Tesco posts record profits
Supermarket giant Tesco has bucked the recessionary gloom with a record £3.13 billion profit – the highest amount ever posted by a UK retailer.
Underlying profits for the 12 months to 28 February rose 10% on the previous year – slightly ahead of predictions – after the group managed to increase both the number of customers at its tills and the average amount they were spending.
The world’s third largest grocer, which currently operates in 14 countries, saw sales soar to more than £1 billion a week for the first time. Total sales for the year came in at £59.4 billion, up 15% on the previous year.
Shareholders were given something to smile about after the stockmarket-listed retailer raised its dividend 9.7% to 11.96p a share.
Chief executive, Sir Terry Leahy, says the group is weathering the downturn well: "At a time when customers everywhere are feeling the economic strain, we are responding to their changing needs in all our markets by lowering prices, introducing more affordable products and offering even sharper promotions."
Tesco's statement to shareholders notes that it has made a “solid” start to the 2009/10 year with UK like-for-like sales growth, excluding petrol, for the first six weeks rising 3.4%.
However, Leahy admits that his chain has lost ground to budget rival Morrisons, which saw full year like-for-like sales growth, excluding petrol, of 7.9%.
Its US venture also proved a sore point, with losses from its fledgling Fresh & Easy stores doubling from £62 million to a worse-than-expected £142 million as efforts to tempt customers away from US titan Wal-Mart were less successful than anticipated.
However, Tesco's European arm was better received with a 29.1% annual increase in sales despite a poor performance in recession-battered Ireland, the Czech Republic and Slovakia. Since February, its international sales have lifted by 21.5%.
Looking forward, the UK’s biggest grocer said it plans to open eight million square feet of new space this financial year, three quarters of which will be outside the UK, although the budget for capital expansion will be £1 billion less than last year at £5.6 billion.
Tesco is also intending to expand its banking business having bought Royal Bank of Scotland’s stake in their previously joint venture.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
A property chain is a line of buyers and sellers (the “links”) who are all simultaneously involved in linked property transactions. When one transaction falls through – for instance, someone can’t get a mortgage or simply withdraws their property from sale, the entire chain breaks and all the transactions are held up or even fail entirely.