Tesco share price: Full-year operating profit up nearly 25%

on Apr 12, 2017
Updated: Oct 21, 2019

Tesco (LON:TSCO) has updated investors on its full-year performance this morning.

**Highlights from the company statement:**
Group operating profit before exceptional items was £1,280m, up 24.9% on last year at constant exchange rates and up 29.9% at actual rates. Statutory operating profit of £1,017m includes the impact of exceptional items, which are described in more detail below and in Note 4 on page 28 of this statement.
Our full year UK & ROI operating profit before exceptional items was £803m, up 60% on last year, with margin growth of 68 basis points year-on-year. This improvement includes the impact of investments we have made in all aspects of our offer, particularly in lowering core prices and in the quality and price of the exclusive fresh food brands which we launched in March 2016. These investments enabled us to drive volume growth, generating positive operational leverage. In addition to managing costs more effectively year-on-year, we are also optimising the mix of our offer across channels and products. For example, within our beers, wines and spirits category we have focused on improving the relevance and profitability of our offer by broadening our range of speciality beers, increasing the prominence of own brand products and maintaining a strong, stable core price position in an extremely promotional market.

In a highly competitive environment, international operating profit before exceptional items was £320m, flat year-on-year at actual exchange rates and down by (12.5)% at constant exchange rates. Whilst we continued to invest in our offer in all of our markets, our response to intense competition in Poland weighed on profitability in Central Europe. We continued to focus on improving our store economics across the region, including simplifying management structures, reducing store administration and closing unprofitable store counters. We also opened a new distribution centre at Poznan in Poland, reducing transport costs for the country by 20%. From April 2017, we have separated the management of our international business, creating two new Executive Committee roles leading Asia and Central Europe, giving greater focus to each region.
Dave Lewis, Chief Executive:
“Today, our prices are lower, our range is simpler and our service and availability have never been better. Our exclusive fresh food brands have strengthened our value proposition and our food quality perception is at its highest level for five years. At the same time, we have increased profits, generated more cash and significantly reduced debt.

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We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October. We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.
On top of this, our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing ‘out of home’ food market.”
**More to follow…**
As of 07:05 BST, Wednesday, 12 April, Tesco PLC share price is 195.24p.


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