Interim Results 2019/20


at actual rates
Change at constant rates Like-for-like sales change8
Headline measures2:                                                  
Group sales3 £28.3bn £28.3bn 0.1% (0.4)% (0.4)%
- UK & ROI £22.4bn £22.4bn 0.2% 0.2% 0.1%
- Central Europe £2.8bn £3.0bn (7.0)% (6.3)% (3.1)%
- Asia £2.6bn £2.4bn 8.4% 1.0% (1.3)%
- Tesco Bank £0.6bn £0.5bn 2.8% 2.8% n/a
Group operating profit before exceptional items and amortisation of acquired intangibles4 £1,406m £1,121m 25.4% 24.4%  
Diluted EPS before exceptional and other items5 8.17p 5.45p 49.8%    
Interim dividend per share 2.65p 1.67p 58.7%    
Retail free cash flow6 £814m £397m 105.0%    
Net debt6 £(12.6)bn £(13.7)bn down 7.8%    
Statutory measures:
Revenue £31.9bn £31.7bn 0.6% 0.1%  
Operating profit £1,134m £1,007m 12.6% 11.4%  
Profit before tax £494m £463m 6.7% 3.7%  
Diluted EPS7 3.31p 3.47p (4.6)%    


Customer satisfaction

  • Shopping trip satisfaction improved across all measures and all channels; +8 point increase year-on-year9
  • Strong fresh food offer driving +0.4% UK volume outperformance in the half
  • ‘Exclusively at Tesco’ brands gaining volume share from all competitors; full range now in 550 stores
  • Brand perception further improved on value, quality and trust10
  • Brand net promoter score improved in the half, versus declines for all key competitors

Cash profitability

  • Group operating profit before exceptional items and amortisation of acquired intangibles4 £1,406m, +25.4%, margin 4.41%, up 87 bps;
    • Significant improvement driven by space right-sizing, cost savings and improved product mix
      • UK & ROI                 £1,085m +28.4%
      • Central Europe      £63m (16.0)% (+1.3% excl. £(13)m provision re. potential historic VAT liabilities)
      • Asia                         £171m +54.1%
    • Bank £87m, (3.3)%: invested in competitiveness of insurance offer
  • Group margin target (pre-IFRS 16 excl. Booker) delivered six months early: 12-month margin 3.73% incl. 1H 3.67%11
  • Cost savings to date £1.6bn, already ahead of £1.5bn FY 19/20 target12
  • EBITDA13 up 15.3% to £2.3bn

Cash flow

  • Retail free cash flow6 of £814m, +£417m YoY 
  • Working capital inflow +£114m (LY: £(12)m) driven by UK & ROI +£216m (LY: £(52)m)
  • Agreed 73 property disposals since year-end, primarily in Poland for total proceeds of £210m (of which 1H: £65m)
  • Interim dividend 2.65p, +58.7%; expect full year dividend pay-out ratio of 50%
  • Net debt6 £(12.6)bn, down £0.6bn since year-end; Pension deficit £0.2bn lower following strong asset performance

CEO succession

  • Group CEO succession announced: Dave Lewis stepping down next year; Ken Murphy appointed as successor


Dave Lewis, Chief Executive:

“Despite challenging external conditions we have delivered a very good start to the year. I’m very pleased to say that we have now delivered every element of the turnaround plan and from this position of strength, the transformation of our business continues at pace.

The Capital Markets Day in June laid out many opportunities for further, profitable growth and I’m delighted to share today the plans to step up our store opening programme, to increase our online capacity, the introduction of Clubcard Plus in the UK and the acquisition of Best Food Logistics as the next step in our Booker growth strategy.

With the turnaround complete and as we begin to implement the next steps of our sustainable growth strategy, now is the right time to plan a smooth and orderly succession. As such, I will step down as Group CEO next summer and pass the baton to Ken Murphy.”

Looking ahead

With the turnaround complete we move to the opportunities outlined at the Capital Markets Day in June. We are in a strong position to generate sustainable growth within our existing capital expenditure allocation of £1.1bn to £1.4bn per year, this includes:


  • Stores: as a result of lowering build costs, reducing operating costs and improvements in margin we will:
    • Open 750 Express stores in Thailand over the next three years
    • Increase rate of Express store expansion in the UK, opening 150 stores over the next three years
    • Proceed with 4 new superstores in UK & ROI
  • Online: having established a more profitable, increasingly cash generative operating model, we will double our online capacity in the UK
    • Open 3 Urban Fulfilment Centres by Summer 2020 (incl. first in West Bromwich by March 2020) as part of plan to open more than 25 over the next three years
  • Loyalty: continue the innovation in loyalty (Digital Clubcard, Clubcard pricing) with the introduction of Clubcard Plus in the UK before the end of 2019
  • Booker: building on the organic growth since merger (£0.7bn additional sales to date), we are announcing today the acquisition of the assets and operations of Best Food Logistics for a nominal consideration, adding a further £1.1bn additional foodservice sales*. Best Food Logistics distributes food to customers including Pret a Manger, KFC and Burger King.


  • •Simplify to serve: continue our journey to focus on improving customer service and lowering operating costs
    • In UK & ROI: repurpose proposition in 153 Metro stores and complete new counters proposition in 692 stores
    • In Asia: roll out new Express propositions, customer satisfaction +16%
    • In CE: addressing 2.7m sq. ft. unproductive space; moving to two-format model in Poland
  • Jack’s: 3 more stores to open by February 2020
  • Product: new seasonal ‘Fresh 5’ offer driving additional 2% sales volumes in fruit and vegetables
  • Plant-based food: number of lines to be doubled by January incl. six new brands
  • Plastic: new strategy launched with 1,500 supplier partners

Enabling technology

  • Growth-enabling:
    • 1.54m Clubcard app users, +77% YoY; more than 1.5m customers benefiting from Clubcard Prices
    • Cost to serve model with 440bn data points continues to support making the right decisions for customers
    • Equity investment in Trigo frictionless shopping technology and ‘Scan, Pay, Go’ app now available to over 5,000 colleagues
  • Cost efficiency:
    • Tesco Connect supplier platform and new algorithms improving fresh sales forecast accuracy by 6.7%
    • Changed stock control process moving to simpler ‘by exception’ model saving c.£40m annually
    • Pay+ transactions +18% in 1H; 4% increase in cashless transactions, lowering cash handling costs
  • Simplification:
    • All large stores using new Scheduler tool, optimising 300 million colleague hours per year
    • Improved online grocery transport planning algorithm saving over 11.2 million miles this year
    • First time automation of lease management of 30,000+ leases in Thailand

*Subject to review by the Competition and Markets Authority


 We have had a strong start to the year, leaving us well-positioned to continue to be highly competitive in challenging markets.

As we move beyond our turnaround goals, we are expecting a more even balance of profitability between the first and second half.

We remain disciplined in our approach to capital allocation, delivering the growth, innovation and enabling technology opportunities outlined above whilst maintaining capital expenditure within a range of £1.1bn and £1.4bn per year.

Our merger with Booker continues to generate synergies ahead of plan and we are very confident that we will reach our cumulative target of c.£140m this year and c.£200m by 2020/21.

We will report our 3Q and Christmas Trading statement on Thursday 9 January 2020.


We have announced this morning that Dave Lewis has decided to step down as Group CEO of Tesco. He will leave the business next year and will be succeeded by Ken Murphy.

John Allan, Chairman:

“It is with regret that I have accepted the resignation of Dave Lewis as Group CEO of Tesco, who has decided that he wants to leave the business in the summer of 2020.

Dave has done an outstanding job in rebuilding Tesco since 2014 and he continues to have unwavering support from the Board. Some time ago, however, he indicated to me that he was considering the best time to hand over to a successor. His openness allowed me to begin a thorough and orderly process to identify a potential candidate to replace him. As a result, today, we have appointed Ken Murphy to succeed Dave as Group CEO of Tesco next summer.

Ken is unquestionably, a seasoned, growth-orientated business leader. He has deep commercial, marketing and brand experience within retail and wholesale businesses, first with Alliance Unichem, and then with Boots. He was Joint Chief Operating Officer at Boots UK & Ireland before rising to Executive Vice President, Chief Commercial Officer and President Global Brands at Walgreens Boots Alliance. Ken has values which align with our own, strong strategic and operating acumen, and is proven at the very top of a large and respected multinational retail group. I firmly believe we have the right person for the job. Ken has contractual commitments to his previous employer, and therefore we will announce his precise start date in due course.

Today’s results confirm that the Tesco turnaround has been delivered. Under Dave’s leadership Tesco has transformed customer satisfaction and rebuilt the business. We can now move forward with renewed confidence. We have an exceptional leadership team, a very clear strategy, a re-invigorated brand and financial strength.”

Dave Lewis, Chief Executive:

“My decision to step down as Group CEO is a personal one. I believe that the tenure of the CEO should be a finite one and that now is the right time to pass the baton. Our turnaround is complete, we have delivered all the metrics we set for ourselves. The leadership team is very strong, our strategy is clear and it is delivering. The Tesco brand is stronger and customer satisfaction is the highest it has been for many years. Colleagues are doing an extraordinary job and their expertise shows in every store and channel every day.

With these firm foundations and a competitive, sustainable growth strategy in place, I have no doubt that Tesco will kick on again under new leadership next year.

When that time comes, I will watch progress from outside with interest, deep affection and pride. In the meantime, you can be sure that I will give the job everything I have until my very last day.”


Dave Lewis’s full departure terms will be confirmed close to his final date of service. However, we can confirm that the Remuneration Committee has approved good leaver status for Dave for his outstanding awards and that departure terms will be in line with Tesco’s Remuneration Policy.

Ken Murphy will receive CEO employment terms in line with Tesco’s remuneration policy. His basic salary will be £1,350,000 per annum and his pension contribution will be 7.5% of basic salary, in line with the pension saving opportunity of the wider UK workforce.

Ken may forfeit payments from his previous employment for which he will be compensated if they arise on a like for like basis. Mr Murphy will also be provided with appropriate relocation assistance. Costs will be disclosed in due course.

There are no additional matters that would require disclosure under LR 9.6.13 R (1) to (6) in respect of Ken Murphy.


1. Last half-year figures restated for adoption of IFRS 16.
2. The Group has defined and outlined the purpose of its alternative performance measures, including its headline measures, in the Glossary on page 61.
3. Group sales exclude VAT and fuel. Sales growth shown on a comparable days basis.
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 underlying performance.
5. Headline ‘diluted earnings per share’ and ‘adjusted Group profit before tax’ measures exclude exceptional items, amortisation of acquired intangibles, net pension finance costs and fair 
value remeasurements of financial instruments. Full details of the diluted earnings per share measure can be found in Note 8, starting on page 39.
6. Net debt and retail free cash flow exclude the impact of Tesco Bank in order to provide further analysis of the retail cash flow statement. Net debt also includes lease liabilities following
the adoption of IFRS 16. Net debt excluding lease liabilities was £(2.3)bn, down £0.4bn since year-end.
7. Statutory diluted earnings per share includes the impact of a net post-tax charge of £(396)m in respect of exceptional items. More detail can be found in Note 3 on page 36. 8. 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).
9. UK Multichannel tracker. Based on your most recent experience, how likely is it that you would recommend this store to a friend or colleague?
10. Reflects year-on-year change in YouGov Brand UK perception measures of quality, value and trust.
11. Group margin target (pre-IFRS 16 and excluding Booker) of 3.5% to 4.0% set in October 2016.
12. Group operating cost reduction target of £1.5bn by the end of the 2019/20 financial year, set in October 2016.
13. Retail EBITDA i.e. excludes the impact of Tesco Bank.
14. Capex is shown excluding property buybacks. Statutory capital expenditure (including property buybacks) for the 26 weeks ended 24 August 2019 was £0.5bn (LY £0.4bn).



Investor Relations: Chris Griffith 01707 912 900
Media: Christine Heffernan 01707 918 701
  Philip Gawith, Teneo 0207 420 3143



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