Preliminary Results 2017/18


On a continuing operations basis

  Change at
constant rates

Change at actual rates
Headline measures1:          
Group sales2 £51.0bn £49.9bn   0.6% 2.3%
Group operating profit before exceptional items3 £1,644m £1,280m   25.9% 28.4%
Diluted EPS pre-exceptional items, IAS 19 finance costs and IAS 39 fair value remeasurements4 11.88p 7.30p     62.7%
Dividend per share 3.0p -     n/a
Retail operating cash flow5 £2,773m £2,278m     21.7%
Net debt5,6 £(2,625)m £(3,729)m     down 29.6%
Statutory measures:
Revenue £57.5bn £55.9bn   1.3% 2.8%
Operating profit £1,837m £1,017m   76.6% 80.6%
Profit before tax £1,298m £145m   769.7% 795.2%
Diluted EPS 12.08p 0.81p     1,391.4%


Positive sales2 and profit3 growth, strong cash5 generation

  • Group sales2 up 2.3% to £51.0bn; ninth consecutive quarter of like-for-like sales growth in Q4
  • UK like-for-like sales7 up 2.2%; consistent strength in fresh food; (0.4)% drag from GM changes
  • Group operating profit before exceptional items3 up 28.4% to £1,644m
    • Includes £31m full year profits arising on property-related items (£(2)m net loss in second half)
  • Group operating margin3 2.9% (+57bps); 3.0% (+64bps) in 2H, well on track for 3.5-4.0% 2019/20 ambition
  • Retail operating cash flow5 up 21.7% to £2.8bn; Retail free cash flow5 of £1,377m
  • Net debt reduced by £1.1bn during the year to £(2.6)bn; total indebtedness £4.4bn lower to £(12.3)bn
  • Final dividend of 2.0p, giving FY dividend of 3.0p - reflects improved performance and Board confidence
  • Statutory revenue up 2.8% to £57.5bn; Profit before tax up £1,153m to £1,298m

Further progress against each of our six strategic drivers

  • Brand health8 continues to strengthen; quality perception +2.7 points and value perception +2.0 points9
  • In-year cost savings of £594m; savings of £820m to date towards £1.5bn medium-term target
  • Generated £2.8bn of retail operating cash5; £499m underlying working capital10 inflow
  • Improving the mix across geographies, channels and product; 16% GM range reduction in the UK
  • Released a further £290m value11 from property; 109 sites sold; 1.1m sq. ft. space re-purposed
  • Innovations including contactless Clubcard; own brand re-launch: new Wicked Kitchen vegan range

Booker merger completed

  • Booker FY results12 show continued customer satisfaction, top line growth, and strong cash generation
  • On track to deliver recurring run-rate of at least £200m pre-tax synergies; c.£60m in first year

Dave Lewis, Chief Executive:

“This has been another year of strong progress, with the ninth consecutive quarter of growth. More people are choosing to shop at Tesco and our brand is stronger, as customers recognise improvements in both quality and value.

We have further improved profitability, with Group operating margin reaching 3.0% in the second half.  We are generating significant levels of cash and net debt is down by almost £6bn over the last three years.  All of this puts us firmly on track to deliver our medium-term ambitions and create long-term value for every stakeholder in Tesco.

I am delighted to have completed our merger with Booker, and we are moving quickly to deliver synergies and access new growth, making the most of the complementary skills in our combined business.”

Serving Britain's shoppers a little better every day

Like-for-like sales performance7

UK & ROI 2.2% 2.1% 2.3% 2.4%   2.1% 2.4%   2.3%
  UK 2.3% 2.1% 2.3% 2.3%   2.2% 2.3%   2.2%
  ROI 0.2% 2.0% 3.3% 5.3%   1.1% 4.3%   2.7%
Central Europe (0.4)% 0.6% 0.8% 0.4%   0.1% 0.6%   0.3%
Asia (6.0)% (10.7)% (9.6)% (14.0%)   (8.3)% (11.8)%   (10.0)%
Group 1.0% 0.6% 0.9% 0.4%   0.8% 0.6%   0.7%

Headline Group results

A full Group income statement can be found on page 14.

52 weeks ended 24 February 2018

On a continuing operations basis

  Year-on-year change
exchange rates)
  Year-on-year change
exchange rates)
Group sales (exc. VAT, exc. fuel) 2 £50,991m   £49,867m   0.6%   2.3%
Fuel £6,500m   £6,050m   7.1%   7.4%
Revenue (exc. VAT, inc. fuel) £57,491m   £55,917m   1.3%   2.8%
Group operating profit before exceptional items 3 £1,644m   £1,280m   25.9%   28.4%
- UK & ROI £1,053m   £803m   30.3%   31.1%
- Central Europe £119m   £58m   89.7%   105.2%
- Asia £299m   £262m   7.6%   14.1%
- Tesco Bank £173m   £157m   10.2%   10.2%
Include exceptional items £193m
Group operating profit £1,837m   £1,017m   76.6%   80.6%
Group profit before tax before exceptional items, IAS 19 finance costs and IAS 39 fair value remeasurements £1,282m   £781m       64.1%
Group statutory profit before tax £1,298m   £145m       795.2%
Diluted EPS before exceptional items, IAS 19 finance costs and IAS 39 fair value remeasurements 11.88p   7.30p        
Diluted EPS 12.08p   0.81p        
Basic EPS 12.12p   0.81p        
Dividend per share 3.0p   -        
Capex 13 £1.1bn   £1.2bn        
Net debt 5,6 £(2.6)bn   £(3.7)bn        
Cash generated from retail operations 5 £2.8bn   £2.3bn        


  1. The Group has defined and outlined the purpose of its alternative performance measures, including its headline measures, in the Glossary on page 55.
  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. Headline earnings per share measure excludes IAS 39 fair value remeasurements as well as exceptional items and IAS 19 net pension finance costs.  Full details of this measure can be found in Note 9, starting on page 38.
  5. 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.
  6. Net debt includes both continuing and discontinued operations.
  7. 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.
  8. As per YouGov BrandIndex (customers recommend) February 2018.
  9. Reflects year-on-year change in YouGov Brand perception measures of quality and value.
  10. Working capital excluding the impact of exceptional items.
  11. Value released from property relates to gross proceeds from property disposals in the year.
  12. Booker unaudited results for the financial year to 30 March 2018. Further details can be found on page 13 of this release.
  13. Capex is shown excluding property buybacks. Statutory capital expenditure (including property buybacks) for the 52 weeks ended 24 February 2018 was £1.5bn (LY £1.6bn)

Creating value for our key stakeholders

We have continued to make further progress this year, 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.


  • 260,000 more shoppers are shopping at Tesco1
  • continued improvement in Brand perception measures of quality (+2.7 points) and value (+2.0 points)2
  • helpful introduction of contactless Clubcard, rolled out to 18 million Clubcard members
  • embarked on re-launch of over 10,000 own brand products with 1,300 completed to date
  • rolled out industry-leading same-day online grocery delivery service to 99% of UK postcodes
  • successful launch of Wicked Kitchen with 44% of ready meal sales to new customers in the category
  • completed roll-out of Tesco Pay+ to all our stores in the UK with 458,000 App downloads to date
  • surpassed 5 million customers at Tesco mobile and winner of 2018 Best Network for Customer Service3
  • significant improvement (+7 NPS) in customer ratings of community and charity initiatives


  • implementing a 10.5% increase for hourly paid store colleagues over the next two years with the first of three stages completed in November
  • maintained strong engagement as a great place to work and shop as we continue transformation
  • simplified our operational structures to improve efficiency, supporting all colleagues to offer the highest levels of customer service
  • low median gender pay gap of 8.7%, less than half the national average at 18.4%
  • developing the UK’s leading workplace health programme for our 300,000 UK colleagues

Supplier partners

  • most improved retailer in our relationships with suppliers for the second successive year in the GCA survey published in June 2017
  • ranked first again in the independently-run Advantage supplier survey
  • Supplier Viewpoint measure maintained at a high level in the UK (78%) despite inflationary challenges
  • launched Partners Toolkit providing 1,695 UK fresh and packaged suppliers with convenient access to key documents and information
  • extended a number of UK supplier agreements to include our Central European businesses
  • innovations in packaging to cut down on food waste such as extending the freshness of avocados


  • operating margin of 2.9% (3.0% in 2H), up 57bps year-on-year
  • generated £2,773m of retail operating cash flow, including underlying working capital inflow of £499m
  • reduced net debt from February 2017 by £1,104m; pension deficit lowered by £2,776m
  • regained sole ownership of 17 stores; raised £290m in property-related proceeds
  • completion of our merger with Booker in line with deal timeline guidance
  • announced final dividend of 2.0p per share; targeting around two times EPS cover in medium term

Looking ahead

We remain firmly on track to deliver the medium-term ambitions we set out in October 2016:  to reduce our costs by £1.5bn, to generate £9bn of retail cash from operations and to improve operating margins to between 3.5% and 4.0% by 2019/20.  In addition, by further reducing debt and maintaining a disciplined approach to capital we can continue to strengthen the balance sheet and generate an increasing level of free cash flow.  Our intention remains to return to an investment grade credit rating, with our key metrics being fixed charge cover4 and total indebtedness/EBITDAR5.

The integration of Booker is well underway and we are focused on delivering the identified synergies to create value for all stakeholders . We anticipate a synergy benefit of c.£60m in the first year, growing to a cumulative c.£140m in the second year and reaching a recurring run-rate of c.£200m per year by the end of the third year.

As we look to capitalise on the enhanced opportunities for growth available to the combined Group, we will place increasing focus on growth in earnings and free cash flow generation, in order to deliver strong, sustainable returns for shareholders.


  1. KantarWorldpanel UK data for the 52 weeks ending 25 February 2018.
  2. Reflects year-on-year change in YouGov Brand perception measures of quality and value.
  3. USwitch Broadband & Mobile Awards.
  4. EBITDAR / Net finance costs (before exceptional charges, IAS 19 net pension finance costs and IAS 39 fair value remeasurements) + Retail operating lease expense
  5. Net Debt + defined pension deficit (net of tax) + discounted operating lease commitments / EBITDAR


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

This document is available at

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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