TIDMTSCO
RNS Number : 3043B
Tesco PLC
07 October 2020
Interim Results 2020/21
SUPPORTING CUSTOMERS THROUGH CHALLENGING TIMES
Change Change
1H 1H at actual at constant
On a continuing operations basis 2020/21 2019/20(1) rates rates
Headline measures(2) :
Group sales(3) GBP26.7bn GBP25.0bn 6.6% 6.8%
- UK & ROI GBP24.3bn GBP22.4bn 8.6% 8.5%
- Central Europe GBP1.9bn GBP2.0bn (4.3)% (1.5)%
- Tesco Bank GBP0.4bn GBP0.6bn (31.4)% (31.4)%
Group operating profit before exceptional
items and amortisation of acquired
intangibles(4) GBP1,037m GBP1,229m (15.6)% (15.8)%
- Retail GBP1,192m GBP1,142m 4.4% 4.2%
- Tesco Bank GBP(155)m GBP87m n/m n/m
Retail free cash flow(5) GBP554m GBP645m (14.1)%
Net debt(5) GBP(12.5)bn GBP(12.6)bn down 0.4%
Interim dividend per share 3.20p 2.65p 20.8%
Statutory measures:
Revenue GBP28.7bn GBP28.5bn 0.7%
Operating profit GBP1,007m GBP1,054m (4.5)%
Profit before tax GBP551m GBP428m 28.7%
Headlines
Throughout the COVID-19 crisis, we have been guided by four key
priorities: providing food for all, safety for everyone, supporting
our colleagues and supporting our communities. As a result, our
440,000 colleagues have been able to make a significant and lasting
contribution towards keeping their nations fed. At the same time,
we have invested in value for customers and continued to make
strategic progress as the business moves beyond the turnaround:
Customer satisfaction
-- Adapted offer to major shifts in customer buying habits; in
UK, food sales up 9.2%, clothing down (17.2)%, GM down (0.3)%
-- Online delivery capacity more than doubled to reach 1.5m
slots a week, including serving 674,000 vulnerable customers
-- c.90% of customers rating store safety highly; >1.1m
customers more loyal to Tesco vs. pre-COVID(6)
-- 'Aldi Price Match' launched in March and then extended to
>500 lines; switching gains from Aldi for first time in a
decade(7)
-- Rewarding loyal customers through exclusive deals with
extension of Clubcard Prices to c.2,000 products
-- Brand net promoter score up 2pts; recognised as 'Brand of the
Year' in Marketing Week Masters Awards last month
-- Resilient Booker performance: Retail sales up 22%; Catering
sales down (12)% - an improvement from 1Q driven by doubling of
market share and benefit of Best Food Logistics
Cash profitability
-- Response to COVID-19 leading to GBP(533)m 1H UK costs as we
prioritise customer and colleague safety
-- Retail operating profit before exceptional items and
amortisation of acquired intangibles(4) of GBP1,192m, +4.4%, margin
4.2%;
- UK & ROI volume and business rates relief offset COVID-19
costs; CE held back by COVID-19 costs and new Hungarian tax
- UK & ROI GBP1,133m, +6.4%, margin 4.3%
- Central Europe GBP59m, (23.4)%, margin 3.0%
-- Bank operating loss before exceptional items GBP(155)m driven
by provision for potential bad debts and reduced income; continue
to expect operating loss of GBP(175)m-GBP(200)m this year; capital
ratios and liquidity remain strong
-- Retail EBITDA(8) GBP1,994m, +4.1% higher YoY
Cash flow
-- Retail free cash flow(5) of GBP554m; stable YoY exc.
GBP(148)m relating to buyback of five UK stores and lower property
proceeds
-- Interim dividend 3.20p; 35% of last year's full year dividend, in line with policy
-- Net debt(5) of GBP(12.5)bn, down GBP0.1bn year-on-year
Sales of businesses in Thailand, Malaysia and Poland progressing
well
-- GBP8.2bn(9) sale of Thailand and Malaysia businesses approved
by shareholders in May; regulatory approval and completion expected
by the end of the calendar year, to be followed immediately by
shareholder meeting to approve c.GBP5bn capital return and GBP2.5bn
one-off contribution to eliminate pension funding deficit
-- Sale of Polish business to Salling Group A/S agreed in June; completion expected Spring 2021
Imran Nawaz to join Board as CFO in April 2021 - as separately
announced this morning
Ken Murphy, Chief Executive:
"The first half of this year has tested our business in ways we
had never imagined, and our colleagues have risen brilliantly to
every challenge, acting in the best interests of our customers and
local communities throughout. I would like to thank all our
colleagues for their amazing contribution and I am delighted and
proud to be part of such an incredible team.
We are absolutely committed to continuing to invest in value for
customers and safety for all in these uncertain times.
Tesco is a great business with many strategic advantages. I'm
excited by the range of opportunities we have to use those
advantages to create further value for our customers and, in doing
so, create value for all of our other stakeholders."
Headline Group results
Key segmental results:
Sales(2) Year-on-year Year-on-year Like-for-like Operating Year-on-year Year-on-year
change change sales Profit/(Loss) change change
(actual (constant change(10) before (actual (constant
rates) rates) exceptional rates) rates)
items and
amortisation
of acquired
intangibles
---------
GBP1,133m 6.4% 6.2%
UK & ROI GBP24,337m 8.6% 8.5% 7.2% 4.30% margin +19bp +19bp
------------ ------------- ------------- -------------- -------------- ------------- -------------
- UK GBP19,537m 7.7% 7.7% 7.6%
- ROI GBP1,322m 16.3% 14.5% 15.5%
-
Booker GBP3,478m 11.0% 11.0% 2.2%
------------ ------------- ------------- -------------- ------------- -------------
Central
Europe GBP1,929m (4.3)% (1.5)% (0.9)% GBP59m (23.4)% (23.4)%
2.96% margin (79)bp (82)bp
---------------------- ------------- ------------- -------------- -------------- ------------- -------------
GBP1,192m 4.4% 4.2%
Retail GBP26,266m 7.5% 7.7% 6.5% 4.21% margin +12bp +11bp
------------ ------------- ------------- -------------- -------------- ------------- -------------
GBP(155)m (278.2)% (278.2)%
Bank GBP386m (31.4)% (31.4)% - n/m n/m n/m
------------ ------------- ------------- -------------- -------------- ------------- -------------
Group GBP26,652m 6.6% 6.8% 6.5% GBP1,037m (15.6)% (15.8)%
3.61% margin (70)bp (71)bp
---------------------- ------------- ------------- -------------- -------------- ------------- -------------
A full Group income statement can be found on page 15.
Year-on-year Year-on-year
26 weeks ended 29 August 2020 change change
On a continuing operations 1H 1H (actual (constant
basis 2020/21 2019/201 rates) rates)
-------------------------------------
Group sales (exc. VAT, exc.
fuel)3 GBP26,652m GBP24,952m 6.6% 6.8%
------------ ------------ ------------- -------------
Fuel GBP2,066m GBP3,560m (42.0)% (41.9)%
------------ ------------ ------------- -------------
Revenue (exc. VAT, inc. fuel) GBP28,718m GBP28,512m 0.7% 0.7%
------------ ------------ ------------- -------------
Group operating profit before
exceptional items and amortisation
of acquired intangibles4 GBP1,037m GBP1,229m (15.6)% (15.8)%
------------ ------------ ------------- -------------
Include exceptional items GBP(30)m GBP(175)m
and amortisation of acquired
intangibles
------------ ------------ ------------- -------------
Group statutory operating
profit GBP1,007m GBP1,054m (4.5)% (4.6)%
------------ ------------ ------------- -------------
Adjusted Group profit before
tax(11) GBP717m GBP873m (17.9)%
------------ ------------
Group statutory profit before
tax GBP551m GBP428m 28.7% 28.0%
------------ ------------ ------------- -------------
Interim dividend per share 3.20p 2.65p 20.8%
Capex(12) GBP0.4bn GBP0.3bn
------------ ------------
Net debt(5) GBP(12.5)bn GBP(12.6)bn
------------ ------------
Retail free cash flow(5) GBP0.6bn GBP0.6bn
------------ ------------
We have not included the usual EPS measures in the tables above
as we consider they do not provide a meaningful reflection of
performance in the first half. Adjusted diluted EPS of 5.75p (LY:
6.85p), which is our usual alternative performance measure,
excludes earnings from our discontinued operations but does not
take account of the share consolidation that is expected to take
place following completion of the sale of our Asian businesses.
Statutory EPS of 4.72p (LY: 3.34p) does include earnings from
discontinued operations, however the year-on-year shape is
distorted as no depreciation has been charged this year after the
related assets were reclassified as 'held for sale' on the balance
sheet.
Adjusted diluted EPS will be refined at the full year to reflect
the post-consolidation share base as if it had been in place from
the start of the previous financial year. The precise impact on the
share base cannot be predicted now as it depends on the share price
at the time of the consolidation. However, based on a share price
of 213.2p (being the average share price for the five days to 2
October 2020), the number of shares in issue would reduce by
c.(24)%. We can apply this reduction to the share base used for the
interim measure to derive a 'Pro forma' Adjusted diluted EPS of
7.56p (LY: 9.01p), which we consider better reflects underlying
performance in the half.
Notes
1. Prior year comparatives are restated for discontinued
operations. Further details on discontinued operations can be found
in Note 6, starting on page 38.
2. The Group has defined and outlined the purpose of its
alternative performance measures, including its headline measures,
in the Glossary starting on page 58.
3. Group Sales exclude VAT and fuel. Sales change shown on a
comparable days basis for Central Europe.
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. 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
GBP(3.0)bn, up GBP0.2bn since year-end.
6. Source: Kantar. The number of customers who became more loyal
through COVID-19, shopping consistently with us between April and
August.
7. Source: Kantar. Net switching data 12 w/e 17 May 2020 and 12
w/e 6 September 2020.
8. Retail EBITDA excludes the impact of Tesco Bank.
9. $10.6bn enterprise value, on a cash and debt free basis,
presented in GBP using a rate of USD1.29:GBP1.00. This is based on
the average daily closing rate from Monday 2 to Friday 6 March
2020.
10. 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 exchange rates).
11. 'Adjusted Group PBT' measures exclude exceptional items,
amortisation of acquired intangibles, net pension finance costs and
fair value remeasurements of financial instruments.
12. Capex is shown excluding property buybacks. Statutory
capital expenditure (including property buybacks) for the 26 weeks
ended 29 August 2020 was GBP0.5bn (LY GBP0.4bn).
Creating value for our key stakeholders
Our priorities in the half have been providing food for all,
safety for everyone, supporting our colleagues and supporting our
communities. Over this period, we have continued to make further
good progress, creating long-term and sustainable value for our key
stakeholders.
Customers
-- Safety : quickly introduced series of social distancing
measures in stores; c.90% of customers rating safety highly
-- Price : 'Aldi Price Match' extended to over 500 Tesco and
branded products; delivering consistent low prices on products and
brands that customers buy every week
-- Simpler shopping trip: improving customer visibility of our
strong core value proposition, with fewer pack size variants,
removal of unnecessary duplication from product ranges and fewer
promotions
-- Online : more than doubled capacity from 0.6m to 1.5m slots a
week; first Urban Fulfilment Centre (UFC) in West Bromwich Extra
now fulfilling orders as part of programme to open more than 25
over next three years
-- Loyalty : extension of Clubcard Prices to c.2,000 products
from September; Clubcard Plus subscriber base continues to grow,
with basket size uplift exceeding expectations
-- Booker : adapting retail offer to meet greater demand for
grocery products; supporting catering customers to move to a
delivery model; well-placed to emerge in a stronger competitive
position
-- Central Europe : completed strategic transformation to
right-size all stores and simplify ranges across all markets
Colleagues
-- Ensured full pay from day one for all colleagues sick or self-isolating with COVID-19
-- 26,000 vulnerable colleagues supported with 12 weeks full pay
as part of COVID-19 support measures
-- Paid 10% bonus to all front line colleagues as a thank you
for going above and beyond from 9 March to 30 May
-- Created 16,000 new permanent roles in August to support the
exceptional growth of our online business
-- Creating 1,000 work placements for young people as a leading
supporter of the 'Kickstart' programme
-- Two mental wellbeing tools, Headspace and SilverCloud, made
available for free to all our 300,000 UK colleagues
-- Launched our first Business Diversity Internship in September
Supplier partners
-- Collaborated across supply base to maintain availability and
adapt to exceptional shift in demand due to COVID-19
-- Supported farmers hardest hit by the closure of large parts
of the food service industry, including selling white shell eggs
and buying products such as chicken and potatoes originally planned
for use in restaurants
-- Moved to immediate payment of invoices for all small suppliers until January 2021
-- Pilot partnership launched with Loop in July for online
delivery of products using only reusable packaging
-- Committed to a 300% increase in sales of plant-based proteins by 2025
-- Supplier viewpoint reached highest ever score of 79.5% (+6.7% pts YoY)
Shareholders
-- Interim dividend of 3.2p per share; set at 35% of last year's
full year dividend, in line with policy
-- Sale of Thailand and Malaysia businesses approved by
shareholders in May, regulatory approval and completion of sale
expected in 2H 2020; to be followed immediately by shareholder
meeting to approve the return of capital
-- Sale of Polish business to Salling Group A/S agreed in June
for net cash proceeds of c.GBP165m; completion expected in Spring
2021; additional proceeds of c.GBP140m expected from the sale of
residual properties in 2021; will contribute to over GBP0.5bn total
cumulative proceeds from the sale of our loss-making Polish
business
-- Since outset of crisis, we have prioritised safety and
colleague & customer welfare; we will continue to progress food
waste and packaging reduction as part of our ongoing efforts to
reduce our environmental footprint
Looking ahead
We will continue to be guided by our four key priorities in
response to the COVID-19 crisis: providing food for all, safety for
everyone, supporting our colleagues and supporting our
communities.
We are continuing to invest in delivering great value to help
customers in increasingly challenging times and, as a result,
expect a broadly even balance to the year in terms of 1H/2H retail
profitability. Whilst significant uncertainties remain, we now
expect retail operating profit in the current year to be at least
the same level as 2019/20 on a continuing operations basis.
We continue to expect to report a loss for the Bank of between
GBP(175)m and GBP(200)m for the 2020/21 financial year. We will
review any changes made to macro-economic forecasts and this could
result in releases from or further additions to the bad debt
provision. Whilst headline profitability is impacted in the short
term, the Bank's capital ratios and liquidity remain strong.
We will report our 3Q and Christmas Trading statement on
Thursday 14 January 2021.
Financial results
The results of our businesses in Thailand and Malaysia, and of
our business in Poland, have been classified as discontinued
operations following the announcements of their proposed sale
(subject to regulatory clearances) on 9 March 2020 and 18 June 2020
respectively.
Sales:
On a continuing operations UK & ROI Central Retail Tesco Group
basis Europe Bank
---------- -----------
Sales GBP24,337m GBP1,929m GBP26,266m GBP386m GBP26,652m
----------- ---------- ----------- -------- -----------
(exc. VAT, exc. fuel)
----------- ---------- ----------- -------- -----------
change at constant exchange
rates % 8.5% (1.5)% 7.7% (31.4)% 6.8%
----------- ---------- ----------- -------- -----------
change at actual exchange rates
% 8.6% (4.3)% 7.5% (31.4)% 6.6%
----------- ---------- ----------- -------- -----------
Like-for-like sales (exc. VAT,
exc. fuel) 7.2% (0.9)% 6.5% n/a 6.5%
----------- ---------- ----------- -------- -----------
Statutory revenue (exc. VAT, GBP26,341m GBP1,991m GBP28,332m GBP386m GBP28,718m
inc. fuel)
----------- ---------- ----------- -------- -----------
Includes: Fuel GBP2,004m GBP62m GBP2,066m - GBP2,066m
----------- ---------- =========== -------- -----------
1. UK & ROI consists of Tesco UK, ROI and Booker.
2. Central Europe consists of Czech Republic, Hungary and
Slovakia. Poland is now reported as a discontinued operation.
3. Sales change shown on a comparable days basis; based on
statutory accounting dates, Group sales grew by 7.0% at constant
exchange rates and grew by 6.8% at actual exchange rates.
Group sales grew by 6.6% at actual rates, including a (0.2)%
foreign exchange translation impact due to the appreciation of
Sterling. The COVID-19 crisis has had far reaching implications on
customer shopping behaviour, impacting all areas of our
business.
In the UK and the Republic of Ireland (ROI), total sales grew by
8.6%. In the UK, first quarter growth was particularly strong in
essential categories such as grocery and household, as customers
sought to stock up on key items ahead of COVID-19 lockdown
restrictions and consumed more meals at home. During demand peaks,
we worked very closely with our supplier partners to simplify
ranges and protect availability of the most important products for
customers. Whilst like-for-like sales growth eased slightly from
the first to second quarter, we continued to see elevated demand
across our food range, particularly in the meat, fish and poultry
category and in beers, wines and spirits.
Growth in the half was most marked in online with sales up 69%
with the rate of growth reaching 90% during the second quarter.
Sales in our convenience business grew by 7.6% including a
particularly strong performance in our Express and One Stop stores
in neighbourhood locations. In large stores, sales grew by 1.4% as
our offer was well placed to serve customers seeking to shop less
frequently whilst buying more on each visit, with average basket
size increasing by 56% and transactions reducing by (31)%.
More than one million customers became more loyal over the
course of the half. As part of our programme to reward loyalty,
last month we extended Clubcard Prices, giving Clubcard holders
exclusive access to more special offers across the store every
week. Whilst we have not sought to accelerate take up during the
COVID-19 crisis, Clubcard Plus is now generating a basket size
uplift three times higher than our original expectation. We
continue to leverage the benefit of Clubcard Plus across our range
of products and services, with new and upgrading Tesco Mobile pay
monthly customers (on eligible plans) currently benefiting from a
free six-month subscription.
We are continuing to invest in our value proposition, including
the extension of our 'Aldi Price Match' campaign to over 500
products, including brands. We are also working with suppliers to
improve the visibility of our proposition by simplifying ranges,
removing pack size variants and reducing promotions. We have
reduced promotional participation from 30% to 22% year-on-year
whilst customer ratings of value have improved by 530 basis
points.
Responding to the significantly increased demand, we rapidly
grew our online business, more than doubling capacity to 1.5
million orders per week, allowing us to serve 674,000 vulnerable
customers. To support this accelerated shift in customer demand, we
extended picking hours, widened delivery windows and brought in
additional colleagues on a temporary basis. In August, we converted
16,000 of these temporary roles into new permanent ones. Online
grocery sales had grown from c.9% of total UK sales to over 16% by
the end of the half.
Our first UFC (Urban Fulfilment Centre) in West Bromwich Extra
is now delivering to customers, providing access to more online
delivery slots at a time that suits them and helping us to build
sustainably our grocery home shopping service. At full capacity,
colleagues in the UFC will be able to increase their pick rate
significantly compared to picking on the shop floor. The continued
roll-out of this new technology will enable us to capture growth
beyond our original ambition, with our second UFC opening in
Lakeside Extra in 2021.
Booker sales grew by 11.0% in the half, including a c.9%
contribution from Best Food Logistics which was acquired in early
March. This included a strong performance in retail with sales up
22% as we supported our customers to broaden their grocery range.
In catering, a period of closure for many of our customers saw
sales decline by (12)% in the half. We have helped customers adapt
their businesses to respond to the crisis, including those moving
to a delivery and take-out model by supplying a complete offer in
both food and consumables. As restaurants started to re-open in
July, catering returned to growth and we maintained the stronger
market share we had built up versus pre-COVID-19 levels. As well as
supporting the Tesco online grocery business by providing more than
100,000 additional click & collect slots, Booker also supported
over 1,000 care organisations and donated three million meals to
those in need.
In ROI, sales grew by 16.3% at actual rates driven by a higher
conversion of 'out of home' consumption and high customer
confidence in our safety measures. Growth was particularly strong
in large stores and in our market leading online grocery
business.
In Central Europe, sales declined by (1.5)% at constant rates
with positive growth in the first quarter reflecting increased
demand for food during the COVID-19 lockdown period. In the second
quarter, year-on-year performance weakened as we came out of
lockdown and traded over one-off activity last year. After the
completion of the strategic transformation, our stores are now
better placed to serve our customers, with all stores right-sized
and our ranges simplified.
Group statutory revenue of GBP28.7bn was 0.7% higher
year-on-year and includes fuel sales of GBP2.1bn which declined by
(42.0)% year-on-year. UK fuel sales declined by as much as (70)% in
April as customers travelled significantly less due to COVID-19
lockdown restrictions before recovering to c.75% of pre-COVID-19
demand by the end of August.
Further information on sales performance is included in
Appendices 1 to 3 starting on page 64 of this statement.
Operating profit before exceptional items and amortisation of
acquired intangibles:
On a continuing operations basis UK & ROI Central Retail Tesco Group
Europe Bank
-------- ----------
Operating profit / (loss) before GBP1,133m GBP59m GBP1,192m GBP(155)m GBP1,037m
exceptional items and amortisation
of acquired intangibles
---------- -------- ---------- ---------- ----------
change at constant exchange rates
% 6.2% (23.4)% 4.2% n/m (15.8)%
---------- -------- ---------- ---------- ----------
change at actual exchange rates
% 6.4% (23.4)% 4.4% n/m (15.6)%
---------- -------- ---------- ---------- ----------
Operating profit margin before
exceptional items and amortisation
of acquired intangibles 4.30% 2.96% 4.21% (40.16)% 3.61%
---------- -------- ---------- ---------- ----------
change at constant exchange rates 19bps (82)bps 11bps n/m (71)bps
(basis points)
---------- -------- ---------- ---------- ----------
change at actual exchange rates 19bps (79)bps 12bps n/m (70)bps
(basis points)
---------- -------- ---------- ---------- ----------
Statutory operating profit / GBP1,007m
(loss)
---------- -------- ========== ---------- ----------
Group operating profit before exceptional items and amortisation
of acquired intangibles was GBP1,037m, down (15.8)% at constant
exchange rates and down (15.6)% at actual rates. Statutory
operating profit of GBP1,007m includes the impact of exceptional
items and amortisation of acquired intangibles, which are described
in more detail below and in Note 3 on page 35 of this
statement.
Retail operating profit before exceptional items and
amortisation of acquired intangibles was GBP1,192m, up 4.4%
year-on-year. UK & ROI operating profit before exceptional
items and amortisation of acquired intangibles was GBP1,133m, up
6.4% year-on-year. Operating margin increased 19 basis points
year-on-year with the margin impact of increased costs more than
offset by a significant reduction in margin-dilutive fuel sales.
The significant changes to our operations in response to COVID-19
led to a substantial increase in costs, mostly relating to payroll.
In the UK, the most significant costs were the recruitment of
47,000 temporary colleagues to cover absence and meet increased
demand and the provision of twelve weeks' paid leave to 26,000
vulnerable colleagues, whilst ensuring any colleague sick or
self-isolating due to COVID-19 received full pay from day one. We
also incurred costs in areas such as the provision of
safety-related consumables and personal protective equipment, in
addition to distribution. In total, COVID-19 related costs amounted
to GBP(533)m for the half, principally offset by business rates
relief of GBP249m and the contribution from higher than expected
food sales. Our latest estimate for these costs for the full-year
is c.GBP(725)m.
In March, we strengthened our value proposition with the launch
of the 'Aldi Price Match' campaign. We extended this to more than
500 Tesco and branded products in July, delivering consistently low
prices on even more products that customers buy every week. In
addition, last month, we extended our Clubcard Prices initiative,
whereby Clubcard holders are now able to access c.2,000 exclusive
deals. Having made these meaningful price investments, we expect to
make additional investments in the value proposition across the
remainder of the year.
Booker profitability was impacted by the significant decline in
catering sales, partially offset by a stronger contribution from
our retail business and robust cost control. To minimise the
overall profit impact of weaker demand in catering, we re-deployed
colleagues from the Best Food Logistics business to support both
the retail side of the Booker business and our online grocery
shopping business as demand increased. In the half, we also merged
our 'Chef Direct' business into the Best Food Logistics operations
to further optimise network efficiency and improve service levels
for customers.
Central European operating profit before exceptional items
reduced by (23.4)% year-on-year, to GBP59m. Whilst we saw an
underlying improvement in profitability, this was more than offset
by a number of one-off impacts, primarily the incremental costs
related to COVID-19 and a one-off reduction in income following
temporary mall closures between March and May. We also incurred an
GBP(11)m charge in the first half relating to a retail sales tax
which was introduced in Hungary in May.
Tesco Bank made an operating loss before exceptional items of
GBP(155)m, reflecting an increase in the provision for potential
bad debts and reduced income. Please refer to page 11 of this
statement for a fuller description of Tesco Bank performance.
Further information on operating profit performance is included
in Note 2, starting on page 23 of this statement.
Exceptional items and amortisation of acquired intangibles in
statutory operating profit:
On a continuing operations basis This Year Last Year
----------
Net restructuring and redundancy costs - GBP(39)m
Impairment of investment in India joint venture - GBP(47)m
Property transactions GBP(2)m GBP14m
Booker integration costs GBP(2)m GBP(6)m
Provision for customer redress - GBP(45)m
Bank Transformation costs - GBP(12)m
UK - ATM business rates GBP105m -
Litigation costs GBP(93)m -
Total exceptional items in statutory operating GBP8m GBP(135)m
profit
Amortisation of acquired intangible assets GBP(38)m GBP(40)m
---------- ----------
Total exceptional items and amortisation of GBP(30)m GBP(175)m
acquired intangibles in statutory operating
profit
---------- ----------
Exceptional items are excluded from our headline performance
measures by virtue of their size and nature in order to reflect
management's view of the underlying performance of the Group. On a
continuing operations basis, total exceptional items resulted in a
credit of GBP8m, compared to a charge of GBP(135)m last year.
A credit of GBP105m relates to the refund of historical ATM
business rates payments after a Supreme Court ruling in May
determined that retailers should not be assessed for rates on ATMs
installed in or outside stores. We expect to start receiving cash
related to this refund from the second half of this year and in
full by the end of the next financial year.
The charge of GBP(93)m relates to the settlement of two
shareholder litigation claims during the period, with associated
costs.
We have incurred a further GBP(2)m exceptional charge related to
Booker integration costs, bringing costs to date to GBP(38)m.
Further detail on exceptional items can be found in Note 3,
starting on page 35 of this statement.
Amortisation of acquired intangible assets is excluded from our
headline performance measures. We incurred a charge of GBP(38)m in
the half, a similar level to the prior year, which primarily
relates to our merger with Booker in March 2018, which resulted in
the recognition of goodwill of GBP3,093m and a GBP755m intangible
asset.
Joint ventures and associates:
This year Last year
On a continuing operations basis
-----------------------------------------------------------
Share of post-tax profits/(losses) from JVs and associates GBP13m GBP(2)m
before exceptional items
---------- ----------
Exceptional items - GBP4m
---------- ----------
Share of post-tax profits from JVs and associates GBP13m GBP2m
---------- ----------
Our share of post-tax profits from joint ventures and associates
before exceptional items was GBP13m, an improvement from losses of
GBP(2)m last year. The year-on-year movement included the impact of
the disposal of our associate in China, which incurred losses of
GBP(6)m last year, as well as an increased contribution from Tesco
Underwriting Ltd and joint ventures in our dunnhumby business.
Finance income and finance costs:
This year Last year
On a continuing operations basis
-----------------------------------------------------
Net interest on medium term notes, loans and bonds GBP(102)m GBP(98)m
---------- ----------
Other interest receivable and similar income GBP7m GBP14m
Other finance charges and interest payable GBP(9)m GBP(24)m
Finance charges payable on lease liabilities GBP(229)m GBP(246)m
Net finance cost before exceptional charges, net GBP(333)m GBP(354)m
pension finance costs and fair value remeasurements
of financial instruments
Fair value remeasurements of financial instruments GBP(108)m GBP(58)m
Net pension finance costs GBP(28)m GBP(36)m
---------- ----------
Net finance costs before exceptional charges GBP(469)m GBP(448)m
---------- ----------
Exceptional charge - Fair value remeasurement on - GBP(180)m
restructuring derivative financial instruments
---------- ----------
Net finance costs GBP(469)m GBP(628)m
---------- ----------
Net finance costs before exceptional charges, net pension
finance costs and fair value remeasurements of financial
instruments reduced by GBP21m year-on-year to GBP(333)m. This
improvement was driven by a reduction in finance charges payable on
lease liabilities primarily due to ongoing lease utilisation and
the buyback of property, including a further five UK stores in the
first half.
Net interest on medium term notes, loans and bonds was
GBP(102)m, similar to last year. A reduction in interest payable
following debt maturities, bond tenders and new issues at a
significantly lower rate of interest was offset by new interest
payments on long dated debt acquired as part of the acquisition of
our partner's stake in the Tesco Atrato Limited Partnership in
September 2019. This acquisition increased our freehold property
ownership and borrowings, replacing associated right of use assets
and lease liabilities.
A fair value remeasurement charge of GBP(108)m primarily related
to the mark-to-market movement on inflation-linked swaps, driven by
falling future inflation rates. These swaps eliminate the impact of
future inflation on the Group's cash flow in relation to historical
sale and leaseback property transactions.
Net pension finance costs decreased by GBP8m year-on-year,
primarily due to a lower opening pension deficit. As previously
indicated, for the full year, net pension finance costs are
expected to be no more than c.GBP(55)m. The exact cost will depend
on the timing of the one-off pension contribution of GBP2.5bn,
agreed with the Trustees as part of the use of proceeds from the
sale of our businesses in Thailand and Malaysia.
Further detail on finance income and costs can be found in Note
4 on page 37, as well as further detail on the exceptional charge
in Note 3 on page 36.
Group tax:
On a continuing operations basis This year Last year
------------------------------------------
Tax on profit before exceptional items GBP(129)m GBP(185)m
and amortisation of acquired intangibles
---------- ----------
Tax on exceptional items and amortisation GBP(25)m GBP52m
of acquired intangibles
---------- ----------
Tax on profit GBP(154)m GBP(133)m
---------- ----------
Tax on Group profit before exceptional items and amortisation of
acquired intangibles was GBP(129)m, GBP56m lower than last year
primarily due to a tax credit related to Tesco Bank operating
losses. This was partially offset by a one-off rate change impact
from revaluing deferred tax from 17% to 19% following the
Government's decision to repeal the reduction to the corporation
tax rate, thereby maintaining the current tax rate of 19%.
The effective tax rate on profit before exceptional items and
amortisation of acquired intangibles was 22.2%, higher than the UK
statutory rate, primarily due to depreciation of assets that do not
qualify for tax relief. We now expect an effective tax rate for
2020/21 of c.22% and continue to expect the effective tax rate to
reduce to around 21% in the medium term. Further detail on Group
tax can be found in Note 5 on page 37.
Earnings per share:
As described earlier, we do not consider the usual EPS measures
to provide a meaningful reflection of performance in the first
half. Adjusted diluted EPS of 5.75p (LY: 6.85p), which is our usual
alternative performance measure, excludes earnings from our
discontinued operations but does not take account of the share
consolidation that is expected to take place following completion
of the sale of our Asian businesses. Statutory EPS of 4.72p (LY:
3.34p) does include earnings from discontinued operations, however
the year-on-year shape is distorted as no depreciation has been
charged this year after the related assets were reclassified as
'held for sale' on the balance sheet.
Adjusted diluted EPS will be refined at the full year to reflect
the post-consolidation share base as if it had been in place from
the start of the previous financial year. The precise impact on the
share base cannot be predicted now as it depends on the share price
at the time of the consolidation. However, based on a share price
of 213.2p (being the average share price for the five days to 2
October 2020), the number of shares in issue would reduce by
c.(24)%. We can apply this reduction to the share base used for the
interim measure to derive a 'Pro forma' Adjusted diluted EPS of
7.56p (LY: 9.01p), which we consider better reflects underlying
performance in the half.
Discontinued operations:
In March, we announced we had agreed to sell our businesses in
Thailand and Malaysia to a combination of CP Group entities for an
enterprise value of GBP8.2bn, on a cash and debt free basis. The
sale received shareholder approval in May with regulatory approval
and completion expected by the end of the calendar year. In June,
we agreed the sale of our business in Poland to Salling Group A/S
for net cash proceeds of c.GBP165m, with completion expected in
Spring 2021. The performance of our Thailand, Malaysia and Poland
businesses is classified as discontinued operations and is excluded
from our headline performance measures.
In Asia, sales declined by (3.0)% at actual rates and by (2.9)%
at constant rates driven by a reduction in footfall in hypermarkets
and in discretionary spend categories such as clothing, despite a
short period of stockpiling of food and groceries early in the
first quarter. Sales in Poland declined by (38.3)% at actual rates
and by (36.8)% at constant rates, driven by the continued impact
from the right-sizing of our hypermarkets, closure of stores and
transition to a two format model.
Operating profit before exceptional items for discontinued
operations increased to GBP265m, up 49.7%, as depreciation was
charged last year but is no longer chargeable in the current year
as the assets are classified as held for sale. Before this impact,
the effect of temporary mall closures due to COVID-19 restrictions
resulted in a decline in profitability.
Within discontinued operations, total exceptional items in the
half were GBP(140)m, which includes a GBP(43)m net loss on
re-measurement of assets in our business in Poland prior to being
classified as held for sale, and a provision for a legal claim of
GBP(86)m, relating to the sale of Homeplus in 2015.
The total profit after tax of discontinued operations was
GBP68m, up GBP39m on last year.
Further information on discontinued operations is included in
Note 6, starting on page 38.
Dividend:
The interim dividend has been set at 3.20 pence per ordinary
share, 20.8% higher year-on-year, in line with our policy of
setting our interim dividend at 35% of the prior year full-year
dividend . The interim dividend was approved by the Board of
Directors on 6 October 2020. As previously announced, we expect to
maintain a full year dividend pay-out ratio of 50% going
forward.
The interim dividend will be paid on 27 November 2020 to
shareholders who are on the register of members at close of
business on 16 October 2020 (the Record Date). Shareholders may
elect to reinvest their dividend in the Dividend Reinvestment Plan
(DRIP). The last date for receipt of DRIP elections and revocations
will be 6 November 2020.
Summary of total indebtedness:
Aug-20 Feb-20 Movement
------------------------------------------
Underlying net debt (excludes Tesco Bank) GBP(3,004)m GBP(2,765)m GBP(239)m
- Continuing operations GBP(3,550)m GBP(3,167)m GBP(383)m
- Discontinued operations GBP546m GBP402m GBP144m
------------- ------------- ----------
Lease liabilities GBP(9,534)m GBP(9,533)m GBP(1)m
- Continuing operations GBP(8,725)m GBP(8,700)m GBP(25)m
- Discontinued operations GBP(809)m GBP(833)m GBP24m
------------- ------------- ----------
Pension deficit, IAS 19 basis (post-tax) GBP(3,315)m GBP(2,573)m GBP(742)m
- Continuing operations GBP(3,292)m GBP(2,550)m GBP(742)m
- Discontinued operations GBP(23)m GBP(23)m -
Total indebtedness GBP(15,853)m GBP(14,871)m GBP(982)m
Overall, total indebtedness has increased by GBP(982)m since the
year-end, primarily due to a GBP(742)m increase in the IAS 19
pension deficit. This was largely driven by a reduction in the
discount rate, partially offset by an increase in assets. The IAS
19 pension deficit is separate to our funding deficit and does not
drive contributions made to the pension scheme.
We have agreed the actuarial pension valuation as at 31 December
2019 with the Tesco plc Trustee at a deficit of GBP(2.2)bn. This is
subject to the completion of the sale of our businesses in Thailand
and Malaysia and is before the payment of the GBP2.5bn one-off
contribution to the Scheme. This payment will eliminate the
actuarial deficit as at that date and significantly reduce the
prospect of having to make further pension deficit contributions in
the future. Further information on the Group's pension liability is
available in Note 18 which begins on page 52.
On a continuing operations basis, lease liabilities increased by
GBP(25)m since the year-end, driven by lease additions, including
those acquired with the Best Food Logistics business, partially
offset by capital repayments made in the period and the benefit
from buying back five stores in the UK.
We have retained a strong cash position with a total of GBP2.0bn
of cash liquidity at the end of the half, having completed the
early redemption of a EUR0.2bn Euro bond, due in November 2020. In
addition, we recently re-financed our committed facilities at
GBP2.5bn for a further three years, securing access to additional
liquidity. The rate of interest payable on utilisation of these
facilities will be linked to the achievement of three ESG targets.
Additionally, the new facility is the first syndicated loan
transaction in the UK that uses Risk Free Rates (RFR) for sterling
and dollars rather than LIBOR.
Our fixed charge cover further improved since the year-end, from
3.1 to 3.2 times, principally driven by a reduction in lease
payments and an increase in retail EBITDA. Our retail EBITDA
measure is based only on the continuing operations, and therefore
excludes the earnings from our businesses in Thailand, Malaysia and
Poland.
Our total indebtedness ratio of 4.0 times in these half-year
accounts is heavily distorted by the timing of the sale of our
businesses in Thailand and Malaysia, given that it includes the net
debt related to our discontinued operations but not the earnings.
It also does not yet take account of the benefit of the anticipated
proceeds, including the expected elimination of our pension funding
deficit.
The increase in the reported total indebtedness ratio since the
year-end is driven by the increase in the IAS 19 pension deficit
described above.
Summary retail cash flow:
The following table reconciles Group operating profit before
exceptional items and amortisation of acquired intangibles to
retail free cash flow. Further details are included in Note 2,
starting on page 29.
On a continuing operations basis This year Last year
Operating profit before exceptional items and GBP1,037m GBP1,229m
amortisation of acquired intangibles
Less: Tesco Bank operating profit / (loss) before GBP155m GBP(87)m
exceptional items
Retail operating profit from continuing operations GBP1,192m GBP1,142m
before exceptional items and amortisation of acquired
intangibles
Add back: Depreciation and amortisation GBP802m GBP773m
----------
Other reconciling items GBP(28)m GBP(11)m
Pension deficit contribution GBP(161)m GBP(144)m
Underlying decrease in working capital GBP170m GBP164m
----------
Retail cash generated from operations before exceptional GBP1,975m GBP1,924m
items
----------
Exceptional cash items: GBP(127)m GBP(107)m
Relating to prior years:
- Restructuring payments GBP(32)m GBP(103)m
Relating to current year:
- Litigation costs GBP(93)m -
- Other GBP(2)m GBP(4)m
Retail operating cash flow GBP1,848m GBP1,817m
Cash capex GBP(369)m GBP(328)m
Net interest GBP(319)m GBP(364)m
----------------------------------------------------------------
- Interest related to net debt (exc. lease liabilities) GBP(91)m GBP(119)m
----------------------------------------------------------------
- Interest related to lease liabilities GBP(228)m GBP(245)m
----------------------------------------------------------------
Tax paid GBP(125)m GBP(117)m
----------------------------------------------------------------
Property proceeds GBP32m GBP62m
----------------------------------------------------------------
Property purchases - store buybacks GBP(148)m GBP(89)m
Market purchases of shares (net of proceeds) GBP(79)m GBP(52)m
Acquisitions & disposals and dividends received GBP6m GBP5m
Repayments of obligations under leases GBP(292)m GBP(289)m
---------- ----------
Retail free cash flow GBP554m GBP645m
---------- ----------
Retail free cash flow decreased by GBP(91)m year-on-year to
GBP554m. Excluding an increased level of store buybacks and a
reduction in property proceeds, retail free cash flow was stable
year-on-year.
We benefited from a working capital inflow of GBP170m in the
first half, primarily driven by an increase in food purchases and
lower levels of promotional activity. These favourable working
capital movements were offset by a c.GBP(100)m impact from
significantly lower fuel purchases.
Interest paid related to net debt (exc. lease liabilities) of
GBP(91)m reduced by GBP28m year-on-year due to bonds maturing and
being re-financed at a lower rate of interest and the effect of
bond buybacks in the prior year.
Cash tax paid was similar to last year. Following changes to the
timing of UK corporation tax payments, we had two additional
quarterly payments in the half. This, in combination with a payment
with respect to the refund of ATM business rates, offset a tax
credit on Bank losses and a tax deduction of GBP60m relating to the
anticipated pension contribution which will be made following the
sale of our Asian businesses.
We utilised GBP(148)m of cash to buy back four Superstores and
one Express store in the UK, which will result in an annual cash
rental saving of GBP9m. Following the half year-end, we also
acquired our partner's share in the Sparta joint venture bringing
back into 100% ownership twelve stores and two distribution centres
at a cost of GBP54m and removing rental payments which were subject
to fixed uplifts each year. We continue to evaluate store buyback
opportunities on an individual lease basis and will use capital for
this purpose where it is economically attractive.
We purchased GBP79m of shares in the market to offset dilution
from the issuance of new shares to satisfy the requirements of
share schemes. This was GBP27m higher than the prior year due to
the timing of share purchases. We now expect to utilise c.GBP100m
for the full year, with the precise amount depending on performance
and market conditions.
Capital expenditure and space (1) :
UK & ROI Central Europe Tesco Bank Group
---------------------
This Last This Last This Last This Last
year year year year year year year year
--------------------- -------- -------- -------- ------- ------- ------- -------- --------
Capital expenditure GBP310m GBP275m GBP39m GBP32m GBP25m GBP19m GBP374m GBP326m
-------- -------- -------- ------- ------- ------- -------- --------
Openings (k sq ft) 9 74 13 21 - - 22 95
Closures (k sq ft) (4) (176) (10) - - - (14) (176)
Repurposed (k sq
ft) 1 - (51) (408) - - (50) (408)
-------- -------- -------- ------- ------- ------- -------- --------
Net space change
(k sq ft) 6 (102) (48) (387) - - (42) (489)
-------- -------- -------- ------- ------- ------- -------- --------
1. 'Retail Selling Space' is defined as net space in store
adjusted to exclude checkouts, space behind checkouts, customer
service desks and customer toilets. Appendix 6 (p.67) provides a
full breakdown of space by segment.
Capital expenditure shown in the table above reflects
expenditure on ongoing business activities across the Group.
Our capital expenditure for the half was GBP374m, GBP48m higher
year-on-year, primarily due to higher spend on both in-store
maintenance and technology. We expect full year capital expenditure
to be in the middle of our GBP0.9bn to GBP1.2bn guidance range.
Statutory capital expenditure of GBP0.5bn includes GBP0.1bn
relating to the buyback of five UK stores referred to above.
Further details of current and forecast space can be found in
Appendix 6 starting on page 66.
Tesco Bank:
This year Last year YoY
------------------------------------
Revenue GBP386m GBP562m (31.4)%
---------- ----------- --------
Operating profit/ (loss) before GBP(155)m GBP87m n/m
exceptional items
---------- ----------- --------
Statutory operating profit/ (loss) GBP(155)m GBP30m n/m
Lending to customers GBP7,285m GBP12,379m (41.2)%
Customer deposits GBP6,637m GBP9,903m (33.0)%
Net interest margin 5.0% 3.8% 1.2%pts
Total capital ratio 24.3% 18.4% 5.9%pts
---------- ----------- --------
The COVID-19 crisis had a material impact on performance across
the Bank including a reduced level of new business in loans and
credit cards, lower unsecured lending and credit card retail
balances, and significantly lower ATM and travel money income.
In addition, a marked deterioration in macro-economic
indicators, particularly UK unemployment and GDP, drove an increase
in the provision for potential bad debts. This, in combination with
the reduction in income, resulted in an operating loss of GBP(155)m
in the half compared to a profit in the first half of the prior
year of GBP87m.
We continue to expect to report a loss for the Bank of between
GBP(175)m and GBP(200)m for the 2020/21 financial year.
Lending to customers declined by (41.2)% and customer deposit
balances declined by (33.0)%, driven by the sale of our mortgage
portfolio in September 2019. The sale also contributed to the
improvement of the Bank's capital position with the total capital
ratio increasing to 24.3%, an improvement of 5.9% pts year-on-year.
The balance sheet remains strong and capital adequacy is regularly
assessed.
We took action to support our customers through this period by
offering loan and credit card payment breaks to the end of October
2020. In addition, we increased contactless payment limits to allow
more customers to shop safely, removed administration fees to allow
insurance customers to change or cancel policies, reduced overdraft
fees and removed fees related to early access to savings accounts.
Our Pay+ app allows contactless payments of up to GBP250 and we now
have over one million users.
An income statement for Tesco Bank can be found in Appendix 7 on
page 69 of this statement. Balance sheet and cash flow detail for
Tesco Bank can be found within Note 2 starting on page 25 of this
statement. Tesco Bank's half year results are also published today
and are available at www.corporate.tescobank.com .
Contacts
Investor Relations: Chris Griffith 01707 940 900
Sarah Titterington 01707 940 693
Media: Christine Heffernan 0330 678 0639
Philip Gawith, Teneo 0207 420 3143
This document is available at www.tescoplc.com/interims2020
.
A live webcast will be held today at 9.00am for investors and
analysts and will be available on our website at
www.tescoplc.com/interims2020 . This will include all Q&A and
will also be available for playback after the event. All
presentation materials, including a transcript, will be made
available on our website.
Additional Disclosures
Principal Risks and Uncertainties
As with any business, effective risk management and controls are
critical to successfully achieving the Group's strategy. Tesco has
an established risk management process to identify, assess and
monitor the principal risks faced by the business. A robust review
of those risks that the Group believe could seriously affect its
performance, future prospects, reputation or its ability to deliver
against its priorities, is performed on a regular basis. This
review includes an assessment of emerging and principal risks we
believe would threaten the Group's business model, future
performance, solvency or liquidity. The Tesco Board has overall
responsibility for risk management and internal controls within the
context of achieving the Group's objectives. At the Group level
each principal risk has an Executive Owner. The Group Chief
Executive has overall accountability for the control and management
of risk.
The principal risks and uncertainties faced by the Group remain
those as set out on pages 13 to 18 of our Annual Report and
Financial Statements 2020: customer; transformation; liquidity;
competition and markets; brand, reputation and trust; technology;
data security and data privacy; political, regulatory and
compliance; health and safety; people; responsible sourcing and
supply chain; Brexit; Tesco Bank and COVID-19 (COVID-19 was
included as a new principal risk in the Annual Report and Financial
Statements 2020). In addition, the risk factors in relation to the
disposal of the Asia Business were set out in the circular sent to
shareholders on 22 April 2020. There have been no significant
changes to the description of the principal risks, key controls and
mitigating factors currently expected for the remaining six months
of the year.
As previously reported on page 140 of the Tesco PLC Annual
Report and Financial Statements 2020, in 2016 the Group received
high court claims against Tesco PLC for matters arising out of or
in connection with the overstatement of expected profits announced
in 2014. These claims were settled in July and August 2020. As a
result of the settlement and associated legal costs, Tesco has
taken a one-off charge in the amount of GBP93 million. Two further
claimant law firms issued proceedings against the Group in
September 2020 in respect of the same matters. The merit, likely
outcome and potential impact on the Group of any further litigation
that might potentially be brought against the Group is subject to a
number of significant uncertainties and, therefore, the Group
cannot make any assessment of the likely outcome or quantum of any
such litigation as at 29 August 2020. There are substantial legal
and factual defences to these claims and the Group will vigorously
defend any further proceedings. Further details relating to this
matter and the Group's other contingent liabilities can be found in
Note 22, on page 57.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Interim Results
for the 26 week period ended 29 August 2020 in accordance with
applicable law, regulations and accounting standards. Each of the
Directors confirm that to the best of their knowledge the condensed
consolidated interim financial statements have been prepared in
accordance with IAS 34: 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a true and fair review of the information required by DTR
4.2.7R and DTR 4.2.8R, namely:
-- an indication of the important events that have occurred
during the first 26 weeks of the financial year and their impact on
the condensed consolidated interim financial statements, and a
description of the principal risks and uncertainties for the
remainder of the financial year; and
-- material related party transactions in the first 26 weeks of
the year and any material changes in the related party transactions
described in the last annual report.
The Directors of Tesco PLC are listed on pages 27 to 30 of the
Tesco PLC Annual Report and Financial Statements 2020. As announced
on 2 October 2019, Dave Lewis resigned from the Board with effect
from 30 September 2020 and Ken Murphy joined the Board on 1 October
2020 as Group Chief Executive. Further to the announcement on 2
June 2020 that Alan Stewart has decided to retire and will leave
the Board on 30 April 2021, Imran Nawaz will join the Board as
Chief Financial Officer in April 2021.
A list of current directors is maintained on the Tesco PLC
website at: www.tescoplc.com .
By order of the Board
Directors
John Allan* - Chairman
Ken Murphy - Group Chief Executive
Alan Stewart - Chief Financial Officer
Deanna Oppenheimer*- Senior Independent Director
Mark Armour*
Melissa Bethell*
Stewart Gilliland*
Steve Golsby*
Byron Grote*
Mikael Olsson*
Simon Patterson*
Alison Platt*
Lindsey Pownall*
*Non-executive Directors
Robert Welch, Company Secretary
6 October 2020
Disclaimer
Certain statements made in this document are forward-looking
statements. For example, statements regarding expected revenue
growth and operating margins, market trends and our product
pipeline are forward-looking statements. Phrases such as "aim",
"plan", "intend", "should", "anticipate", "well-placed", "believe",
"estimate", "expect", "target", "consider" and similar expressions
are generally intended to identify forward-looking statements.
Forward looking statements are based on current expectations and
assumptions and are subject to a number of known and unknown risks,
uncertainties and other important factors that could cause actual
results or events to differ materially from what is expressed or
implied by those statements. Many factors may cause actual results,
performance or achievements of Tesco to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Important factors that
could cause actual results, performance or achievements of Tesco to
differ materially from the expectations of Tesco include, among
other things, general business and economic conditions globally,
industry trends, competition, changes in government and other
regulation and policy, including in relation to the environment,
health and safety and taxation, labour relations and work
stoppages, interest rates and currency fluctuations, changes in its
business strategy, political and economic uncertainty, including as
a result of global pandemics. As such, undue reliance should not be
placed on forward-looking statements. Any forward-looking statement
is based on information available to Tesco as of the date of the
statement. All written or oral forward-looking statements
attributable to Tesco are qualified by this caution. Other than in
accordance with legal and regulatory obligations, Tesco undertakes
no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
Group income statement
26 weeks ended 26 weeks ended
29 August 2020 24 August 2019(a)
------------------ --------- -------------------------------------------- --------------------------------------------
Before
exceptional Exceptional Before Exceptional
items items and exceptional items and
and amortisation items and amortisation
amortisation of acquired amortisation of acquired
of acquired intangibles of acquired intangibles
intangibles (Note 3) Total intangibles (Note 3) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Continuing
operations
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Revenue 2 28,718 - 28,718 28,512 - 28,512
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Cost of sales(b) (26,550) 103 (26,447) (26,326) (86) (26,412)
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Impairment
(loss)/reversal
on financial
assets(b) 2 (264) - (264) (117) - (117)
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Gross
profit/(loss) 1,904 103 2,007 2,069 (86) 1,983
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Administrative
expenses (867) (133) (1,000) (840) (89) (929)
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Operating
profit/(loss) 1,037 (30) 1,007 1,229 (175) 1,054
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Share of post-tax
profits/(losses)
of joint ventures
and
associates 13 - 13 (2) 4 2
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Finance income 4 7 - 7 14 - 14
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Finance costs 4 (476) - (476) (462) (180) (642)
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Profit/(loss)
before tax 581 (30) 551 779 (351) 428
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Taxation 5 (129) (25) (154) (185) 52 (133)
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Profit/(loss) for
the
period from
continuing
operations 452 (55) 397 594 (299) 295
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Discontinued
operations
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Profit/(loss) for
the
period from
discontinued
operations 6 192 (124) 68 126 (97) 29
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Profit/(loss) for
the
period 644 (179) 465 720 (396) 324
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Attributable to:
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Owners of the
parent 639 (179) 460 720 (396) 324
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Non-controlling
interests 5 - 5 - - -
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
644 (179) 465 720 (396) 324
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Earnings/(losses)
per
share from
continuing
and discontinued
operations
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Basic 8 4.72p 3.34p
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Diluted 8 4.71p 3.31p
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Earnings/(losses)
per
share from
continuing
operations
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Basic 8 4.07p 3.04p
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
Diluted 8 4.06p 3.02p
------------------ --------- ---------------- ---------------- -------- ---------------- ---------------- --------
The notes on pages 22 to 57 form part of this condensed
consolidated financial information.
(a) Comparatives have been restated to present Thailand,
Malaysia and Poland as discontinued operations. Refer to Note 6 for
further details.
(b) Impairment (loss)/reversal on financial assets comparatives
have been presented separately from Cost of sales. Refer to Note 1
for further details.
Group statement of comprehensive income/ (loss)
26 weeks 26 weeks
2020 2019*
GBPm GBPm
---------------------------------------------------------- -------- --------
Items that will not be reclassified to the Group
income statement
---------------------------------------------------------- -------- --------
Remeasurements of defined benefit pension schemes (1,112) 202
----------------------------------------------------------- -------- --------
Net fair value gains/(losses) on inventory cash flow
hedges (18) 78
----------------------------------------------------------- -------- --------
Tax on items that will not be reclassified 288 (50)
----------------------------------------------------------- -------- --------
(842) 230
---------------------------------------------------------- -------- --------
Items that may subsequently be reclassified to the
Group income statement
---------------------------------------------------------- -------- --------
Change in fair value of financial assets through
other comprehensive income (2) 7
----------------------------------------------------------- -------- --------
Currency translation differences:
---------------------------------------------------------- -------- --------
Retranslation of net assets of overseas subsidiaries,
joint ventures and associates (67) 323
----------------------------------------------------------- -------- --------
Gains/(losses) on other cash flow hedges:
---------------------------------------------------------- -------- --------
Net fair value gains/(losses) 41 234
----------------------------------------------------------- -------- --------
Reclassified and reported in the Group income statement (40) (99)
----------------------------------------------------------- -------- --------
Tax on items that may be reclassified (3) (26)
----------------------------------------------------------- -------- --------
(71) 439
---------------------------------------------------------- -------- --------
Total other comprehensive income/(loss) for the period (913) 669
----------------------------------------------------------- -------- --------
Profit/(loss) for the period 465 324
----------------------------------------------------------- -------- --------
Total comprehensive income/(loss) for the period (448) 993
----------------------------------------------------------- -------- --------
Attributable to:
---------------------------------------------------------- -------- --------
Owners of the parent (453) 993
----------------------------------------------------------- -------- --------
Non-controlling interests 5 -
----------------------------------------------------------- -------- --------
Total comprehensive income/(loss) for the period (448) 993
----------------------------------------------------------- -------- --------
Total comprehensive income/(loss) attributable to
owners of the parent arising from:
---------------------------------------------------------- -------- --------
Continuing operations (439) 735
----------------------------------------------------------- -------- --------
Discontinued operations (14) 258
----------------------------------------------------------- -------- --------
(453) 993
---------------------------------------------------------- -------- --------
The notes on pages 22 to 57 form part of this condensed
consolidated financial information.
* Comparatives have been restated to present Thailand, Malaysia
and Poland as discontinued operations. Refer to Note 6 for further
details.
Group balance sheet
29 August 29 February 24 August
2020 2020* 2019*
Notes GBPm GBPm GBPm
---------------------------------------------- ----- --------- ----------- ---------
Non-current assets
---------------------------------------------- ----- --------- ----------- ---------
Goodwill and other intangible assets 9 5,742 6,078 6,212
---------------------------------------------- ----- --------- ----------- ---------
Property, plant and equipment 10 16,560 19,234 19,042
---------------------------------------------- ----- --------- ----------- ---------
Right of use assets 11 6,150 6,874 7,605
---------------------------------------------- ----- --------- ----------- ---------
Investment property 19 26 36
---------------------------------------------- ----- --------- ----------- ---------
Investments in joint ventures and associates 178 307 548
---------------------------------------------- ----- --------- ----------- ---------
Financial assets at fair value through other
comprehensive income 10 866 1,012
---------------------------------------------- ----- --------- ----------- ---------
Investment securities at amortised cost 826 - -
---------------------------------------------- ----- --------- ----------- ---------
Trade and other receivables 254 166 262
---------------------------------------------- ----- --------- ----------- ---------
Loans and advances to customers and banks 3,655 4,171 4,186
---------------------------------------------- ----- --------- ----------- ---------
Derivative financial instruments 1,113 1,083 1,679
---------------------------------------------- ----- --------- ----------- ---------
Deferred tax assets 627 449 336
---------------------------------------------- ----- --------- ----------- ---------
35,134 39,254 40,918
---------------------------------------------- ----- --------- ----------- ---------
Current assets
---------------------------------------------- ----- --------- ----------- ---------
Financial assets at fair value through other
comprehensive income - 202 30
---------------------------------------------- ----- --------- ----------- ---------
Investment securities at amortised cost 26 - -
---------------------------------------------- ----- --------- ----------- ---------
Inventories 13 2,254 2,433 2,719
---------------------------------------------- ----- --------- ----------- ---------
Trade and other receivables 1,416 1,396 1,620
---------------------------------------------- ----- --------- ----------- ---------
Loans and advances to customers and banks 3,630 4,280 4,962
---------------------------------------------- ----- --------- ----------- ---------
Derivative financial instruments 284 63 132
---------------------------------------------- ----- --------- ----------- ---------
Current tax assets 55 21 1
---------------------------------------------- ----- --------- ----------- ---------
Short-term investments 14 942 1,076 362
---------------------------------------------- ----- --------- ----------- ---------
Cash and cash equivalents 14 3,206 3,408 2,656
---------------------------------------------- ----- --------- ----------- ---------
11,813 12,879 12,482
---------------------------------------------- ----- --------- ----------- ---------
Assets of the disposal groups and non-current
assets classified as held for sale 6 5,199 285 3,880
---------------------------------------------- ----- --------- ----------- ---------
17,012 13,164 16,362
---------------------------------------------- ----- --------- ----------- ---------
Current liabilities
---------------------------------------------- ----- --------- ----------- ---------
Trade and other payables (8,297) (8,922) (9,641)
---------------------------------------------- ----- --------- ----------- ---------
Borrowings 16 (1,291) (1,490) (814)
---------------------------------------------- ----- --------- ----------- ---------
Lease liabilities 11 (557) (598) (638)
---------------------------------------------- ----- --------- ----------- ---------
Derivative financial instruments (166) (61) (53)
---------------------------------------------- ----- --------- ----------- ---------
Customer deposits and deposits from banks (5,599) (6,377) (8,864)
---------------------------------------------- ----- --------- ----------- ---------
Current tax liabilities (246) (324) (320)
---------------------------------------------- ----- --------- ----------- ---------
Provisions (198) (155) (229)
---------------------------------------------- ----- --------- ----------- ---------
(16,354) (17,927) (20,559)
---------------------------------------------- ----- --------- ----------- ---------
Liabilities of the disposal groups classified
as held for sale 6 (2,098) - (4)
---------------------------------------------- ----- --------- ----------- ---------
Net current liabilities (1,440) (4,763) (4,201)
---------------------------------------------- ----- --------- ----------- ---------
Non-current liabilities
---------------------------------------------- ----- --------- ----------- ---------
Trade and other payables (100) (170) (171)
---------------------------------------------- ----- --------- ----------- ---------
Borrowings 16 (6,527) (6,005) (6,104)
---------------------------------------------- ----- --------- ----------- ---------
Lease liabilities 11 (8,199) (8,968) (9,700)
---------------------------------------------- ----- --------- ----------- ---------
Derivative financial instruments (957) (887) (931)
---------------------------------------------- ----- --------- ----------- ---------
Customer deposits and deposits from banks (1,538) (1,830) (3,038)
---------------------------------------------- ----- --------- ----------- ---------
Post-employment benefit obligations 18 (4,043) (3,085) (2,514)
---------------------------------------------- ----- --------- ----------- ---------
Deferred tax liabilities (43) (40) (42)
---------------------------------------------- ----- --------- ----------- ---------
Provisions (90) (137) (138)
---------------------------------------------- ----- --------- ----------- ---------
(21,497) (21,122) (22,638)
---------------------------------------------- ----- --------- ----------- ---------
Net assets 12,197 13,369 14,079
---------------------------------------------- ----- --------- ----------- ---------
Equity
---------------------------------------------- ----- --------- ----------- ---------
Share capital 20 490 490 490
---------------------------------------------- ----- --------- ----------- ---------
Share premium 5,165 5,165 5,165
---------------------------------------------- ----- --------- ----------- ---------
All other reserves 3,570 3,658 4,238
---------------------------------------------- ----- --------- ----------- ---------
Retained earnings 2,989 4,078 4,210
---------------------------------------------- ----- --------- ----------- ---------
Equity attributable to owners of the parent 12,214 13,391 14,103
---------------------------------------------- ----- --------- ----------- ---------
Non-controlling interests (17) (22) (24)
---------------------------------------------- ----- --------- ----------- ---------
Total equity 12,197 13,369 14,079
---------------------------------------------- ----- --------- ----------- ---------
The notes on pages 22 to 57 form part of this condensed
consolidated financial information.
* Refer to Note 1 for further details regarding the prior year
restatement.
These unaudited condensed consolidated interim financial
statements for the 26 weeks ended 29 August 2020 were approved by
the Board on 6 October 2020.
Group statement of changes in equity
All other reserves
-----------------------------------------------------------------
Currency Capital Own Non-
Share Share basis redemption Hedging Translation shares Merger Retained controlling Total
capital premium reserve reserve reserve reserve held reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
At 29 February
2020
(restated*) 490 5,165 (15) 16 154 663 (250) 3,090 4,078 13,391 (22) 13,369
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Profit/(loss)
for the period - - - - - - - - 460 460 5 465
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Other
comprehensive
income/(loss)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Currency
translation
differences - - - - - (67) - - - (67) - (67)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Change in fair
value of
financial
assets at fair
value through
other
comprehensive
income - - - - - - - - (2) (2) - (2)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Remeasurements
of defined
benefit
pension
schemes - - - - - - - - (1,112) (1,112) - (1,112)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Gains/(losses)
on cash flow
hedges - - (4) - (13) - - - - (17) - (17)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Tax relating
to components
of other
comprehensive
income - - 1 - (1) - - - 285 285 - 285
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Total other
comprehensive
income/(loss) - - (3) - (14) (67) - - (829) (913) - (913)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Total
comprehensive
income/(loss) - - (3) - (14) (67) - - (369) (453) 5 (448)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Inventory cash
flow hedge
movements
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Gains/(losses)
transferred
to the cost
of inventory - - - - (28) - - - - (28) - (28)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Tax on
gains/(losses)
transferred
to the cost
of inventory - - - - 4 - - - - 4 - 4
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Total inventory
cash flow
hedge
movements - - - - (24) - - - - (24) - (24)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Transactions
with owners
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Purchase of
own shares - - - - - - (219) - - (219) - (219)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Share-based
payments - - - - - - 239 - (86) 153 - 153
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Dividends (Note
7) - - - - - - - - (634) (634) - (634)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Total
transactions
with owners - - - - - - 20 - (720) (700) - (700)
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
At 29 August
2020 490 5,165 (18) 16 116 596 (230) 3,090 2,989 12,214 (17) 12,197
--------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
The notes on pages 22 to 57 form part of this condensed
consolidated financial information.
* Refer to Note 1 for further details regarding the prior year
restatement.
All other reserves
-----------------------------------------------------------------
Currency Capital Own Non-
Share Share basis redemption Hedging Translation shares Merger Retained controlling Total
capital premium reserve reserve reserve reserve held reserve earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
At 23 February
2019 490 5,165 (5) 16 118 730 (179) 3,090 4,031 13,456 (24) 13,432
(as previously
reported)
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Cumulative
adjustment
to opening
balances - - - - - - - - 116 116 - 116
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
At 23 February
2019
(restated*) 490 5,165 (5) 16 118 730 (179) 3,090 4,147 13,572 (24) 13,548
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Profit/(loss)
for the period - - - - - - - - 324 324 - 324
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Other
comprehensive
income/(loss)
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Currency
translation
differences - - - - - 323 - - - 323 - 323
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Change in fair
value of
financial
assets at fair
value through
other
comprehensive
income - - - - - - - - 7 7 - 7
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Remeasurements
of defined
benefit
pension schemes - - - - - - - - 202 202 - 202
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Gains/(losses)
on cash flow
hedges - - 5 - 208 - - - - 213 - 213
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Tax relating
to components
of other
comprehensive
income - - (1) - (36) (3) - - (36) (76) - (76)
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Total other
comprehensive
income/(loss) - - 4 - 172 320 - - 173 669 - 669
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Total
comprehensive
income/(loss) - - 4 - 172 320 - - 497 993 - 993
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Inventory cash
flow hedge
movements
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Gains/(losses)
transferred
to the cost
of inventory - - - - (35) - - - - (35) - (35)
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Tax on
gains/(losses)
transferred
to the cost
of inventory - - - - 6 - - - - 6 - 6
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Total inventory
cash flow hedge
movements - - - - (29) - - - - (29) - (29)
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Transactions
with owners
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Purchase of
own shares - - - - - - (95) - - (95) - (95)
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Share-based
payments - - - - - - 96 - (35) 61 - 61
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Dividends (Note
7) - - - - - - - - (399) (399) - (399)
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
Total
transactions
with owners - - - - - - 1 - (434) (433) - (433)
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
At 24 August
2019 490 5,165 (1) 16 261 1,050 (178) 3,090 4,210 14,103 (24) 14,079
---------------- ------- ------- -------- ---------- -------- ----------- ------ ------------ ------------ ---------- ----------- ----------
The notes on pages 22 to 57 form part of this condensed
consolidated financial information.
* Refer to Note 1 for further details regarding the prior year
restatement.
Group cash flow statement
26 weeks 26 weeks
2020 2019*
GBPm GBPm
-------------------------------------------------------------------- -------- -----------------
Cash flows generated from/(used in) operating activities
-------------------------------------------------------------------- -------- -----------------
Operating profit/(loss) of continuing operations 1,007 1,054
--------------------------------------------------------------------- -------- -----------------
Operating profit/(loss) of discontinued operations 95 80
--------------------------------------------------------------------- -------- -----------------
Depreciation and amortisation 889 1,029
--------------------------------------------------------------------- -------- -----------------
(Profit)/loss arising on sale of property, plant and
equipment, investment property, intangible assets and
assets classified as held for sale and early termination
of leases (32) (32)
--------------------------------------------------------------------- -------- -----------------
Transaction and derivative costs associated with sale
of subsidiaries 30 -
--------------------------------------------------------------------- -------- -----------------
Net impairment loss/(reversal) on property, plant and
equipment, right of use assets, intangible assets and
investment property 53 71
--------------------------------------------------------------------- -------- -----------------
Impairment of joint ventures - 47
--------------------------------------------------------------------- -------- -----------------
Adjustment for non-cash element of pensions charge - 7
--------------------------------------------------------------------- -------- -----------------
Other defined benefit pension scheme payments (161) (144)
--------------------------------------------------------------------- -------- -----------------
Share-based payments 15 20
--------------------------------------------------------------------- -------- -----------------
Tesco Bank fair value movements included in operating
profit/(loss) 259 72
--------------------------------------------------------------------- ======== =================
Retail (increase)/decrease in inventories (172) (61)
--------------------------------------------------------------------- -------- -----------------
Retail (increase)/decrease in development stock 1 1
--------------------------------------------------------------------- -------- -----------------
Retail (increase)/decrease in trade and other receivables (21) (72)
--------------------------------------------------------------------- -------- -----------------
Retail increase/(decrease) in trade and other payables 201 254
--------------------------------------------------------------------- -------- -----------------
Retail increase/(decrease) in provisions 64 (43)
--------------------------------------------------------------------- ======== =================
Retail (increase)/decrease in working capital 73 79
--------------------------------------------------------------------- ======== =================
Tesco Bank (increase)/decrease in loans and advances
to customers and banks (145) (150)
--------------------------------------------------------------------- -------- -----------------
Tesco Bank (increase)/decrease in trade and other receivables (76) (53)
--------------------------------------------------------------------- -------- -----------------
Tesco Bank increase/(decrease) in customer and bank
deposits, trade and other payables 107 (219)
--------------------------------------------------------------------- -------- -----------------
Tesco Bank increase/(decrease) in provisions (16) 29
--------------------------------------------------------------------- ======== =================
Tesco Bank (increase)/decrease in working capital (130) (393)
--------------------------------------------------------------------- -------- -----------------
Cash generated from/(used in) operations 2,098 1,890
--------------------------------------------------------------------- -------- -----------------
Interest paid (351) (407)
--------------------------------------------------------------------- -------- -----------------
Corporation tax paid (147) (171)
--------------------------------------------------------------------- -------- -----------------
Net cash generated from/(used in) operating activities 1,600 1,312
--------------------------------------------------------------------- -------- -----------------
The notes on pages 22 to 57 form part of this condensed
consolidated financial information.
* Comparatives have been restated to present Thailand, Malaysia
and Poland as discontinued operations. Refer to Note 6 for further
details.
26 weeks 26 weeks
2020 2019
Notes GBPm GBPm
--------------------------------------------------------- --------- -------- --------
Net cash generated from/(used in) operating activities 1,600 1,312
--------------------------------------------------------- --------- -------- --------
Cash flows generated from/(used in) investing activities
--------------------------------------------------------- --------- -------- --------
Proceeds from sale of property, plant and equipment,
investment property, intangible assets and assets
classified as held for sale 83 65
--------------------------------------------------------- --------- -------- --------
Purchase of property, plant and equipment and investment
property (537) (418)
--------------------------------------------------------- --------- -------- --------
Purchase of intangible assets (89) (79)
--------------------------------------------------------- --------- -------- --------
Disposal of subsidiaries, net of cash disposed (26) -
--------------------------------------------------------- --------- -------- --------
Acquisition of businesses, net of cash acquired 15 -
--------------------------------------------------------- --------- -------- --------
Net (increase)/decrease in loans to joint ventures
and associates (1) 8
--------------------------------------------------------- --------- -------- --------
Investments in associates and joint ventures (11) -
--------------------------------------------------------- --------- -------- --------
Net (investments in)/proceeds from sale of short-term
investments 134 28
--------------------------------------------------------- --------- -------- --------
Net (investments in)/proceeds from sale of financial
assets at fair value through other comprehensive
income and amortised cost 202 14
--------------------------------------------------------- --------- -------- --------
Dividends received from joint ventures and associates 12 28
--------------------------------------------------------- --------- -------- --------
Interest received 5 13
--------------------------------------------------------- --------- -------- --------
Net cash generated from/(used in) investing activities (213) (341)
--------------------------------------------------------- --------- -------- --------
Cash flows generated from/(used in) financing activities
--------------------------------------------------------- --------- -------- --------
Own shares purchased (79) (52)
--------------------------------------------------------- --------- -------- --------
Repayments of obligations under leases (321) (326)
--------------------------------------------------------- --------- -------- --------
Increase in borrowings 583 882
--------------------------------------------------------- --------- -------- --------
Repayment of borrowings (295) (1,407)
--------------------------------------------------------- --------- -------- --------
Net cash flows from derivative financial instruments (224) 42
--------------------------------------------------------- --------- -------- --------
Dividends paid to equity owners 7 (634) (399)
--------------------------------------------------------- --------- -------- --------
Net cash generated from/(used in) financing activities (970) (1,260)
--------------------------------------------------------- --------- -------- --------
Net increase/(decrease) in cash and cash equivalents 417 (289)
--------------------------------------------------------- --------- -------- --------
Cash and cash equivalents at the beginning of the
period 3,408 2,916
--------------------------------------------------------- --------- -------- --------
Effect of foreign exchange rate changes (21) 29
--------------------------------------------------------- --------- -------- --------
Cash and cash equivalents including cash held in
disposal groups at the end of the period 3,804 2,656
--------------------------------------------------------- --------- -------- --------
Cash held in disposal groups 6 (598) -
--------------------------------------------------------- --------- -------- --------
Cash and cash equivalents at the end of the period 14 3,206 2,656
--------------------------------------------------------- --------- -------- --------
The notes on pages 22 to 57 form part of this condensed
consolidated financial information.
Note 1 Basis of preparation
These unaudited condensed consolidated interim financial
statements have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the UK Financial Conduct
Authority, and with IAS 34 'Interim Financial Reporting', as
adopted by the European Union. Unless otherwise stated, the
accounting policies applied, and the judgements, estimates and
assumptions made in applying these policies, are consistent with
those used in preparing the Annual Report and Financial Statements
2020. The financial period represents the 26 weeks ended 29 August
2020 (prior financial period 26 weeks ended 24 August 2019, prior
financial year 53 weeks ended 29 February 2020).
These condensed consolidated interim financial statements for
the current period and prior financial periods do not constitute
statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the statutory accounts for the prior financial year
has been filed with the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
The Directors consider that the Group has adequate resources to
continue in operational existence for the foreseeable future and
have therefore continued to adopt the going concern basis in
preparing the condensed consolidated interim financial statements.
The Directors have considered the impact of COVID-19 on the Group's
operations, as set out in further detail in the Financial results,
and have concluded that there are no material uncertainties
relating to going concern. Further information on the Group's
strong liquidity position is given in the Financial results,
Summary of total indebtedness section.
Discontinued operations
During the period, the Board approved plans to dispose of the
Group's operations in Thailand, Malaysia and Poland. The net
results for the year are presented as discontinued operations in
the Group income statement (for which the comparatives have been
restated) and the assets and liabilities of the businesses are
presented separately in the Group balance sheet as held for sale.
See Note 6 for further details.
Income statement presentation
The Group now presents 'Impairment (loss)/reversal on financial
assets' on a separate line on the face of the Group income
statement, following a significant increase in expected credit
losses in Tesco Bank in the period. Prior period comparatives have
been reclassified. For further details, see the Financial results
and Note 17, Financial instruments.
Prior year restatement
The consolidated financial statements include a prior year
restatement in relation to the original accounting for deferred tax
and the associated goodwill recognised on the business combination
of three property partnerships in 2015/16. A reassessment of
tax-related information from 2005 has identified a material
difference in deferred tax. The Group has corrected this as a prior
year error, as it concluded this information should reasonably have
been available in 2016. The impact in both the 29 February 2020 and
24 August 2019 balance sheets is to increase deferred tax assets by
GBP157m (being a reduction in UK deferred tax liabilities) and
reduce goodwill by GBP41m with a corresponding net GBP116m increase
in net assets and retained earnings. There is no impact on the
comparative period income statement or cash flow statement.
Accounting policies
The Group has adopted the 'Definition of a business' amendment
to IFRS 3, 'Business combinations' in the current financial year,
and has applied its guidance when evaluating whether acquisitions
in the period are asset acquisitions or business combinations. The
Group has elected not to apply the exemption granted in the
'COVID-19-related rent concessions' amendment to IFRS 16, 'Leases',
once it is EU-endorsed, as the Group has not received material
COVID-19-related rent concessions as a lessee.
On 1 March 2020, the Group's portfolio of debt instrument
investments measured at fair value through comprehensive income was
reclassified to investment securities at amortised cost, measured
using the effective interest rate method less allowance for
expected credit losses. This was following a change in business
model to hold these debt instrument investments for the collection
of contractual cash flows only. In the prior period, gains and
losses arising from changes in fair value were recognised directly
in other comprehensive income, except for impairment gains or
losses, interest income and foreign exchange gains and losses,
which were recognised in the Group income statement.
Key sources of estimation uncertainty
In light of the impact of COVID-19 on the Group's operations and
performance, as set out in more detail in the Financial results,
the Group has provided additional information on COVID-19 and key
sources of estimation uncertainty as follows:
-- Note 12, Impairment of non-current assets
-- Note 17, Financial instruments
-- Note 18, Post-employment benefits
Alternative performance measures (APMs)
In the reporting of financial information, the Directors have
adopted various APMs. Refer to the Glossary for a full list of the
Group's APMs, including comprehensive definitions, their purpose,
reconciliations to IFRS measures and details of any changes to
APMs.
Note 2 Segmental reporting
The Group's operating segments are determined based on the
Group's internal reporting to the Chief Operating Decision Maker
(CODM). The CODM has been determined to be the Group Chief
Executive, with support from the Executive Committee, as the
function primarily responsible for the allocation of resources to
segments and assessment of performance of the segments.
On 9 March 2020, the Group announced that it had reached
agreement on the terms of a proposed sale of its operations in
Thailand and Malaysia (previously reported in the Asia segment),
and on 18 June 2020, the Group announced that it had agreed the
terms of the proposed sale of its business in Poland (previously
reported in the Central Europe segment). Accordingly, these
operations have been treated as discontinued as described in more
detail in Notes 1 and 6. The segment results do not include these
discontinued operations and intercompany recharges previously
reported between continuing and discontinued operations have been
eliminated in both the current and prior period.
Following the presentation of the Group's operations in Thailand
and Malaysia as discontinued operations, the Group no longer
presents Asia as a separate reportable segment. The remaining
operations previously reported within the Asia segment, which
consist of our Trent Hypermarket joint venture, have been
reclassified to the UK & ROI segment. The comparatives for UK
& ROI have also been reclassified to include the China
associate Gain Land, which the Group sold on 28 February 2020 and
which was previously included within the Asia segment. The Group
has reclassified GBP6m of operating costs before exceptional items
and amortisation of acquired intangibles, and GBP47m of exceptional
impairment charges to the UK & ROI segment income statement for
the 26 weeks ended 24 August 2019. The Group has also reclassified
GBP59m of investments in joint ventures and associates as at 29
February 2020 (24 August 2019: GBP307m), and GBP22m of current tax
assets as at 29 February 2020 (24 August 2019: GBPnil) to the UK
& ROI segment balance sheets.
The principal activities of the Group are therefore presented in
the following segments:
-- Retailing and associated activities (Retail) in:
- UK & ROI - the United Kingdom, Republic of Ireland, and
Indian joint venture Trent Hypermarket; and
- Central Europe - Czech Republic, Hungary and Slovakia.
-- Retail banking and insurance services through Tesco Bank in the UK (Tesco Bank).
This presentation reflects how the Group's operating performance
is reviewed internally by management.
The CODM uses operating profit before exceptional items and
amortisation of acquired intangibles, as reviewed at monthly
Executive Committee meetings, as the key measure of the segments'
results as it reflects the segments' underlying performance for the
financial period under evaluation. Operating profit before
exceptional items and amortisation of acquired intangibles is a
consistent measure within the Group as defined within the Glossary.
Refer to Note 3 for exceptional items and amortisation of acquired
intangibles. Inter-segment revenue between the operating segments
is not material.
Income statement
The segment results and the reconciliation of the segment
measures to the respective statutory items included in the Group
income statement are as follows:
Total at Total at
Central Tesco constant Foreign actual
26 weeks ended 29 August 2020 UK & ROI Europe Bank exchange exchange exchange
At constant exchange rates GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ -------- ------- ------- --------- ---------- ---------
Continuing operations
------------------------------------ -------- ------- ------- --------- ---------- ---------
Group sales 24,306 1,954 386 26,646 6 26,652
------------------------------------ -------- ------- ------- --------- ---------- ---------
Revenue 26,311 2,017 386 28,714 4 28,718
------------------------------------ -------- ------- ------- --------- ---------- ---------
Operating profit/(loss) before
exceptional items and amortisation
of acquired intangibles 1,131 59 (155) 1,035 2 1,037
------------------------------------ -------- ------- ------- --------- ---------- ---------
Exceptional items and amortisation
of acquired intangibles (28) (2) - (30) - (30)
------------------------------------ -------- ------- ------- --------- ---------- ---------
Operating profit/(loss) 1,103 57 (155) 1,005 2 1,007
------------------------------------ -------- ------- ------- --------- ---------- ---------
Operating margin 4.3% 2.9% (40.2)% 3.6% 3.6%
------------------------------------ -------- ------- ------- --------- ---------- ---------
Total at
Central Tesco actual
26 weeks ended 29 August 2020 UK & ROI Europe Bank exchange
At actual exchange rates GBPm GBPm GBPm GBPm
------------------------------------------- -------- ------- ------- ---------
Continuing operations
------------------------------------------- -------- ------- ------- ---------
Group sales 24,337 1,929 386 26,652
------------------------------------------- -------- ------- ------- ---------
Revenue 26,341 1,991 386 28,718
------------------------------------------- -------- ------- ------- ---------
Operating profit/(loss) before exceptional
items and amortisation of acquired
intangibles 1,133 59 (155) 1,037
------------------------------------------- -------- ------- ------- ---------
Exceptional items and amortisation
of acquired intangibles (28) (2) - (30)
------------------------------------------- -------- ------- ------- ---------
Operating profit/(loss) 1,105 57 (155) 1,007
------------------------------------------- -------- ------- ------- ---------
Operating margin 4.3% 3.0% (40.2)% 3.6%
------------------------------------------- -------- ------- ------- ---------
Share of post-tax profits/(losses)
of joint ventures and associates 13
------------------------------------------- -------- ------- ------- ---------
Finance income 7
------------------------------------------- -------- ------- ------- ---------
Finance costs (476)
------------------------------------------- -------- ------- ------- ---------
Profit/(loss) before tax 551
------------------------------------------- -------- ------- ------- ---------
Tesco Bank revenue of GBP386m (26 weeks ended 24 August 2019:
GBP562m) comprises interest and similar revenues of GBP292m (26
weeks ended 24 August 2019: GBP379m) and fees and commissions
revenue of GBP94m (26 weeks ended 24 August 2019: GBP183m).
Total at
Central Tesco actual
26 weeks ended 24 August 2019 UK & ROI Europe Bank exchange
At actual exchange rates GBPm GBPm GBPm GBPm
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Continuing operations
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Group sales 22,416 1,974 562 24,952
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Revenue 25,895 2,055 562 28,512
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Operating profit/(loss) before
exceptional
items and amortisation of acquired
intangibles 1,065 77 87 1,229
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Exceptional items and amortisation
of acquired intangibles (118) - (57) (175)
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Operating profit/(loss) 947 77 30 1,054
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Operating margin 4.1% 3.7% 15.5% 4.3%
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Share of post-tax profits/(losses)
of joint ventures and associates 2
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Finance income 14
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Finance costs (642)
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Profit/(loss) before tax 428
--------------------------------------- ------------------ ------------------ ------------------ -----------------
Balance sheet
The following tables showing segment assets and liabilities
exclude those balances that make up net debt (cash and cash
equivalents, short-term investments, joint venture loans and other
receivables, bank and other borrowings, lease liabilities,
derivative financial instruments and net debt of the disposal
group). With the exception of lease liabilities which have been
allocated to each segment, all other components of net debt have
been included within the unallocated segment to reflect how the
Group manages these balances. Intercompany transactions have been
eliminated other than intercompany transactions with Tesco Bank in
net debt.
UK & Central Tesco Total continuing Discontinued
ROI Europe Bank Unallocated operations operations Total
At 29 August 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Goodwill and other intangible
assets 4,811 26 905 - 5,742 - 5,742
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Property, plant and equipment
and investment property 14,689 1,827 63 - 16,579 - 16,579
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Right of use assets 5,733 404 13 - 6,150 - 6,150
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Investments in joint ventures
and associates 82 1 95 - 178 - 178
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Non-current financial assets
at fair value through other
comprehensive income (a) 6 - 4 - 10 - 10
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Non-current investment securities
at amortised cost (a) - - 826 - 826 - 826
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Non-current trade and other
receivables (b) 92 1 57 - 150 - 150
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Non-current loans and advances
to customers and banks - - 3,655 - 3,655 - 3,655
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Deferred tax assets 520 33 74 - 627 - 627
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Non-current assets (c) 25,933 2,292 5,692 - 33,917 - 33,917
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Inventories and current trade
and other receivables (d)(e) 2,831 372 440 - 3,643 - 3,643
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Current loans and advances
to customers and banks - - 3,630 - 3,630 - 3,630
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Current investment securities
at amortised cost (a) - - 26 26 - 26
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Total trade and other payables (7,519) (532) (346) - (8,397) - (8,397)
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Total customer deposits and
deposits from banks - - (7,137) - (7,137) - (7,137)
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Total provisions (229) (11) (48) - (288) - (288)
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Deferred tax liabilities (4) (39) - - (43) - (43)
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Net current tax (242) 26 25 - (191) - (191)
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Post-employment benefits (4,043) - - - (4,043) - (4,043)
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Assets of the disposal groups
and non-current assets classified
as held for sale 67 - - - 67 5,132 5,199
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Liabilities of the disposal
groups classified as held
for sale - - - - - (2,098) (2,098)
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Net debt (including Tesco
Bank) (f)(g) (8,207) (518) 254 (3,550) (12,021) - (12,021)
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
Net assets 8,587 1,590 2,536 (3,550) 9,163 3,034 12,197
---------------------------------- ------- ------- ------- ----------- ---------------- ------------ --------
(a) Refer to Note 1.
(b) Excludes loans to joint ventures of GBP104m (29 February
2020: GBP23m, 24 August 2019: GBP127m) which form part of net
debt.
(c) Excludes derivative financial instrument non-current assets
of GBP1,113m (29 February 2020: GBP1,083m, 24 August 2019:
GBP1,679m).
(d) Excludes net interest and other receivables of GBP3m (29
February 2020: GBP1m, 24 August 2019: GBP1m) which form part of net
debt.
(e) Excludes loans to joint ventures of GBP24m (29 February
2020: GBP104m, 24 August 2019: GBPnil) which form part of net
debt.
(f) Refer to Note 19.
(g) Net debt (including Tesco Bank) at 29 August 2020 excludes
Net debt of the disposal groups classified as held for sale of
GBP(263)m.
Total
continuing
operations
GBPm
UK & Central Tesco Discontinued
ROI Europe Bank Unallocated operations Total
At 29 February 2020 GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Goodwill and other intangible
assets(a) 4,851 25 914 - 5,790 288 6,078
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Property, plant and equipment
and investment property 14,635 1,826 61 - 16,522 2,738 19,260
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Right of use assets 5,719 392 14 - 6,125 749 6,874
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Investments in joint ventures
and associates 70 1 87 - 158 149 307
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Non-current financial assets
at fair value through other
comprehensive income 7 - 859 - 866 - 866
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Non-current trade and other
receivables(b) 65 - 65 - 130 13 143
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Non-current loans and advances
to customers and banks - - 4,171 - 4,171 - 4,171
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Deferred tax assets(a) 286 33 69 - 388 61 449
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Non-current assets (c) 25,633 2,277 6,240 - 34,150 3,998 38,148
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Inventories and current
trade and other receivables
( d)(e) 2,678 314 252 - 3,244 480 3,724
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Current loans and advances
to customers and banks - - 4,280 - 4,280 - 4,280
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Current financial assets
at fair value through other
comprehensive income - - 202 - 202 - 202
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Total trade and other payables (7,215) (511) (249) - (7,975) (1,117) (9,092)
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Total customer deposits
and deposits from banks - - (8,207) - (8,207) - (8,207)
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Total provisions (161) (11) (57) - (229) (63) (292)
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Deferred tax liabilities (4) (36) - - (40) - (40)
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Net current tax (248) 9 (26) - (265) (38) (303)
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Post-employment benefits (3,056) - - - (3,056) (29) (3,085)
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Non-current assets classified
as held for sale 75 - 45 - 120 165 285
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Net debt (including Tesco
Bank)(f) (8,203) (497) 47 (3,167) (11,820) (431) (12,251)
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
Net assets 9,499 1,545 2,527 (3,167) 10,404 2,965 13,369
------------------------------- ------- ------- ------- ----------- ------------ -------------- --------
(a)-(f) Refer to previous table for footnotes.
Total
UK & Central Tesco continuing Discontinued
ROI Europe Bank Unallocated operations operations Total
At 24 August 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Goodwill and other intangible
assets(a) 4,877 25 1,007 - 5,909 303 6,212
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Property, plant and equipment
and investment property 13,979 1,942 59 - 15,980 3,098 19,078
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Right of use assets 6,351 396 14 - 6,761 844 7,605
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Investments in joint ventures
and associates 319 1 84 - 404 144 548
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Non-current financial assets
at fair value through other
comprehensive income 3 - 1,009 - 1,012 - 1,012
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Non-current trade and other
receivables(b) 78 2 37 - 117 18 135
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Non-current loans and advances
to customers and banks - - 4,186 - 4,186 - 4,186
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Deferred tax assets(a) 159 36 61 - 256 80 336
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Non-current assets (c) 25,766 2,402 6,457 - 34,625 4,487 39,112
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Inventories and current
trade and other receivables
( d)(e) 3,082 367 319 - 3,768 570 4,338
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Current loans and advances
to customers and banks - - 4,962 - 4,962 - 4,962
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Current financial assets
at fair value through other
comprehensive income - - 30 - 30 - 30
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Total trade and other payables (7,688) (624) (241) - (8,553) (1,259) (9,812)
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Total customer deposits
and deposits from banks - - (11,902) - (11,902) - (11,902)
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Total provisions (174) (24) (81) - (279) (88) (367)
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Deferred tax liabilities (8) (25) - - (33) (9) (42)
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Net current tax (263) (9) (23) - (295) (24) (319)
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Post-employment benefits (2,486) - - - (2,486) (28) (2,514)
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Assets of the disposal groups
and non-current assets classified
as held for sale 40 9 3,690 - 3,739 141 3,880
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Liabilities of the disposal
groups classified as held
for sale - - (4) - (4) - (4)
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Net debt (including Tesco
Bank)(f) (8,853) (530) (690) (2,656) (12,729) (554) (13,283)
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
Net assets 9,416 1,566 2,517 (2,656) 10,843 3,236 14,079
----------------------------------- ------- ------- -------- ----------- ------------ -------------- --------
(a)-(f) Refer to previous table for footnotes.
Total Discontinued Total
Other segment information Central Tesco continuing operations GBPm
26 weeks ended 29 August UK & ROI Europe Bank operations GBPm
2020 GBPm GBPm GBPm GBPm
----------------------------------- -------- ------- ------ ----------- ------------- -------
Capital expenditure (including
acquisitions through business
combinations):
----------------------------------- -------- ------- ------ ----------- ------------- -------
Property, plant and equipment
(a)(b) 406 35 7 448 56 504
----------------------------------- -------- ------- ------ ----------- ------------- -------
Goodwill and other intangible
assets (c) 71 4 18 93 1 94
----------------------------------- -------- ------- ------ ----------- ------------- -------
Depreciation and amortisation:
----------------------------------- -------- ------- ------ ----------- ------------- -------
Property, plant and equipment (399) (50) (4) (453) (14) (467)
----------------------------------- -------- ------- ------ ----------- ------------- -------
Right of use assets (259) (18) (1) (278) (5) (283)
----------------------------------- -------- ------- ------ ----------- ------------- -------
Other intangible assets (110) (4) (24) (138) (1) (139)
----------------------------------- -------- ------- ------ ----------- ------------- -------
Impairment(d) :
----------------------------------- -------- ------- ------ ----------- ------------- -------
(loss)/reversal on financial
assets (6) (1) (257) (264) (6) (270)
----------------------------------- -------- ------- ------ ----------- ------------- -------
Total Discontinued Total
Central Tesco continuing operations GBPm
26 weeks ended 24 August UK & ROI Europe Bank operations GBPm
2019 GBPm GBPm GBPm GBPm
----------------------------------- -------- ------- ------ ----------- ------------- -------
Capital expenditure (including
acquisitions through business
combinations):
----------------------------------- -------- ------- ------ ----------- ------------- -------
Property, plant and equipment
(a) 307 28 1 336 45 381
----------------------------------- -------- ------- ------ ----------- ------------- -------
Goodwill and other intangible
assets (c) 55 5 18 78 1 79
----------------------------------- -------- ------- ------ ----------- ------------- -------
Depreciation and amortisation:
----------------------------------- -------- ------- ------ ----------- ------------- -------
Property, plant and equipment (372) (49) (5) (426) (129) (555)
----------------------------------- -------- ------- ------ ----------- ------------- -------
Right of use assets (265) (16) (1) (282) (41) (323)
----------------------------------- -------- ------- ------ ----------- ------------- -------
Other intangible assets (105) (6) (36) (147) (4) (151)
----------------------------------- -------- ------- ------ ----------- ------------- -------
Impairment(d) :
----------------------------------- -------- ------- ------ ----------- ------------- -------
(loss)/reversal on financial
assets (4) - (113) (117) - (117)
----------------------------------- -------- ------- ------ ----------- ------------- -------
(a) Includes GBP12m (24 August 2019: GBPnil) acquired through
business combinations.
(b) Includes GBP54m related to the disposal groups subsequent to
reclassification to held for sale.
(c) Includes GBP5m (24 August 2019: GBPnil) of goodwill and
other intangible assets acquired through business combinations.
(d) Refer to Note 12 for impairment of non-current assets.
Cash flow statement
The following tables provide further analysis of the Group cash
flow statement, including a split of cash flows between Retail
continuing operations and Tesco Bank as well as an analysis of
Group continuing and discontinued operations.
Retail Tesco Bank
---------------------------------------- ---------------------------------------- -----
Before Before
exceptional Exceptional exceptional Exceptional
items and items and items and items and
amortisation amortisation amortisation amortisation Tesco
of acquired of acquired Retail of acquired of acquired Bank
26 weeks ended 29 August intangibles intangibles Total intangibles intangibles Total Total
2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Continuing operations
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Operating profit/(loss)
of continuing operations 1,192 (30) 1,162 (155) - (155) 1,007
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Depreciation and
amortisation 802 38 840 29 - 29 869
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
ATM net income (8) - (8) 8 - 8 -
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
(Profit)/loss arising
on sale of property,
plant
and equipment,
investment
property, intangible
assets
and assets classified
as held for sale and
early
termination of leases (36) 1 (35) - - - (35)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Transaction and - - - - - - -
derivative
costs associated with
sale of subsidiaries
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Net impairment
loss/(reversal)
on property, plant and
equipment, right of use
assets, intangible
assets
and investment property 10 - 10 - - - 10
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Other defined benefit
pension scheme payments (161) - (161) - - - (161)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Share-based payments 6 - 6 3 - 3 9
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Tesco Bank fair value
movements included in
operating profit/(loss) - - - 259 - 259 259
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Cash flows generated from
operations excluding
working
capital 1,805 9 1,814 144 - 144 1,958
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
(Increase)/decrease in
working capital 170 (136) 34 (116) (14) (130) (96)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Cash generated from/(used
in) operations* 1,975 (127) 1,848 28 (14) 14 1,862
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Interest paid (323) - (323) (3) - (3) (326)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Corporation tax paid (125) - (125) (9) - (9) (134)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Net cash generated
from/(used
in) operating activities 1,527 (127) 1,400 16 (14) 2 1,402
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
* APM: 'Retail operating cash flow' of GBP1,848m (26 weeks ended
24 August 2019: GBP1,817m) is the cash generated from operations of
the continuing Retail business.
Retail Tesco Bank
-------------------------------------- ------------------------------ --------------------
Before
exceptional Before
items Exceptional exceptional Exceptional
and items and items and items and
amortisation amortisation amortisation amortisation Tesco
of acquired of acquired Retail of acquired of acquired Bank
26 weeks ended 29 August intangibles intangibles Total intangibles intangibles Total Total
2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net cash generated
from/(used
in) operating activities 1,527 (127) 1,400 16 (14) 2 1,402
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Proceeds from sale of
property,
plant and equipment,
investment
property, intangible
assets
and assets classified as
held
for sale - 32 32 - 51 51 83
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Purchase of property,
plant
and equipment and
investment
property - store buy
backs (148) - (148) - - - (148)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Purchase of property,
plant
and equipment and
investment
property - other capital
expenditure (299) - (299) (24) - (24) (323)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Purchase of intangible
assets (70) - (70) (18) - (18) (88)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Disposal of subsidiaries,
net
of cash disposed (1) (25) (26) - - - (26)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Acquisition of businesses,
net
of cash acquired 15 - 15 - - - 15
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net (increase)/decrease in
loans
to joint ventures and
associates (1) - (1) - - - (1)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Investments in associates
and
joint ventures (11) - (11) - - - (11)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net (investments
in)/proceeds
from sale of short-term
investments 134 - 134 - - - 134
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net (investments
in)/proceeds
from sale of financial
assets
at fair value through
other
comprehensive income and
amortised
cost - - - 202 - 202 202
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Dividends received from
joint
ventures and associates 6 - 6 - - - 6
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Interest received 4 - 4 - - - 4
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net cash generated
from/(used
in) investing activities (371) 7 (364) 160 51 211 (153)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Own shares purchased (79) - (79) - - - (79)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Repayment of obligations
under
leases (292) - (292) (2) - (2) (294)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Add: Cash outflow from
major
disposal - 22 22 - - - 22
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Less: Net
increase/(decrease)
in loans to joint
ventures and
associates 1 - 1 - - - 1
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Less: Net investments
in/(proceeds
from sale of)
short-term investments (134) - (134) - - - (134)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Free cash flow* 652 (98) 554 174 37 211 765
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Increase in borrowings 583 - 583 - - - 583
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Repayment of borrowings (287) - (287) - - - (287)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net cash flows from
derivative
financial instruments 19 (243) (224) - - - (224)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Dividends paid to equity
owners (634) - (634) - - - (634)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net cash generated
from/(used
in) financing activities (690) (243) (933) (2) - (2) (935)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net increase/(decrease) in
cash
and cash equivalents from
continuing
operations 466 (363) 103 174 37 211 314
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net increase/(decrease) in
cash
and cash equivalents from
discontinued
operations 106 (3) 103 - - - 103
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Intra-Group funding and
intercompany
transactions (5) - (5) 5 - 5 -
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net increase/(decrease) in
cash
and cash equivalents 567 (366) 201 179 37 216 417
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Cash and cash equivalents
at
the beginning of the
period 2,044 1,364 3,408
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Effect of foreign exchange
rate
changes (21) - (21)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Cash and cash equivalents
at
the end of the period 2,224 1,580 3,804
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Cash held in disposal
groups (598) - (598)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Cash and cash equivalents
not
held in disposal groups 1,626 1,580 3,206
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
* Retail free cash flow of GBP554m (26 weeks ended 24 August
2019: GBP645m) is reported on a continuing operations basis.
Retail Tesco Bank
---------------------------------------- ---------------------------------------- -----
Before Before
exceptional Exceptional exceptional Exceptional
items and items and items and items and
amortisation amortisation amortisation amortisation Tesco
of acquired of acquired Retail of acquired of acquired Bank
26 weeks ended 24 August intangibles intangibles Total intangibles intangibles Total Total
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Continuing operations
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Operating profit/(loss)
of continuing operations 1,142 (118) 1,024 87 (57) 30 1,054
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Depreciation and
amortisation 773 40 813 39 3 42 855
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
ATM net income (17) - (17) 17 - 17 -
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
(Profit)/loss arising
on sale of property,
plant
and equipment,
investment
property, intangible
assets
and assets classified
as held for sale and
early
termination of leases (8) (14) (22) - - - (22)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Net impairment
loss/(reversal)
on property, plant and
equipment, right of use
assets, intangible
assets
and investment property (1) - (1) - - - (1)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Impairment of joint
ventures - 47 47 - - - 47
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Adjustment for non-cash
element of pensions
charge 1 - 1 - - - 1
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Other defined benefit
pension scheme payments (144) - (144) - - - (144)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Share-based payments 14 - 14 1 - 1 15
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Tesco Bank fair value
movements included in
operating profit/(loss) - - - 72 - 72 72
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Cash flows generated from
operations excluding
working
capital 1,760 (45) 1,715 216 (54) 162 1,877
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
(Increase)/decrease in
working capital 164 (62) 102 ( 427) 34 (393) (291)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Cash generated from/(used
in) operations 1,924 (107) 1,817 (211) (20) (231) 1,586
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Interest paid (376) - (376) (4) - (4) (380)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Corporation tax paid (117) - (117) (32) - (32) (149)
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Net cash generated
from/(used
in) operating activities 1,431 (107) 1,324 (247) (20) (267) 1,057
------------------------- ----------------- ------------- ------ ------------- ------------- ---------- -----
Retail Tesco Bank
-------------------------------------- ------------------------------ --------------------
Before Before
exceptional exceptional
items Exceptional items Exceptional
and items and and items and
amortisation amortisation amortisation amortisation Tesco
of acquired of acquired Retail of acquired of acquired Bank
26 weeks ended 24 August intangibles intangibles Total intangibles intangibles Total Total
2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net cash generated
from/(used
in) operating activities 1,431 (107) 1,324 (247) (20) (267) 1,057
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Proceeds from sale of
property,
plant and equipment,
investment
property, intangible
assets
and assets classified as
held
for sale - 62 62 - - - 62
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Purchase of property,
plant
and equipment and
investment
property - store buy
backs (89) - (89) - - - (89)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Purchase of property,
plant
and equipment and
investment
property - other capital
expenditure (267) - (267) (1) - (1) (268)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Purchase of intangible
assets (61) - (61) (18) - (18) (79)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Disposal of subsidiaries, - - - - - - -
net
of cash disposed
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Acquisition of businesses, - - - - - - -
net of cash acquired
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net (increase)/decrease in
loans to joint ventures
and
associates - - - 8 - 8 8
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net (investments
in)/proceeds
from sale of short-term
investments 28 - 28 - - - 28
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net (investments
in)/proceeds
from sale of financial
assets
at fair value through
other
comprehensive income and
amortised
cost - - - 14 - 14 14
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Dividends received from
joint
ventures and associates 5 - 5 16 - 16 21
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Interest received 12 - 12 - - - 12
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net cash generated
from/(used
in) investing activities (372) 62 (310) 19 - 19 (291)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Own shares purchased (52) - (52) - - - (52)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Repayment of obligations
under
leases (289) - (289) (1) - (1) (290)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Add: Cash outflow from - - - - - - -
major
acquisition
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Less: Net
increase/(decrease)
in loans to joint
ventures
and associates - - - (8) - (8) (8)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Less: Net investments
in/(proceeds
from sale of)
short-term investments (28) - (28) - - - (28)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Free cash flow 690 (45) 645 (237) (20) (257) 388
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Increase in borrowings 632 - 632 250 - 250 882
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Repayment of borrowings (1,057) - (1,057) (350) - (350) (1,407)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net cash flows from
derivative
financial instruments 42 - 42 - - - 42
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Dividends paid to equity
owners (399) - (399) - - - (399)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net cash generated
from/(used
in) financing activities (1,123) - (1,123) (101) - (101) (1,224)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net increase/(decrease) in
cash and cash equivalents
from
continuing operations (64) (45) (109) (329) (20) (349) (458)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net increase/(decrease) in
cash and cash equivalents
from
discontinued operations 178 (9) 169 - - - 169
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Intra-Group funding and
intercompany
transactions 1 - 1 (1) - (1) -
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Net increase/(decrease) in
cash and cash equivalents 115 (54) 61 (330) (20) (350) (289)
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Cash and cash equivalents
at
the beginning of the
period 1,873 1,043 2,916
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Effect of foreign exchange
rate changes 29 - 29
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Cash and cash equivalents
at
the end of the period 1,963 693 2,656
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Cash held in disposal - - -
groups
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Cash and cash equivalents
not
held in disposal groups 1,963 693 2,656
-------------------------- ------------ ------------ ---------- ---------------- ------------ --------- ---------
Continuing Discontinued Total Group
operations operations
---------------------- ---------------------- ----------------------
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit/(loss) 1,007 1,054 95 80 1,102 1,134
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Depreciation and amortisation 869 855 20 174 889 1,029
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
(Profit)/loss arising on sale
of property, plant and equipment,
investment property, intangible
assets and assets held for sale
and early termination of leases (35) (22) 3 (10) (32) (32)
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Transaction and derivative costs
associated with sale of subsidiaries - - 30 - 30 -
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Net impairment loss/(reversal)
on property, plant and equipment,
right of use assets, intangible
assets and investment property 10 (1) 43 72 53 71
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Impairment of joint ventures - 47 - - - 47
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Adjustment for non-cash element
of pensions charge - 1 - 6 - 7
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Other defined benefit pension
scheme payments (161) (144) - - (161) (144)
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Share-based payments 9 15 6 5 15 20
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Tesco Bank fair value movements
included in operating profit/(loss) 259 72 - - 259 72
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Cash flows generated from operations
excluding working capital 1,958 1,877 197 327 2,155 2,204
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
(increase)/decrease in working
capital (96) (291) 39 (23) (57) (314)
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Cash generated from/(used in) operations 1,862 1,586 236 304 2,098 1,890
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Interest paid (326) (380) (25) (27) (351) (407)
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Corporation tax paid (134) (149) (13) (22) (147) (171)
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Net cash generated from/(used in)
operating activities 1,402 1,057 198 255 1,600 1,312
------------------------------------------ ---------- ---------- ---------- ---------- ---------- ----------
Continuing Discontinued Total Group
operations operations
---------------------- ---------------------- ----------------------
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net cash generated from/(used in)
operating activities 1,402 1,057 198 255 1,600 1,312
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Proceeds from sale of property, plant
and equipment, investment property,
intangible assets and non-current
assets classified as held for sale 83 62 - 3 83 65
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Purchase of property, plant and equipment,
investment property and non-current
assets classified as held for sale
- store buybacks (148) (89) - - (148) (89)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Purchase of property, plant and equipment,
investment property and non-current
assets classified as held for sale
- other capital expenditure (323) (268) (66) (61) (389) (329)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Purchase of intangible assets (88) (79) (1) - (89) (79)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Disposal of subsidiaries, net of cash
disposed (26) - - - (26) -
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Acquisition of businesses, net of
cash acquired (Note 21) 15 - - - 15 -
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase/(decrease) in loans to
joint ventures and associates (1) 8 - - (1) 8
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Investments in joint ventures and
associates (11) - - - (11) -
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net (investments in)/proceeds from
sale of short-term investments 134 28 - - 134 28
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net (investments in)/proceeds from
sale of financial assets at fair value
through other comprehensive income
and amortised cost 202 14 - - 202 14
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Dividends received from joint ventures
and associates 6 21 6 7 12 28
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Interest received 4 12 1 1 5 13
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net cash generated from/(used in)
investing activities (153) (291) (60) (50) (213) (341)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Own shares purchased (79) (52) - - (79) (52)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Repayments of obligations under leases (294) (290) (27) (36) (321) (326)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Increase in borrowings 583 882 - - 583 882
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Repayment of borrowings (287) (1,407) (8) - (295) (1,407)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net cash flows from derivative financial
instruments (224) 42 - - (224) 42
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Dividends paid to equity owners (634) (399) - - (634) (399)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net cash generated from/(used in)
financing activities (935) (1,224) (35) (36) (970) (1,260)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase/(decrease) in cash and
cash equivalents before intra-Group
funding and intercompany transactions 314 (458) 103 169 417 (289)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Intra-Group funding and intercompany
transactions (113) 225 113 (225) - -
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase/(decrease) in cash and
cash equivalents 201 (233) 216 (56) 417 (289)
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at the beginning
of the period 3,408 2,916
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Effects of foreign exchange rate changes (21) 29
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at the end
of the period 3,804 2,656
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Cash held in disposal groups (598) -
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Cash and cash equivalents not held
in disposal groups 3,206 2,656
------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Note 3 Exceptional items and amortisation of acquired
intangibles
Income statement
26 weeks ended 29 August 2020
Profit/(loss) for the period from continuing operations included
the following exceptional items and amortisation of acquired
intangibles:
Total exceptional
Exceptional items items and
and amortisation
amortisation of of acquired Share of
acquired intangibles joint ventures
intangibles Cost of Administrative included within and associates Finance
included sales expenses operating profit profits/(losses) costs Taxation
in: GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
Exceptional items:
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
Property
transactions(a) (2) - (2) - - -
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
Booker integration(b) - (2) (2) - - -
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
ATM Business Rates(c) 105 - 105 - - (20)
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
Litigation costs(d) - (93) (93) - - -
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
Total exceptional items 103 (95) 8 - - (20)
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
Amortisation of
acquired
intangibles:
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
Amortisation of
acquired
intangible assets
(Note
9) - (38) (38) - - (5)
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
Total exceptional items
and amortisation of
acquired
intangibles 103 (133) (30) - - (25)
----------------------- ----------- -------------- ---------------------- --------------------- ------- --------
(a) As part of the Group's strategy to maximise value from
property, the Group disposed of surplus properties.
(b) Costs incurred in integrating Booker within the Tesco Group,
mainly focused on aligning distribution networks and operating
platforms.
(c) Supreme Court ruling that Tesco Group is due a refund of
business rates related to external-facing ATMs in stores.
(d) Costs arising from the 2016 claims against Tesco PLC for
matters arising out of or in connection with the overstatement of
expected profits announced in 2014.
26 weeks ended 24 August 2019
Profit/(loss) for the period included the following exceptional
items and amortisation of acquired intangibles:
Total exceptional
Exceptional items items and
and amortisation
amortisation of of acquired Share of
acquired intangibles joint ventures
intangibles Cost Administrative included within and associates Finance
included of sales expenses operating profit profits/(losses) costs Taxation
in: GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Exceptional items:
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Net restructuring and
redundancy costs (39) - (39) - - 7
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Property transactions 4 10 14 - - 1
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Booker integration (3) (3) (6) - - 1
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Impairment of
investment
in India joint
venture - (47) (47) - - -
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Provision for customer
redress (45) - (45) - - -
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Derivative
restructuring - - - - (180) 34
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Ogden rate change - - - 4 - -
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Bank transformation
costs (3) (9) (12) - - 2
---------------------- ------------- -------------- --------------------- ---------------------
Total exceptional
items (86) (49) (135) 4 (180) 45
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Amortisation of
acquired
intangibles:
---------------------- ------------- -------------- --------------------- --------------------- ------- --------
Amortisation of
acquired
intangible assets
(Note
9) - (40) (40) - - 7
------------- -------------- --------------------- --------------------- ------- --------
Total exceptional
items
and amortisation of
acquired
intangibles* (86) (89) (175) 4 (180) 52
------------- -------------- --------------------- ---------------------
* Comparatives have been restated to present Thailand, Malaysia
and Poland as discontinued operations. Refer to Note 6 for further
details.
Cash flow statement
The table below shows the impact of exceptional items on the
Group cash flow statement:
Amortisation of acquired intangibles does not affect the Group's
cash flow.
Cash flows from Cash flows from Cash flows from
operating activities investing activities financing activities
26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks
2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm GBPm GBPm
Prior year restructuring
and redundancy costs (32) (103) - - - -
Current year restructuring
and redundancy costs - (1) - - - -
Property transactions * - - 32 62 - -
Tesco Bank Mortgage Book
Proceeds - - 51 - - -
Settlement of claims for
customer redress in Tesco
Bank (14) (19) - - - -
Litigation costs (93) - - - - -
Costs and proceeds deposit
associated with the sale
of Asia and Poland - - (25) - - -
Booker integration cash
payments (2) (4) - - - -
Hedging costs associated
with the sale of Asia - - - - (243) -
Total continuing operations (141) (127) 58 62 (243) -
Exceptional cash flows from
discontinued operations (3) (9) - - - -
Total (144) (136) 58 62 (243) -
* These relate to proceeds from property disposals primarily in
UK & ROI and Central Europe.
Note 4 Finance income and costs
Notes 26 weeks 26 weeks
2020 2019(a)
Continuing operations GBPm GBPm
Finance income
Interest receivable and similar income 5 12
Finance income receivable on net investment in leases 2 2
Total finance income 7 14
Finance costs
GBP MTNs and Loans (70) (62)
EUR MTNs (27) (30)
USD Bonds (5) (6)
Finance charges payable on lease liabilities (229) (246)
Other interest payable (9) (24)
Fair value remeasurements of financial instruments(b) (108) (58)
Total finance costs before exceptional items and
net pension finance costs (448) (426)
Net pension finance costs 18 (28) (36)
Total finance costs before exceptional items (476) (462)
Fair value remeasurement loss on derivative restructuring 3 - (180)
Total finance costs (476) (642)
Net finance cost (469) (628)
(a) Comparatives have been restated to present Thailand,
Malaysia and Poland as discontinued operations. Refer to Note 6 for
further details.
(b) Fair value remeasurements includes GBPnil (26 weeks ended 24
August 2019: GBP(62)m) relating to the premium paid on the
repurchase of long-dated bonds.
Note 5 Taxation
Recognised in the Group income statement
26 weeks 26 weeks
2020 2019*
Continuing operations GBPm GBPm
UK 130 105
Overseas 24 28
Taxation charge 154 133
* Comparatives have been restated to present Thailand, Malaysia
and Poland as discontinued operations. Refer to Note 6 for further
details.
The tax charge in the Group income statement is based on
management's best estimate of the full year effective tax rates by
geographical unit applied to half year profits, which is then
adjusted for tax on exceptional items and amortisation of acquired
intangibles arising in the period to 29 August 2020.
The Finance Act 2020 included legislation to maintain the main
rate of UK corporation tax at 19%, rather than reducing it to 17%
from 1 April 2020. The change to the main UK corporation tax rate
was substantively enacted by the balance sheet date and is
therefore included in these condensed consolidated interim
financial statements. Temporary differences have been remeasured
using the enacted tax rates that are expected to apply when the
liability is settled or the asset realised with the UK corporation
tax rate change increasing the deferred tax asset by GBP39m.
Deferred tax asset recognition
Deferred tax assets can only be recognised to the extent it is
probable there will be future taxable profits. The Group has
reviewed the current impact of COVID-19 on those future taxable
profits and concluded that deferred tax assets can continue to be
recognised.
Note 6 Discontinued operations and assets classified as held for
sale
Assets and liabilities of the disposal group and non-current
assets classified as held for sale
29 August 29 February 24 August
2020 2020 2019
GBPm GBPm GBPm
Assets of the disposal group(a) 4,892 - 3,690
Non-current assets classified as held for sale(b) 307 285 190
Total assets of the disposal group and non-current
assets classified as held for sale 5,199 285 3,880
Total liabilities of the disposal group(a) (2,098) - (4)
Total net assets of the disposal group and non-current
assets classified as held for sale 3,101 285 3,876
(a) Balances as at 29 August 2020 are with respect to the
Group's operations in Thailand, Malaysia and Poland. Balances as at
24 August 2019 represent the mortgage portfolio of Tesco Bank, with
assets of the disposal group consisting of loans and advances to
customers, with the associated trade and other payables presented
as liabilities of the disposal group. Beneficial ownership of the
mortgage portfolio transferred to Halifax, which is part of the
Lloyds Banking Group, on 27 September 2019.
(b) The non-current assets classified as held for sale consist
mainly of properties in the UK and Central Europe due to be sold
within one year.
The tables below show the results of the discontinued operations
which are included in the Group balance sheet, Group income
statement and Group cash flow statement respectively.
Balance sheet of the disposal group
29 August 2020
Thailand
and Malaysia Poland Total
GBPm GBPm GBPm
Assets of the disposal group
Goodwill and other intangible assets 279 3 282
Property, plant and equipment 2,345 229 2,574
Right of use assets 657 89 746
Investments in joint ventures and associates 147 - 147
Deferred tax assets 49 - 49
Inventories 309 70 379
Trade and other receivables 95 21 116
Cash and cash equivalents 535 63 598
Current tax assets 1 - 1
Total assets of the disposal group 4,417 475 4,892
Liabilities of the disposal group
Trade and other payables (958) (117) (1,075)
Lease liabilities (655) (154) (809)
Current tax liabilities (55) - (55)
Deferred tax liabilities (11) - (11)
Post-employment benefit obligations (29) - (29)
Borrowings - (52) (52)
Provisions (49) (18) (67)
Total liabilities of the disposal group (1,757) (341) (2,098)
Total net assets of the disposal group 2,660 134 2,794
Discontinued operations
On 9 March 2020, the Group reached agreement on the terms of a
proposed sale of its operations in Thailand and Malaysia, which
were presented in the Group's former Asia segment. The transaction
received shareholder approval on 14 May 2020, with regulatory
approval and completion expected by the end of the calendar year.
The assets and liabilities related to the Group's Thailand and
Malaysia operations have been classified as a disposal group held
for sale within the period, and the results have been presented as
discontinued operations.
On 18 June 2020, the Group reached agreement on the terms of a
proposed corporate sale of its business in Poland, which was
previously presented in the Group's Central Europe segment. The
transaction is subject to regulatory approval, with completion
expected in Spring 2021. The assets and liabilities related to the
Group's Poland operation have been classified as a disposal group
held for sale within the period. Further properties in Poland not
included in the corporate sale also individually meet the criteria
to be classified as held for sale, and therefore the Group's entire
business in Poland has been presented as discontinued
operations.
Income statement
26 weeks 2020 26 weeks 2019
Thailand Thailand
and Malaysia Poland Other Total and Malaysia Poland Other Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 2,546 522 - 3,068 2,556 841 - 3,397
Operating costs(a) (2,269) (534) - (2,803) (2,372) (848) - (3,220)
Operating profit, before exceptional
items 277 (12) - 265 184 (7) - 177
Share of post-tax profits/(losses)
of joint ventures and associates 6 - - 6 12 - - 12
Finance (costs)/income (18) (7) - (25) (18) (8) - (26)
Profit/(loss) before tax,
before exceptional items 265 (19) - 246 178 (15) - 163
Taxation (53) (1) - (54) (33) (4) - (37)
Profit/(loss) after tax, before
exceptional items 212 (20) - 192 145 (19) - 126
Exceptional items(b) - (54) (86) (140) - (97) - (97)
Fair value remeasurements
of financial instruments(c) (2) - - (2) - - - -
Transaction costs (24) (4) - (28) - - - -
Tax on transaction costs and
fair value remeasurements
of financial instruments 46 - - 46 - - - -
Total profit/(loss) after
tax of discontinued operations 232 (78) (86) 68 145 (116) - 29
(a) O perating costs include GBP(20)m depreciation and
amortisation charges (26 weeks ended 24 August 2019:
GBP(174)m).
(b) Exceptional items before tax of GBP(140)m (26 weeks ended 24
August 2019: GBP(97)m) includes GBP(8)m (26 weeks ended 24 August
2019: GBP(36)m) of net restructuring and redundancy costs, GBP(43)m
(26 weeks ended 24 August 2019: GBP(71)m) of net impairment loss on
non-current assets, GBP(3)m loss (26 weeks ended 24 August 2019:
GBP10m profit) on disposal of surplus properties, and GBP(86)m (26
weeks ended 24 August 2019: GBPnil) provision relating to claims
from Homeplus (Korea) purchasers. There was no tax on exceptional
items (26 weeks ended 24 August 2019: GBPnil).
(c) The income statement impact of the derivative contracts
entered into by the Group to economically hedge the foreign
exchange risk on the anticipated USD disposal proceeds from the
Asia business is a fair value loss of GBP(2)m, being the difference
between the premiums paid to enter into the contracts GBP(243)m and
their fair value at the balance sheet date GBP241m.
Cash flow statement
26 weeks 2020 26 weeks 2019
Thailand Thailand
and Malaysia Poland Total and Malaysia Poland Total
GBPm GBPm GBPm GBPm GBPm GBPm
Net cash flows from operating activities 244 (46) 198 233 22 255
Net cash flows from investing activities (54) (6) (60) (47) (3) (50)
Net cash flows from financing activities (21) (14) (35) (26) (10) (36)
Net cash flows from discontinued operations 169 (66) 103 160 9 169
Note 7 Dividends
26 weeks ended 26 weeks ended
29 August 2020 24 August 2019
Pence/share GBPm Pence/share GBPm
Amounts recognised as distributions to
owners in the period:
Prior financial year final dividend* 6.50 634 4.10 399
Interim dividend declared for the current
period 3.20 314 2.65 260
* Excludes GBP3m dividends waived (24 August 2019: GBP3m).
The interim dividend was approved by the Board of Directors on 6
October 2020 and has not been included as a liability as at 29
August 2020. It will be paid on 27 November 2020 to shareholders
who are on the Register of members at close of business on 16
October 2020.
A dividend reinvestment plan (DRIP) is available to shareholders
who would prefer to invest their dividends in the shares of the
Company. For those shareholders electing to receive the DRIP, the
last date for receipt of a new election is 6 November 2020.
Note 8 Earnings/(losses) per share and diluted earnings/(losses)
per share
Basic earnings/(losses) per share amounts are calculated by
dividing the profit/(loss) attributable to owners of the parent by
the weighted average number of ordinary shares in issue during the
financial period.
Diluted earnings/(losses) per share amounts are calculated by
dividing the profit/(loss) attributable to owners of the parent by
the weighted average number of ordinary shares in issue during the
financial period adjusted for the effects of potentially dilutive
share options. The dilutive effect is calculated on the full
exercise of all potentially dilutive ordinary share options granted
by the Group, including performance-based options which the Group
considers to have been earned.
For the 26 weeks ended 29 August 2020 there were 27 million (26
weeks ended 24 August 2019: 59 million) potentially dilutive share
options. As the Group has recognised a profit for the period,
dilutive effects have been considered in calculating diluted
earnings per share.
26 weeks ended 29 August 26 weeks ended 24 August
2020 2019(a)
Potentially Potentially
dilutive dilutive
Basic share options Diluted Basic share options Diluted
Profit/(loss) (GBPm)
Continuing operations 397 - 397 295 - 295
Discontinued operations(b) 63 - 63 29 - 29
Total 460 - 460 324 - 324
Weighted average number
of shares (millions) 9,744 27 9,771 9,715 59 9,774
Earnings/(losses) per
share (pence)
Continuing operations 4.07 (0.01) 4.06 3.04 (0.02) 3.02
Discontinued operations 0.65 - 0.65 0.30 (0.01) 0.29
Total 4.72 (0.01) 4.71 3.34 (0.03) 3.31
(a) Comparatives have been restated to present Thailand,
Malaysia and Poland as discontinued operations. Refer to Note 6 for
further details.
(b) Excludes profits from non-controlling interests of GBP5m (26
weeks ended 24 August 2019: GBPnil)
Alternative performance measure: Diluted earnings/(losses) per
share from continuing operations before exceptional items and
amortisation of acquired intangibles, net pension finance costs and
fair value remeasurements of financial instruments
Notes 26 weeks 26 weeks
2020 2019*
Profit before tax from continuing operations before
exceptional items and amortisation of acquired intangibles
(GBPm) 581 779
Add: Net pension finance costs (GBPm) 4 28 36
Add: Fair value remeasurements of financial instruments
(GBPm) 4 108 58
Profit before tax from continuing operations before
exceptional items and amortisation of acquired intangibles,
net pension finance costs and fair value remeasurements
of financial instruments (GBPm) 717 873
Profit before tax from continuing operations before
exceptional items and amortisation of acquired intangibles,
net pension finance costs and fair value remeasurements
of financial instruments attributable to the owners
of the parent (GBPm) 717 873
Taxation on profit from continuing operations before
exceptional items and amortisation of acquired intangibles,
net pension finance costs and fair value remeasurements
of financial instruments attributable to the owners
of the parent (GBPm) (155) (203)
Profit after tax from continuing operations before
exceptional items and amortisation of acquired intangibles,
net pension finance costs and fair value remeasurements
of financial instruments attributable to the owners
of the parent (GBPm) 562 670
Basic weighted average number of shares (millions) 9,744 9,715
Basic earnings per share from continuing operations
before exceptional items and amortisation of acquired
intangibles, net pension finance costs and fair value
remeasurements of financial instruments (pence) 5.77 6.90
Diluted weighted average number of shares (millions) 9,771 9,774
Diluted earnings per share from continuing operations
before exceptional items and amortisation of acquired
intangibles, net pension finance costs and fair value
remeasurements of financial instruments (pence) 5.75 6.85
* Comparatives have been restated to present Thailand, Malaysia
and Poland as discontinued operations. Refer to Note 6 for further
details.
Note 9 Goodwill and other intangible assets
Goodwill of GBP4,570m (29 February 2020: GBP4,840m, 24 August
2019: GBP4,893m) consists of UK GBP3,792m (29 February 2020:
GBP3,793m, 24 August 2019: GBP3,797m), ROI GBP3m (29 February 2020:
GBP3m, 24 August 2019: GBP4m), Thailand GBPnil (29 February 2020:
GBP193m, 24 August 2019: GBP210m), Malaysia GBPnil (29 February
2020: GBP76m, 24 August 2019: GBP80m) and Tesco Bank GBP775m (29
February 2020: GBP775m, 24 August 2019: GBP802m). Refer to Note 1
for further details regarding the prior year restatement.
Other intangible assets comprise software of GBP527m (29
February 2020: GBP544m, 24 August 2019: GBP589m), customer
relationships of GBP533m (29 February 2020: GBP567m, 24 August
2019: GBP606m) and other intangible assets of GBP112m (29 February
2020: GBP127m, 24 August 2019: GBP124m).
Of the GBP139m (26 weeks ending 24 August 2019: GBP151m)
amortisation of other intangible assets, GBP38m (26 weeks ended 24
August 2019: GBP40m) arising from the amortisation of intangible
assets acquired through business combinations has been included
within exceptional items and amortisation of intangible assets.
Refer to Note 3 for further details.
Note 10 Property, plant and equipment
Land and Other
buildings (a) Total
GBPm GBPm GBPm
Cost
At 29 February 2020 24,868 6,925 31,793
Foreign currency translation 102 21 123
Additions 228 210 438
Acquired through business combinations 8 4 12
Reclassification (5) 264 259
Disposals (25) (160) (185)
Classified (to)/from assets held for sale 28 - 28
Transfer to disposal group classified as held for
sale (3,642) (1,415) (5,057)
At 29 August 2020 21,562 5,849 27,411
Accumulated depreciation and impairment losses
At 29 February 2020 7,841 4,718 12,559
Foreign currency translation 34 15 49
Charge for the period 219 248 467
Impairment losses(b) 68 11 79
Reversal of impairment losses(b) (31) (3) (34)
Reclassification 8 250 258
Disposals (22) (156) (178)
Classified (to)/from assets held for sale 24 - 24
Transfer to disposal group classified as held for
sale (1,386) (987) (2,373)
At 29 August 2020 6,755 4,096 10,851
Net carrying value
At 29 August 2020 14,807 1,753 16,560
At 24 August 2019 16,936 2,106 19,042
Construction in progress included above(c)
At 29 August 2020 61 165 226
At 24 August 2019 61 88 149
(a) Other assets consist of fixtures and fittings with a net
carrying value of GBP1,286m (29 February 2020: GBP1,712m, 24 August
2019: GBP1,593m), office equipment with a net carrying value of
GBP212m (29 February 2020: GBP245m, 24 August 2019: GBP312m) and
motor vehicles with a net carrying value of GBP255m (29 February
2020: GBP250m, 24 August 2019: GBP201m).
(b) Refer to Note 12.
(c) Construction in progress does not include land.
Land and
buildings Other(a) Total
GBPm GBPm GBPm
Cost
At 23 February 2019 24,484 6,993 31,477
Foreign currency translation 436 141 577
Additions 171 210 381
Reclassification (41) (43) (84)
Disposals (45) (246) (291)
Classified as held for sale (216) (36) (252)
At 24 August 2019 24,789 7,019 31,808
Accumulated depreciation and impairment losses
At 23 February 2019 7,523 4,768 12,291
Foreign currency translation 149 99 248
Charge for the period 256 299 555
Impairment losses(b) 82 20 102
Reversal of impairment losses(b) (25) - (25)
Reclassification (2) (5) (7)
Disposals (32) (243) (275)
Classified as held for sale (98) (25) (123)
At 24 August 2019 7,853 4,913 12,766
Net carrying value 16,936 2,106 19,042
(a)-(b) Refer to previous page for footnotes.
Commitments for capital expenditure contracted for, but not
incurred, at 29 August 2020 were GBP234m (29 February 2020:
GBP140m, 24 August 2019: GBP216m), principally relating to store
development.
Note 11 Leases
Right of use assets
Land and
buildings Other Total
GBPm GBPm GBPm
Net carrying value at 29 February 2020 6,734 140 6,874
Additions (including acquisitions through business
combinations) 173 30 203
Depreciation charge for the period (259) (24) (283)
Impairment losses(a) (8) - (8)
Reversal of impairment losses(a) 2 - 2
Transfer to disposal group classified as held for
sale (724) (20) (744)
Other(b) 106 - 106
Net carrying value at 29 August 2020 6,024 126 6,150
Land and
buildings Other Total
GBPm GBPm GBPm
Net carrying value at 23 February 2019 7,561 152 7,713
Additions (including acquisitions through business
combinations) 69 29 98
Depreciation charge for the period (290) (33) (323)
Impairment losses(a) (10) - (10)
Reversal of impairment losses(a) 15 - 15
Other(b) 110 2 112
Net carrying value at 24 August 2019 7,455 150 7,605
(a) Refer to Note 12.
(b) Other movements include lease terminations, modifications
and reassessments, foreign exchange and entering into finance
subleases.
Lease liabilities
The following tables show the discounted lease liabilities
included in the Group balance sheet and a maturity analysis of the
contractual undiscounted lease payments:
29 August 29 February 24 August
2020 2020 2019
Lease liabilities GBPm GBPm GBPm
Current 557 598 638
Non-current 8,199 8,968 9,700
Total lease liabilities 8,756 9,566 10,338
29 August 29 February 24 August
Maturity analysis - contractual undiscounted lease 2020 2020 2019
payments GBPm GBPm GBPm
Within one year 989 1,081 1,191
Greater than one year but less than five years 3,685 3,958 4,185
Greater than five years but less than ten years 3,834 4,178 4,471
Greater than ten years but less than fifteen years 2,536 2,810 3,166
After fifteen years 2,142 2,596 3,017
Total undiscounted lease payments 13,186 14,623 16,030
A reconciliation of the Group's opening to closing lease
liabilities balance is presented in Note 19.
Note 12 Impairment of non-current assets
Impairment losses and reversals
No goodwill impairment losses were recognised by the Group in
the period to 29 August 2020 (24 August 2019: GBPnil).
The table below summarises the Group's pre-tax impairment losses
and reversals on other non-current assets and investments in joint
ventures and associates, with the former aggregated by segment due
to the large number of individually immaterial store
cash-generating units. This includes any losses recognised
immediately before classifying an asset or disposal group as held
for sale. Impairment losses and reversals are presented gross and
prior financial period comparatives have been re-presented in order
to show the Group's Poland, Thailand and Malaysia businesses as
discontinued operations. There were no impairment losses or
reversals in the period (26 weeks ended 24 August 2019: GBPnil)
with respect to other non-current assets and investments in joint
ventures and associates in Tesco Bank.
Total continuing Discontinued
UK & ROI Central Europe operations operations Total*
Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment
26 weeks ended loss reversal loss reversal loss reversal loss reversal loss reversal
29 August 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Group balance
sheet
Other intangible - - - - - - - - - -
assets
Property, plant
and equipment (13) 11 - - (13) 11 (66) 23 (79) 34
Right of use
assets (8) 2 - - (8) 2 - - (8) 2
Investment
property (2) - - - (2) - - - (2) -
Other
non-current
assets (23) 13 - - (23) 13 (66) 23 (89) 36
Investments - - - - - - - - - -
in joint
ventures
and associates
Total impairment
(loss)/
reversal (23) 13 - - (23) 13 (66) 23 (89) 36
Group income
statement
Cost of sales - - - - - - - - - -
- underlying
Cost of sales - - - - - - - - - -
- exceptional
Administrative
expenses
- underlying (23) 13 - - (23) 13 - - (23) 13
Administrative - - - - - - - - - -
expenses
- exceptional
Total impairment
(loss)/
reversal
from continuing
operations (23) 13 - - (23) 13 - - (23) 13
Discontinued - - - - - - - - - -
operations -
underlying
Discontinued
operations -
exceptional - - - - - - (66) 23 (66) 23
Total impairment
(loss)/reversal (23) 13 - - (23) 13 (66) 23 (89) 36
* Of the GBP53m other non-current assets net impairment loss
(loss of GBP(89)m and reversal of GBP36m) for the Group (24 August
2019: GBP71m), a net loss of GBP43m (24 August 2019: GBP71m) has
been classified within exceptional items and in discontinued
operations.
Total continuing Discontinued
UK & ROI Central Europe operations operations Total(a)(b)
Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment
26 weeks ended loss reversal loss reversal loss reversal loss reversal loss reversal
24 August 2019 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Group balance
sheet
Other intangible - - - - - - - - - -
assets
Property, plant
and equipment (2) 4 - - (2) 4 (100) 21 (102) 25
Right of use
assets (6) 5 - - (6) 5 (4) 10 (10) 15
Investment
property - - - - - - - 1 - 1
Other
non-current
assets (8) 9 - - (8) 9 (104) 32 (112) 41
Investments
in joint
ventures
and associates (47) - - - (47) - - - (47) -
Total impairment
(loss)/
reversal (55) 9 - - (55) 9 (104) 32 (159) 41
Group income
statement
Cost of sales - - - - - - - - - -
- underlying
Cost of sales - - - - - - - - - -
- exceptional
Administrative
expenses
- underlying (8) 9 - - (8) 9 - - (8) 9
Administrative
expenses
- exceptional (47) - - - (47) - - - (47) -
Total impairment
(loss)/
reversal
from continuing ( 55 ( 55
operations (55) 9 - - ) 9 - - ) 9
Discontinued
operations -
underlying - - - - - - (1) - (1) -
Discontinued
operations -
exceptional - - - - - - (103) 32 (103) 32
Total impairment
(loss)/reversal (55) 9 - - (55) 9 (104) 32 (159) 41
(a) Refer to previous table for footnote.
(b) Comparatives have been restated to present Thailand,
Malaysia and Poland as discontinued operations. Refer to Note 6 for
further details.
Immediately preceding their recognition as held for sale, an
impairment review was carried out on the Group's Poland, Malaysia
and Thailand operations. There were no significant changes in
relation to the Malaysia and Thailand operations between the 2020
year end and reclassification as held for sale, and expected
proceeds exceed the carrying value so no impairment was required.
The Poland disposal involves both a corporate sale and the separate
sale of the remaining assets. Expected proceeds for the corporate
sale exceed the carrying value so no impairment was required. The
recoverable amount of the remaining assets is based on fair value
less cost of disposal on an asset by asset basis, such that some
assets are impaired while others have an impairment reversal. This
results in a net impairment charge of GBP43m, recognised in
discontinued operations - exceptional. See Note 6 for further
details.
All other impairment charges and reversals are in relation to
specific store closures or non-trading assets.
The Group considered whether the COVID-19 pandemic and the
accompanying economic uncertainty had the potential to represent a
significant impairment indicator as at 29 August 2020. Despite
additional associated costs of responding to the pandemic, which
are expected to be temporary, grocery retail has proved resilient
and the performance of the Group's portfolio of store
cash-generating units has remained strong. Reductions in discount
rates since 29 February 2020 offset the impact of increased costs
and the reduction in long term growth rates across all markets.
Therefore, management concluded that the impact of COVID-19 on the
longer term outlook for these cash-generating units did not
constitute an indicator of significant impairment and hence a full
impairment test was not required.
The impact of the COVID-19 pandemic on Tesco Bank, including
both increased expected credit losses and an increased discount
rate, is considered an indicator of goodwill impairment, so a full
impairment test has been conducted. The carrying amount of goodwill
allocated to Tesco Bank pre-impairment review was GBP775m,
impairment testing on a value in use basis resulted in a
recoverable amount of GBP870m and headroom of GBP95m. Additional
sensitivities are given in the Key assumptions and sensitivity
section below.
Impairment methodology
The impairment methodology is unchanged from that described in
Note 15 of the Annual Report and Financial Statements 2020, however
the following assumptions have been updated across the Group in
light of COVID-19:
-- The weighted average cost of capital (WACC) has seen high
volatility levels in the period to 29 August 2020, such that the
use of the spot risk-free rate and equity risk premium would not
give a discount rate that a market participant would expect at the
balance sheet date in determining the present value of cash flows
into perpetuity. In order to reflect a more appropriate discount
rate, an average of the risk-free rate and equity risk premiums
over the past 18 months has been used, reflecting the period since
the adoption of IFRS 16, 'Leases'.
-- Cash flow projections are based on the Group's three-year
internal forecasts, the results of which are reviewed by the Board.
Given the current forecasts were approved before COVID-19,
management has reviewed those forecasts and updated its best
estimate of cash flows in year 1 and retained a COVID-19 risk
adjustment to the discount rate in subsequent years to reflect the
impact of inherent uncertainty in forecast cash flows.
Key assumptions and sensitivity
With the exception of Tesco Bank, no reasonably possible changes
in key assumptions would indicate an impairment for any group of
cash-generating units to which goodwill has been allocated.
Similarly, there is not a significant risk of an adjustment to the
carrying amount of any one store cash-generating unit that would be
material to the Group as a whole in the next financial year.
The key assumptions to which the Tesco Bank goodwill recoverable
amount is most sensitive are the discount rate, equity cash flows
in excess of the regulatory capital requirement and the long-term
growth rate. The table below sets out the amount by which these
assumption values would have to change for the recoverable amount
to equal the carrying amount.
Key assumption Amount by which assumption
value would have to change
for the recoverable amount
Assumption value to equal the carrying amount
Post-tax discount rate 8.9% Increase of 0.3ppt
Annual equity cash flows Variable Decrease by 4.6% p.a.
Long-term growth rate 1.6% Decrease of 0.3ppt
Note 13 Inventories
29 August 29 February 24 August
2020 2020 2019
GBPm GBPm GBPm
Goods held for resale 2,251 2,429 2,714
Development properties 3 4 5
2,254 2,433 2,719
Cost of inventories from continuing operations recognised as an
expense for the 26 weeks ended 29 August 2020 were GBP20,948m (26
weeks ended 24 August 2019: GBP20,992m). Inventory losses and
provisions from continuing operations recognised as an expense for
the 26 weeks ended 29 August 2020 were GBP524m (26 weeks ended 24
August 2019: GBP541m).
Note 14 Cash and cash equivalents and short-term investments
Cash and cash equivalents 29 August 29 February 24 August
2020 2020 2019
GBPm GBPm GBPm
Cash at bank and in hand 3,183 3,251 2,462
Short-term deposits 23 157 194
3,206 3,408 2,656
Short-term investments 29 August 29 February 24 August
2020 2020 2019
GBPm GBPm GBPm
Money market funds 942 1,076 362
Cash and cash equivalents includes GBP61m (29 February 2020:
GBP35m, 24 August 2019: GBP38m) of restricted amounts mainly
relating to the Group's pension schemes and employee benefit
trusts.
Note 15 Commercial income
Below are the commercial income balances included within
inventories and trade and other receivables, or netted against
trade and other payables. Amounts received in advance of income
being earned are included in accruals.
29 August 29 February 24 August 2019
2020 2020 GBPm
GBPm GBPm
Current assets
Inventories (19) (55) (50)
Trade and other receivables
Trade/other receivables 99 138 135
Accrued income 88 157 156
Current liabilities
Trade and other payables
Trade payables 128 292 190
Accruals and deferred income (2) (3) (3)
Note 16 Borrowings
Borrowings are classified as current and non-current based on
their scheduled redemption date and not their maturity date.
Repayments of principal amounts are classified as current if the
repayment is scheduled to be made within one year of the reporting
date.
Current
29 August 29 February 24 August
2020 2020 2019
Par value Maturity GBPm GBPm GBPm
Bank loans and overdrafts - - 485 413 619
5.5% MTN GBP97m Dec 2019 - - 101
1% RPI Tesco Bank Retail Bond GBP73m Dec 2019 - - 73
2.125% MTN EUR296m Nov 2020 - 255 -
1m USD LIBOR + 0.70% Tesco Bank
Bond $350m Nov 2020 260 273 -
5% Tesco Bank Retail Bond GBP200m Nov 2020 201 202 -
LIBOR + 0.53% Tesco Bank Bond GBP300m Oct 2022 300 299 -
5.5457% Secured Bond(a)(b) GBP312m Feb 2029 26 22 21
6.067% Secured Bond(a) GBP200m Feb 2029 2 - -
6.0517% Secured Bond(c)(d) GBP471m Oct 2039 17 26 -
1,291 1,490 814
* Refer to next page for footnotes.
Non-current
29 August 29 February 24 August
2020 2020 2019
Par value Maturity GBPm GBPm GBPm
2.125% MTN EUR500m Nov 2020 - - 461
1m USD LIBOR + 0.70% Tesco
Bank Bond $350m Nov 2020 - - 286
5% Tesco Bank Retail Bond GBP200m Nov 2020 - - 203
6.125% MTN GBP417m Feb 2022 428 416 429
LIBOR + 0.53% Tesco Bank Bond GBP300m Oct 2022 - - 299
5% MTN GBP93m Mar 2023 101 103 102
1.375% MTN EUR750m Oct 2023 687 660 705
2.5% MTN EUR750m Jul 2024 669 653 680
2.5% MTN GBP400m May 2025 419 418 411
3.5% Tesco Bank Senior MREL
Notes(e) GBP250m Jul 2025 254 250 250
3.322% LPI MTN(f) GBP354m Nov 2025 361 358 352
0.875% MTN EUR750m May 2026 664 640 -
5.5457% Secured Bond(a)(b) GBP312m Feb 2029 259 281 292
6.067% Secured Bond(a) GBP200m Feb 2029 191 192 192
LIBOR + 1.2% Secured Bond(a) GBP50m Feb 2029 48 36 35
6% MTN GBP48m Dec 2029 59 58 59
2.5% MTN GBP450m Apr 2030 452 - -
5.5% MTN GBP109m Jan 2033 135 133 137
1.982% RPI MTN(g) GBP294m Mar 2036 298 297 290
6.15% USD Bond $525m Nov 2037 546 555 546
6.0517% Secured Bond(c)(d) GBP471m Oct 2039 587 590 -
4.875% MTN GBP20m Mar 2042 20 20 20
5.125% MTN EUR356m Apr 2047 320 316 326
5.2% MTN GBP30m Mar 2057 29 29 29
6,527 6,005 6,104
(a) The bonds are secured by a charge over the property, plant
and equipment held within the Tesco Property Limited Partnership, a
100% owned subsidiary of Tesco PLC. The carrying amounts of assets
pledged as security for secured bonds is GBP791m (29 February 2020:
GBP794m, 24 August 2019: GBP798m).
(b) This is an amortising bond which matures in February 2029
and is payable in quarterly instalments until maturity.
(c) This bond is secured by a charge over the property, plant
and equipment held within The Tesco Atrato Limited Partnership, a
100% owned subsidiary of Tesco PLC. The carrying amount of assets
pledged as security for secured bonds is GBP663m (29 February 2020:
GBP612m).
(d) This is an amortising bond which matures in October 2039 and
is payable in quarterly instalments until maturity.
(e) These Notes are Tesco Bank MREL compliant senior debt and
were issued on 25 July 2019. The scheduled redemption date is July
2024.
(f) The 3.322% Limited Price Inflation (LPI) MTN is redeemable
at par, indexed for increases in the RPI over the life of the MTN.
The maximum indexation of the principal in any one year is 5%, with
a minimum of 0%.
(g) The 1.982% RPI MTN is redeemable at par, indexed for
increases in the RPI over the life of the MTN.
Borrowing facilities
The Group has the following undrawn committed facilities
available at 29 August 2020, in respect of which all conditions
precedent had been met as at that date:
29 August 29 February 24 August
2020 2020 2019
GBPm GBPm GBPm
Expiring in less than one year 438 38 38
Expiring between one and two years 2,600 3,000 -
Expiring in more than two years - - 3,000
3,038 3,038 3,038
The undrawn committed facilities include GBP0.4bn (29 February
2020: GBP0.4bn, 24 August 2019: GBP0.4bn) of bilateral facilities
and a GBP2.6bn (29 February 2020: GBP2.6bn, 24 August 2019:
GBP2.6bn) syndicated revolving credit facility. All facilities
incur commitment fees at market rates and would provide funding at
floating rates. Since the half year, GBP0.4bn of bilateral
facilities have been cancelled and the GBP2.6bn syndicated
revolving credit facility has been refinanced at GBP2.5bn.
Note 17 Financial instruments
The following table presents the Group's financial assets and
liabilities that are measured at fair value at 29 August 2020, by
level of fair value hierarchy:
-- quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
-- inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is derived from prices) (Level
2); and
-- inputs for the asset or liability that are not based on
observable market data (from unobservable inputs) (Level 3).
The fair values of financial instruments have been determined by
reference to prices available from the markets on which the
instruments are traded, where they are available. Where market
prices are not available, the fair value has been calculated by
discounting expected future cash flows at prevailing interest
rates. The expected maturity of the financial assets and
liabilities is not considered to be materially different to their
current and non-current classifications.
Level Level Level
1 2 3 Total
At 29 August 2020 GBPm GBPm GBPm GBPm
Assets
Financial assets at fair value through other
comprehensive income - - 10 10
Financial assets at fair value through profit
or loss* - 24 - 24
Derivative financial instruments:
- Interest rate swaps and similar instruments - 59 - 59
- Cross currency swaps - 487 - 487
- Index-linked swaps - 567 - 567
- Forward contracts - 284 - 284
Total assets - 1,421 10 1,431
Liabilities
Derivative financial instruments:
- Interest rate swaps and similar instruments - (80) - (80)
- Cross currency swaps - (11) - (11)
- Index-linked swaps - (918) - (918)
- Forward contracts - (106) (8) (114)
Total liabilities - (1,115) (8) (1,123)
Total - 306 2 308
* Cash balances relating to the Group's Travel Money offering are carried
at fair value under IFRS 9 and classified within cash and cash equivalents.
Level Level Level
1 2 3 Total
At 29 February 2020 GBPm GBPm GBPm GBPm
Assets
Financial assets at fair value through other
comprehensive income 1,058 - 10 1,068
Financial assets at fair value through profit
or loss* - 26 - 26
Derivative financial instruments:
- Interest rate swaps and similar instruments - 47 - 47
- Cross currency swaps - 497 - 497
- Index-linked swaps - 541 - 541
- Forward contracts - 61 - 61
Total assets 1,058 1,172 10 2,240
Liabilities
Derivative financial instruments:
- Interest rate swaps and similar instruments - (70) - (70)
- Cross currency swaps - - - -
- Index-linked swaps - (816) - (816)
- Forward contracts - (62) - (62)
Total liabilities - (948) - (948)
Total 1,058 224 10 1,292
* Refer to previous table for footnote.
Level Level Level
1 2 3 Total
At 24 August 2019 GBPm GBPm GBPm GBPm
Assets
Financial assets at fair value through other
comprehensive income 1,036 - 6 1,042
Derivative financial instruments:
- Interest rate swaps and similar instruments - 61 - 61
- Cross currency swaps - 642 - 642
- Index-linked swaps - 984 - 984
- Forward contracts - 124 - 124
Total assets 1,036 1,811 6 2,853
Liabilities
Derivative financial instruments:
- Interest rate swaps and similar instruments - (82) - (82)
- Cross currency swaps - - - -
- Index-linked swaps - (850) - (850)
- Forward contracts - (47) (5) (52)
Total liabilities - (979) (5) (984)
Total 1,036 832 1 1,869
There were no transfers between Levels 1 and 2 during the period
(29 February 2020: GBPnil, 24 August 2019: GBPnil) and no transfers
into or out of Level 3 fair value measurements (29 February 2020:
GBPnil, 24 August 2019: GBPnil).
The Group's policy is to recognise transfers into and transfers
out of fair value hierarchy levels as of the date of the event or
change in circumstances that caused the transfer.
Carrying amounts versus fair values
The table below excludes cash and cash equivalents, short-term
investments, trade and other receivables/payables, derivative
financial instruments, deposits from banks relating to Tesco Bank
and financial assets at fair value through other comprehensive
income where the carrying values are either fair value or
approximate fair value.
The carrying value and fair value of the following financial
assets and liabilities are as follows:
29 August 2020 29 February 2020 24 August 2019
GBPm GBPm GBPm
Carrying Carrying Carrying
value Fair value value Fair value value Fair value
GBPm GBPm GBPm GBPm GBPm GBPm
Assets
Investment securities at
amortised cost 852 854 - - - -
Loans and advances to customers
and banks - Tesco Bank 7,285 7,454 8,451 8,672 9,148 9,315
Loans and advances to customers
held for sale - Tesco Bank - - 45 45 3,690 3,712
Joint venture and associate loan
receivables* 128 192 127 193 127 132
Liabilities
Short-term borrowings:
-Amortised cost (829) (829) (1,015) (928) (741) (744)
-Bonds in fair value hedge
relationships (462) (464) (475) (478) (73) (73)
Long-term borrowings:
-Amortised cost (4,097) (5,151) (4,049) (4,714) (3,628) (4,259)
-Bonds in fair value hedge
relationships (2,430) (2,437) (1,956) (1,954) (2,476) (2,461)
Customer deposits - Tesco Bank (6,637) (6,647) (7,707) (7,711) (9,903) (9,907)
* Joint venture and associate loan receivables carrying amounts
of GBP128m (29 February 2020: GBP127m, 24 August 2019: GBP127m) are
presented in the Group balance sheet net of deferred profits of
GBP54m (29 February 2020: GBP54m, 24 August 2019: GBP54m)
historically arising from the sale of property assets to joint
ventures.
Tesco Bank expected credit loss (ECL)
The Group has commissioned four new scenarios from its
third-party provider, all of which were based on an economic
outlook that sought to take account of the ramifications of the
COVID-19 outbreak. These scenarios include a Base scenario, an
Upside scenario, and two different Downside scenarios. The Base
scenario anticipates a delayed economic recovery, with consumer
confidence remaining weak in the near term and unemployment peaking
in Q4 2020. The Upside scenario involves a sharper economic
recovery while Downside 1 assumes a longer delay until the economy
recovers. Downside 2 is a prolonged and sustained recession with a
slow economic recovery thereafter. In selecting the Downside
scenarios, the Group explored the extremities of potential economic
impacts, and as a result these Downside scenarios have been given a
lesser weighting due to the context of the base and upside
scenarios also taking into account the deep negative impact of the
pandemic on the UK economy. The Base, Upside, Downside 1 and
Downside 2 scenarios have been assigned weighting of 50%, 34%, 15%
and 1% respectively.
The weighted economic measures from the scenarios are as
follows:
Economic measure
2020 2021 2022 2023 2024
% % % % %
Bank of England base rate(a) 0.3 0.1 0.1 0.1 0.1
Gross domestic product(b) (6.5) 6.7 2.2 1.7 1.7
Unemployment rate(a) 6.5 7.8 6.4 5.5 5.0
Unemployment rate peak in year 8.6 8.3 6.8 5.8 5.2
(a) Simple average
(b) Annual growth rates
Key assumptions and sensitivity
The key assumptions to which the Tesco Bank ECL is most
sensitive are the probability of default (PD), loss given default
(LGD), PD threshold (staging), and expected lifetime (revolving
credit facilities). The table below sets out the changes in the ECL
allowance that would arise from reasonably possible changes in
these assumptions from those used in Tesco Bank's calculations as
at 29 August 2020.
Impact on the loss allowance
Reasonably 29 August 29 February 24 August
possible 2020 2020 2020
change GBPm GBPm GBPm
Closing ECL allowance 650 488 511
Increase
Probability of default of 2.5% 13 11 10
Decrease
of 2.5% (13) (11) (9)
Increase
Loss given default of 2.5% 15 12 12
Decrease
of 2.5% (15) (12) (13)
Probability of default threshold Increase
(staging) of 20% (19) (17) (13)
Decrease
of 20% 21 21 20
Expected lifetime (revolving credit Increase
facilities) of 1 year 4 2 3
Decrease
of 1 year (4) (2) (3)
Note 18 Post-employment benefits
Pensions
The Group operates a variety of post-employment benefit
arrangements, covering both funded and unfunded defined benefit
schemes and defined contribution schemes.
The principal defined benefit pension plan within the Group is
the Tesco PLC Pension Scheme (the Scheme), a UK scheme closed to
future accrual. We have agreed the actuarial pension valuation as
at 31 December 2019 with the Tesco PLC Trustee at a deficit of
GBP(2.2)bn. This is subject to the completion of the sale of our
businesses in Thailand and Malaysia and is before the payment of
the GBP2.5bn one-off contribution to the Scheme. This payment will
eliminate the actuarial deficit as at the date and significantly
reduce the prospect of having to make further pension deficit
contributions in the future.
Summary of movements in Group deficit during the financial
period
Changes in the Group deficit, including movements of
discontinued operations up to classification as held for sale.
29 August 29 February 24 August
2020 2020 2019
GBPm GBPm GBPm
Deficit in schemes at the beginning of the period (3,085) (2,808) (2,808)
Current service cost (22) (40) (21)
Past service cost - (5) (5)
Finance income/(cost) (28) (71) (36)
Included in the Group income statement* (50) (116) (62)
Remeasurement gain/(loss):
Financial assumptions gain/(loss) (1,712) (2,867) (2,824)
Demographic assumptions gain/(loss) (102) 182 220
Experience gain/(loss) 79 61 15
Return on plan assets excluding finance income 623 2,158 2,791
Foreign currency translation (8) 2 (9)
Included in the Group statement of comprehensive
income/(loss)* (1,120) (464) 193
Employer contributions 22 36 19
Additional employer contributions 147 262 141
Benefits paid 14 5 3
Classified as held for sale 29 - -
Other movements* 212 303 163
Deficit in schemes at the end of the period (4,043) (3,085) (2,514)
Deferred tax asset 751 512 416
Deficit in schemes at the end of the period,
net of deferred tax (3,292) (2,573) (2,098)
* Movement in relation to discontinued operations for the year
ended 29 February 2020 included GBP(8)m (24 August 2019: GBP(6)m)
within the income statement, GBP(3)m (24 August 2019: GBPnil) in
Group statement of comprehensive income/loss and GBP1m (24 August
2019: GBPnil) in other movements.
Scheme principal assumptions
The major financial assumptions, on a weighted average basis,
used by the actuaries to value the defined benefit obligation for
the Scheme were as follows:
29 August 29 February 24 August
2020
2020 % 2019
% %
Discount rate 1.7 1.9 2.1
Price inflation 2.9 2.8 3.1
Rate of increase in deferred pensions* 2.1 2.0 2.1
Rate of increase in pensions in payment*
Benefits accrued before 1 June 2012 2.7 2.7 2.9
Benefits accrued after 1 June 2012 2.2 2.1 2.2
* In excess of any Guaranteed Minimum Pension (GMP) element.
If the discount rate assumption increased by 0.1% or 1.0%, the
Scheme defined benefit obligation would decrease by approximately
GBP500m or GBP4,373m respectively. If this assumption decreased by
0.1% or 1.0%, the Scheme defined benefit obligation would increase
by approximately GBP521m or GBP6,123m respectively.
If the inflation assumption increased by 0.1% or 1.0%, the
Scheme defined benefit obligation would increase by approximately
GBP437m or GBP4,831m respectively. If this assumption decreased by
0.1% or 1.0%, the Scheme defined benefit obligation would decrease
by approximately GBP417m or GBP3,749m respectively.
Movements in the defined benefit obligation from discount rate
and inflation rate changes may be partially offset by movements in
assets.
Note 19 Analysis of changes in net debt
Non-cash movements
Cash flows Operating Discontinued
At arising and Fair operations At
29 from investing value Interest GBPm 29
February financing cash gains/ Foreign income/ August
2020 activities flows (losses) exchange (charge) Other 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Total Group
Bank and
other
borrowings (7,495) (288) 113 1 (92) (109) - 52 (7,818)
Lease
liabilities (9,566) 321 252 - (8) (252) (312) 809 (8,756)
Net
derivative
financial
instruments 198 224 (14) (133) 1 (2) - - 274
Arising from
financing
activities (16,863) 257 351 (132) (99) (363) (312) 861 (16,300)
Cash and
cash
equivalents 3,408 - 417 - (21) - - (598) 3,206
Short-term
investments 1,076 - (134) - - - - - 942
Joint
venture
loans 127 - 1 - - - - - 128
Interest and
other
receivables 1 - (5) - - 7 - - 3
Net debt of
the
disposal
group
held for
sale - - - - - - - (263) (263)
Total Group (12,251) 257 630 (132) (120) (356) (312) - (12,284)
Tesco Bank
Bank and
other
borrowings (1,260) - 2 10 - (2) - - (1,250)
Lease
liabilities (33) 2 1 - - (1) - - (31)
Net
derivative
financial
instruments (45) - - (21) - - - - (66)
Arising from
financing
activities (1,338) 2 3 (11) - (3) - - (1,347)
Cash and
cash
equivalents 1,364 - 216 - - - - - 1,580
Joint
ventures
loans 21 - - - - - - - 21
Tesco Bank 47 2 219 (11) - (3) - - 254
Retail
Bank and
other
borrowings (6,235) (288) 111 (9) (92) (107) - 52 (6,568)
Lease
liabilities (9,533) 319 251 - (8) (251) (312) 809 (8,725)
Net
derivative
financial
instruments 243 224 (14) (112) 1 (2) - - 340
Arising from
financing
activities (15,525) 255 348 (121) (99) (360) (312) 861 (14,953)
Cash and
cash
equivalents 2,044 - 201 - (21) - - (598) 1,626
Short-term
investments 1,076 - (134) - - - - - 942
Joint
ventures
loans 106 - 1 - - - - - 107
Interest and
other
receivables 1 - (5) - - 7 - - 3
Net debt of
the
disposal
group
held for
sale - - - - - - - (263) (263)
Net debt (12,298) 255 411 (121) (120) (353) (312) - (12,538)
Net debt excludes the net debt of Tesco Bank but includes that
of discontinued operations. Balances and movements in respect of
the total Group and Tesco Bank are presented to allow
reconciliation between the Group balance sheet and the Group cash
flow statement.
Non-cash movements
Cash flows Operating
arising and Fair At
At from investing value Interest 24
23 February financing cash gains/ Foreign income/ August
2019 activities flows (losses) exchange (charge) Other 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Total Group
Bank and
other
borrowings (7,143) 525 144 (180) (139) (125) - (6,918)
Lease
liabilities (10,505) 326 271 - (93) (271) (66) (10,338)
Net
derivative
financial
instruments 591 (42) (8) 283 - 3 - 827
Arising from
financing
activities (17,057) 809 407 103 (232) (393) (66) (16,429)
Cash and
cash
equivalents 2,916 - (289) - 29 - - 2,656
Short-term
investments 390 - (28) - - - - 362
Joint
venture
loans 133 - (8) - 2 - - 127
Interest and
other
receivables 1 - (13) - (1) 14 - 1
Total Group (13,617) 809 69 103 (202) (379) (66) (13,283)
Tesco Bank
Bank and
other
borrowings (1,421) 100 3 (27) - (2) - (1,347)
Lease
liabilities (35) 1 1 - - (1) - (34)
Net
derivative
financial
instruments (29) - - 6 - - - (23)
Arising from
financing
activities (1,485) 101 4 (21) - (3) - (1,404)
Cash and
cash
equivalents 1,043 - (350) - - - - 693
Joint
ventures
loans 29 - (8) - - - - 21
Tesco Bank (413) 101 (354) (21) - (3) - (690)
Retail
Bank and
other
borrowings (5,722) 425 141 (153) (139) (123) - (5,571)
Lease
liabilities (10,470) 325 270 - (93) (270) (66) (10,304)
Net
derivative
financial
instruments 620 (42) (8) 277 - 3 - 850
Arising from
financing
activities (15,572) 708 403 124 (232) (390) (66) (15,025)
Cash and
cash
equivalents 1,873 - 61 - 29 - - 1,963
Short-term
investments 390 - (28) - - - - 362
Joint
ventures
loans 104 - - - 2 - - 106
Interest and
other
receivables 1 - (13) - (1) 14 - 1
Net debt (13,204) 708 423 124 (202) (376) (66) (12,593)
Note 20 Called up share capital
26 weeks ended 53 weeks ended
29 August 2020 29 February 2020
Ordinary shares of Ordinary shares of
5p each 5p each
Number GBPm Number GBPm
Allotted, called up and fully paid:
At the beginning and end of the
financial period 9,793,496,561 490 9,793,496,561 490
No shares were issued during the current financial year in
relation to share options or bonus awards.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at general meetings of Tesco PLC (the Company). In addition,
the Board intends to return c.GBP5.0bn to shareholders via a
special dividend with associated share consolidation.
Own shares purchased
Own shares represent the shares of Tesco PLC that are held in
Treasury or by the Employee Benefit Trust. Own shares are recorded
at cost and are deducted from equity.
The own shares held represents the cost of shares in Tesco PLC
purchased in the market and held by the Tesco International
Employee Benefit Trust to satisfy share awards under the Group's
share scheme plans. The number of ordinary shares held by the Tesco
International Employee Benefit Trust at 29 August 2020 was 70.8
million (29 February 2020: 87.6 million). This represents 0.72% of
called-up share capital at the end of the financial period (29
February 2020: 0.89%).
Reconciliation of net cash flow to movement in Net debt 29 August 24 August
2020 2019
GBPm GBPm
Net increase/(decrease) in cash and cash equivalents 417 (289)
Elimination of Tesco Bank movement in cash and cash equivalents (216) 350
Retail cash movement in other Net debt items:
Net increase/(decrease) in short-term investments (134) (28)
Net increase/(decrease) in joint venture loans 1 -
Net (increase)/decrease in borrowings and lease liabilities 31 750
Net cash flows from derivative financial instruments 224 (42)
Net interest paid on components of Net debt 343 390
Change in Net debt resulting from cash flow 666 1,131
Retail net interest charge on components of Net debt (353) (376)
Retail fair value and foreign exchange movements (241) (78)
Retail other non-cash movements (312) (66)
(Increase)/decrease in Net debt (240) 611
Opening Net debt (12,298) (13,204)
Closing Net debt (12,538) (12,593)
Note 21 Business combinations
On 7 March 2020, the Group acquired the trade and assets of Best
Food Logistics (trading name of BFS Group Ltd), which has been
accounted for as an acquisition of a business in accordance with
IFRS 3 'Business Combinations'. Best Food Logistics provides a food
supply chain and logistics services to national fast food and
casual dining clients. The acquisition builds on the Group's
expertise in wholesale operations in the UK market and will further
enhance its foodservice offer to customers within procurement,
warehousing and distribution solutions. The purchase consideration
received by the Group of GBP15m was fully satisfied by cash. There
is no deferred or contingent consideration.
The fair value of the assets and liabilities recognised as a
result of the acquisition of Best Food Logistics are as
follows:
Fair
value
GBPm
Acquired intangible assets 4
Property, plant and equipment 12
Right of use assets 41
Inventories 27
Trade and other receivables 77
Trade and other payables (128)
Lease liabilities (42)
Deferred tax liabilities (2)
Provisions (5)
Total (16)
Goodwill 1
Purchase consideration received (15)
The goodwill is primarily attributable to synergies. None of the
goodwill is expected to be deductible for tax purposes.
Acquired intangible assets comprise software of GBP1m and
customer relationships of GBP3m, which are amortised over 3 years.
The amortisation charge on the acquired intangibles is excluded
from the Group's operating profit before exceptional items and
amortisation of acquired intangibles.
The fair value of acquired trade and other receivables is
GBP77m. The gross contractual amount for trade receivables due was
GBP78m, of which GBP1m is expected to be uncollectable.
Best Food Logistics contributed revenues of GBP282m and net loss
after tax of GBP(8)m to the Group from 7 March 2020 to 29 August
2020. The GBP(8)m loss includes GBP1m of amortisation expense on
acquired intangible assets. If the acquisition had occurred on 1
March 2020, Group revenue and net loss after tax for the 26 weeks
ended 29 August 2020 would not be materially different. Transaction
costs of GBPnil have been included in Administrative expenses for
the 26 weeks ended 29 August 2020 (53 weeks ended 29 February 2020:
GBP2m).
Note 22 Contingent liabilities
There are a number of contingent liabilities that arise in the
normal course of business, which if realised, are not expected to
result in a material liability to the Group. The Group recognises
provisions for liabilities when it is more likely than not that a
settlement will be required and the value of such a payment can be
reliably estimated.
In July and August 2020, the Group settled claims brought by two
claimant groups against Tesco PLC for matters arising out of or in
connection with the overstatement of expected profits announced in
2014. As a result of the settlement and associated legal costs,
Tesco has taken a one-off charge in the amount of GBP93 million.
Two claimant law firms issued proceedings against the Group in
September 2020 in respect of the same matters. The merit, likely
outcome and potential impact on the Group of any further litigation
that might potentially be brought against the Group is subject to a
number of significant uncertainties and, therefore, the Group
cannot make any assessment of the likely outcome or quantum of any
such litigation as at 29 August 2020. There are substantial legal
and factual defences to these claims and the Group will vigorously
defend any further proceedings.
Prior to the disposal of its Korean operations (Homeplus), Tesco
PLC provided guarantees in respect of 13 Homeplus lease agreements
in Korea in the event of termination of the relevant lease
agreement by the landlord due to Homeplus' default. Entities
controlled by MBK Partners and Canada Pension Plan Investment
Board, as the purchasers of Homeplus, undertook to procure Tesco
PLC's release from these guarantees following the disposal of
Homeplus. At 29 August 2020, four guarantees remained outstanding.
This liability decreases over time with all relevant leases
expiring in the period between 2027 and 2030. The maximum potential
liability under these outstanding guarantees is between KRW 107bn
(GBP67m) and KRW 184bn (GBP117m). In the event that the guarantees
are called, the potential economic outflow is estimated at KRW 79bn
(GBP50m). However, the net potential outflow to Tesco is estimated
at KRW 42bn (GBP26m), with funds of KRW 37bn (GBP24m) placed in
escrow to provide the payment mechanism for these guarantees.
Additionally, Tesco PLC has the benefit of an indemnity from the
purchasers of Homeplus for any claims made over and above the
amounts in escrow.
Following the sale of Homeplus for GBP4.2bn in 2015, Tesco PLC
received claims from the purchasers relating to the sale of the
business. In July 2020, an arbitral tribunal dismissed the majority
of the claims. It made findings of liability in relation to the
remaining claims but reserved its position in relation to quantum.
The parties are in the process of making submissions on the damages
that should be awarded in relation to the
remaining claims. A provision in the amount of GBP86m has been recognised in the accounts.
As previously reported, Tesco Stores Limited has received claims
from current and former Tesco store colleagues alleging that their
work is of equal value to that of colleagues working in Tesco's
distribution centres and that differences in terms and conditions
relating to pay are not objectively justifiable. The claimants are
seeking the differential between the pay terms looking back, and
equivalence of pay terms moving forward. There are three separate
stages of these claims, and to be successful, the claimants have to
win at each stage. These claims are in their initial phases and
none of these stages has been determined, and each may be subject
to appeal. A final determination of these claims is not expected
for several years. At present, the likely number of claims that may
be received and the merit, likely outcome and potential impact on
the Group of any such litigation is subject to a number of
significant uncertainties and therefore, the Group cannot make any
assessment of the likely outcome or quantum of any such litigation
as at the date of this disclosure. There are substantial factual
and legal defences to these claims and the Group intends to
vigorously defend them.
Note 23 Events after reporting period
On 18 September 2020, the Group obtained control of the Tesco
Property No 2 Limited Partnership (the partnership), previously
accounted for as a joint venture, through the acquisition of the
other partner's 50% interest for GBP54m. The partnership has
long-term bond and derivative liabilities, and owns 12 stores and
two distribution centres, which it leases to the Group. The
acquisition, which is treated as an asset acquisition, increases
the Group's owned property portfolio and borrowings, replacing the
Group's associated right of use assets and lease liabilities, which
are eliminated on consolidation. Given the proximity of the
transaction to the announcement of the Group's interim results, the
valuation of the assets and liabilities acquired has not yet been
completed and therefore a reasonable estimate of the impact cannot
be made.
The Group is subject to inflation risk on certain lease
liabilities with its joint ventures, which increase annually with
LPI (RPI restricted to a range of 0-5%). In order to mitigate this
inflation risk to the Group, a restructure of derivatives held with
external counterparties was undertaken last financial year. As part
of the restructure, on 30 September 2020 the Group made cash
payments of GBP686m to external counterparties in relation to
derivative financial instruments. The impact of this transaction
was to increase the derivative financial instrument asset value on
the balance sheet with a corresponding decrease in cash. This
transaction had no effect on either the Group income statement or
Net debt.
Glossary - Alternative performance measures
Introduction
In the reporting of financial information, the Directors have
adopted various APMs.
These measures are not defined by International Financial
Reporting Standards (IFRS) and therefore may not be directly
comparable with other companies' APMs, including those in the
Group's industry.
APMs should be considered in addition to, and are not intended
to be a substitute for, or superior to, IFRS measurements.
Purpose
The Directors believe that these APMs assist in providing
additional useful information on the underlying trends, performance
and position of the Group.
APMs are also used to enhance the comparability of information
between reporting periods and geographical units (such as
like-for-like sales), by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid users in
understanding the Group's performance.
Consequently, APMs are used by the Directors and management for
performance analysis, planning, reporting and incentive-setting
purposes.
Some of the Group's IFRS measures are translated at constant
exchange rates. Constant exchange rates are the average actual
periodic exchange rates for the previous financial period and are
used to eliminate the effects of exchange rate fluctuations in
assessing performance. Actual exchange rates are the average actual
periodic exchange rates for that financial period.
Changes to APMs
The Directors and management have redefined Free cash flow and
Retail free cash flow to be from continuing operations. Redefining
Free cash flow and Retail free cash flow to exclude the cash flows
of the Group's discontinued operations ensures consistency with the
Group's Retail operating cash flow APM, and is a more appropriate
measure of the ongoing cash generation of the Group.
The Directors and management have added Retail sales as a new
APM, which is defined as Group sales excluding Tesco Bank sales and
sales made at petrol filling stations. This metric is used to
demonstrate the underlying performance in the Group's core Retail
businesses and removes the volatilities associated with the
movement in fuel prices.
Closest Note/page
equivalent Adjustments to reference
IFRS reconcile for
APM measure to IFRS measure reconciliation Definition and purpose
Income
statement
Revenue
measures
Group sales Revenue Note 2
* Exclude sales made at petrol filling stations * Excludes the impact of sales made at petrol filling
stations to demonstrate the Group's underlying
performance in the core retail and financial services
businesses by removing the volatilities associated
with the movement in fuel prices.
* This is a key management incentive metric.
Growth in No direct Not applicable
sales equivalent * Consistent with accounting policy * Growth in sales is a ratio that measures year-on-year
movement in Group sales for continuing operations for
26 weeks. It shows the annual rate of increase in the
Group's sales and is considered a good indicator of
how rapidly the Group's core business is growing.
Like-for-like No direct Not applicable
equivalent * Consistent with accounting policy * 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 (but excludes prior year sales of
stores closed during the year) at constant foreign
exchange rates. It is a widely used indicator of a
retailer's current trading performance and is
important when comparing growth between retailers
that have different profiles of expansion, disposals
and closures.
Retail sales Revenue Not applicable
* Exclude Tesco Bank sales * Group sales excluding Tesco Bank sales to demonstrate
the Group's underlying performance in the core Retail
businesses.
* Exclude sales made at petrol filling stations
Profit
measures
Operating Operating Note 2
profit before profit* * Exceptional items * Operating profit before exceptional items and
exceptional amortisation of acquired intangibles is the headline
items and measure of the Group's performance, and is based on
amortisation * Amortisation of acquired intangibles operating profit from continuing operations before
of acquired the impact of exceptional items and amortisation of
intangibles intangible assets acquired in business combinations.
Exceptional items relate to certain cost or incomes
that derive from events or transactions that fall
within the normal activities of the Group but which,
individually or, if of similar type, in aggregate,
are excluded by virtue of their size and nature in
order to reflect management's view of the underlying
performance of the Group. This is a key management
incentive metric.
Retail Operating Page 61
operating profit* * Tesco Bank operating profit * Retail operating profit is a measure of the Group's
profit operating profit from continuing operations from the
Retail business excluding Tesco Bank. It is based on
* Retail exceptional items Retail operating profit before exceptional items and
amortisation of acquired intangibles.
* Retail amortisation of acquired intangibles
* Operating profit is presented on the Group income statement.
It is not defined per IFRS, however, is a generally accepted profit
measure.
Closest Note/page
equivalent Adjustments to reference
IFRS reconcile for
APM measure to IFRS measure reconciliation Definition and purpose
Profit
measures
continued
Operating No direct Not applicable
margin equivalent * Consistent with accounting policy * Operating margin is calculated as operating profit
before exceptional items and amortisation of acquired
intangibles divided by revenue. Progression in
operating margin is an important indicator of the
Group's operating efficiency.
Retail earnings Operating Page 61
before profit* * Exceptional items * This measure is based on Retail operating profit from
exceptional continuing operations. It excludes Retail exceptional
items, items, depreciation and amortisation and is used to
interest, * Depreciation and amortisation derive the Total indebtedness ratio and Fixed charge
tax, cover APMs.
depreciation
and * Tesco Bank earnings
amortisation
(Retail EBITDA)
* before exceptional items, interest, tax, depreciat
ion
and amortisation
* Discontinued operations
Profit before Profit Note 8
tax before before * Exceptional items * This is a key management incentive metric. This
exceptional tax measure excludes exceptional items and amortisation
items and of acquired intangibles, net finance costs of the
amortisation * Amortisation of acquired intangibles defined benefit pension deficit and fair value
of acquired remeasurements of financial instruments. Net pension
intangibles, finance costs are impacted by corporate bond yields,
net pension * Net pension finance costs which can fluctuate significantly and are reset each
finance costs year based on often volatile external market factors.
and fair value Fair value remeasurements are impacted by changes to
remeasurements * Fair value remeasurements of financial instruments credit risk and various market indices, which can
of financial fluctuate significantly. Also included in these items
instruments are fair value remeasurements of financial
instruments resulting from liability management
exercises.
Total finance Finance Page 61
costs before costs * Exceptional items * Total finance costs before exceptional items, net
exceptional pension finance costs and fair value remeasurements
items, net of financial instruments is the net finance costs
pension * Net pension finance costs adjusted for nonrecurring one-off items, net pension
finance costs finance costs and fair value remeasurements of
and fair value financial instruments. Net pension finance costs are
remeasurements * Fair value remeasurements of financial instruments impacted by corporate bond yields, which can
of financial fluctuate significantly and are reset each year based
instruments on often volatile external market factors. Fair value
remeasurements are impacted by changes to credit risk
and various market indices, which can fluctuate
significantly. Also included in these items are fair
value remeasurements of financial instruments
resulting from liability management exercises.
Diluted Diluted Note 8
earnings earnings * Exceptional items * This relates to profit after tax before exceptional
per share per share items and amortisation of acquired intangibles from
from continuing operations, net pension finance costs and
continuing * Amortisation of acquired intangibles fair value remeasurements attributable to owners of
operations the parent divided by the weighted average number of
before ordinary shares in issue during the financial period
exceptional * Discontinued operations adjusted for the effects of potentially dilutive
items and share options.
amortisation
of * Net pension finance costs
acquired * It excludes net pension finance costs and fair value
intangibles,
net pension * Fair value remeasurements of financial instruments
finance costs * remeasurements of financial instruments. Net pension
and fair value finance costs are impacted by corporate bond yields,
remeasurements which can fluctuate significantly and are reset each
of financial year based on often volatile external market factors.
instruments Fair value remeasurements are impacted by changes to
credit risk and various market indices, which can
fluctuate significantly. Also included in these items
are fair value remeasurements of financial
instruments resulting from liability management
exercises.
Tax measures
Effective Effective Not applicable
tax rate before tax rate * Exceptional items and * Effective tax rate before exceptional items and
exceptional amortisation of acquired intangibles is calculated as
items and total income tax credit/(charge) excluding the tax
amortisation * their tax impact impact of exceptional items and amortisation of
of acquired intangibles from continuing operations
acquired divided by profit before tax before exceptional items
intangibles * Amortisation of acquired intangibles and their tax and amortisation of acquired intangibles from
impact continuing operations. This provides an indication of
the ongoing tax rate across the Group.
Effective Effective Not applicable
tax rate before tax rate * Exceptional items and * Effective tax rate before exceptional items and
exceptional amortisation of acquired intangibles, net pension
items and finance costs and fair value remeasurements of
amortisation * their tax impact financial instruments is calculated as total income
of tax credit/(charge) excluding the tax impact of
acquired exceptional items and amortisation of acquired
intangibles, * Amortisation of acquired intangibles and their tax intangibles items, net pension finance costs and fair
net pension impact value remeasurements from continuing operations
finance costs divided by the profit before tax before exceptional
and fair value items and amortisation of acquired intangibles, net
remeasurements * Net pension finance costs and their tax impact pension finance costs and fair value remeasurements
of financial from continuing operations.
instruments
* Fair value remeasurements of financial instruments
and their tax impact
* Operating profit is presented on the Group income statement. It is
not defined per IFRS, however, is a generally accepted profit measure.
Closest Note/page
equivalent Adjustments reference
IFRS to reconcile for
APM measure to IFRS measure reconciliation Definition and purpose
Balance
sheet
measures
Net debt Borrowings Note 19
less cash * Net debt from Tesco Bank * Net debt excludes the net debt of Tesco Bank but
and includes that of the discontinued operations to
related reflect the net debt obligations of the Retail
hedges business. Net debt comprises bank and other
borrowings, lease liabilities, net derivative
financial instruments, joint venture loans and other
receivables and net interest receivables/payables,
offset by cash and cash equivalents and short-term
investments. It is a useful measure of the progress
in generating cash and strengthening of the Group's
balance sheet position and is a measure widely used
by credit rating agencies.
Total Borrowings Page 61
indebtedness less * Consistent with accounting policy * Total indebtedness is the net debt plus the IAS 19
cash and deficit in the pension schemes (net of associated
related deferred tax) to provide an overall view of the
hedges Group's obligations. It is an important measure of
the long-term obligations of the Group and is a
measure widely used by credit rating agencies.
Total No direct Page 61
indebtedness equivalent * Consistent with accounting policy * Total indebtedness ratio is calculated as Total
ratio indebtedness divided by the rolling 12-month Retail
EBITDA. It is a measure of the Group's ability to
meet its payment obligations and is widely used by
analysts and credit rating agencies.
Fixed charge No direct Page 61
cover equivalent * Consistent with accounting policy * Fixed charge cover is calculated as the rolling
12-month Retail EBITDA divided by the sum of net
finance cost (excluding net pension finance costs,
finance charges payable on lease liabilities,
exceptional items, capitalised interest and fair
value remeasurements) and all lease liability
payments from continuing operations. It is a measure
of the Group's ability to meet its payment
obligations and is widely used by analysts and credit
rating agencies.
Cash flow
measures
Retail Cash Note 2
operating generated * Tesco Bank operating cash flow * Retail operating cash flow is the cash generated from
cash flow from continuing operations, excluding the effects of Tesco
operating Bank's cash flows. It is a measure of the cash
activities * Discontinued operations generation and working capital efficiency by the
Retail business, recognising that Tesco Bank is run
and regulated independently from the Retail
operations, and a key measure to demonstrate the
recovery of the Retail operations. This is a key
management incentive metric.
Free cash Cash Note 2
flow generated * Net cash generated from/(utilised in) investing * Free cash flow includes all cash flows from
from activities, and the market purchase of shares issued continuing operations from operating and investing
operating in relation to scheme schemes activities, the market purchase of shares net of
activities proceeds from shares issued in relation to share
schemes, and repayment of obligations under leases.
* Repayment of obligations under leases The following items are excluded: investing cash
flows that increase/ decrease items within Group net
debt, and cash flows from major corporate
* Investing cash flows that increase items within Group acquisitions and disposals. This measure reflects the
net debt cash available to shareholders.
* Cash flows from major corporate acquisitions and
disposals
Retail free Cash Note
cash flow generated * Tesco Bank operating cash flow 2 * Retail free cash flow: Retail free cash flow includes
from all cash flows from continuing operations from
operating operating and investing activities, the market
activities * Retail net cash generated from/(used in) investing purchase of shares net of proceeds from shares issued
activities, and the market purchase of shares issued in relation to share schemes and repayments of
in relation to share schemes obligations under leases, excluding the effects of
Tesco Bank's cash flows. The following items are
excluded: investing cash flows that increase/decrease
* Repayment of obligations under leases items within Net debt, and cash flows from major
corporate acquisitions and disposals.
* Investing cash flows that increase/decrease items
within Net debt
* Cash flows from major corporate acquisitions and
disposals
APMs: Reconciliation of debt metrics
12 months 29 February APM
to 2020
29 August as reported 22 February
on a 53-week
2020 basis Exclude 2020
GBPm GBPm week 53 52-week
GBPm basis
Retail EBITDA (a) GBPm
Operating profit/(loss) from continuing
operations before exceptional items and
amortisation of acquired intangibles(a) 2,333 2,571 (46) 2,525
Less: Tesco Bank operating profit/(loss)
before exceptional items(a) 49 (193) - (193)
Retail operating profit 2,382 2,378 (46) 2,332
Add: Depreciation and amortisation (excluding
amortisation of acquired intangibles)(a) 1,717 1,730 (29) 1,701
Less: Tesco Bank depreciation and
amortisation(a) (128) (141) - (141)
Retail EBITDA (a) 3,971 3,967 (75) 3,892
29 August 29 February APM
2020
2020 as reported 22 February
on a 53-week
basis Exclude 2020
Total indebtedness ratio week 53 52-week
basis
Net debt (GBPm) 12,538 12,298 (197) 12,101
Add: Defined benefit pension deficit, net
of deferred tax (GBPm) 3,292 2,573 - 2,573
Add: Defined benefit pension deficit, net
of deferred tax of discontinued operations
classified as held for sale (GBPm) 23 - - -
Total indebtedness (GBPm) 15,853 14,871 (197) 14,674
Retail EBITDA (GBPm) (a) 3,971 3,967 (75) 3,892
Total indebtedness ratio 4.0 3.7 0.1 3.8
12 months 29 February APM
to 2020
29 August as reported 22 February
on a 53-week
2020 basis Exclude 2020
week 53 52-week
Fixed charge cover(a) basis
Net finance cost (GBPm)(b) 984 1,170 (27) 1,143
Less: Net pension finance costs (GBPm)(b) (63) (71) - (71)
Less: Exceptional fair value remeasurement
on restructuring derivative financial
instruments - (180) - (180)
Add: Exceptional fair value remeasurement
gain on Tesco Bank mortgage book disposal
(GBPm) 29 29 - 29
Add: Fair value remeasurements of financial
instruments (GBPm)(b) (278) (246) 18 (228)
Net finance cost, excluding net pension
finance costs, exceptional items, capitalised
interest and fair value remeasurements
of financial instruments (GBPm) 672 702 (9) 693
Add: Capitalised interest (GBPm)(b) - - - -
Less: Finance charges payable on lease
liabilities (GBPm)(b) (463) (486) 6 (480)
Net finance cost, excluding net pension
finance cost, exceptional items, capitalised
interest, fair value remeasurements of
financial instruments and finance charges
payable on lease liabilities (GBPm) 209 216 (3) 213
Add: Retail total lease liability payments
(GBPm)(b) 1,145 1,170 - 1,170
Less: Retail discontinued operations total
lease liability payments GBP(m)(b) (111) (122) - (122)
1,243 1,264 (3) 1,261
Retail EBITDA (GBPm) (a) 3,971 3,967 (75) 3,892
Fixed charge cover (a) 3.2 3.1 - 3.1
(a) Retail EBITDA and Fixed charge cover APM's on a 52-week
basis for 2020 have been restated to exclude Thailand, Malaysia and
Poland, which have been presented as discontinued operations. See
Note 6 for further details.
(b) As the incomes and expenses included in debt APMs are
calculated using a rolling 12-month period, the amounts for the 12
months to 29 August 2020 are not disclosed in the notes to the
condensed consolidated interim financial statements for the current
financial period.
Glossary - Other
Capital expenditure (Capex)
The additions to property, plant and equipment, investment property
and intangible assets (excluding assets acquired under business combinations).
Capital employed
Net assets plus net debt plus dividend creditor less net assets of
the disposal groups and non-current assets classified as held for
sale.
Enterprise Value
This is calculated as market capitalisation plus net debt.
EURIBOR
Euro Interbank Offered Rate.
ESG
Environmental, social and governance.
FTE
FTE refers to full-time equivalents.
LPI
LPI refers to limited price inflation.
Market capitalisation
The total value of all Tesco shares calculated as total number of
shares multiplied by closing share price at year-end.
MTN
MTN refers to medium term note.
MREL
Minimum Requirements for Own Funds and Eligible Liabilities (European
Banking Authority).
Net Promoter Score (NPS)
This is a loyalty measure based on a single question requiring a score
between 0-10. The NPS is calculated by subtracting the percentage
of detractors (scoring 0-6) from the percentage of promoters (scoring
9-10). This generates a figure between -100 and 100 which is the NPS.
Return on capital employed (ROCE)
Return divided by the average of opening and closing capital employed.
Return
Profit before exceptional items, amortisation of acquired intangibles
and interest, after tax (applied at effective rate of tax).
RPI
RPI refers to retail price index.
Total shareholder return
The notional annualised return from a share, measured as the percentage
change in the share price, plus the dividends paid with the gross
dividends, reinvested in Tesco shares. This is measured over both
a one and five year period.
Independent review report to Tesco PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
26 weeks ended 29 August 2020 which comprises the Group income
statement, the Group statement of comprehensive income, the Group
balance sheet, the Group statement of changes in equity, the Group
cash flow statement and related Notes 1 to 23. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 weeks ended 29
August 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
6 October 2020
Appendix 1
Total sales performance at actual rates (exc. VAT, exc. fuel)
for continuing operations(a)
1H 2H FY 1Q 2Q 1H
2019/20 2019/20 2019/20 2020/21 2020/21 2020/21
UK & ROI 0.2% 0.0% 0.1% 9.4% 7.8% 8.6%
UK & ROI (comparable
growth(b) ) (0.4)% 0.0% (0.2)% 9.4% 7.8% 8.6%
UK (0.9)% (0.4)% (0.6)% 9.1% 6.3% 7.7%
ROI 0.5% (1.9)% (0.7)% 23.0% 9.6% 16.3%
Booker(b) 2.3% 3.5% 2.9% 6.1% 15.7% 11.0%
Central Europe (2.7)% (7.7)% (5.2)% 0.8% (8.9)% (4.3)%
Tesco Bank 2.8% (8.1)% (2.6)% (26.5)% (35.9)% (31.4)%
Group 0.0% (0.8)% (0.4)% 7.9% 5.4% 6.6%
Group (comparable
growth (b) ) (0.5)% (0.8)% (0.6)% 7.9% 5.4% 6.6%
(a) Sales growth shown on a comparable days basis.
(b) Booker sales this year are on a comparable basis. Comparable
sales growth for the prior year is shown for reference. On a
comparable basis, Booker's growth was 3.1% for 1Q 2019/20 and 2.3%
for 1H 2019/20.
Appendix 2
Total sales performance at constant rates (exc. VAT, exc. fuel)
for continuing operations(a)
1H 2H FY 1Q 2Q 1H
2019/20 2019/20 2019/20 2020/21 2020/21 2020/21
UK & ROI 0.2% 0.2% 0.2% 9.2% 7.8% 8.5%
UK & ROI (comparable
growth(b) ) (0.4)% 0.2% (0.1)% 9.2% 7.8% 8.5%
UK (0.9)% (0.4)% (0.6)% 9.1% 6.3% 7.7%
ROI 0.6% 1.0% 0.8% 19.7% 9.4% 14.5%
Booker(b) 2.3% 3.5% 2.9% 6.1% 15.7% 11.0%
Central Europe (1.9)% (3.9)% (2.9)% 3.3% (5.7)% (1.5)%
Tesco Bank 2.8% (8.1)% (2.6)% (26.5)% (35.9)% (31.4)%
Group 0.0% (0.3)% (0.1)% 8.0% 5.6% 6.8%
Group (comparable
growth (b) ) (0.4)% (0.3)% (0.4)% 8.0% 5.6% 6.8%
(a) Sales growth shown on a comparable days basis.
(b) Booker sales this year are on a comparable basis. Comparable
sales growth for the prior year is shown for reference. On a
comparable basis, Booker's growth was 3.1% for 1Q 2019/20 and 2.3%
for 1H 2019/20.
Appendix 3
Like-for-like sales performance (exc. VAT, exc. fuel) for
continuing operations
1H 2H FY 1Q 2Q 1H
2019/20 2019/20 2019/20 2020/21 2020/21 2020/21
UK & ROI 0.1% 0.4% 0.2% 8.2% 6.2% 7.2%
UK (0.3)% (0.3)% (0.3)% 8.7% 6.4% 7.6%
ROI 0.1% 2.2% 1.2% 20.5% 10.6% 15.5%
Booker 2.4% 4.2% 3.3% 0.6% 3.7% 2.2%
Central Europe (0.7)% (2.3)% (1.5)% 3.9% (5.3)% (0.9)%
Bank n/a n/a n/a n/a n/a n/a
Group 0.0% 0.2% 0.1% 7.9% 5.2% 6.5%
Appendix 4
Country detail - Retail
Revenue
(exc. VAT, inc. fuel)
Local Average Closing
currency exchange exchange
(m) GBPm rate rate
UK 21,536 21,536 1.0 1.0
ROI 1,485 1,327 1.1 1.1
Booker 3,478 3,478 1.0 1.0
Czech Republic 20,513 685 29.9 29.3
Hungary 275,041 702 391.8 397.7
Slovakia 675 604 1.1 1.1
Appendix 5
UK sales area by size of store
Store size (sq. ft.) 29 August 2020 29 February 2020
No. of Million % of total No. of Million % of total
stores sq. ft. sq. ft. stores sq. ft. sq. ft.
0 - 3,000 2,510 5.4 14.0% 2,508 5.4 14.0%
3,001 - 20,000 284 3.0 7.8% 284 3.0 7.8%
20,001 - 40,000 284 8.2 21.3% 284 8.2 21.3%
40,001 - 60,000 182 8.8 22.9% 182 8.8 22.9%
60,001 - 80,000 120 8.4 21.8% 120 8.4 21.8%
80,001 - 100,000 45 3.7 9.6% 45 3.7 9.6%
Over 100,000 8 1.0 2.6% 8 1.0 2.6%
Total* 3,433 38.5 100.0% 3,431 38.5 100.0%
* Excludes Booker and franchise stores.
Appendix 6
Actual Group space - store numbers (a)
2019/20 Closures/ Net gain/ As at 29 Repurposing/
year-end Openings disposals (reduction)(b) August 2020 extensions
Large 796 - - - 796 -
Convenience 1,920 3 (2) 1 1,921 -
Dotcom only 6 - - - 6 -
Total Tesco 2,722 3 (2) 1 2,723 -
One Stop (c) 697 1 - 1 698 -
Booker 196 - - - 196 -
Jack's 12 - - - 12 -
UK (c) 3,627 4 (2) 2 3,629 -
ROI 150 - - - 150 -
UK & ROI
(c) 3,777 4 (2) 2 3,779 -
Czech Republic
(c) 186 - (2) (2) 184 1
Hungary 202 - (1) (1) 201 -
Slovakia 150 2 - 2 152 2
Central Europe
(c) 538 2 (3) (1) 537 3
Group (c) 4,315 6 (5) 1 4,316 3
UK (One Stop) 191 9 (6) 3 194 -
Czech Republic 107 8 - 8 115 -
Franchise
stores 298 17 (6) 11 309 -
(a) Continuing operations.
(b) The net gain/(reduction) reflects the number of store
openings less the number of store closures/disposals.
(c) Excludes franchise stores.
Actual Group space - '000 sq. ft. (a)
2019/20 Closures/ Repurposing/ Net gain/ As at 29
year-end Openings disposals extensions(b) (reduction) August 2020
Large 31,336 - - - - 31,336
Convenience 5,204 7 (4) - 3 5,207
Dotcom only 716 - - - - 716
Total Tesco 37,256 7 (4) - 3 37,259
One Stop(c) 1,139 2 - (4) (2) 1,137
Booker 8,376 - - - - 8,376
Jack's 119 - - - - 119
UK(c) 46,890 9 (4) (4) 1 46,891
ROI 3,274 - - 5 5 3,279
UK & ROI(c) 50,164 9 (4) 1 6 50,170
Czech Republic(c) 4,289 - (7) (18) (25) 4,264
Hungary 6,000 - (3) - (3) 5,997
Slovakia 3,180 13 - (33) (20) 3,160
Central Europe(c) 13,469 13 (10) (51) (48) 13,421
Group(c) 63,633 22 (14) (50) (42) 63,591
UK (One Stop) 237 11 (9) - 2 239
Czech Republic 101 7 - - 7 108
Franchise stores 338 18 (9) - 9 347
(a) Continuing operations.
(b) Repurposing of retail selling space.
(c) Excludes franchise stores.
Group space forecast to 27 February 2021 - '000 sq. ft. (a)
As at
29
August Closures/ Net gain/ 2020/21
2020 Openings disposals Repurposing/extensions(b) (reduction) year-end
Large 31,336 21 - - 21 31,357
Convenience 5,207 39 (13) - 26 5,233
Dotcom only 716 - - - - 716
Total Tesco 37,259 60 (13) - 47 37,306
One Stop(c) 1,137 8 - - 8 1,145
Booker 8,376 - - - - 8,376
Jack's 119 - - - - 119
UK(c) 46,891 68 (13) - 55 46,946
ROI 3,279 56 - - 56 3,335
UK & ROI(c) 50,170 124 (13) - 111 50,281
Czech Republic(c) 4,264 14 (4) - 10 4,274
Hungary 5,997 - - - - 5,997
Slovakia 3,160 3 - (13) (10) 3,150
Central Europe(c) 13,421 17 (4) (13) - 13,421
Group(c) 63,591 141 (17) (13) 111 63,702
UK (One Stop) 239 7 - - 7 246
Czech Republic 108 18 - - 18 126
Slovakia - 12 - - 12 12
Franchise stores 347 37 - - 37 384
(a) Continuing operations.
(b) Repurposing of retail selling space.
(c) Excludes franchise stores.
Appendix 7
Tesco Bank income statement
1H 1H
2020/21 (a) 2019/20 (a)
GBPm GBPm
Revenue
Interest receivable and similar income 292 379
Fees and commissions receivable 94 183
386 562
Direct costs
Interest payable (51) (94)
Fees and commissions payable (6) (13)
(57) (107)
Gross profit 329 455
Other expenses
Staff costs (91) (86)
Premises and equipment (36) (37)
Other administrative expenses (70) (93)
Depreciation and amortisation (30) (39)
Impairment loss on financial assets (257) (113)
Operating profit before exceptional items (155) 87
Exceptional items(b) - (57)
Operating profit (155) 30
Net finance costs: movements on derivatives
and hedge accounting (1) (10)
Net finance costs: interest (3) (3)
Share of profit/(loss) of joint venture 9 7
Profit before tax (150) 24
(a) These results are for the six months ended 31 August 2020
and the previous comparison is made with the six months ended 31
August 2019.
(b) Comprised of a PPI provision charge of GBPnil (1H 2019/2020:
GBP45m), a restructuring charge of GBPnil (1H 2019/20: charge of
GBP8m), accelerated amortisation and costs related to the sale of
the mortgage book of GBPnil (1H 2019/20: GBP4m).
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