries are for 178 days ended 25 August 2013 compared to 179 days ended 26 August 2012. Half 2 growth rates are based on comparable days for the current year and the previous year comparison for the UK and the Republic of Ireland. All other countries are for 187 days ended 28 February 2014 compared to 186 days ended 28 February 2013.

Inc. Petrol Group 0.0% 1.3% 0.5% (1.2)% (0.9)% (0.9)% (0.2)%
  International (0.1)% 0.1% (0.6)% (1.2)% (0.1)% (0.1)% (0.3)%
  Asia 3.2% 2.5% 2.0% 0.5% (0.5)% 0.7% 1.4%
  Europe (3.4)% (2.3)% (3.1)% (2.9)% 0.4% (0.9)% (2.0)%
  UK 0.1% 2.0% 1.1% (1.2)% (1.2)% (1.2)% (0.1)%
  Tesco Bank (2.3)% (3.8)% (3.1)% 0.9% (1.6)% (0.4)% (1.8)%
Exc. Petrol Group 0.7% 1.5% 0.9% 0.2% (0.7)% (0.1)% 0.4%
  International 0.1% 0.2% (0.4)% (1.2)% (0.2)% (0.1)% (0.3)%
  Asia 3.2% 2.5% 2.0% 0.5% (0.5)% 0.7% 1.4%
  Europe (3.0)% (2.3)% (3.0)% (2.9)% 0.2% (0.9)% (1.9)%
  UK 1.0% 2.3% 1.7% 0.9% (1.0)% (0.1)% 0.8%
  Tesco Bank (2.3)% (3.8)% (3.1)% 0.9% (1.6)% (0.4)% (1.8)%
    Like-For-Like Sales Growth 2013/14*
    Q1 Q2 H1 Q3 Q4 H2 FY

* Like-for-like growth shown on a continuing operations basis.

Inc. Petrol Group (2.5)% (1.3)% (1.9)% (3.6)% (3.0)% (3.3)% (2.6)%
  International (4.8)% (3.9)% (4.3)% (4.6)% (3.0)% (3.8)% (4.0)%
  Asia (3.5)% (3.6)% (3.7)% (5.1)% (5.6)% (5.4)% (4.5)%
  Europe (5.9)% (4.2)% (5.0)% (4.0)% (0.3)% (2.1)% (3.5)%
  UK (1.6)% (0.2)% (0.9)% (3.2)% (3.0)% (3.1)% (2.0)%
  Tesco Bank N/A N/A N/A N/A N/A N/A N/A
Exc. Petrol Group (2.1)% (1.4)% (1.8)% (2.5)% (3.0)% (2.8)% (2.3)%
  International (4.5)% (3.9)% (4.3)% (4.6)% (3.2)% (3.8)% (4.0)%
  Asia (3.5)% (3.6)% (3.7)% (5.1)% (5.6)% (5.4)% (4.5)%
  Europe (5.5)% (4.3)% (4.9)% (4.0)% (0.6)% (2.2)% (3.5)%
  UK (0.9)% 0.0% (0.5)% (1.4)% (2.9)% (2.2)% (1.3)%
  Tesco Bank N/A N/A N/A N/A N/A N/A N/A

Appendix 2 – Country Like-For-Like Growth Inc. VAT Exc. Petrol*

  Like-For-Like Growth
  Q1 Q2 H1 Q3 Q4 H2 FY
UK (0.9)% 0.0% (0.5)% (1.4)% (2.9)% (2.2)% (1.3)%
Asia (3.5)% (3.6)% (3.7)% (5.1)% (5.6)% (5.4)% (4.5)%
Malaysia 1.3% (1.9)% (0.4)% (1.1)% 1.2% 0.1% (0.2)%
South Korea (5.1)% (2.4)% (3.7)% (4.8)% (4.9)% (4.8)% (4.3)%
Thailand (3.0)% (6.3)% (4.7)% (6.9)% (9.1)% (8.1)% (6.5)%
Europe (5.5)% (4.3)% (4.9)% (4.0)% (0.6)% (2.2)% (3.5)%
Czech Republic (9.0)% (5.0)% (6.9)% (4.9)% 0.6% (2.0)% (4.4)%
Hungary^ 0.1% (0.4)% (0.1)% (1.3)% 3.4% 1.2% 0.5%
Poland (8.2)% (4.5)% (6.4)% (0.7)% 1.9% 0.6% (2.8)%
Slovakia (4.1)% (4.4)% (4.3)% (5.7)% (3.0)% (4.3)% (4.3)%
Turkey (15.5)% (10.7)% (12.8)% (3.5)% 1.7% (0.9)% (7.0)%
Republic of Ireland (3.0)% (4.4)% (3.7)% (8.1)% (6.4)% (7.2)% (5.5)%
  Like-For-Like Growth
  Q1 Q2 H1 Q3 Q4 H2 FY

* Like-for-like growth shown on a continuing operations basis.

^ Following the introduction of legislation preventing large retailers from selling tobacco in mid-July 2013, Hungary like-for-like growth for 2013/14 is shown on an exc. tobacco basis. Including tobacco sales, Q1 was 0.2%, Q2 was (1.6)%, H1 was (0.8)%, Q3 was (3.8)%, Q4 was 1.1%, H2 was (1.3)% and FY was (1.0)%.

UK (1.4)% 0.2% (0.6)% (0.7)% 0.5% (0.1)% (0.3)%
Asia 0.3% (3.3)% (1.6)% (1.2)% (2.6)% (1.9)% (1.8)%
Malaysia (1.7)% 0.9% (0.2)% 1.7% 0.6% 1.1% 0.5%
South Korea (1.1)% (6.6)% (4.0)% (5.1)% (7.9)% (6.6)% (5.3)%
Thailand 2.5% 0.9% 1.7% 4.4% 4.5% 4.4% 3.1%
Europe 0.4% (0.8)% (0.2)% (3.6)% (4.5)% (4.3)% (2.3)%
Czech Republic (4.5)% (7.0)% (5.8)% (9.2)% (7.1)% (8.2)% (7.0)%
Hungary 0.1% (0.8)% (0.4)% 0.6% (2.2)% (1.0)% (0.7)%
Poland 3.3% 1.0% 2.2% (6.6)% (8.3)% (8.0)% (3.0)%
Slovakia 3.4% 2.6% 3.0% (2.1)% (0.8)% (1.5)% 0.6%
Turkey (2.7)% (1.6)% (2.1)% (7.0)% (10.0)% (8.8)% (5.4)%
Republic of Ireland 0.4% 0.2% 0.3% (0.3)% (1.4)% (0.9)% (0.3)%

For more information please contact the Tesco Press Office on
01992 644645

We are a team of over 530,000 people in 12 markets dedicated to bringing the best value, choice and service to our millions of customers each week. Our core purpose is 'we make what matters better, together'.

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