Tesco made further strides in its turnround efforts in 2016, reporting its first full-year increase in UK like for like sales in seven years, but a record payment related to its historic accounting scandal dragged down profits.
Revenues in the year to February 25 were at the top end of analyst forecasts, increasing 3.7 per cent compared to the previous year to £55.9bn.
Same-store sales in the company’s core UK business increased 0.9 per cent, with food up 1.3 per cent, the first full-year growth since the 2009 to 2010 financial year.
Adjusted operating profit was slightly better than expected at the start of the year, rising 30 per cent to £1.28bn. However, statutory pre-tax profit was significantly below expectations, thanks to £235m of exceptional charges to cover payments to the Financial Conduct Authority and Serious Fraud Office.
Pre-tax profits dropped 39 per cent, to £145m.
Last month the company’s UK arm agreed to pay a £129m penalty to avoid prosecution for an accounting scandal that emerged that year.
Chief executive Dave Lewis has been looking to draw a line under the scandal, focusing on securing future growth with a £3.7bn bid for Booker, the wholesaler.
The bid has provoked opposition from some major investors in Tesco, but Mr Lewis has defended the plan, telling the FT recently that the group needs to plan ahead as well as focusing on its turnround.
Mr Lewis said today:
We are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October. We are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.
On top of this, our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing ‘out of home’ food market.