Interim Results 2018/19


On a continuing operations basis  
(restated IFRS 15)1
Change at
constant rates
Change at actual rates
Headline measures2:          
Group sales3 £28.3bn £25.2bn   12.5% 12.8%
Group operating profit before exceptional items and amortisation of acquired intangibles4 £933m £750m   23.9% 24.4%
Diluted EPS before exceptional and other items5 6.36p 5.37p     18.4%
Interim dividend per share 1.67p 1.00p     67.0%
Retail operating cash flow6 £1.123m £1.139m     (1.4)%
Net debt6,7 £(3,126)m £(3,260)m     4.1% lower
Statutory measures:
Revenue £31.7bn £28.3bn   11.8% 12.0%
Operating profit £819m £876m   (6.8)% (6.5)%
Profit before tax £564m £553m   2.2% 2.0%
Diluted EPS 4.37p 5.13p     (14.8)%

*Note: Booker consolidated from 5 March 2018 and included in the 2018/19 figures


  • Group sales3 of £28.3bn, up 12.8%
    • UK & ROI LFL sales8 up 3.8%, strengthening from 3.5% in 1Q to 4.2% in 2Q
      • incl. Tesco UK LFL sales up 2.3% (1Q: 2.1%; 2Q: 2.5%) and Booker LFL sales up 14.7% (1Q: 14.3%; 2Q: 15.1%)
      • significant investment in ‘Exclusively at Tesco’ brands; roll-out 81% complete
    • Central Europe LFL sales declined by (1.5)% due to impact of Sunday trading regulations
    • Asia LFL sales decline reduced from (9.0)% in 1Q to (4.8)% in 2Q following annualisation of bulk-selling impact; Government-issued welfare cards continue to impact sales in Thailand by c.(2)%
  • Group operating profit before exceptional items and amortisation of acquired intangibles4 up 24.4% to £933m
    • UK & ROI profit of £685m, up 47.6%; incl. first-time consolidation of £97m Booker profit and £16m synergies
    • Central Europe profit of £59m, down (3.3)% reflecting £9m profit on property-related items in prior year
    • Asia profit of £100m, down (29.1)% due to combined impact of sales deleverage, price investment and renegotiation of promotional investment
    • Bank profit of £89m, up 6.0% mainly due to increased income and ongoing cost reductions
  • Group operating margin4 of 2.94% (+29bps); margin of 3.02% excl. Tesco Direct
  • Retail operating cash flow6 of £1.1bn, down (1.4)% (up 10.8% before £(139)m timing impact of P&H failure last year)
  • £404m retail free cash flow (after net outflow of £(139)m relating to market purchase of shares)
  • Interim dividend of 1.67p, up 67% year-on-year; on track to deliver c.2.0x EPS cover in the medium-term
  • Statutory revenue up 12.0% to £31.7bn; operating profit down (6.5)% to £819m; profit before tax up 2.0% to £564m

Further progress against each of our six strategic drivers

  • Brand health9 continues to strengthen; quality perception +3.6 points10
  • In-year cost savings of £241m; savings of £1.1bn to date towards £1.5bn target
  • Generated £1.1bn of retail operating cash6; net debt of £(3.1)bn is after £(766)m Booker cash consideration
  • Improving the mix across geographies, channels and product; focus on sustainable general merchandise categories by closing Tesco Direct; on track to achieve 3.5-4.0% margin ambition11 by 2019/20
  • Released a further £134m value12 from property; further buyback (Cirencester Extra) announced Sept 2018
  • Innovations including 5,038 of 10,000 own brand products re-launched; eight new ‘Exclusively at Tesco’ brands; launched ‘Jack’s’ as part of celebrating 100 years of great value at Tesco

Dave Lewis, Chief Executive:

"We have made a good start to the year. The step up in Q2 is driven mainly by the UK & ROI and delivers our eleventh consecutive quarter of growth.

At the same time, we have made further strategic progress. We completed our merger with Booker in March and are delighted with performance so far. We announced a strategic alliance with Carrefour in July which goes live this month. And we are now more than half-way through the biggest own brand re-launch in our nearly 100-year history, including a significant investment in over 300 new ‘Exclusively at Tesco’ products at market-leading prices.

We are firmly on track to deliver our medium-term ambitions and are continuing to improve the quality and value of our offer for customers in all of our markets. In doing so, we are well-positioned to deliver strong, sustainable returns for shareholders."

Like-for-like sales performance8

UK & ROI 2.1% 2.4% 2.3%   3.5% 4.2%   3.8%
 Tesco UK 2.2% 2.3% 2.2%   2.1% 2.5%   2.3%
 ROI 1.1% 4.3% 2.7%   3.0% 3.1%   3.1%
 Booker n/a n/a n/a   14.3% 15.1%   14.7%
Central Europe 0.1% 0.6% 0.3%   (1.0)% (2.0)%   (1.5)%
Asia (8.3)% (11.8)% (10.0)%   (9.0)% (4.8)%   (7.0)%
Group 0.8% 0.6% 0.7%   1.8% 2.7%   2.2%

Headline Group results

26 weeks ended 25 August 2018 
On a continuing operations basis
1H 2018/19   1H 2017/18
  Year-on-year change
exchange rates)
  Year-on-year change
exchange rates)
Group sales (exc. VAT, exc. fuel)3 £28,294m   £25,163m   12.5%   12.8%
Fuel £3,440m   £3,176m   8.2%   8.3%
Revenue (exc. VAT, inc. fuel) £31,734m   £28,339m   11.8%   12.0%
Group operating profit before exceptional items and amortisation of acquired intangibles4  
- UK & ROI £685m   £464m   47.0%   47.6%
- Central Europe £59m   £61m   (4.9)%   (3.3)%
- Asia £100m   £141m   (29.1)%   (29.1)%
- Tesco Bank £89m   £84m   6.0%   6.0%
Include exceptional items and amortisation of acquired intangibles
Group operating profit £819m   £876m   (6.8)%   (6.5)%
Group profit before tax before exceptional items, amortisation of acquired intangibles, net pension finance costs and fair value remeasurements of financial instruments £806m   £566m       42.4%
Group statutory profit before tax £564m   £553m       2.0%
Diluted EPS before exceptional items, amortisation of acquired intangibles, net pension finance costs and fair value remeasurements of financial instruments 6.36p   5.37p       18.4% 
Diluted EPS 4.37p   5.13p        
Basic EPS 4.40p   5.13p        
Divident per share 1.67p   1.00p       67.0% 
Capex13 £0.4bn   £0.4bn        
Net debt6,7 £(3.1)bn   £(3.3)bn        
Cash generated from retail operations6 £1.1bn   £1.1bn        


  1. Last half-year figures restated for impact of IFRS 15 ‘Revenue from contracts with customers’. Impacts include a £(9)m reduction in revenue and operating profit.
  2. The Group has defined and outlined the purpose of its alternative performance measures, including its headline measures, in the Glossary starting on page 49.
  3. Group sales exclude VAT and fuel. Sales growth shown on a comparable days basis and includes an adjustment to last year’s figures to reflect a change in the reporting of consignment sales.
  4. Excludes amortisation of acquired intangibles and excludes exceptional items by virtue of their size and nature in order to reflect management’s view of the performance of the Group.
  5. Headline earnings per share measure excludes exceptional items, amortisation of acquired intangibles, net pension finance costs and fair value remeasurements of financial instruments. Full details of this measure can be found in Note 9, starting on page 34.
  6. Net debt, retail operating cash flow and retail free cash flow exclude the impact of Tesco Bank in order to provide further analysis of the retail cash flow statement.
  7. Net debt includes both continuing and discontinued operations.
  8.  Like-for-like is a measure of growth in online sales and sales from stores that have been open for at least a year (at constant foreign exchange rates).
  9. As per YouGov BrandIndex (customers recommend) August 2018.
  10. Reflects year-on-year change in YouGov Brand perception measure of quality.
  11. Ambition announced in October 2016 and excludes Booker. Booker contributed 9bps of the Group margin accretion in the half.
  12.  Value released from property relates to gross proceeds from property disposals in the half.
  13. Capex is shown excluding property buybacks. Statutory capital expenditure (including property buybacks) for the 26 weeks ended 25 August 2018 was £0.4bn (LY £0.6bn).

Creating value for our key stakeholders

We have continued to make further good progress in the half, guided by the six strategic drivers that we set out in October 2016, as we create long-term and sustainable value for our key stakeholders.


  • 189,500 more customers are shopping at Tesco1
  • continued improvement in Brand perception – quality up 3.6 pts, with stable value perception
  • more than half-way through own brand re-launch; roll out to be largely complete by end-February
  • significant investment in eight new ‘Exclusively at Tesco’ brands; already shopped by 51% of customers
  • launched partnership with Jamie Oliver to make it easier for customers to eat well and live healthier lives
  • Tesco customers now able to access Booker products: top 30 Booker products now rolled out to 70 Tesco stores; integrated Booker offer in Gallions Reach to be rolled out to eight more stores
  • voted ‘Britain’s Favourite Supermarket’ by customers for the fourth year running
  • launched ‘Jack’s’ - a new brand and store format – as part of celebrating 100 years of great value at Tesco


  • 84% of colleagues recommend Tesco as a great place to work; scores improved in all markets
  • implemented second stage of two-year, 10.5% hourly pay increase for UK store colleagues in July 2018
  • continuing commitment to colleague health; over 17,000 colleagues benefited from mental health e-learning
  • conducted UK’s largest ever workplace health survey, with over 8,000 colleagues taking part
  • new partnership with The Prince’s Trust, helping 10,000 young people to develop skills and employability
  • opened ‘Heart’ building in Welwyn Garden City in May, bringing together innovation and learning capability

Supplier partners

  • retailer with most improved supplier relationships for third successive year in June 2018 GCA survey
  • Supplier Viewpoint measure improved 330bps year-on-year to 74.7% for the Group
  • ranked first for the third successive year in the independently-run Advantage supplier survey
  • suppliers now accessing faster UK sales growth; joint Tesco Booker terms agreed with top 60 suppliers
  • working together with suppliers to remove hard-to-recycle materials from all packaging by 2019, moving towards creating a closed loop approach
  • established our tenth Sustainable Farming Group, with 1,600 beef farmers in the UK now benefiting from 12 month contracts that guarantee above-market prices
  • worked alongside 358 of our existing suppliers to create new ‘Jack’s’ brand with 1,800 products


  • operating margin of 2.94%, up 29bps year-on-year; margin of 3.02% excluding Tesco Direct
  • generated £1.1bn of retail operating cash flow (up 10.8% before £(139)m timing impact of P&H failure last year)
  • retail free cash flow of £404m (after net outflow of £(139)m relating to market purchase of shares)
  • announced interim dividend of 1.67p per share; targeting around two times EPS cover in medium term
  • continue to take steps to strategically re-position the Group: Booker contributing to faster growth as planned; entered into long-term, strategic alliance with Carrefour; closure of Tesco Direct in July
  • Booker delivering synergies; £16m in first half and on track to deliver at least £60m in full-year

Looking ahead

We remain firmly on track to deliver the medium-term ambitions set out in October 2016: to reduce our costs by £1.5bn, to generate £9bn of retail cash from operations and to improve Group operating margins to between 3.5% and 4.0% by 2019/20. In addition, we will continue to strengthen the balance sheet and place increasing focus on growth in earnings and free cash flow generation.

We continue to maintain a disciplined approach to capital. Capital expenditure for the year is now expected to be no more than £1.2bn. Going forward, we expect annual capital expenditure to remain between £1.1bn and £1.4bn.

In Thailand, the combined effects of sales deleverage, price investment and renegotiation of promotional investment as we reposition our offer have impacted Asian profits in the first half. We expect this impact to continue in the second half as we maintain our investment in price in order to position the business for growth in a competitive and challenging market.

As planned, we anticipate that synergies associated with our merger with Booker will generate a benefit of at least £60m this year, growing to a cumulative c.£140m in 2019/20 and c.£200m by 2020/21.

1. KantarWorldpanel UK data for the 52 weeks ending 9 September 2018.


Investor Relations: Chris Griffith 01707 912 900
Media: Jane Lawrie 01707 918 701
  Philip Gawith, Teneo Blue Rubicon 0207 420 3143

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A meeting for investors and analysts will be held today at 9.00am at London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. Access will be by invitation only. For those unable to attend, there will be a live webcast available on our website at This will include all Q&A and will also be available for playback after the event. All presentation materials, including a transcript, will be made available on our website.


This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and operating margins, 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 involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the 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. Tesco does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances.

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