News Worms
News Worms

Dividend return and credit rating hint bolster Tesco's recovery

Dividend return and credit rating hint bolster Tesco's recovery

In addition to the triumphant return of its interim dividend, group sales were up 3.3% to £25.2bn, marking Tesco's seventh consecutive quarter of higher sales.

Mr Lewis said: "We are continuing to make strong progress".

Tesco (TSCO) has announced its first dividend since it was plunged into crisis by the revelation of a £263 million black hole in its accounts, after a 27% jump in first-half profits.

Group operating profit before exceptional items in the 26 weeks to August 26 increased by 23.7 percent at constant exchange rates to 759 million pounds, compared with the same period a year earlier.

Overall, pre-tax profits rose to £562m from £71m (691.5% change) reported in the first half of 2016/17.

The last time this happened was in the 2014-15 financial year, weeks before Tesco became embroiled in an accounting scandal that saw it overstate profits by £326 million.

"It's a significant milestone in the recovery of the business and one which demonstrates the confidence we and the board have in our plans", he told reporters.

Tesco remains the largest of Britain's supermarket groups by a clear margin, having a market share of nearly 28% according to the latest industry figures.

It remains 'firmly on track to reduce our costs by £1.5 billion, generate £9 billion of retail cash from operations and improve operating margins to between 3.5% and 4.0% by 2019/20'.

Tesco agreed to pay a fine of £129m to the Serious Fraud Office earlier this year to avoid prosecution for its 2014 accounting irregularities scandal.

"Tesco appears most at risk" with only 65 percent of its 743 supermarkets in the United Kingdom within 2km of an Aldi or a Lidl which is the lowest percentage among the Big Four grocers, Credit Suisse said, as quoted by Sharecast.

Provisional results are due from the Competition and Markets Authority later this month and a final decision will come in December.

While the numbers and story behind Tesco at the moment looks encouraging, our view is that competition is here to stay and will be ramped up by the German discounters making the margin improvement targets more hard to achieve over time.

He said the secret of Lewis's success has been to work with fewer suppliers and then use the formidable buying power of the country's largest grocer to drive down prices.


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