Lewis hails 'improvement'
Tesco profits slump amid ongoing price war
Profits at Tesco fell by more than half in the first half of the year as its restructuring and price deflation took a toll on the supermarket chain.
Chief executive Dave Lewis put a gloss on the figures, saying they showed “sustained improvement”.
Pre-tax profits slumped 55.1% from £779 million to £354m in the six months to the end of August.
The company said it had maintained investment in service, with an increased proportion of customer-facing roles, slashed prices on more than 500 key product lines and improved on-shelf availability to record levels. It has closed 53 unprofitable stores now since the start of the year.
Mr Lewis said: “We have delivered an unprecedented level of change in our business over the last twelve months and it is working. The first half results show sustained improvement across a broad range of key indicators.
“In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment.
“Our transformation programme in Europe has accelerated growth and reduced operating expenses, and in Asia, we have gained market share in challenging economic conditions.
“We have concluded our portfolio review with the sale of Homeplus, our business in Korea, enabling us to take a significant step forward on our priority of strengthening the balance sheet. Further progress will be driven by continuing to increase the level of cash generated from our retained assets.”
The number of accounts at the Edinburgh based banks has risen from 7.4m to 7.6m, an increase of 6.2% in 12 months.
· Profit Before Tax is 25.1% higher at £100.1m (August 2014: £80.0m).
· Underlying Profit Before Tax1 is 8.7% lower at £106.8m (August 2014: £117.0m).
· Total underlying income has decreased by 0.3% to £392.7m (August 2014: £393.7m) driven by the impact of regulation on interchange rates more than offsetting growth in other areas.
· Credit quality in the first half of the year: Impairment charges have increased 3.5% to £35.4m compared to the same period in 2014 (£34.2m) reflecting asset growth. The bad debt:asset ratio is in line with the six months ended August 2014 at 0.9%.
· An overall increase in customer lending since February 2015 of 7.4% to £8.3bn (February 2015: £7.7bn) has been underpinned by mortgage growth.
· Customer Deposits of £6.6bn (February 2015: £6.9bn) continue to be the main source of the group’s funding.
· The group successfully completed a Credit Card securitisation of £300m in May 2015. This has supported continued growth in customer lending.
· The balance sheet remains strong and well positioned to support future lending growth from both a liquidity and capital stand point. At August 2015, the risk asset ratio was 19.1% (February 2015: 18.8%) and net stable funding ratio was 108.8% (February 2015: 116.6%).