REG - Tesco PLC - Tesco PLC Preliminary Results
10/04/2024 07:00
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RNS Number : 9429J Tesco PLC 10 April 2024
Preliminary Results 2023/24
MARKET SHARE GAINS AND RETuRN TO POSITIVE VOLUME GROWTH AS CUSTOMERS SHOP MORE
AT TESCO.
Performance highlights (on a continuing operations basis)(1,2) FY 23/24 FY 22/23(3) Change at actual rates Change at constant rates
Group sales (exc. VAT, exc. fuel)(4) £61,477m £57,216m 7.4% 7.2%
Adjusted operating profit(5) £2,829m £2,509m 12.8% 12.7%
- Retail £2,760m £2,487m 11.0% 10.9%
- Tesco Bank(1) £69m £22m 213.6% 213.6%
Retail free cash flow(6) £2,063m £2,133m (3.3)%
Net debt(6,7) £(9,764)m £(10,493)m 6.9%
Adjusted diluted EPS(5) 23.41p 20.53p 14.0%
Dividend per share(7) 12.10p 10.90p 11.0%
Statutory measures (on a continuing operations basis)(1)
Revenue (exc. VAT, inc. fuel) £68,187m £65,322m 4.4%
Operating profit £2,821m £1,410m 100.1%
Profit before tax £2,289m £882m 159.5%
Retail cash generated from operating activities £3,712m £3,752m (1.1)%
Diluted EPS 24.53p 8.81p 178.4%
Statutory measures (including discontinued operations)(1)
Profit for the year (after tax) £1,192m £736m 62.0%
Diluted EPS 16.56p 9.85p 68.1%
The results of our existing banking operations (credit cards, loans and
savings) have been treated as discontinued following our 9 February 2024
announcement of the proposed sale to Barclays. As such, Tesco Bank results
included in continuing operations above refer only to the retained Tesco Bank
business, i.e. insurance and money services. Total Tesco Bank adjusted
operating profit including discontinued operations was £148m(1).
Ken Murphy, Chief Executive
"This strong performance reflects the hard work of colleagues across the whole
Tesco Group, and their commitment to serving our customers. Customers are
choosing to shop more at Tesco, which is reflected in growing market share as
they respond to the improvements we've made to the value and quality of our
products.
Inflationary pressures have lessened substantially, however we are conscious
that things are still difficult for many customers, so we have worked hard to
reduce prices and have now been the cheapest full-line grocer for well over a
year. We have continued to invest in helping customers where it matters
most, cutting prices on more than 4,000 products and doubling down on our
powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard
Prices. Customer perception of the quality of our products is growing ahead
of the market and we continue to win customers from premium retailers, with
sales of Tesco Finest now exceeding £2bn.
We have strong momentum in our business, and are encouraged by signs of
improving consumer sentiment. We're excited about the opportunities ahead,
with the right plans to keep winning with customers, as well as a great team
to deliver them."
Sales growth across all markets and continued cost savings deliver strong
financial performance:
· Strong sales performance across the Group, with Retail LFL(8) sales up
6.8%; inflation fell throughout the year, with volume growth in the UK and
Republic of Ireland across the second half
- UK & ROI LFL sales up 7.3%, including UK up 7.7%, ROI up 6.8% and Booker
up 5.4%
- Central Europe LFL sales up 0.2% in a challenging trading environment, with
our investments in value supporting an improving volume trajectory during the
second half
· Statutory revenue £68,187m, up 4.4%, includes impact of (17.2)% lower
fuel sales, primarily due to reduced retail prices
· Retail adjusted operating profit(5) £2,760m, up 10.9% at constant
rates, including Save to Invest delivery of c.£640m
- UK & ROI adjusted operating profit £2,670m, up 15.7%, as a strong
trading performance and accelerated cost savings offset significant cost
headwinds and our investments in value, quality and service
- Central Europe adjusted operating profit £90m, down (50.0)%, primarily
driven by cost inflation headwinds and regulatory actions in Hungary
· Statutory operating profit(1) £2,821m, up 100.1%, reflects last year's
£(982)m non-cash impairment charge compared to a £28m net release this year
· Strong retail free cash flow(6) £2,063m, including a positive working
capital inflow of £418m
· Net debt(6,7) reduced by £729m due to strong cash flow and Bank
special dividend of £250m; net debt/EBITDA ratio at 2.2x
· Supporting returns to shareholders through ongoing buyback programme;
£750m of shares purchased during 23/24
· Proposed final dividend of 8.25pps, with full year dividend of
12.10pps, up 11.0% year-on-year
Winning with customers through investments in value, quality and service:
· Strengthening brand perception in both value and quality; all customer
satisfaction measures improving
· Overall gains in both value and volume share in UK and ROI; UK value
+28bps and volume +8bps, with 12 consecutive periods of switching gains; ROI
value +73bps and volume +76bps, with 15 consecutive periods of switching gains
· Latest market share results (to 17 March 2024) strengthened further,
with UK value +53bps and volume +26bps
· Unique customer offer combining Aldi Price Match on >600 lines, Low
Everyday Prices on >1,000 lines and c.8,000 exclusive Clubcard Prices deals
each week, means we have been the cheapest full-line grocer for 16 consecutive
months
· Investing in product quality and innovation, launching over 1,000 new
products and improving c.2,700 existing lines
· Value for money and quality reflected in 19 consecutive periods of net
switching gains from premium retailers
Maintaining disciplined approach to investment whilst investing in
high-returning future growth & digital capability:
· Continued store expansion & improvement, with net increase of 87
stores (UK 74, ROI 4, CE 9) and 389 store refreshes
· Developing AI technology solutions to drive productivity,
competitiveness and value for customers, including new range optimisation tool
which automates bespoke product selection based on store location and
demographic
· Enhanced transport scheduling system and new stock assembly processes
driving greater supply chain efficiency
· Started construction of fresh food distribution centre in Aylesford,
Kent, incorporating robotic automation technology
· Stepped up investment to support Booker growth, including conversion of
Fareham Makro into c.120k sq.ft retail hub, unlocking more choice for retail
customers and freeing up catering capacity
· Continuing to selectively invest in high-returning initiatives, with
total capital expenditure of £1.3bn in 23/24; expected spend of £1.4bn in
24/25
· Entered into global grocery retail innovation partnership with Ahold
Delhaize, Sobeys, Shoprite and Woolworths, to jointly invest in startups which
accelerate growth and sustainability
Balancing the needs of all stakeholders to create long-term, sustainable
value:
· Largest ever increase in colleague pay, in addition to 'Thank You'
payment for hourly paid colleagues and new wellbeing benefits, including
virtual GP appointments and enhanced family leave
· Investing in skills and employment with more hours for existing
colleagues, the launch of a new retail apprenticeship programme, and plans to
create c.2,000 additional UK roles across 70 new stores and our technology and
online teams
· Continued strong support for our communities with launch of Stronger
Starts programme, funding activities and nutrition in 4,000 projects, and
significantly increased donations to food banks and charities, now at 4
million meals per month
· Improving product sourcing and efficiency of supply chain through
collaboration with suppliers, contributing an additional £75m to British
agriculture; #1 position in Advantage supplier survey for eighth year in a row
· Healthy products now 63% of sales volume in UK and ROI, well on track
to achieve 2025 target of 65%
Planned sale of banking operations and long-term strategic partnership with
Barclays announced in February 2024:
· Sale expected to complete in second half of 2024, generating c.£700m
cash (net of transaction costs) made up of c.£600m consideration and c.£100m
other net cash; planned sale results in a remeasurement loss of £(628)m
(post-tax)
· Combined with £250m special dividend paid to the Group by Tesco Bank
in August 2023, expected to deliver c.£1bn of cash
· Total Tesco Bank adjusted operating profit for the year of £148m, in
line with guidance; including £69m from retained business (insurance and
money services), presented within continuing operations
· Banking operations classified as discontinued, with £79m adjusted
operating profit excluded from headline performance
· On an annualised basis, we expect the retained Tesco Bank business to
generate £80m to £100m adjusted operating profit, including income from
partnership with Barclays, enabling us to offer Tesco-branded financial
products and services
CAPITAL RETURN PROGRAMME.
Since launching our capital return programme in October 2021, we have now
purchased £1.8bn worth of shares, including £750m in the twelve months to
April 2024. We continue to see the buyback programme as an ongoing and
critical driver of shareholder returns and we are pleased to announce that we
will buy back £1.0bn worth of shares over the next twelve months, including
£250m funded by the special dividend paid by Tesco Bank in August 2023. A
further update on our plans for the return of the proceeds generated from the
sale of our banking operations will be provided following completion.
OUTLOOK.
The investments we've made to date have strengthened our offer to customers,
made us more efficient, and more digitally capable, establishing a strong
foundation for future growth. We are building a consistent track record of
delivery against the performance framework we set out in October 2021.
For the 2024/25 financial year, we expect retail adjusted operating profit of
at least £2.8bn. In addition, we expect total adjusted operating profit
from the retained Tesco Bank business of around £80m, which includes a
part-year amount of partnership income, based on the completion of the
transaction towards the end of this calendar year. We expect to generate
retail free cash flow within our guidance range of £1.4bn to £1.8bn.
STRATEGIC PRIORITIES.
Our strategic priorities ensure that we focus on offering great value, quality
and convenience whilst also rewarding loyalty. Through our colleagues, our
reach and our supplier relationships we are well-placed to serve our customers
whenever, wherever and however they need us. Our strategy guides us to drive
top-line growth, grow profit and generate cash and in doing so, deliver for
all our stakeholders.
1) Magnetic Value for Customers - Re-defining value to become the customer's
favourite
· Led the way on passing savings on to customers; prices cut on over
4,000 products by an average of c.12% over the year
· Clubcard Prices on around 8,000 products each week, saving customers up
to £360 off the annual cost of their groceries
· Continual process of quality innovation and improvement, with 1,047 new
lines introduced during the year, including our new Finest Summer, 'Slow
Cooked' and Christmas party food ranges and meat-free Plant Chef ready meals
· Finest sales now >£2bn, up 15.7% during the year, with volumes up
9.0% and more than 23m customers buying into our Finest brand, including one
in four customer baskets containing a Finest product over Christmas
· Increases in all customer perception scores, including satisfaction
(+101bps), quality (+96bps) and value (+88bps)
· Further strengthening our non-food offering with the introduction of
Paperchase and The Entertainer brands, adding premium stationery and an even
more compelling toys range to our stores, respectively
· Quality of Booker offer reflected in winning 2023 Quality Awards
Foodservice Operator of the year
· Largest ever Booker Catering price lock on over 700 products throughout
the Christmas period, with a further 600 products locked through to May 2024
2) I Love my Tesco Clubcard - Creating a competitive advantage through our
powerful digital capability
· Expanding Clubcard reach: now over 22m Clubcard households in UK, +6.2%
YoY; Tesco app users increased to 16.3m across the Group: UK 12.7m, ROI 1.0m,
Central Europe 2.6m
· Clubcard sales penetration up in all markets, now at: UK 82%, ROI 85%,
Central Europe 87%, Mobile 88% and Bank 66%
· Double Clubcard points event for first time in a decade, >10bn
Clubcard points issued during January & February event
· Growing personalisation: issuing 289m personalised coupons to 7.6m
customers during the year; 'Clubcard Unpacked' shopper insight reached over
17m customers, up from 9m last year
· Growing reach of digital media with significant increase in number of
connected screens; c.2,000 now installed
· Leveraging Clubcard insights and dunnhumby expertise to create
sophisticated digital platform; more than 17,000 campaigns delivered in the
year, with newly created team focused on growing our retail media contribution
3) Easily the Most Convenient - Serving customers wherever, whenever and
however they want to be served
· Opened 113 stores across the Group (seven new superstores, 60 Express
stores & 27 One Stop stores in UK, one superstore and four Express stores
in ROI, and 14 new stores in Central Europe)
· UK online market share strong at c.34%; further strengthened
availability to 98.1% with 'perfect orders' up 20ppts YoY
· Whoosh now available in 1,424 stores; available to 66% of population;
with 74% of deliveries within 30 minutes and larger baskets now available in
over 1,000 stores
· Opened a further three Urban Fulfilment Centres in Gallions Reach,
King's Lynn and Coventry; now at nine UFCs in total
· Almost doubled number of electric home delivery vans to 571, now at 11%
of fleet; target to be fully electric in UK by 2030
· Working with 354 net new Booker retail partners; converted existing
Fareham site into c.120k sq.ft retail hub, unlocking more choice for retail
customers and freeing up catering capacity
· Tesco Mobile ranked highest mobile brand in the UK Customer
Satisfaction index - also won overall network of the year and best network for
customer service at the 2024 Uswitch Telecoms Awards
4) Save to Invest - Significant opportunities to simplify, become more
productive and reduce costs
· Exceeded savings target, with c.£640m of savings in 23/24 and £1.2bn
total cumulative savings over past two years
· Strong delivery across all areas: goods and services not for resale,
property, operations and central overheads
· Completed space realignment and optimisation of management structures
in large stores
· End-to-end review of promotional replenishment to strengthen
availability and deliver efficiency gains
· Further energy consumption initiatives delivered in the year, including
upgraded LED lighting
· Strong plan to deliver a further £500m of efficiency savings in 24/25
COMMUNITIES.
During the year, we launched Stronger Starts, our £5m grant programme, which
has so far supported around 4,000 projects for children and young people,
providing support around health, nutrition and physical activity.
We have worked with our redistribution partners to significantly increase the
amount of surplus food we donate to charities and local communities in the UK,
donating over four million meals per month, bringing our total to date to over
200 million meals. In ROI, we celebrated ten years of the Surplus
Redistribution Programme, with 20 million meals donated to date, whilst Booker
have joined Tesco in being awarded the FareShare Food Partner Logo in
recognition of their consistent food donation work.
We've made strong progress on health in the year, with healthy products now
accounting for 63% of sales volume in the UK and ROI, well on track towards
achieving our target of 65% by 2025. We remain committed to making healthy
options more accessible and affordable for all our customers, and we expanded
our Better Baskets campaign in the year, with dedicated zones now in seven
different aisles in our large stores.
PLANET.
We continue to take action on climate change and this year we became one of
the first companies globally to set validated science-based targets on all
greenhouse gas emissions across our full Group value chain, including those
originating from forests, land and agriculture (FLAG). The Science Based
Targets Initiative (SBTi) validated our stretching commitments, as we work
towards our objective of net zero across our entire value chain by 2050,
aligned to a 1.5-degree pathway. We have made significant progress in the
year in reducing emissions in our own operations (Scope 1 and 2), delivering a
61% reduction against our baseline, exceeding our 2025 target of 60%. Our
actions included rolling out 278 more electric delivery vans in the UK, moving
to lower emissions refrigerant gases in our chilled distribution network, and
installing heat pumps which are now in most of our UK Express stores and a
small number of stores across ROI and Central Europe.
We already use 100% renewable electricity across the Group and plan to
roll-out solar panels on 100 of our stores across the UK over the next three
years. We generate renewable energy as part of our partnership with EDF
Renewables and a number of other partners, through offsite power purchase
arrangements. These partnerships are expected to generate around a third of
our UK electricity demand within the next 18 months. We are also supporting
our agricultural suppliers' transition to low-carbon fertilisers, with our
second year of trials underway and covering ten times the area of the first
year; and engaging our suppliers to better support our net zero commitment,
with over 70% (by cost of goods sold) now having publicly set a net zero
ambition.
GROUP REVIEW OF PERFORMANCE.
On a continuing operations basis(1)
As set out on page 1 of this release, the results of our existing banking
operations have been treated as discontinued following the announcement of our
proposed sale to Barclays. As such, Tesco Bank results included in the table
below and within the segmental review of performance, refer only to the
retained Tesco Bank business, i.e. insurance and money services, unless
otherwise stated.
52 weeks ended 24 February 2024(2,7) FY 23/24 FY 22/23(3) Change at Change at constant rates
actual rates
Sales (exc. VAT, exc. fuel)(4) £61,477m £57,216m 7.4% 7.2%
Fuel £6,710m £8,106m (17.2)% (17.2)%
Revenue (exc. VAT, inc. fuel) £68,187m £65,322m 4.4% 4.2%
Adjusted operating profit(5) £2,829m £2,509m 12.8% 12.7%
Adjusting items £(8)m £(1,099)m
Statutory operating profit £2,821m £1,410m 100.1%
Net finance costs £(538)m £(536)m
Joint ventures and associates £6m £8m
Statutory profit before tax £2,289m £882m 159.5%
Group tax £(525)m £(224)m
Statutory profit after tax £1,764m £658m 168.1%
Adjusted diluted EPS(5) 23.41p 20.53p 14.0%
Statutory diluted EPS 24.53p 8.81p 178.4%
Dividend per share(7) 12.10p 10.90p 11.0%
Net debt(6,7) £(9,764)m £(10,493)m 6.9%
Retail free cash flow(6) £2,063m £2,133m (3.3)%
Capex(9) £1,314m £1,235m 6.4%
Group sales(4) increased by 7.2% at constant rates, with growth across all
segments. The impact of inflation was evident across all markets, although
reduced gradually across the year as many global commodity prices fell and we
passed savings on to customers by cutting prices across everyday grocery
lines. Customer demand was resilient and volume performance improved across
the year, supported by our ongoing investments in value, quality, and
service. Revenue increased by 4.2% at constant rates, including a (17.2)%
decline in fuel sales, primarily driven by lower retail prices year-on-year.
Group adjusted operating profit(5) increased by 12.7% at constant rates,
including a further c.£640m contribution from Save to Invest in the year.
We effectively managed significant cost headwinds, whilst our ongoing
investments in the customer offer drove stronger than expected volumes.
Group statutory operating profit improved by 100.1% year-on-year, primarily
due to a £(982)m non-cash net impairment charge in the prior year. The
non-cash net impairment release of £28m in the current year reflects an
improvement in UK & ROI performance, partially offset by lower property
market values.
Net finance costs were broadly flat year-on-year, with stable net interest
costs and a £(98)m increase in net pensions finance costs, being largely
offset by a £91m movement in fair value remeasurements of financial
instruments.
The higher tax charge this year was driven mainly by an increase in UK
corporation tax rates effective from April 2023, the impact of higher retail
operating profits and a lower tax credit on adjusting items, driven by last
year's net impairment charge.
Adjusted diluted EPS(5) increased by 14.0%, due to higher retail adjusted
operating profits and the ongoing benefit from our share buyback programme.
We have announced a full year dividend of 12.10 pence per ordinary share, up
11.0% year-on-year.
We generated £2,063m of retail free cash flow(6), including a net £418m
working capital inflow. Net debt(6,7) reduced by £729m to £9.8bn, driven
by this strong retail free cash flow and the £250m special dividend from
Tesco Bank. This was partially offset by cash returned to shareholders via
our ongoing share buyback programme and dividend payments made in the year.
The net debt/EBITDA ratio was 2.2 times, compared to 2.6 times last year,
driven by strong cash generation and higher retail EBITDA.
Further commentary on these metrics can be found below and a full income
statement can be found on page 15.
Notes:
1. Following the announcement in February 2024 that we have
reached an agreement to sell our Banking operations, the performance of these
banking operations has been presented as a discontinued operation with
comparatives also restated. Discontinued operations are excluded from our
headline performance metrics. The assets and liabilities related to the
discontinued operations have been classified as held for sale. Retained
business (money services and insurance) has been presented on a continuing
operations basis and therefore within headline performance measures. Further
details on discontinued operations can be found in Note 6, starting on page
30, and please refer to Note 2 for the segmental results of the Bank.
2. The Group has defined and outlined the purpose of its
alternative performance measures, including its performance highlights, in the
Glossary starting on page 50.
3. Comparatives have been restated for the adoption of IFRS 17
'Insurance contracts' and to present Banking operations as a discontinued
operation. Refer to Notes 1, 6 and 22 for further details.
4. Group sales exclude VAT and fuel. Sales change shown on a
comparable days basis for Central Europe.
5. Adjusted operating profit and adjusted diluted EPS exclude
adjusting items.
6. Net debt and Retail free cash flow exclude Tesco Bank.
7. All measures apart from Net debt and Dividend per share are
shown on a continuing operations basis unless otherwise stated. Further
information on Net debt can be found in Note 21, starting on page 45.
8. Like-for-like (LFL) is a measure of growth in Group sales
from stores that have been open for at least a year and online sales (at
constant exchange rates, excluding VAT and fuel).
9. Capex excludes additions arising from business
combinations, property buybacks (typically stores) and other store
purchases. Refer to page 54 for further details.
Segmental review of performance:
Sales performance:
(exc. VAT, exc. fuel)(3,4,7)
On a continuing operations basis(1) Sales LFL sales change(8) Total sales change at actual rates(3) Total sales change at constant rates(3)
(£m)
- UK 44,371 7.7% 8.1% 8.1%
- ROI 2,891 6.8% 9.3% 8.5%
- Booker 9,082 5.4% 4.6% 4.6%
UK & ROI 56,344 7.3% 7.6% 7.6%
Central Europe 4,322 0.2% 3.1% 0.6%
Retail 60,666 6.8% 7.3% 7.0%
Tesco Bank 811 21.7% 21.7%
Group sales 61,477 7.4% 7.2%
Fuel 6,710 (17.3)% (17.2)% (17.2)%
Group revenue 68,187 4.4% 4.2%
Further information on sales performance is included in the supplementary
information starting on page 57.
Adjusted operating profit(3,5,7) performance:
Profit
(£m)
On a continuing operations basis(1) Change at actual rates Change at constant rates Margin % at actual rates Margin % change at actual rates
UK & ROI 2,670 15.7% 15.7% 4.2% 42 bps
Central Europe 90 (50.0)% (50.0)% 2.0% (208) bps
Retail 2,760 11.0% 10.9% 4.1% 25 bps
Tesco Bank 69 213.6% 213.6% 8.5% 520 bps
Group 2,829 12.8% 12.7% 4.1% 31 bps
Further information on operating profit performance is included in Note 2
starting on page 22.
UK & ROI OVERVIEW:
In the UK, Republic of Ireland (ROI) and Booker, like-for-like sales increased
by 7.3%. Inflation fell gradually across the year as we worked hard to cut
prices across everyday grocery lines in response to falling global commodity
prices. Volumes were stronger than anticipated across the year and returned
to growth in the second half.
UK & ROI adjusted operating profit was £2,670m, up 15.7% at constant
rates, reflecting the accelerated delivery of our Save to Invest programme,
effective management of inflationary cost pressures, resilient volumes, and a
strong contribution from Booker.
Adjusted operating margin was 4.2%, 42bps higher year-on-year, reflecting the
cumulative effect of our Save to Invest programme. Our current year
operating margin is now similar to pre-pandemic levels.
Further information on each of the UK & ROI businesses follows below.
UK - Executing strongly across all areas of the shopping trip, leading to
market share gains:
Like-for-like sales grew by 7.7%, driven by a strong performance across all
formats and channels. Sales inflation fell across the year, whilst volumes
improved as customers responded well to our efforts to cut prices ahead of the
market, our investments in service and market-leading availability.
Overall market share grew by +28bps year-on-year to 27.6%, with a particularly
strong performance in our large stores. We delivered eight consecutive
four-week periods of market share gains and in the latest period (to 17 March
2024), we grew volumes ahead of the market. We have now delivered 12
consecutive four-week periods of switching gains, including continued gains
from the premium retailers, supported by ongoing investments in quality. Our
Finest range performed well, with volumes up 9.0% and record sales over
Christmas.
Food sales grew by 9.3%, with volume growth in the second half supported by
market-leading availability, our continued investment in price and our focus
on great quality across the range. We launched 1,047 new products and
reformulated and improved a further c.2,700, including re-launches across our
'food for tonight' customer mission, such as our new Tex Mex Feast range,
meat-free Plant Chef ready meals and Finest 'Dinner for Two' offer, in
addition to category relaunches across chocolate, fish and pasta. Overall
brand perception increased by 133bps at the end of the year, driven by a
significant step up across all drivers, including satisfaction (+101bps),
quality (+96bps) and value (+88bps).
We have been the cheapest of the full-line grocers since November 2022 and our
price position strengthened again this year, including a further improvement
against the limited-range discounters. Over 4,000 products were cheaper at
the end of the year than at the start, with an average reduction of around
12%.
Clubcard Prices continue to offer customers exclusive access to around 8,000
great value promotions each week. We also ran the first double Clubcard
points event in over a decade, with more than 10 billion Clubcard points
issued across January and February. Clubcard sales penetration grew by a
further 3ppts in the year to 82%. The number of customers engaging with the
Tesco app reached 12.7 million by the end of the year and has increased by
over 40% since we completed the roll-out of Clubcard Prices in March 2022.
Home and Clothing sales, which now account for around 7% of total UK sales,
declined by (3.4)% for the full year, reflecting the impact of strategic
ranging decisions, including exiting low returning categories such as large
electricals. Excluding these impacts, sales were broadly flat. Our clothing
sales grew faster than the broader store-based clothing market, with
Womenswear a particular highlight, growing 3.7%. We launched the Paperchase
brand in 120 stores in time for Christmas, offering more customers access to a
range of premium stationery and cards which reflects the heritage of the
brand. In January, we announced a new partnership with The Entertainer and
we will roll-out a leading range of toy brands to around 750 UK stores across
the coming year.
Sales grew across both large and convenience store formats, by 8.2% and 4.5%
respectively. In our large stores, we invested across key seasonal events,
including increasing the number of colleagues on the shop floor, delivering
market-leading availability, leading to an improvement across our customer
metrics, including price satisfaction and service. Convenience sales were
impacted by trading over exceptionally hot weather in the first half and by
some customers switching a greater level of spend to our large stores. Our
city-centre stores continue to perform well, growing by 6.0%.
Online sales grew by 10.4%, including a c.2ppts contribution from the roll-out
of Tesco Whoosh. Overall online average orders per week were up 5.3%
year-on-year to 1.2 million and we further improved the proportion of 'perfect
orders', meaning more customers received their order on time and at full
availability. Customer satisfaction scores improved as a result, with
availability up 21ppts and price satisfaction up 9ppts year-on-year. Online
sales participation remains stable at c.13% of total UK sales.
Tesco Whoosh, our rapid delivery service, is now available in 1,424 stores,
adding a further 424 in the year. The number of active Tesco Whoosh
customers more than doubled year-on-year as we expanded the offer to 66% of
the population. Customers can access a range of 2,900 products on average,
with some of our larger stores offering an even broader range. Customer
satisfaction scores continue to improve, including a particularly strong step
forward in availability, with 74% of orders delivered within 30 minutes.
We opened three further Urban Fulfilment Centres (UFC) in the year, in
Gallions Reach and King's Lynn in the first half, followed by Coventry in
September, adding a total of one million order capacity per year.
Online performance FY 23/24 YoY change
Sales inc. VAT £6.2bn 10.4%
Orders per week 1.20m 5.3%
Basket size £99 4.2%
Online % of UK total sales 13.1% 0.3ppts
ROI - Volume growth driving strong market share gains:
We have now gained market share in ROI for 24 consecutive four-week periods,
taking our share to 23.6% at the end of the year, up 73bps year-on-year.
Like-for like sales grew by 6.8% for the full year, including three
consecutive quarters of volume growth. Total sales grew by 8.5% at constant
rates, including a 1.7ppts contribution from new stores, driven by the
full-year impact of the nine Joyce's stores we acquired in 2022, the opening
of a new superstore in Adamstown and four new Tesco Express stores.
Food sales grew by 9.1%, including volume growth in fresh food supported by an
extensive refresh in 22 stores, with new and improved produce and bakery areas
and innovations in coffee, hot food and food-on-the-go offers. The
investments we are making in the overall quality of our products was
recognised when we won 45 awards at the 'Blas na hÉireann' ('Taste of
Ireland') awards in October, with strong coverage across our range.
We lowered the price of over 800 essential products by an average of c.12%,
through our 'Price Cuts' campaign, leading to a gradual decline in inflation
across the year. Clubcard sales penetration stepped up by a further 8ppts
year-on-year to 85%, supported by exclusive Clubcard Prices deals, including
market-leading offers over Christmas.
The reallocation of space towards food through our store refresh programme
impacted Home and Clothing sales, which declined by (3.9)%.
BOOKER - Strong growth across core catering and retail; building profitable
growth capacity:
Sales LFL
£m
Retail (excluding tobacco) 3,205 11.0%
Tobacco 1,858 (4.3)%
Catering* 2,501 10.2%
Best Food Logistics 1,518 (0.1)%
Total Booker 9,082 5.4%
* Includes small businesses sales
Booker delivered overall like-for-like sales growth of 5.4%, with further
growth across the two key business streams of catering and retail.
Retail sales (excluding tobacco) grew by 11.0%, supported by a further 211 net
new retail partners in the second half and record levels of availability.
Our entry level ranges, Euroshopper and Jack's, performed particularly
strongly, with sales up 16% year-on-year as we expanded the number of lines
within these ranges in response to customer demand. Customer satisfaction
improved across the year due to our focus on availability and value. Tobacco
sales declined by (4.3)% overall, reflecting an ongoing market volume
contraction.
Catering sales increased by 10.2%, with particularly strong growth in our own
label 'Chef's Essential' and 'Chef's Larder' ranges. We launched our largest
ever Price Lock, on over 700 products throughout the festive period, and our
'On-Trade' club now offers almost 9,000 licensed customers access to
discounted prices on some of our most popular products, including snacks,
drinks and food. We also have 45,000 customers signed up to our 'Fast Food'
club, which provides them with access to exclusive deals and discounts. Our
investments in quality were recognised when we were awarded 2023 Quality
Awards Foodservice Operator of the year.
Best Food Logistics sales declined by (0.1)%, which includes a sales decline
of (5.4)% in the second half, driven by our actions to exit unprofitable
contracts.
In November, we repurposed a former Makro freehold store in Fareham,
converting the site to a c.120k sq.ft. distribution centre which further
centralises fulfilment to our retail customers, offering them a broader range,
whilst creating capacity in our branches to grow our catering business. We
have plans in place to further enhance our capacity in the current year.
CENTRAL EUROPE - Challenging backdrop across markets; encouraging volume
response to value investments:
Like-for-like sales grew by 0.2%, reflecting a challenging trading environment
due to ongoing inflationary pressures. Inflation fell sharply across the
second half, whilst the volume trajectory improved and we delivered volume
growth over the key Christmas trading period, driven by a strong customer
response to our value investments, which included a 'Low Price Guarantee' on
over 500 lines.
Food sales grew by 1.1%, with growth across both fresh and packaged
categories, including volume growth across the fourth quarter. Non-food
sales declined by (4.8)%, mainly driven by a reduction in discretionary
spending across the markets. We launched a new 'Basics' range in Clothing
and Home, offering customers great value and quality at a competitive, entry
price point. We recently expanded this range to all of our largest stores in
the region. Clubcard penetration is now at 87%, which is 2ppts higher than
last year.
Central Europe adjusted operating profit was £90m, a decrease of (50.0)%
year-on-year at constant rates, primarily driven by external factors facing
our business in Hungary and a challenging trading environment across the
region, which was partially offset by a strong Save to Invest delivery. In
Hungary, local regulatory actions, such as incremental retail taxes, price
caps and mandatory promotions on everyday grocery products remained in place
and limited our ability to recover the impact of higher operating costs.
TESCO BANK:
Our existing banking operations (credit cards, loans and savings), which are
due to be sold to Barclays Bank UK plc, have been treated as discontinued
operations within these results. Our headline performance measures therefore
only include those business lines which are treated as continuing operations,
i.e. insurance, ATMs, travel money and gift cards.
Full detail on the accounting impacts of the announced sale can be found
within Note 6, starting on page 30. The key impacts are to present banking
operations (credit cards, loans and savings) as discontinued, remeasuring
assets and liabilities as held for sale on the balance sheet to £7.7bn and
£7.1bn, respectively. In doing so, we have recognised a post-tax loss of
£(628)m, which includes a £(211)m write-down of goodwill allocated to the
banking operations and contributes to an overall loss for the year from
discontinued operations of £(572)m after tax.
Subject to usual regulatory approvals, the sale will generate c.£600m of
proceeds on completion, and a further c.£100m of cash after the settlement of
certain regulatory capital amounts and transaction costs. When combined with
this year's £250m special dividend paid by Tesco Bank, the Group will have
generated a total of c.£1bn of cash, the majority of which will be returned
to shareholders by means of incremental share buybacks.
The breakdown of our overall performance between continuing and discontinued
operations is shown in the table below.
FY 23/24 FY 22/23(3) YoY change
Revenue £1,521m £1,234m 23.1%
Continuing operations £811m £666m 21.7%
Discontinued operations £710m £568m 24.9%
Adjusted operating profit £148m £135m 9.6%
Continuing operations* £69m £22m 213.6%
Discontinued operations £79m £113m (30.1)%
* Includes net investment income associated with banking operations which
will cease on completion of the proposed sale to Barclays (FY 23/24: £12m, FY
22/23: £(6)m)
Continuing operations revenue grew by 21.7%, primarily driven by strong growth
in insurance due to high levels of renewals and new business volumes.
The growth in adjusted operating profit on a continuing operations basis was
driven by a strong performance in insurance, gift cards and travel money, in
addition to £15m benefit resulting from the up-front recognition of a
one-year extension of our pet insurance agreement and £12m of net investment
income which will cease following completion of the proposed sale to
Barclays. Adjusted operating profit from discontinued operations includes a
£(28)m charge relating to customer redress provisions.
We expect the transaction to complete in the second half of this calendar
year. Post-completion, the revenue and adjusted operating profit
contribution from the retained business will be included within retail
adjusted operating profit. For the 24/25 financial year, we expect a
contribution from the retained business of around £80m, which includes a
part-year amount of strategic partnership income, based on the expected
completion timeline. On an on-going basis, we expect an adjusted operating
profit contribution of between £80m to £100m per year.
Adjusting items:
FY 23/24 FY 22/23
£m £m
Net impairment release / (charge) on non-current assets 28 (982)
Save to Invest restructuring provisions (50) (132)
Property transactions 75 91
Amortisation of acquired intangible assets (74) (76)
Other* 13 -
Total adjusting items in statutory operating profit (continuing operations) (8) (1,099)
Net finance income 20 27
Tax 68 195
Total adjusting items (continuing operations) 80 (877)
Adjusting items (discontinued operations) (628) (13)
Total adjusting items (548) (890)
* Other includes the disposal of Booker's Ritter-Courivaud Limited subsidiary,
see page 27 for further detail.
Adjusting items are excluded from our adjusted operating profit performance by
virtue of their size and nature to provide a helpful perspective of the
year-on-year performance of the Group's ongoing business. Total adjusting
items in statutory operating profit from continuing operations resulted in a
net charge of £(8)m, compared to a £(1,099)m net charge in the prior
year.
In the current year, there was a non-cash net impairment release on
non-current assets of £28m, primarily reflecting an improvement in UK &
ROI performance, partially offset by a reduction in property fair values due
to market factors, and a challenging performance in Central Europe. This
compares to a £(982)m non-cash net impairment charge in the prior year as a
consequence of higher discount rates, which have remained broadly stable in
the current year.
We recognised an adjusting credit of £75m related to property transactions,
including £30m generated on exiting a leasehold site in Gateshead and a
further £12m from the remeasurement of assets held for sale. In the prior
year, we recognised an adjusting credit of £91m related to the disposal of
the Middlewich distribution centre in the UK, and 17 mall properties and one
retail park in Central Europe.
Amortisation of acquired intangible assets is excluded from our headline
performance measures. We incurred a charge of £(74)m in the year, which
primarily relates to the intangible assets that were recognised as a result of
our merger with Booker in March 2018.
In the current year, we recognised a £(50)m restructuring provision related
to our ongoing Save to Invest programme. In the prior year, we recognised a
provision of £(132)m which included changes made to our store management
structures and the closure of our remaining UK counters.
Further detail on adjusting items can be found in Note 3, starting on page 27
and on discontinued operations in Note 6, starting on page 30.
Net finance costs:
On a continuing operations basis FY 23/24 £m FY 22/23(3)
£m
Net interest costs (179) (189)
Net finance expenses from insurance contracts (6) (3)
Finance charges payable on lease liabilities (373) (371)
Net finance costs before adjusting items (558) (563)
Fair value remeasurements of financial instruments 38 (53)
Net pension finance income / (costs) (18) 80
Net finance costs (538) (536)
Net finance costs of £(538)m were broadly flat year-on-year. Within
adjusting items, fair value remeasurements of financial instruments led to a
credit of £38m compared to a £(53)m charge in the prior year, largely driven
by non-cash mark-to-market gains on index-linked swaps and other
derivatives. This was partially offset by net pension finance costs this
year of £(18)m, compared to an income of £80m in the prior year, which
reflects the IAS 19 pension deficit at the start of 2023/24, compared to an
opening surplus in 2022/23.
Further detail on finance income and costs can be found in Note 4 on page 28,
as well as further detail on the adjusting items in Note 3, starting on page
27.
Group tax:
On a continuing operations basis FY 23/24 £m FY 22/23(3)
£m
Tax on adjusted profit (593) (419)
Tax on adjusting items 68 195
Tax on profit (525) (224)
Tax on adjusted Group profit was £(593)m, £(174)m higher than last year,
primarily reflecting an increase in the UK corporation tax rate from 19% to
25%, effective from 1( ) April 2023, as well as stronger retail adjusted
operating profit year-on-year.
The £68m credit in tax on adjusting items primarily relates to tax relief on
impairment charges on qualifying assets, as well as a settlement related to
our exit from the Gain Land associate in China in 2020. In the prior year,
the £195m adjusting credit was driven by tax relief relating to the non-cash
impairment charge of £(982)m.
The effective tax rate on adjusted Group profit was 26.0%, higher than the
current UK statutory rate, primarily due to the depreciation of assets which
do not qualify for tax relief. We expect our 2024/25 effective tax rate to
be around 27%, reflecting the full-year impact of the increase in the UK
statutory rate mentioned above.
Earnings per share:
On a continuing operations basis FY 23/24 FY 22/23(3) YoY change
Adjusted diluted EPS 23.41p 20.53p 14.0%
Statutory diluted EPS 24.53p 8.81p 178.4%
Statutory basic EPS 24.80p 8.89p 179.0%
On a total basis, including discontinued operations
Statutory diluted EPS 16.56p 9.85p 68.1%
Statutory basic EPS 16.74p 9.94p 68.4%
Adjusted diluted EPS was 23.41p, 14.0% higher year-on-year, due to an increase
in retail operating profit and the benefit from our ongoing share buyback
programme, partially offset by a higher tax charge.
Statutory diluted EPS was 24.53p, 178.4% higher year-on-year, due to a
significant reduction in adjusting items driven by the £(982)m non-cash net
impairment charge in the prior year.
On a total basis, including discontinued operations, statutory diluted EPS was
16.56p, 68.1% higher year-on-year. The adjusted diluted EPS growth described
above and the effect of last year's net impairment charge were partially
offset by the remeasurement loss related to the planned sale of our banking
operations, which was recognised in the year.
Dividend:
We propose to pay a final dividend of 8.25 pence per ordinary share, taking
the full year dividend to 12.10 pence per ordinary share. The full year
dividend is based on our 50% pay-out policy, applied to total Group earnings
per share in the year, including the discontinued operations of Tesco Bank as
it was under Group ownership for the entire financial year. This includes
the payment of an interim dividend of 3.85 pence per ordinary share in
November 2023.
The proposed final dividend was approved by the Board of Directors on 9 April
2024 and is subject to the approval of shareholders at this year's Annual
General Meeting. The final dividend will be paid on 28 June 2024 to
shareholders who are on the register of members at close of business on 17 May
2024 (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 7 June 2024.
Summary of total indebtedness (excludes Tesco Bank):
Feb-24 Feb-23 Movement
£m £m £m
Net debt before lease liabilities (2,144) (2,775) 631
Lease liabilities (7,620) (7,718) 98
Net debt (9,764) (10,493) 729
Pension deficit, IAS 19 basis (post-tax) (493) (300) (193)
Total indebtedness (10,257) (10,793) 536
Net debt / EBITDA 2.2x 2.6x
Total indebtedness ratio 2.4x 2.7x
Net debt was £(9,764)m, a reduction of £729m year-on-year, predominantly
driven by strong retail free cash flow generation of £2,063m and the receipt
of a £250m special dividend from Tesco Bank, which more than offset a total
of £(1.5)bn of shareholder returns, including the £(750)m share buyback and
dividend payments of £(778)m. Lease liabilities reduced by £98m
year-on-year, driven by the overall reducing nature of our lease liability,
partially offset by the impact of rent reviews and new stores.
Total indebtedness was £(10,257)m, a reduction of £536m year-on-year, which
was primarily driven by the £729m reduction in net debt explained above,
partially offset by a £(193)m increase in the IAS 19 pension deficit. The
IAS 19 pension deficit does not determine the extent of pension contributions
and reflects movements in discount rate assumptions mandated by the accounting
standard, which can be volatile. The trustees of each pension scheme,
including the main Tesco Pension Scheme are required to calculate the net
surplus/deficit on the basis of Technical Provisions issued by the Pensions
Regulator. On this basis, the main UK scheme continues to be in surplus.
The next triennial valuation for this scheme, on a Technical Provisions
basis, is scheduled in March 2025.
We had strong levels of liquidity at the year-end, including £3.2 billion of
cash and highly liquid short-term deposits and money market investments. In
addition, our £2.5 billion committed revolving credit facility remained
undrawn throughout the year.
Our Net debt to EBITDA ratio was 2.2 times at the end of the year, down from
2.6 times in the prior year. The year-on-year reduction was driven by an
increase in Retail EBITDA and a decrease in net debt which includes a £250m
benefit from the special dividend paid by Tesco Bank in the first half. The
total indebtedness ratio was 2.4 times compared to 2.7 times last
year-end.
Fixed charge cover was 3.7 times at the end of the year, an improvement
year-on-year, primarily driven by an increase in Retail EBITDA.
Summary retail free cash flow:
The following table reconciles Group adjusted operating profit to retail free
cash flow. Further details are included in Note 2, starting on page 22.
On a continuing operations basis FY 23/24 FY 22/23(3)
£m £m
Adjusted operating profit 2,829 2,509
Less: Tesco Bank adjusted operating (profit) / loss (69) (22)
Retail adjusted operating profit 2,760 2,487
Add back: Depreciation and amortisation 1,602 1,570
Other reconciling items 82 61
Pensions (29) (23)
Decrease in working capital 418 468
Retail cash generated from operations before adjusting items 4,833 4,563
Cash capex (1,289) (1,143)
Net interest (560) (573)
- Interest related to Net debt before lease liabilities (188) (202)
- Interest related to lease liabilities (372) (371)
Tax paid (214) (107)
Dividends received 9 68
Repayments of obligations under leases (623) (589)
Own shares purchased for share schemes (93) (86)
Retail free cash flow 2,063 2,133
Memo (not included in Retail free cash flow definition):
- Special dividend received from Tesco Bank 250 -
- Net acquisitions and disposals (2) (281)
- Property buybacks, store purchases and disposal proceeds (66) 266
- Cash impact of adjusting items (98) (61)
We delivered strong retail free cash flow of £2,063m, significantly ahead of
our medium-term target range of between £1.4bn to £1.8bn, driven by higher
retail adjusted operating profit and another strong working capital
performance. The year-on-year reduction of £(70)m primarily reflects the
higher cash capital expenditure (Capex) and tax paid.
Our total working capital inflow was £418m, reflecting the strong sales
performance in the year and the impact of input cost inflation, leading to
higher trade balances.
Net interest paid was broadly flat year-on-year.
Tax paid was £(107)m higher year-on-year, driven by an increase in the UK
statutory tax rate in addition to higher retail profits. We continued to
benefit from in-year tax relief of £155m related to the £2.5bn one-off
pension contribution made in 2021, which was required to be spread over four
years. Moving forward, we will no longer benefit from this relief.
Dividends received of £9m were £(59)m lower year-on-year due to the removal
of the annual dividend received from Tesco Bank, following the announcement of
the planned sale of our existing banking operations. In the first half of
the year, Tesco Bank paid a one-off special dividend of £250m to the Group,
reflecting the strength of the Bank's balance sheet and capital ratios. This
special dividend is not included within retail free cash flow.
Within the memo lines shown, the net £(66)m outflow relating to property
transactions results from the buyback of three stores and two freehold sites
in the UK, partially offset by proceeds generated from held for sale sites in
Central Europe, and the exit of a leasehold site in Gateshead. The £266m
inflow in the prior year primarily related to the sale of 17 malls and one
retail park in Central Europe and our distribution centre in Middlewich in the
UK.
The cash impact of adjusting items of £(98)m relates to operational
restructuring changes as part of our Save to Invest programme which were
announced at the end of the prior financial year.
Capital expenditure and space:
UK & ROI Central Europe Tesco Bank Group
On a continuing operations basis FY 23/24 FY 22/23 FY 23/24 FY 22/23 FY 23/24 FY 22/23 FY 23/24 FY 22/23
Capex £1,171m £1,069m £113m £115m £30m £51m £1,314m £1,235m
Openings (k sq ft) 366 318 87 77 - - 453 395
Closures (k sq ft) (204) (233) (22) (25) - - (226) (258)
Repurposed (k sq ft) - 9 (342) (407) - - (342) (398)
Net space change (k sq ft) 162 94 (277) (355) - - (115) (261)
'Retail Selling Space' is defined as net space in store adjusted to exclude
checkouts, space behind checkouts, customer service desks and customer
toilets. The data above excludes space relating to franchise stores. A
full breakdown of space by segment is included in the supplementary
information starting on page 57.
Capital expenditure shown in the table above reflects expenditure on ongoing
business activities across the Group, excluding property buybacks and store
purchases.
We have been pleased with the results of our continued investment in our store
estate, including refreshing a total of 389 stores and opening seven
superstores, 60 Tesco Express stores and 27 One Stop stores in the UK. We
also opened an additional UFC in the second half taking our full year openings
to three and our total number of UFCs to nine. In Ireland, we opened one
superstore in Adamstown in the first half, followed by four Tesco Express
stores in the second half. In Central Europe, we opened 14 new convenience
stores.
Our total capital expenditure for the year was £1,314m, £79m higher
year-on-year. This reflects increased investment in high-returning areas
such as Save to Invest and our digital platforms, in addition to the impact of
inflation. We continue to see attractive opportunities to commit capital to
these types of high-returning investments going forwards, with next year's
overall capital investment expected to total around £1.4bn.
Statutory capital expenditure for the year was £1.5bn.
Further details of current space can be found in the supplementary information
starting on page 57.
Property:
UK & ROI Central Europe Group
Feb-24 Feb-23 Feb-24 Feb-23 Feb-24 Feb-23
Property(1) - fully owned
- Estimated market value £15.1bn £15.4bn £1.8bn £1.8bn £16.9bn £17.2bn
- NBV £15.2bn £14.9bn £1.5bn £1.5bn £16.7bn £16.4bn
% store selling space owned 58% 58% 68% 68% 60% 60%
% property owned by value(2) 59% 59% 65% 65% 60% 60%
1. Stores, malls, investment property, offices, distribution centres,
fixtures and fittings, work-in-progress. Excludes joint ventures.
2. Excludes fixtures and fittings.
The estimated market value of our fully owned property as at the year-end
reduced by £(0.3)bn to £16.9bn due to a small decline in the UK property
investment market year-on-year. The market value represents a surplus of
£0.2bn over the net book value (NBV).
Our Group freehold property ownership percentage was 60%, flat year-on-year.
In January 2024, we obtained control of The Tesco Coral Limited Partnership
property joint venture, bringing back two large stores into full ownership
with the remaining two stores operating on a leased basis, under full
ownership of the previous joint venture partner. We also repurchased two
large stores as part of our ongoing buyback strategy, Milton Cambridge and New
Oscott Extra, and purchased the freehold to two new large stores in the UK.
In Central Europe, the market value of fully owned property remains flat
year-on-year, with small increases in value offset by foreign exchange
movements.
Contacts.
Investor Relations: Chris Griffith 01707 940 900
Media: Christine Heffernan 0330 6780 639
Teneo 0207 4203 143
This document is available at www.tescoplc.com/prelims2024
(www.tescoplc.com/prelims2024) .
A webcast including a live Q&A will be held today at 9.00am for investors
and analysts and will be available on our website at
www.tescoplc.com/prelims2024 (www.tescoplc.com/prelims2024) . This will be
available for playback after the event. All presentation materials,
including a transcript, will be made available on our website.
We will report our Q1 Trading statement on 14 June 2024.
Sources.
· UK market share based on Kantar Total Grocers Total Till Roll on 12
week rolling basis to 18 February 2024.
· UK Kantar net switching gains 12 w/e rolling basis to 18 February
2024.
· ROI market share based on Kantar Total Till Roll on 12 week rolling
basis to 18 February 2024.
· 'Latest market share' based on Kantar Total Grocers Total Till Roll
on a 4 week basis to 17 March 2024.
· Premium retailer gains refers to Kantar net switching gains from
Waitrose & M&S on 12 week rolling basis to 18 February 2024.
· 'Full-line grocers' refers to Tesco, Sainsbury's, Asda and
Morrisons and 'Limited-range discounters' refers to Aldi and Lidl.
· UK Price index is an internal measure calculated using the retail
selling price of each item on a per unit or unit of measure basis. Competitor
retail selling prices are collected weekly by a third party. The price index
includes price cut promotions and is weighted by sales to reflect customer
importance.
· c.£360 of savings for Clubcard: c.£360 saving is based on the top
25% of Tesco Clubcard members and large stores sales between 27/02/2023 -
25/02/2024. Tesco Clubcard Price savings versus regular Tesco price.
· Customer satisfaction and Brand Perception based on YoY changes in
YouGov BrandIndex scores for the 12 weeks ended 25 February 2024.
· Availability based on Multi channel tracker. 3 period rolling data.
Responses to question: "Had any products that you wanted to buy sold out?".
· 63% healthy volume sales by 2025: Tesco tracks the healthiness of
its products and ranges using the UK Government's nutrient profiling model.
· Number of Booker retail partners and Premier stores shown net of
openings and closures.
Disclaimer.
Certain statements made in this document are forward-looking statements. For
example, statements regarding future financial performance, 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
52 weeks ended 52 weeks ended
24 February 2024
25 February 2023 (restated((a)))
Notes Before adjusting Adjusting Total Before adjusting Adjusting Total
£m
items
£m
items items
£m items
£m
(Note 3) (Note 3)
£m
£m
Continuing operations
Revenue from sale of goods and services 67,673 - 67,673 64,864 - 64,864
Insurance revenue((b)) 514 - 514 458 - 458
Revenue 2 68,187 - 68,187 65,322 - 65,322
Cost of sales (62,832) (4) (62,836) (60,487) (1,029) (61,516)
Insurance service expenses((b)) (454) - (454) (408) - (408)
Net expenses from reinsurance contracts held((b)) (48) - (48) (37) - (37)
Gross profit/(loss) 4,853 (4) 4,849 4,390 (1,029) 3,361
Administrative expenses (2,024) (4) (2,028) (1,881) (70) (1,951)
Operating profit/(loss) 2 2,829 (8) 2,821 2,509 (1,099) 1,410
Share of post-tax profits of joint ventures and associates 6 - 6 8 - 8
Finance income 4 267 - 267 87 - 87
Finance costs 4 (825) 20 (805) (650) 27 (623)
Profit/(loss) before tax from continuing operations 2,277 12 2,289 1,954 (1,072) 882
Taxation 5 (593) 68 (525) (419) 195 (224)
Profit/(loss) for the year from continuing operations 1,684 80 1,764 1,535 (877) 658
Discontinued operations
Profit/(loss) for the year from discontinued operations 6 56 (628) (572) 91 (13) 78
Profit/(loss) for the year 1,740 (548) 1,192 1,626 (890) 736
Attributable to:
Owners of the parent 1,736 (548) 1,188 1,627 (890) 737
Non-controlling interests 4 - 4 (1) - (1)
1,740 (548) 1,192 1,626 (890) 736
Earnings per share from continuing and discontinued operations
Basic 8 16.74p 9.94p
Diluted 8 16.56p 9.85p
Earnings per share from continuing operations
Basic 8 24.80p 8.89p
Diluted 8 24.53p 8.81p
(a) Comparatives have been restated following the adoption of IFRS 17 and to
present Banking operations as a discontinued operation. Refer to Notes 1, 6
and 22 for further details.
(b) Following the adoption of IFRS 17, the income statement has been
re-presented to separately present insurance revenue, insurance service
expenses and net expenses from reinsurance contracts held. Refer to Note 1 for
further details.
The notes on pages 20 to 49 form part of this condensed consolidated financial
information.
Group statement of comprehensive income/(loss)
Notes 52 weeks ended 24 February 2024 52 weeks ended 25 February 2023 (restated*)
£m
£m
Items that will not be reclassified to the Group income statement
Change in fair value of financial assets at fair value through other - 2
comprehensive income
Remeasurements of defined benefit pension schemes 18 (251) (3,341)
Net fair value gains/(losses) on inventory cash flow hedges (38) 54
Tax on items that will not be reclassified 62 853
(227) (2,432)
Items that may subsequently be reclassified to the Group income statement
Change in fair value of financial assets at fair value through other 16 (43)
comprehensive income
Currency translation differences:
Retranslation of net assets of overseas subsidiaries, joint ventures and (116) 120
associates, net of hedging instruments
Gains on cash flow hedges:
Net fair value gains 25 17
Reclassified and reported in the Group income statement (56) (61)
Finance income/(expenses) from insurance contracts issued (4) 39
Finance income/(expenses) from reinsurance contracts held 1 (20)
Tax on items that may be reclassified (6) 17
(140) 69
Total other comprehensive income/(loss) for the year (367) (2,363)
Profit/(loss) for the year 1,192 736
Total comprehensive income/(loss) for the year 825 (1,627)
Attributable to:
Owners of the parent 820 (1,632)
Non-controlling interests 5 5
Total comprehensive income/(loss) for the year 825 (1,627)
Total comprehensive income/(loss) attributable to owners of the parent arising
from:
Continuing operations 1,392 (1,710)
Discontinued operations 6 (572) 78
820 (1,632)
* Comparatives have been restated following the adoption of IFRS 17 and to
present Banking operations as a discontinued operation. Refer to Notes 1, 6
and 22 for further details.
The notes on pages 20 to 49 form part of this condensed consolidated financial
information.
Group balance sheet
Notes 24 February 2024 25 February 2023 (restated*) 26 February 2022 (restated*)
£m
£m
£m
Non-current assets
Goodwill and other intangible assets 5,066 5,375 5,360
Property, plant and equipment 9 17,221 16,862 17,060
Right of use assets 10 5,478 5,500 5,720
Investment property 24 24 22
Investments in joint ventures and associates 102 93 86
Other investments 1,546 1,339 1,253
Trade and other receivables 36 79 159
Loans and advances to customers - 3,029 3,141
Reinsurance contract assets 15 125 135 171
Derivative financial instruments 781 873 942
Post-employment benefit surplus 18 22 6 3,150
Deferred tax assets 5 32 84 88
30,433 33,399 37,152
Current assets
Other investments 206 353 226
Inventories 2,635 2,510 2,339
Trade and other receivables 1,349 1,235 1,218
Loans and advances to customers - 3,948 3,251
Derivative financial instruments 55 57 69
Current tax assets 110 63 93
Short-term investments 12 2,128 1,628 2,076
Cash and cash equivalents 12 2,340 2,465 2,345
8,823 12,259 11,617
Assets of the disposal group and non-current assets classified as held for 6 7,783 210 368
sale
16,606 12,469 11,985
Current liabilities
Trade and other payables (10,264) (9,762) (9,040)
Borrowings 14 (1,536) (1,770) (725)
Lease liabilities 10 (584) (595) (547)
Provisions (306) (366) (283)
Insurance contract liabilities 15 (526) (501) (588)
Customer deposits and deposits from banks (108) (4,485) (4,729)
Derivative financial instruments (25) (99) (26)
Current tax liabilities (1) (18) (11)
(13,350) (17,596) (15,949)
Liabilities of the disposal group classified as held for sale 6 (7,122) (14) (14)
Net current liabilities (3,866) (5,141) (3,978)
Non-current liabilities
Trade and other payables (39) (54) (54)
Borrowings 14 (5,683) (5,581) (6,674)
Lease liabilities 10 (7,038) (7,132) (7,411)
Provisions (175) (194) (183)
Customer deposits and deposits from banks (800) (2,265) (1,650)
Derivative financial instruments (241) (288) (357)
Post-employment benefit deficit 18 (657) (400) (303)
Deferred tax liabilities 5 (269) (119) (910)
(14,902) (16,033) (17,542)
Net assets 11,665 12,225 15,632
Equity
Share capital 19 445 463 484
Share premium 5,165 5,165 5,165
Other reserves 19 3,131 3,139 3,080
Retained earnings 2,930 3,469 6,919
Equity attributable to owners of the parent 11,671 12,236 15,648
Non-controlling interests (6) (11) (16)
Total equity 11,665 12,225 15,632
* Comparatives have been restated following the adoption of IFRS 17. Refer to
Notes 1 and 22 for further details.
The notes on pages 20 to 49 form part of this condensed consolidated financial
information.
Group statement of changes in equity
Notes Share Share Other reserves Retained earnings Total Non-controlling interests Total
capital
premium
£m
£m
equity
£m
£m (Note 19) £m
£m
£m
At 25 February 2023 (as previously reported) 463 5,165 3,123 3,490 12,241 (11) 12,230
Cumulative adjustment on initial application of IFRS 17 (net of tax) - - 16 (21) (5) - (5)
At 25 February 2023 (restated*) 463 5,165 3,139 3,469 12,236 (11) 12,225
Profit/(loss) for the year - - - 1,188 1,188 4 1,192
Other comprehensive income/(loss)
Retranslation of net assets of overseas subsidiaries, joint ventures and - - (116) - (116) - (116)
associates, net of hedging instruments
Change in fair value of financial assets at fair value through other - - - 16 16 - 16
comprehensive income
Remeasurements of defined benefit pension schemes 18 - - - (251) (251) - (251)
Gains/(losses) on cash flow hedges - - (14) - (14) 1 (13)
Cash flow hedges reclassified and reported in the Group income statement - - (56) - (56) - (56)
Finance income/(expenses) from insurance contracts issued - - (4) - (4) - (4)
Finance income/(expenses) from reinsurance contracts held - - 1 - 1 - 1
Tax relating to components of other comprehensive income - - (4) 60 56 - 56
Total other comprehensive income/(loss) - - (193) (175) (368) 1 (367)
Total comprehensive income/(loss) - - (193) 1,013 820 5 825
Transfer from hedging reserve to retained earnings - - 44 (44) - - -
Inventory cash flow hedge movements
(Gains)/losses transferred to the cost of inventory - - 79 - 79 - 79
Total inventory cash flow hedge movements - - 79 - 79 - 79
Transactions with owners
Own shares purchased for cancellation 19 - - (752) - (752) - (752)
Own shares cancelled 19 (18) - 770 (752) - - -
Own shares purchased for share schemes - - (140) - (140) - (140)
Share-based payments - - 184 11 195 - 195
Dividends 7 - - - (777) (777) - (777)
Tax on items charged/(credited) to equity - - - 10 10 - 10
Total transactions with owners (18) - 62 (1,508) (1,464) - (1,464)
At 24 February 2024 445 5,165 3,131 2,930 11,671 (6) 11,665
Notes Share Share Other reserves (Note 19) Retained earnings Total Non-controlling interests Total
capital
premium
£m
£m
£m
equity
£m
£m £m
£m
At 26 February 2022 (as previously reported) 484 5,165 3,079 6,932 15,660 (16) 15,644
Cumulative adjustment on initial application of IFRS 17 (net of tax) - - 1 (13) (12) - (12)
At 26 February 2022 (restated*) 484 5,165 3,080 6,919 15,648 (16) 15,632
Profit/(loss) for the year* - - - 737 737 (1) 736
Other comprehensive income/(loss)
Retranslation of net assets of overseas subsidiaries, joint ventures and - - 120 - 120 - 120
associates, net of hedging instruments
Change in fair value of financial assets at fair value through other - - - (41) (41) - (41)
comprehensive income
Remeasurements of defined benefit pension schemes 18 - - - (3,341) (3,341) - (3,341)
Gains/(losses) on cash flow hedges - - 63 - 63 8 71
Cash flow hedges reclassified and reported in the Group income statement - - (61) - (61) - (61)
Finance income/(expenses) from insurance contracts issued* - - 39 - 39 - 39
Finance income/(expenses) from reinsurance contracts held* - - (20) - (20) - (20)
Tax relating to components of other comprehensive income* - - 18 854 872 (2) 870
Total other comprehensive income/(loss)* - - 159 (2,528) (2,369) 6 (2,363)
Total comprehensive income/(loss)* - - 159 (1,791) (1,632) 5 (1,627)
Inventory cash flow hedge movements
(Gains)/losses transferred to the cost of inventory - - (127) - (127) - (127)
Total inventory cash flow hedge movements - - (127) - (127) - (127)
Transactions with owners
Own shares purchased for cancellation 19 - - (758) - (758) - (758)
Own shares cancelled 19 (21) - 816 (795) - - -
Own shares purchased for share schemes - - (188) - (188) - (188)
Share-based payments - - 157 (1) 156 - 156
Dividends 7 - - - (858) (858) - (858)
Tax on items charged/(credited) to equity - - - (5) (5) - (5)
Total transactions with owners (21) - 27 (1,659) (1,653) - (1,653)
At 25 February 2023 (restated*) 463 5,165 3,139 3,469 12,236 (11) 12,225
* Comparatives have been restated following the adoption of IFRS 17. Refer
to Notes 1 and 22 for further details.
The notes on pages 20 to 49 form part of this condensed consolidated financial
information.
Group cash flow statement
Notes 52 weeks ended 24 February 2024 52 weeks ended 25 February 2023 (restated*)
£m £m
Cash flows generated from/(used in) operating activities
Operating profit/(loss) of continuing operations 2,821 1,410
Operating profit/(loss) of discontinued operations 6 (659) 98
Depreciation and amortisation 1,723 1,700
(Profit)/loss arising on sale of property, plant and equipment, investment (53) (76)
property, intangible assets, assets classified as held for sale and early
termination of leases
(Profit)/loss arising from sale of other investments - 3
(Profit)/loss arising on sale of joint ventures and associates (9) -
(Profit)/loss arising on sale of subsidiaries (12) -
Net impairment (reversal)/loss on property, plant and equipment, right of use 11 (28) 982
assets, intangible assets and investment property
Net remeasurement loss on non-current assets held for sale 720 23
Defined benefit pension scheme payments 18 (29) (23)
Share-based payments 17 78 59
Fair value movements included in operating profit/(loss) 71 70
Retail (increase)/decrease in inventories (150) (147)
Retail (increase)/decrease in trade and other receivables (118) (54)
Retail increase/(decrease) in trade and other payables 714 643
Retail increase/(decrease) in provisions (72) 75
Retail (increase)/decrease in working capital 374 517
Tesco Bank (increase)/decrease in loans and advances to customers (714) (690)
Tesco Bank (increase)/decrease in trade, reinsurance and other receivables (9) 83
Tesco Bank increase/(decrease) in customer and bank deposits, trade, insurance 584 348
liabilities and other payables
Tesco Bank increase/(decrease) in provisions 28 (7)
Tesco Bank (increase)/decrease in working capital (111) (266)
Cash generated from/(used in) operations 4,886 4,497
Interest paid (824) (652)
Corporation tax paid (223) (123)
Net cash generated from/(used in) operating activities 3,839 3,722
Cash flows generated from/(used in) investing activities
Proceeds from sale of property, plant and equipment, investment property, 55 342
intangible assets and assets classified as held for sale
Purchase of property, plant and equipment, investment property and other (1,108) (971)
long-term assets
Purchase of intangible assets (278) (279)
Disposal of subsidiaries, net of cash disposed 15 -
Acquisition of subsidiaries, net of cash acquired (17) (71)
Proceeds from sale of joint ventures and associates 9 -
Increase in loans to joint ventures and associates (61) (1)
Investments in joint ventures and associates (9) (10)
Net (investments in)/proceeds from sale of short-term investments (507) 451
Proceeds from sale of other investments 352 230
Purchase of other investments (390) (529)
Dividends received from joint ventures and associates 9 14
Interest received 249 70
Cash inflows from derivative financial instruments 5 54
Cash outflows from derivative financial instruments (24) (6)
Net cash generated from/(used in) investing activities (1,700) (706)
Cash flows generated from/(used in) financing activities
Own shares purchased for cancellation 19 (752) (781)
Own shares purchased for share schemes 17 (93) (86)
Repayment of capital element of obligations under leases (627) (593)
Cash outflows exceeding the incremental increase in assets in a property (62) (21)
buyback
Increase in borrowings 1,232 -
Repayment of borrowings (775) (709)
Cash inflows from derivative financial instruments 98 232
Cash outflows from derivative financial instruments (102) (371)
Dividends paid to equity owners 7 (778) (859)
Net cash generated from/(used in) financing activities (1,859) (3,188)
Net increase/(decrease) in cash and cash equivalents 280 (172)
Cash and cash equivalents at the beginning of the year 1,565 1,771
Effect of foreign exchange rate changes 29 (34)
Cash and cash equivalents including cash held in the disposal group at the end 1,874 1,565
of the year
Less: Cash held in the disposal group (346) -
Cash and cash equivalents at the end of the year 12 1,528 1,565
* Comparatives have been restated following the adoption of IFRS 17 and to
present Banking operations as a discontinued operation. Refer to Notes 1, 6
and 22 for further details.
The notes on pages 20 to 49 form part of this condensed consolidated financial
information.
Notes
Note 1 Basis of preparation
This preliminary consolidated financial information has been prepared in
accordance with the Disclosure and Transparency Rules of the UK Financial
Conduct Authority, and the principles of UK-adopted IFRS. 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 Group financial statements 2024, which are the same as those
used in preparing the Annual Report and Group financial statements 2023,
except as noted below. The financial year represents the 52 weeks ended 24
February 2024 (prior financial year 52 weeks ended 25 February 2023). This
preliminary consolidated financial information does not constitute statutory
consolidated financial statements for the 52 weeks ended 24 February 2024 as
defined under section 434 of the Companies Act 2006.
The Annual Report and Group financial statements for the 52 weeks ended 24
February 2024 were approved by the Board of Directors on 9 April 2024. The
report of the auditor on those Group financial statements was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006. The Annual Report and Group
financial statements for 2024 will be filed with the Registrar in due course.
The Annual Report and Group financial statements for the 52 weeks ended 25
February 2023 were approved by the Board of Directors on 12 April 2023. The
report of the auditor on those Group financial statements was unqualified, did
not contain an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
The Directors have, at the time of approving the financial statements, a
reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, which reflects a period of
18 months from the date of approval of the financial statements, and have
concluded that there are no material uncertainties relating to going concern.
Thus they continue to adopt the going concern basis of accounting in preparing
the consolidated Group financial statements. Further information on the
Group's strong liquidity position is given in the Summary of total
indebtedness section.
Adoption of new IFRSs
IFRS 17 'Insurance contracts' is effective for the accounting period
commencing 26 February 2023. IFRS 17 has been applied fully retrospectively
and comparatives for prior periods have been restated from a transition date
of 27 February 2022. Refer to Note 22 for further details.
Other standards, interpretations and amendments effective in the current
financial year have not had a material impact on the consolidated Group
financial statements.
The Group has not applied any standards, interpretations or amendments that
have been issued but are not yet effective. The impact of the following is
under assessment:
- IFRS 18 'Primary financial statements', which will become effective in
the consolidated Group financial statements for the financial year ending 26
February 2028, subject to UK endorsement.
Other standards, interpretations and amendments issued but not yet effective
are not expected to have a material impact on the consolidated Group financial
statements.
Discontinued operations
During the year, the Board approved a plan to dispose of the Group's regulated
Banking operations, which form the major part of the Tesco Bank segment. The
net results of the Banking operations are presented as a discontinued
operation in the Group income statement, for which the comparatives have been
restated. The assets and liabilities of the Banking operations disposal group
are presented separately in the Group balance sheet as held for sale. For
further details, refer to Note 6.
Accounting policies
Insurance
Classification of insurance contracts
Contracts under which the Group accepts significant insurance risk from
another party (the policyholder) by agreeing to compensate the policyholder or
other beneficiary if a specified uncertain future event (the insured event)
adversely affects the policyholder or other beneficiary are classified as
insurance contracts. These contracts remain insurance contracts until all
rights and obligations are extinguished or expire. Insurance contracts may
also transfer some financial risk.
Level of aggregation
The level of aggregation for the Group is determined firstly by dividing the
business written into motor and home portfolios. Portfolios comprise groups of
contracts with similar risks which are managed together. At initial
recognition the Group assesses whether the motor and home portfolios are
divided further into groups of contracts that are onerous, have no significant
possibility of becoming onerous, or are neither.
In determining the level of aggregation, the Group identifies a contract as
the smallest 'unit', i.e. the lowest common denominator. No group for level of
aggregation purposes shall contain contracts issued more than one year apart.
The Group divides portfolios of reinsurance contracts held applying the same
principles.
Insurance contracts issued
Insurance contract liabilities include both a liability for incurred claims
(LIC), which represents outstanding claims and incurred but not reported
claims and other incurred insurance expenses; and a liability for remaining
coverage (LRC), which represents the Group's obligation for insured events
related to the unexpired portion of the coverage period. The LRC is measured
either using the general model or a simplified premium allocation approach
(PAA).
The Group applies the PAA to all insurance contracts issued since the
acquisition of Tesco Underwriting (TU) in May 2021. The Group qualifies to use
this approach as the coverage period of each contract in the group is one year
or less. There is no allowance for the time value of money as the premiums are
due within one year of the coverage period.
The Group applies the general model to all issued insurance contracts acquired
on the acquisition of TU, as the settlement of these claims and their
associated insurance risk will spread over multiple years. The Group has
recognised an acquired claims liability as part of the LRC, which is measured
at the probability-weighted average of discounted cash flows plus a risk
adjustment for non-financial risk, plus any contractual service margin (CSM)
if the fulfilment cash flows result in a net inflow. If the fulfilment cash
flows result in a net outflow, an onerous loss is recognised in the Group
income statement. The risk adjustment reflects the compensation that the Group
requires for bearing uncertainty in respect of the amount and timing of the
cash flows from non-financial risk, whilst the CSM represents the unearned
profit in the contracts relating to services that will be provided under the
contracts in the future.
Commission payable to agents and other acquisition costs, which are incurred
for acquiring new and renewal insurance business that is primarily related to
the production of that business, are deferred and presented as part of the
LRC. Such deferred acquisition costs are amortised over the period of
insurance contract services on the basis of the passage of time.
The carrying amount of the LRC measured under the general model is updated at
the end of each reporting period to reflect current estimates of the amounts,
timing and uncertainty of future cash flows, as well as discount rates and
other financial variables.
The Group estimates the LIC as the discounted value of expected fulfilment
cash flows related to incurred claims and other incurred insurance expenses,
plus an explicit adjustment for non-financial risk. The fulfilment cash flows
incorporate, in an unbiased way, all reasonable and supportable information
available about the amount, timing and uncertainty of those future cash flows.
Estimates of the present value of future cash flows reflect current
expectations as at the end of the reporting period and are adjusted for events
which have occurred since actuarial valuation.
Future cash flows are assessed by reviewing individual claims data and making
an allowance for claims incurred but not yet reported, adjusted for the effect
on the claims incurred of both internal and external foreseeable events, such
as changes in claims handling procedures, inflation, judicial trends,
substantively enacted legislative changes and past experience and trends.
Reinsurance
The Group cedes reinsurance in the normal course of business for the purpose
of limiting its net loss potential through the diversification of its risks.
Reinsurance ceded includes quota share, excess of loss and adverse development
cover contracts. Reinsurance arrangements do not relieve the Group from its
direct obligations to its policyholders. Only contracts that give rise to a
significant transfer of insurance risk are accounted for as reinsurance
contracts.
Reinsurance assets include balances due from reinsurance companies for
reinsurance claims. Amounts recoverable from reinsurers are estimated in a
manner consistent with the outstanding claims provision or settled claims
associated with the reinsured policy.
The Group applies the PAA to all reinsurance contracts that it holds, except
for contracts held prior to the acquisition of TU. The PAA is applicable for
all reinsurance contracts purchased since the acquisition of TU as the
contracts either qualify automatically in having a coverage period of one year
or less, or because there is no material difference in their measurement
between the PAA and the general model.
Modification and derecognition of insurance and reinsurance contracts
The Group derecognises insurance and reinsurance contracts when the rights and
obligations relating to the contract are extinguished (i.e. discharged,
cancelled or expired). When a modification is not treated as a derecognition,
the Group recognises amounts paid or received for the modification with the
contract as an adjustment to the relevant LRC or asset for remaining coverage.
Presentation of insurance contracts issued and reinsurance contracts held
The Group classifies all insurance contract liabilities as current as it does
not have the right to defer settlement beyond 12 months after the reporting
date. The Group classifies its reinsurance portfolio as non-current as it does
not reasonably expect to realise its reinsurance assets within 12 months of
the reporting date.
Insurance revenue
The insurance revenue recognised is the amount of expected premium receipts
allocated to the period. For insurance contracts issued after the acquisition
of TU in May 2021, the Group allocates the expected premium receipts to each
period of insurance contract services based on the passage of time.
The insurance revenue recognised for insurance contracts acquired as part of
the acquisition of TU comprises:
- Claims costs incurred in the period measured at the amounts expected
at the beginning of the period;
- Changes in the risk adjustment for non-financial risk; and
- The amount of the CSM recognised for services provided in the period.
Insurance service expenses
Insurance service expenses include total claims cost for the period, as well
as all directly attributable insurance expenses. There are no acquisition
costs for acquired claims. Insurance acquisition cash flows arising from the
costs of selling, underwriting and starting a group of insurance contracts are
allocated to insurance service expenses based on the passage of time.
Net income or expenses from reinsurance contracts held
The Group separately presents income or expenses from reinsurance contracts
held from the expenses or income from insurance contracts issued. The Group
presents the income or expenses from a group of reinsurance contracts held as
a single amount.
Insurance finance income and expenses
Insurance finance income or expenses comprise the change in the carrying
amount of the group of insurance contracts arising from the effect of the time
value of money, financial risk and changes in financial risk.
The impact of changes in market interest rates on the carrying value of
insurance assets and liabilities is reflected in the Group statement of other
comprehensive income in order to minimise accounting mismatches between the
accounting for financial assets and insurance assets and liabilities. The
Group's financial assets backing both the motor and home insurance portfolios
are predominantly measured at fair value through other comprehensive income.
The amount of insurance finance income or expenses recognised in the Group
income statement is calculated using the discount rate curve determined at the
date of the incurred claim.
Note 2 Segmental reporting
The Group's operating segments are determined based on the Group's
organisational structure and 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.
The principal activities of the Group are presented in the following
reportable segments:
- Retailing and associated activities (Retail) in:
- UK & ROI - the United Kingdom and Republic of Ireland; and
- Central Europe - Czech Republic, Hungary and Slovakia.
- Retail banking, insurance and money services through Tesco Bank in the UK
(Tesco Bank).
In February 2024, the Board announced the sale of the Group's banking
operation ('Banking operations'), which has been consequently classified as a
discontinued operation. Refer to Note 6 for further details. The remaining
insurance business and money services are included within continuing
operations. Both continuing and discontinued elements remain within the Tesco
Bank segment, reflecting the Group's organisational structure and internal
reporting to the CODM at the year end.
The CODM uses adjusted operating profit, as reviewed at periodic Executive
Committee meetings, as the key measure of the segments' results as it
reflects the segments' trading performance that aids comparability over time
for the financial year under evaluation. Adjusted operating profit is a
consistent measure within the Group as defined within the Glossary. Refer to
Note 3 for adjusting items. Inter-segment revenue between the 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:
52 weeks ended 24 February 2024 UK & ROI Central Total Tesco Total segments at Foreign exchange Exclude: Continuing operations at
At constant exchange rates
£m
Europe
Retail
Bank
constant
£m
Banking operations
actual
£m
£m
£m
exchange
£m
exchange
£m
£m
Revenue 62,864 4,388 67,252 1,521 68,773 124 (710) 68,187
Less: Fuel sales (6,537) (171) (6,708) - (6,708) (2) - (6,710)
Sales 56,327 4,217 60,544 1,521 62,065 122 (710) 61,477
Adjusted operating profit 2,669 90 2,759 148 2,907 1 (79) 2,829
Adjusting items (Note 3) 19 (23) (4) (741) (745) (1) 738 (8)
Operating profit 2,688 67 2,755 (593) 2,162 - 659 2,821
Adjusted operating margin 4.2% 2.1% 4.1% 9.7% 4.2% 11.1% 4.1%
Tesco Bank segmental revenue of £1,521m (2023: £1,234m) comprises continuing
interest income of £94m (2023: £38m), fees and commissions income of £203m
(2023: £170m), insurance revenue of £514m (2023: £458m) and revenue within
the discontinued Banking operations of £710m (2023: £568m).
52 weeks ended 24 February 2024 UK & ROI Central Total Tesco Total Exclude: Continuing operations at actual exchange
At actual exchange rates
£m
Europe
Retail
Bank
Banking operations
£m
£m
£m
£m segments
£m
£m
Revenue 62,880 4,496 67,376 1,521 68,897 (710) 68,187
Less: Fuel sales (6,536) (174) (6,710) - (6,710) - (6,710)
Sales 56,344 4,322 60,666 1,521 62,187 (710) 61,477
Adjusted operating profit 2,670 90 2,760 148 2,908 (79) 2,829
Adjusting items (Note 3) 19 (24) (5) (741) (746) 738 (8)
Operating profit 2,689 66 2,755 (593) 2,162 659 2,821
Adjusted operating margin 4.2% 2.0% 4.1% 9.7% 4.2% 11.1% 4.1%
Share of post-tax profits of joint ventures and associates 6
Finance income 267
Finance costs (805)
Profit before tax 2,289
52 weeks ended 25 February 2023 UK & ROI Central Total Tesco Total Exclude: Continuing operations at actual
At actual exchange rates
£m
Europe
Retail
Bank (restated*)
Banking operations
exchange (restated*)
£m
£m
£m segments (restated*)
£m
(restated*)
£m
£m
Revenue 60,246 4,410 64,656 1,234 65,890 (568) 65,322
Less: Fuel sales (7,877) (229) (8,106) - (8,106) - (8,106)
Sales 52,369 4,181 56,550 1,234 57,784 (568) 57,216
Adjusted operating profit 2,307 180 2,487 135 2,622 (113) 2,509
Adjusting items (Note 3) (1,058) (36) (1,094) (11) (1,105) 6 (1,099)
Operating profit 1,249 144 1,393 124 1,517 (107) 1,410
Adjusted operating margin 3.8% 4.1% 3.8% 10.9% 4.0% 19.9% 3.8%
Share of post-tax profits of joint ventures and associates 8
Finance income 87
Finance costs (623)
Profit before tax 882
* Comparatives have been restated following the adoption of IFRS 17 and
re-presented to disclose Banking operations as a discontinued operation. Refer
to Notes 1, 6 and 22 for further details.
Balance sheet
The following tables show segment net assets and net debt (cash and cash
equivalents, short-term investments, joint venture loans, bank and other
borrowings, lease liabilities, derivative financial instruments and net debt
of the disposal group). Lease liabilities, joint venture loans and interest
receivables have been allocated to each segment. All other components of net
debt have been included within the unallocated segment to reflect how these
balances are managed. Intercompany transactions have been eliminated other
than intercompany transactions with Tesco Bank in net debt. Balances in
relation to the discontinued Banking operations have been included in the
Tesco Bank segment in both current and prior year.
.At 24 February 2024 UK & ROI Central Tesco Bank Unallocated Total
£m
Europe
£m
£m
£m
£m
Goodwill and other intangible assets((a)) 4,713 33 320 - 5,066
Property, plant and equipment and investment property 15,707 1,475 63 - 17,245
Right of use assets 5,038 439 1 - 5,478
Non-current assets held for sale 23 62 - - 85
Net assets of the disposal group excluding net debt((b)) - - 758 - 758
Net debt (including Tesco Bank)((c)) (6,926) (575) (102) (2,263) (9,866)
Other net assets/(liabilities) (7,101) (300) 300 - (7,101)
Total net assets 11,454 1,134 1,340 (2,263) 11,665
(a) Refer to Note 11 for the allocation of goodwill between remaining
operations and the Banking operations disposal group classified as held for
sale.
(b) Excludes £(182)m of net debt items within the Tesco Bank segment
relating to the Banking operations disposal group.
(c) Refer to Note 21.
At 25 February 2023 UK & ROI Central Tesco Bank Unallocated((b)) Total
£m
Europe
(restated((a)))
£m
£m
£m (restated((a)))
£m
Goodwill and other intangible assets 4,715 37 623 - 5,375
Property, plant and equipment and investment property 15,346 1,468 72 - 16,886
Right of use assets 5,057 433 10 - 5,500
Assets of the disposal group and non-current assets held for sale 25 169 - 16 210
Net debt (including Tesco Bank)((c)) (7,036) (553) 151 (2,904) (10,342)
Other net assets/(liabilities) (6,414) (310) 1,320 - (5,404)
Total net assets 11,693 1,244 2,176 (2,888) 12,225
(a) Comparatives have been restated following the adoption of IFRS 17. Refer
to Notes 1 and 22 for further details.
(b) Includes £16m of assets and £(14)m of items within net debt relating
to residual properties and leases with respect to the Group's operation in
Poland.
(c) Refer to previous table for footnote.
Other segment information
The table below shows the Group's total capital expenditure, depreciation and
amortisation, and impairment loss on financial assets, reconciling to
continuing operations:
52 weeks ended 24 February 2024 UK & ROI Central Tesco Total Exclude: Banking operations Continuing operations
£m
Europe
Bank
£m
£m
£m
£m segments
£m
Capital expenditure (including acquisitions through business combinations):
Property, plant and equipment((a)(b)) 1,091 99 8 1,198 - 1,198
Goodwill and other intangible assets((c)) 255 12 25 292 (22) 270
Depreciation and amortisation:
Property, plant and equipment (802) (86) (11) (899) 3 (896)
Right of use assets (496) (46) (2) (544) 1 (543)
Other intangible assets (235) (12) (33) (280) 25 (255)
Impairment:
(Loss)/reversal on financial assets 1 1 (65) (63) 65 2
(a) Includes £65m of land and buildings related to obtaining control of The
Tesco Coral Limited Partnership (2023: £248m of land and buildings related to
obtaining control of The Tesco Dorney Limited Partnership). Refer to Note 9.
(b) Includes £nil (2023: £42m) of property, plant and equipment acquired
through business combinations.
(c) Includes £17m (2023: £31m) of goodwill and other intangible assets
acquired through business combinations.
52 weeks ended 24 February 2023 UK & ROI Central Tesco Total segments((d)) Exclude: Banking operations((d)) Continuing operations((d))
£m
Europe
Bank((d))
£m
£m
£m
£m £m
Capital expenditure (including acquisitions through business combinations):
Property, plant and equipment((a)(b)) 1,176 104 14 1,294 (2) 1,292
Goodwill and other intangible assets((c)) 259 12 37 308 (26) 282
Depreciation and amortisation:
Property, plant and equipment (788) (84) (10) (882) 2 (880)
Right of use assets (500) (37) (2) (539) 1 (538)
Investment property (1) - - (1) - (1)
Other intangible assets (226) (10) (42) (278) 31 (247)
Impairment:
(Loss)/reversal on financial assets (5) (1) (60) (66) 60 (6)
(a)-(c) Refer to previous table for footnotes.
(d) Comparatives have been restated following the adoption of IFRS 17 and to
present Banking operations as a discontinued operation. Refer to Notes 1, 6
and 22 for further details.
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 continuing and discontinued operations.
Tesco Bank
Retail Continuing Discontinued Tesco
operations operations Group
52 weeks ended 24 February 2024 Before adjusting Adjusting Total Before adjusting items Adjusting items Total Total Total
£m
£m
£m
£m
items items £m £m
£m £m
Operating profit/(loss) 2,760 (5) 2,755 69 (3) 66 (659) 2,162
Depreciation and amortisation 1,602 75 1,677 17 - 17 29 1,723
ATM net income (9) - (9) 9 - 9 - -
(Profit)/loss arising on sale of property, plant and equipment, investment 10 (63) (53) - - - - (53)
property, intangible assets, assets held for sale and early termination of
leases
(Profit)/loss arising on sale of joint ventures and associates - (9) (9) - - - - (9)
(Profit)/loss arising on sale of subsidiaries - (12) (12) - - - - (12)
Net impairment (reversal)/loss on property, plant and equipment, right of use - (28) (28) - - - - (28)
assets, intangible assets and investment property
Net remeasurement (gain)/loss on non-current assets held for sale - (12) (12) - - - 732 720
Defined benefit pension scheme payments (29) - (29) - - - - (29)
Share-based payments 75 - 75 (3) - (3) 6 78
Fair value movements included in operating profit/(loss) 6 - 6 3 - 3 62 71
Cash generated from/(used in) operations excluding working capital 4,415 (54) 4,361 95 (3) 92 170 4,623
(Increase)/decrease in working capital 418 (44) 374 (105) 1 (104) (7) 263
Cash generated from/(used in) operations 4,833 (98) 4,735 (10) (2) (12) 163 4,886
Interest paid (809) - (809) (14) - (14) (1) (824)
Corporation tax paid (214) - (214) (9) - (9) - (223)
Net cash generated from/(used in) operating activities(*) 3,810 (98) 3,712 (33) (2) (35) 162 3,839
Proceeds from sale of property, plant and equipment, investment property, 2 53 55 - - - - 55
intangible assets and assets classified as held for sale
Purchase of property, plant and equipment, investment property and other (66) 7 (59) - - - - (59)
long-term assets - property buybacks and store purchases
Purchase of property, plant and equipment, investment property and other (1,039) - (1,039) (10) - (10) - (1,049)
long-term assets - other capital expenditure
Purchase of intangible assets (250) - (250) (6) - (6) (22) (278)
Disposal of subsidiaries, net of cash disposed - 15 15 - - - - 15
Acquisition of subsidiaries, net of cash acquired (17) - (17) - - - - (17)
Proceeds from the sale of joint ventures and associates - 9 9 - - - - 9
Increase in loans to joint ventures and associates (61) - (61) - - - - (61)
Investments in joint ventures and associates (9) - (9) - - - - (9)
Net (investments in)/proceeds from sale of short-term investments (507) - (507) - - - - (507)
Proceeds from sale of other investments 5 - 5 347 - 347 - 352
Purchase of other investments (5) - (5) (385) - (385) - (390)
Dividends received from joint ventures and associates 9 - 9 - - - - 9
Special dividend received from Tesco Bank 250 - 250 (250) - (250) - -
Interest received 249 - 249 - - - - 249
Cash inflows from derivative financial instruments 5 - 5 - - - - 5
Cash outflows from derivative financial instruments (24) - (24) - - - - (24)
Net cash generated from/(used in) investing activities(*) (1,458) 84 (1,374) (304) - (304) (22) (1,700)
Own shares purchased for cancellation (752) - (752) - - - - (752)
Own shares purchased for share schemes (93) - (93) - - - - (93)
Repayment of capital element of obligations under leases (623) - (623) (2) - (2) (2) (627)
Cash outflows exceeding the incremental increase in assets in a property (62) - (62) - - - - (62)
buyback
Increase in borrowings 682 - 682 - - - 550 1,232
Repayment of borrowings (775) - (775) - - - - (775)
Cash inflows from derivative financial instruments 98 - 98 - - - - 98
Cash outflows from derivative financial instruments (102) - (102) - - - - (102)
Dividends paid to equity holders (777) (1) (778) - - - - (778)
Net cash generated from/(used in) financing activities(*) (2,404) (1) (2,405) (2) - (2) 548 (1,859)
Net increase/(decrease) in cash and cash equivalents (52) (15) (67) (339) (2) (341) 688 280
Cash and cash equivalents at the beginning of the year 1,565
Effect of foreign exchange rate changes 29
Cash and cash equivalents, including cash held in the disposal group, at the 1,874
end of the year
Less: Cash held in the disposal group (346)
Cash and cash equivalents at the end of the year 1,528
* Refer to page 55 for the reconciliation of the APM: Retail free cash flow.
Retail Tesco Bank continuing Discontinued Tesco
operations (restated((a))) operations((b)) Group
(restated((a)))
52 weeks ended 25 February 2023 Before adjusting Adjusting Total Before adjusting items Adjusting items Total Total Total
£m
£m
£m
£m
items items £m £m
£m £m
Operating profit/(loss) 2,487 (1,094) 1,393 22 (5) 17 98 1,508
Depreciation and amortisation 1,570 76 1,646 19 - 19 35 1,700
ATM net income (16) - (16) 16 - 16 - -
(Profit)/loss arising on sale of property, plant and equipment, investment 13 (91) (78) - - - 2 (76)
property, intangible assets, assets held for sale and early termination of
leases
(Profit)/loss arising from sale of other investments - - - 3 - 3 - 3
Net impairment loss on property, plant and equipment, right of use assets, - 982 982 - - - - 982
intangible assets and investment property
Net remeasurement loss on non-current assets held for sale - 14 14 - - - 9 23
Defined benefit pension scheme payments (23) - (23) - - - - (23)
Share-based payments 64 - 64 (2) - (2) (3) 59
Fair value movements included in operating profit/(loss) - - - 15 - 15 55 70
Cash generated from/(used in) operations excluding working capital 4,095 (113) 3,982 73 (5) 68 196 4,246
(Increase)/decrease in working capital 468 52 520 (39) (3) (42) (227) 251
Cash generated from/(used in) operations 4,563 (61) 4,502 34 (8) 26 (31) 4,497
Interest paid (643) - (643) (9) - (9) - (652)
Corporation tax paid (107) - (107) (17) - (17) 1 (123)
Net cash generated from/(used in) operating activities((c)) 3,813 (61) 3,752 8 (8) - (30) 3,722
Proceeds from sale of property, plant and equipment, investment property, 6 335 341 1 - 1 - 342
intangible assets and assets classified as held for sale
Purchase of property, plant and equipment, investment property and other (14) (40) (54) - - - - (54)
long-term assets - property buybacks
Purchase of property, plant and equipment, investment property and other (902) - (902) (13) - (13) (2) (917)
long-term assets - other capital expenditure
Purchase of intangible assets (241) - (241) (12) - (12) (26) (279)
Acquisition of subsidiaries, net of cash acquired (66) - (66) (5) - (5) - (71)
Increase in loans to joint ventures and associates (1) - (1) - - - - (1)
Investments in joint ventures and associates (10) - (10) - - - - (10)
Net (investments in)/proceeds from sale of short-term investments 451 - 451 - - - - 451
Proceeds from sale of other investments 1 - 1 229 - 229 - 230
Purchase of other investments (206) - (206) (323) - (323) - (529)
Dividends received from joint ventures and associates 14 - 14 - - - - 14
Dividends received from Tesco Bank 54 - 54 (54) - (54) - -
Interest received 70 - 70 - - - - 70
Cash inflows from derivative financial instruments 54 - 54 - - - - 54
Cash outflows from derivative financial instruments (6) - (6) - - - - (6)
Net cash generated from/(used in) investing activities((c)) (796) 295 (501) (177) - (177) (28) (706)
Own shares purchased for cancellation (781) - (781) - - - - (781)
Own shares purchased for share schemes (86) - (86) - - - - (86)
Repayment of capital element of obligations under leases (589) - (589) (2) - (2) (2) (593)
Cash outflows exceeding the incremental increase in assets in a property (21) - (21) - - - - (21)
buyback
Repayment of borrowings (608) - (608) (101) - (101) - (709)
Cash inflows from derivative financial instruments 232 - 232 - - - - 232
Cash outflows from derivative financial instruments (365) - (365) (6) - (6) - (371)
Dividends paid to equity holders (858) (1) (859) - - - - (859)
Net cash generated from/(used in) financing activities((c)) (3,076) (1) (3,077) (109) - (109) (2) (3,188)
Net increase/(decrease) in cash and cash equivalents (59) 233 174 (278) (8) (286) (60) (172)
Cash and cash equivalents at the beginning of the year 1,771
Effect of foreign exchange rate changes (34)
Cash and cash equivalents at the end of the year 1,565
(a) Comparatives have been restated following the adoption of IFRS 17 and
re-presented to disclose Banking operations as a discontinued operation within
the Tesco Bank segment. Refer to Notes 1, 6 and 22 for further details.
(b) Comprising Banking operations and immaterial balances in relation to the
Group's residual properties in Poland. Refer to Note 6.
(c) Refer to page 55 for the reconciliation of the APM: Retail free cash
flow.
Note 3 Adjusting items
Group income statement
52 weeks ended 24 February 2024
Profit/(loss) for the year included the following adjusting items:
Cost of sales Administrative expenses Total adjusting items included within operating profit Finance income/ Taxation Adjusting items included within discontinued operations
£m
£m
£m
£m
(costs) £m
£m
Total adjusting items
£m
Property transactions((a)) 6 69 75 - (18) - 57
Disposal of China associate in a prior year((b)) - 9 9 - 23 - 32
Net impairment (loss)/reversal of non-current assets((c)) 35 (7) 28 - 38 - 66
Restructuring((d)) (45) (5) (50) - 12 - (38)
Amortisation of acquired intangible assets((e)) - (74) (74) - 18 - (56)
Disposal of subsidiary((f)) - 12 12 - - - 12
Banking operations disposal costs((g)) - (8) (8) - - - (8)
Net pension finance income/(costs)((h)) - - - (18) 5 - (13)
Fair value remeasurements of financial instruments((h)) - - - 38 (10) - 28
Total adjusting items from continuing operations (4) (4) (8) 20 68 - 80
Adjusting items relating to discontinued operations((i)) - - - - - (628) (628)
Total adjusting items (4) (4) (8) 20 68 (628) (548)
(a) The Group disposed of surplus properties that generated a profit before
tax of £63m (2023: £91m). In addition, there was a £12m gain (2023: £nil)
arising from the remeasurement of assets held for sale, subsequently
reclassified to property, plant and equipment.
(b) During the current financial year, the Group reached a settlement with
the Chinese tax authorities in respect of the sale of the Group's 20% share of
Gain Land Limited to China Resources Holdings on 28 February 2020. As a result
of the settlement the Group released a tax provision of £23m (2023: £nil).
Additionally, final proceeds of £9m were recognised upon settlement.
(c) Refer to Note 11 for further details on net impairment (loss)/reversal
of non-current assets.
(d) Provisions relating to operational restructuring changes announced as
part of 'Save to Invest', a multi-year programme which commenced in June 2022.
The total pre-tax cost of the programme to date is £(232)m (2023: £(182)m).
Future cost savings will not be reported within adjusting items.
(e) Amortisation of acquired intangibles relates to historical inorganic
business combinations and does not reflect the Group's ongoing trading
performance.
(f) On 30 June 2023 the Group disposed of its Booker subsidiary
Ritter-Courivaud Limited, part of the UK & ROI segment.
(g) Costs incurred within the continuing Group in relation to the sale of
Banking operations.
(h) Net pension finance costs and fair value remeasurements of financial
instruments are included within adjusting items, as they can fluctuate
significantly due to external market factors that are outside management's
control. Refer to Note 4 for details of finance income and costs. Refer to
Note 18 for details of pension schemes.
(i) Refer to Note 6.
52 weeks ended 25 February 2023
Profit/(loss) for the year included the following adjusting items:
Cost of sales Administrative expenses Total adjusting items included within operating profit Finance income/ Taxation Adjusting items included within discontinued operations
£m
£m
£m
£m
(costs) £m
£m
Total adjusting items
(restated*)
£m
Property transactions 36 55 91 - 29 - 120
Net impairment (loss)/reversal of non-current assets (965) (17) (982) - 129 - (853)
Fair value less cost of disposal movements on assets held for sale - (14) (14) - 1 - (13)
Restructuring (107) (25) (132) - 26 - (106)
Disposal of Asia operations - 2 2 - - - 2
ATM business rates refund 7 - 7 - (1) - 6
Release of onerous contract provision - 5 5 - - - 5
Amortisation of acquired intangible assets - (76) (76) - 14 - (62)
Net pension finance income - - - 80 (15) - 65
Fair value remeasurements of financial instruments - - - (53) 12 - (41)
Total adjusting items from continuing operations (1,029) (70) (1,099) 27 195 - (877)
Adjusting items relating to discontinued operations* - - - - - (13) (13)
Total adjusting items (1,029) (70) (1,099) 27 195 (13) (890)
* Comparatives have been restated to present Banking operations as a
discontinued operation. Refer to Notes 1 and 6.
Group cash flow statement
The table below shows the impact of adjusting items on the Group cash flow
statement:
Cash flows from Cash flows from Cash flows from
operating activities
investing activities
financing activities
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
2024
2023
2024
2023
2024
2023
£m (restated((a))) £m £m £m
£m
£m
Property transactions((b)) - - 53 335 - -
Disposal of subsidiaries((c)) - - 15 - - -
Restructuring((d)) (100) (68) - - - -
Disposal of China associate - - 9 - - -
Customer redress claims settlement in Tesco Bank - (4) - - - -
ATM business rates refund - 5 - - - -
Disposal of Asia operations - (2) - - - -
Acquisition of property joint venture - - 7 (40) - -
Special dividend - - - - (1) (1)
Total adjusting items from continuing operations (100) (69) 84 295 (1) (1)
Adjusting items relating to discontinued operations (1) (8) - - - -
Total (101) (77) 84 295 (1) (1)
(a) Comparatives have been restated to present Banking operations as a
discontinued operation. Refer to Notes 1 and 6.
(b) Property transactions include £14m proceeds (2023: £43m) relating to
the sale of stores in Poland not included in the sale of the corporate
business.
(c) On 30 June 2023, the Group disposed of its Booker subsidiary
Ritter-Courivaud Limited, part of the UK & ROI segment.
(d) Cash outflows relating to operational restructuring changes as part of
the multi-year 'Save to Invest' programme, which commenced in June 2022.
Note 4 Finance income and costs
Continuing operations Notes 52 weeks 52 weeks
2024
2023
£m
(restated((a)))
£m
Finance income
Interest and similar income 252 78
Interest income from other investments 12 3
Finance income on net investment in leases 2 4
Finance income from reinsurance contracts held 1 2
Total finance income 267 87
Finance costs
GBP MTNs and loans (190) (160)
EUR MTNs (113) (53)
USD bonds (15) (18)
Interest expense on lease liabilities (373) (371)
Finance expense from insurance contracts issued (7) (5)
Other interest costs (127) (43)
Total finance costs before adjusting items (825) (650)
Fair value remeasurements of financial instruments((b)) 38 (53)
Net pension finance income/(cost) 18 (18) 80
Total finance costs (805) (623)
Net finance costs (538) (536)
(a) Comparatives have been restated following the adoption of IFRS 17 and
re-presented to disclose Banking operations as a discontinued operation. Refer
to Notes 1, 6 and 22 for further details.
(b) Fair value remeasurements of financial instruments included £nil (2023:
£70m gain) relating to the repurchase of long-dated bonds.
Note 5 Taxation
Recognised in the Group income statement
Continuing operations 52 weeks 52 weeks
2024
2023
£m
(restated*)
£m
Current tax (credit)/charge
UK corporation tax 351 174
Overseas tax 71 78
Adjustments in respect of prior years (29) 19
393 271
Deferred tax (credit)/charge
Origination and reversal of temporary differences 133 (15)
Adjustments in respect of prior years (4) (35)
Change in tax rate 3 3
132 (47)
Total income tax (credit)/charge 525 224
* Comparatives have been restated following the adoption of IFRS 17 and
re-presented to disclose Banking operations as a discontinued operation. Refer
to Notes 1, 6 and 22 for further details.
Reconciliation of effective tax charge
Continuing operations 52 weeks 52 weeks
2024
2023
£m
(restated((a)))
£m
Profit/(loss) before tax 2,289 882
Tax credit/(charge) at 24.45% (2023: 19%) (560) (168)
Effect of:
Non-qualifying depreciation((b)) (39) (5)
Expenses not deductible (24) (23)
Property items taxed on a different basis to accounting entries 6 33
Net impairment (loss)/reversal of non-current assets 46 (87)
Differences in overseas taxation rates 15 11
Adjustments in respect of prior years 33 16
Share of profits of joint ventures and associates 2 2
Change in tax rate (3) (3)
Irrecoverable withholding tax (1) -
Total income tax credit/(charge) (525) (224)
Effective tax rate 22.9% 25.4%
(a) Comparatives have been restated following the adoption of IFRS 17 and
re-presented to disclose Banking operations as a discontinued operation. Refer
to Notes 1, 6 and 22 for further details.
(b) This figure has been reduced by the tax effect of the super-deduction of
£3m (2023: £30m) in respect of tax relief for fixed assets.
Reconciliation of effective tax charge on adjusted profit before tax
Continuing operations 52 weeks 52 weeks
2024
2023
£m
(restated((a)))
£m
Profit/(loss) before tax 2,289 882
Exclude: Adjusting items (12) 1,072
Adjusted profit before tax 2,277 1,954
Tax credit/(charge) at 24.45% (2023: 19%) (557) (371)
Effect of:
Non-qualifying depreciation((b)) (39) (5)
Expenses not deductible (23) (24)
Differences in overseas taxation rates 19 10
Adjustments in respect of prior years 10 (3)
Share of profits of joint ventures and associates 2 2
Change in tax rate((c)) (4) (28)
Irrecoverable withholding tax (1) -
Total income tax credit/(charge) before adjusting items (593) (419)
Adjusted effective tax rate 26.0% 21.4%
(a)-(b) Refer to previous table for footnotes.
(c) Change in tax rate includes £nil (2023: £31m) in relation to provision
of deferred tax at 25% (2023: 25%) on assets qualifying for super-deductions.
Deferred tax
The following are the major deferred tax (liabilities)/assets recognised by
the Group and movements thereon during the current and prior financial years,
measured using the tax rates that are expected to apply when the liability is
settled or the asset realised based on the tax rates that have been enacted or
substantively enacted by the balance sheet date. Deferred tax assets are
recognised when it is probable sufficient taxable profits will be available to
utilise deductible temporary differences or unused tax losses. This assessment
is based on the Group's three-year long-term plan which is updated and
approved annually by the Board and is consistent with the Group's longer-term
viability statement and impairment assessments.
Property-related Acquired intangibles Post- Share-based Other Tax losses Financial Total
£m
employment
payments
£m
instruments
£m
items((a))
£m short-term
£m
benefits((b))
timing
£m
differences
£m
£m
At 26 February 2022 (as previously reported) (352) (108) (451) 39 45 6 (4) (825)
Cumulative adjustment on initial application of IFRS 17 - - - - 3 - - 3
At 26 February 2022 (restated((c))) (352) (108) (451) 39 48 6 (4) (822)
(Charge)/credit to the Group income statement (89) 15 (13) 12 14 140 (32) 47
(Charge)/credit to the Group statement of changes in equity - - - (11) - - - (11)
(Charge)/credit to the Group statement of comprehensive income/(loss) - - 719 - - - 27 746
Discontinued operations 9 - - (1) - - - 8
Foreign exchange and other movements (2) (2) - - 1 - - (3)
At 25 February 2023 (restated((c))) (434) (95) 255 39 63 146 (9) (35)
(Charge)/credit to the Group income statement (85) 18 2 - 11 (73) (5) (132)
(Charge)/credit to the Group statement of changes in equity - - - 10 - - - 10
(Charge)/credit to the Group statement of comprehensive income/(loss) - - (95) - - - (8) (103)
Discontinued operations 27 - - - - - (3) 24
Foreign exchange and other movements (1) - - - - - - (1)
At 24 February 2024 (493) (77) 162 49 74 73 (25) (237)
(a) Property-related items include a deferred tax liability on rolled-over
gains of £424m (2023: £421m), deferred tax assets on capital losses of
£242m (2023: £242m) and deferred tax assets on IFRS 16 balances of £199m
(2023: £235m). The remaining balance relates to accelerated tax depreciation.
(b) The deferred tax asset on post-employment retirement benefits includes a
deferred tax asset of £nil (2023: £155m) arising from a one-off contribution
of £2.5bn paid in December 2020 on which tax deductions are spread over 4
years, resulting in the closing balance entirely relating to pension schemes
in deficit. Refer to Note 18 for further details.
(c) Comparatives have been restated following the adoption of IFRS 17. Refer
to Notes 1 and 22 for further details.
Changes in tax law or its interpretation
The Group is within the scope of the Organisation for Economic Co-operation
and Development (OECD) Pillar Two model rules. Pillar Two legislation has been
enacted in the UK introducing a global minimum effective tax rate of 15%. The
legislation implements a domestic top-up tax and a multinational top-up tax,
effective for accounting periods starting on or after 31 December 2023. The
Group has applied the exception under IAS 12 to recognising and disclosing
information about deferred tax assets and liabilities related to top-up income
taxes. Under the legislation, the Group is liable to pay a top-up tax for the
difference between its effective tax rate per jurisdiction and the 15% minimum
rate. The Group has performed an assessment of the potential exposure to
Pillar Two income taxes and there is not expected to be a material impact on
the Group's tax charge.
Note 6 Discontinued operations
The following table presents a breakdown of the assets and liabilities of
disposal groups and non-current assets classified as held for sale.
2024 2023((b))
Banking operations Other((a)) Total Total
£m
£m
£m
£m
Assets of the disposal group 7,698 - 7,698 11
Non-current assets classified as held for sale((c)) - 85 85 199
Total assets of the disposal group and non-current assets classified as held 7,698 85 7,783 210
for sale
Liabilities of the disposal group (7,122) - (7,122) (14)
Total net assets of the disposal group and non-current assets classified as 576 85 661 196
held for sale
(a) Other 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. Due to
the individual nature of each property, fair values are classified as Level 3
within the fair value hierarchy.
(b) The assets and liabilities of the disposal group in the comparative
period included £(14)m of net debt relating to residual properties and leases
with respect to the Group's operation in Poland. During the year, the net debt
and £11m of assets were reclassified from the disposal group to continuing
operations, as the residual balances no longer met the held for sale
classification criteria.
(c) The movement in other non-current assets classified as held for sale in
the current year includes a £12m gain arising from fair value remeasurement
and £(126)m of assets reclassified to property, plant and equipment as these
balances no longer met the held for sale criteria.
Disposal of Banking operations
In February 2024, the Group reached agreement on the terms of a proposed sale
of its banking operations, comprising personal loans, credit cards, customer
deposits, and associated operational capabilities ('Banking operations') for
consideration of £600m. The sale is subject to regulatory approval and is
expected to complete within 12 months of the reporting date.
The related assets and liabilities have been classified as held for sale in
the Banking operations disposal group within the Tesco Bank segment, with
Group results re-presented to present Banking operations as a discontinued
operation. Refer to Note 1 for further details.
Balance sheet of the disposal group
The following table presents a breakdown of the assets and liabilities of the
Banking operations disposal group:
2024
£m
Loans and advances to customers 7,669
Derivative financial instruments 54
Trade and other receivables 47
Cash and cash equivalents 346
Excess loss on remeasurement of the disposal group (418)
Assets of the disposal group classified as held for sale 7,698
Trade and other payables (81)
Borrowings (549)
Provisions (19)
Lease liabilities (17)
Deposits from customers (6,440)
Derivative financial instruments (16)
Liabilities of the disposal group classified as held for sale (7,122)
Upon classification as held for sale, the Group recognised a £(732)m loss on
remeasuring the disposal group to fair value less costs to sell. The loss was
allocated to goodwill and other assets of the disposal group within the scope
of the measurement requirements of IFRS 5, which were fully written off. The
excess loss remaining was then recognised as a reduction in the total assets
of the disposal group, which primarily comprise loans and advances to
customers measured under IFRS 9.
The Group has continued to measure financial assets within the disposal group
under IFRS 9, as they are out of scope of the measurement requirements of IFRS
5. Loans and advances to customers and customer deposits are measured at
amortised cost. Derivative financial instruments are measured at fair value as
Level 2 instruments. In the year Tesco Bank issued £550m of notes, in
relation to securitisation transactions, which form part of the Banking
operations disposal group. Interest payable on these notes is based on
sterling overnight index average (SONIA) plus a margin of 80 to 92 basis
points (2023: no notes in issue).
Income statement of discontinued operations
2024 2023((a))
Banking operations Banking operations Other Total
£m
£m
£m
£m
Revenue 710 568 - 568
Operating costs (631) (455) - (455)
Adjusted operating profit/(loss) 79 113 - 113
Adjusted finance (costs)/income (1) (2) - (2)
Adjusted profit/(loss) before tax 78 111 - 111
Taxation (22) (20) - (20)
Adjusted profit/(loss) after tax 56 91 - 91
Fair value remeasurement of assets of the disposal group((b)) (732) - - -
Fair value remeasurement of non-current assets held for sale((c)) - - (9) (9)
Other adjusting items((d)) (11) (4) - (4)
Tax on adjusting items 115 - - -
Total adjusting items (628) (4) (9) (13)
Total profit/(loss) after tax of discontinued operations (572) 87 (9) 78
(a) Comparatives have been re-presented to disclose Banking operations as a
discontinued operation.
(b) Fair value remeasurement of assets of the disposal group includes
£(211)m of goodwill impairment, £(96)m remeasurements on non-current assets,
£(418)m loss in excess of the carrying amount of the non-current assets and
£(7)m costs already incurred in relation to the sale. Refer to Note 11 for
further details on goodwill.
(c) Fair value remeasurement of non-current assets held for sale in the
prior year of £(9)m primarily relate to surplus properties in Poland.
(d) Other adjusting items of £(11)m in the current year comprises £(6)m
indirect costs incurred in relation to the sale of Banking operations and
£(5)m of costs relating to fair value remeasurement of financial assets.
Other adjusting items of £(4)m in the prior year primarily relate to
operational restructuring changes as part of the 'Save to Invest' programme.
Cash flow statement of discontinued operations
2024 2023
Banking operations Banking operations
£m
£m
Net cash flows from operating activities 162 (30)
Net cash flows from investing activities (22) (28)
Net cash flows from financing activities 548 (2)
Net cash flows from discontinued operations 688 (60)
Expected credit losses (ECLs) of the Banking operations disposal group
The Banking operations disposal group has specific risks in relation to ECLs
on loans and advances to customers. The financial risk for ECLs is that a
retail customer or counterparty to a wholesale transaction will fail to meet
its obligations in accordance with contractually agreed terms and Tesco Bank
will incur losses as a result.
To minimise the potential exposure to bad debts that are outside risk
appetite, processes, systems and limits have been established that cover the
end-to-end retail credit risk customer life cycle. These include credit
scoring, affordability, credit policies and guides, and monitoring and
reporting. Controls and risk mitigants include daily monitoring of exposures,
investing in counterparties with investment-grade ratings, restricting the
amount that can be invested with one counterparty and credit-rating mitigation
techniques. Assessment of the ECLs on loans and advances to customers has
taken into account a range of macroeconomic scenarios.
The table below presents the maximum exposure of the disposal group to credit
risk i.e. total gross exposure, by stages.
2024 2023 (restated((a)))
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
£m Not past <30 days >30 days Total £m £m £m Not past <30 days >30 days Total £m £m
due
past due
past due
£m
due
past due
past due
£m
£m
£m
£m
£m
£m
£m
Loans and advances to customers 6,687 1,141 44 30 1,215 233 8,135 5,687 1,559 40 24 1,623 202 7,512
Loan commitments - loans and advances to customers 12,257 574 8 1 583 10 12,850 11,508 690 6 - 696 8 12,212
Total gross exposure((b)) 18,944 1,715 52 31 1,798 243 20,985 17,195 2,249 46 24 2,319 210 19,724
Total loss allowance((c)) 70 189 18 17 224 139 433 56 258 19 14 291 113 460
Total net exposure - loans and advances to customers 6,617 952 26 13 991 94 7,702 5,631 1,301 21 10 1,332 89 7,052
Coverage - loans and advances to customers 1% 17% 41% 57% 18% 60% 5% 1% 17% 48% 58% 18% 56% 6%
(a) Comparatives have been restated following the adoption of IFRS 17. Refer
to Notes 1 and 22 for further details.
(b) For loans and advances to customers, the balances are based on gross
carrying amounts. For loan commitments, the amounts represent the amount for
which the Banking operations disposal group is contractually committed.
(c) The loss allowance in respect of loan commitments in relation to credit
card products is included within the total loss allowance for loans and
advances to customers above to the extent that it is below the gross carrying
amount of loans and advances to customers. Where the loss allowance exceeds
the gross carrying amount, any excess is included within the liabilities of
the disposal group as a provision.
There are four classifications of credit quality for all credit exposures:
high, satisfactory, low and below standard. Credit exposures are segmented
according to the probability of default (PD), with credit impaired reflecting
a PD of 100%.
2024 2023 (restated*)
12-month PD Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
%
£m
£m
£m
£m
£m
£m
£m
£m
Loans and advances to customers:
High quality <=3.02 6,212 389 - 6,601 5,493 742 - 6,235
Satisfactory quality >3.03 - 11.10 464 570 - 1,034 186 610 - 796
Low quality and below standard => 11.11 11 256 - 267 8 271 - 279
Credit impaired 100 - - 233 233 - - 202 202
6,687 1,215 233 8,135 5,687 1,623 202 7,512
* Comparatives have been restated following the adoption of IFRS 17. Refer to
Notes 1 and 22 for further details.
The ECLs on loans and advances to customers was updated at the reporting date
to reflect changes in credit risk. A three-stage model for impairment has been
applied and further details on ECLs are presented below.
The table below presents the reconciliation of ECL allowances on loans and
advances to customers.
2024 2023 (restated*)
Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total
£m
£m
£m
£m
£m
£m
£m
£m
Gross exposure 6,687 1,215 233 8,135 5,687 1,623 202 7,512
Loan commitments 12,257 583 10 12,850 11,508 696 8 12,212
Total exposure 18,944 1,798 243 20,985 17,195 2,319 210 19,724
Allowance for expected credit losses
At the beginning of the year (56) (291) (113) (460) (93) (266) (128) (487)
Transfers:
Transfers from stage 1 to stage 2 7 (7) - - 19 (19) - -
Transfers from stage 2 to stage 1 (104) 104 - - (20) 20 - -
Transfers to stage 3 1 42 (43) - 3 21 (24) -
Transfers from stage 3 (1) (1) 2 - (1) (2) 3 -
Movements recognised in the Group income statement:
Net remeasurement following transfer of stage 75 (22) (57) (4) 8 (27) (54) (73)
New financial assets originated (35) (37) (11) (83) (24) (63) (7) (94)
Financial assets derecognised during the current financial year 6 14 3 23 6 5 3 14
Changes in risk parameters and other movements 36 (27) (25) (16) 48 41 (11) 78
Other movements:
Write-offs and asset disposals - - 105 105 - - 105 105
Transfers to provisions for liabilities and charges 1 1 - 2 (2) (1) - (3)
At the end of the year (70) (224) (139) (433) (56) (291) (113) (460)
Net exposure 6,617 991 94 7,702 5,631 1,332 89 7,052
Fair value adjustment (33) (75)
Carrying value at the end of the year 7,669 6,977
* Comparatives have been restated following the adoption of IFRS 17. Refer to
Notes 1 and 22 for further details.
Assessment of significant increase in credit risk
At each reporting date, the change in credit risk of the financial asset is
observed using a set of quantitative and qualitative criteria, together
with a backstop based on arrears status. For each financial asset, Tesco Bank
compares the lifetime PD at the reporting date with the lifetime PD that was
expected at the reporting date at initial recognition (PD threshold). Tesco
Bank has established PD thresholds for each type of product which vary
depending on initial term and term remaining. A number of qualitative criteria
are in place such as: forbearance offered to customers in financial
difficulty; risk-based pricing post-origination; credit indebtedness; credit
limit decrease; and pre-delinquency information. As a backstop, Tesco Bank
considers that if an account's contractual payments are more than 30 days past
due then a significant increase in credit risk has taken place.
The ECLs calculation and the measurement of significant deterioration in
credit risk both incorporate forward-looking information using a range of
macroeconomic scenarios, with key variables being the Bank of England base
rate, unemployment rate and gross domestic product.
There are four scenarios commissioned from a third-party provider:
Scenario Scenario assumptions Weighting (%)
Base No further increase in base rate, inflation trends downwards toward 2% target 40
by mid-2024. Unemployment expected to peak at 4.6%. Prospect of robust return
to growth forecasted for 2025.
Upside Improvements in energy supply and global supply chains leads to inflation of 30
2% by Q2 2024, base rates falling in Q2 2024 and commensurate increases in
business and consumer confidence.
Downside 1 Disruption to energy supplies and commodities from geopolitical tensions drive 25
wholesale price rises that are passed on to consumers leading to higher
inflation, 7% base rates in Q4 2024, and economic contraction until 2026.
Downside 2 Similar to Downside 1, but inflation remains higher for longer and Sterling 5
depreciates more markedly against the Dollar, base rates reach 8.7% in early
2025 and unemployment peaks to 7.9%.
The economic scenarios used include the following ranges of key indicators:
2024 2023
Five-year average Base Upside Downside 1 Downside 2 Base Upside Downside 1 Downside 2
40%
30%
25%
5%
40%
30%
25%
5%
Bank of England base rate((a)) 4.1% 3.5% 5.4% 7.2% 3.8% 3.0% 4.7% 5.8%
Gross domestic product((b)) 1.5% 2.0% 0.8% 0.1% 1.0% 1.5% 0.4% (0.1)%
Unemployment rate 4.4% 4.0% 5.5% 7.2% 5.2% 4.2% 6.5% 8.4%
Unemployment rate peak in year 4.4% 4.0% 5.7% 7.5% 5.4% 4.2% 6.8% 8.9%
(a) Simple average.
(b) Annual growth rates.
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 the
ECL allowance calculations as at 24 February 2024 and excludes specific
management overlays which are discussed further below:
Impact on the loss allowance
Key assumption Reasonably possible change 2024 2023
£m (restated*)
£m
Closing ECL allowance 433 460
Macroeconomic factors (100% weighted) Upside scenario (42) (59)
Base scenario (20) (11)
Downside scenario 1 55 65
Downside scenario 2 170 161
Probability of default Increase of 2.5% (2023: 10%) 30 32
Decrease of 2.5% (2023: 10%) (29) (31)
Loss given default Increase of 2.5% 10 10
Decrease of 2.5% (10) (10)
Probability of default threshold (staging) Increase of 20% (8) (9)
Decrease of 20% 13 13
Expected lifetime (revolving credit facility) Increase of 1 year 4 3
Decrease of 1 year (5) (5)
* Comparatives have been restated following the adoption of IFRS 17. Refer to
Notes 1 and 22 for further details.
Despite stability in the performance of the underlying portfolio, the
increased risk from a high inflationary environment and cost-of-living crisis
creates uncertainty on future loss projections and the current model outputs.
As a result, certain specific management overlays have been recognised to
address the prevailing downside risks and ensure the potential impacts of
future stress are adequately provided for, detailed below:
Overlay Description of adjustment 2024 2023
£m
£m
Underestimation risk Risk that the beneficial impact of recent credit loss trends incorporated into 8 68
credit risk models are transitive and may reverse due to the uncertain
economic climate
Cost of living A portion of Tesco Bank's customers may be more impacted by cost-of-living 20 22
pressures, with deterioration in their ability to repay unsecured lending
balances
Total overlays 28 90
Default
An account is deemed to have defaulted when Tesco Bank considers that a
customer is in significant financial difficulty and that the customer meets
certain quantitative and qualitative criteria regarding their ability to make
contractual payments when due. This includes instances such as when the
customer makes a declaration of significant financial difficulty; an account's
contractual payments are more than 90 days past due; or where the customer is
deceased.
A loan deemed uncollectable is written off against the related provision after
all of the necessary procedures have been completed and the amount of the loss
has been determined. The outstanding contractual amount of such assets written
off was £99m (2023: £115m).
Forbearance
Forbearance is relief granted by a lender to assist customers in financial
difficulty, through arrangements which temporarily allow the customer to pay
an amount other than the contractual amounts due. The main aim of forbearance
is to support customers in returning to a position where they are able to meet
their contractual obligations. This routinely, but not exclusively, includes
arrangements to repay arrears over a period of time, or short-term
concessions, where the borrower is allowed to make reduced repayments (or in
exceptional circumstances, no repayments) on a temporary basis.
Gross loans and Forbearance programmes as a proportion of total loans and Proportion of forbearance programmes covered by allowance
advances subject to
advances by category
for expected credit losses
forbearance programmes
2024 2023 2024 2023 2024 2023
£m
£m
%
%
%
%
Credit cards 123 102 3 3 53 49
Loans 40 30 1 1 44 31
Note 7 Dividends
2024 2023
Pence/share £m Pence/share £m
Paid prior financial year final dividend((a)) 7.05 506 7.70 574
Paid interim dividend((b)) 3.85 271 3.85 284
Amounts recognised through equity as distributions to owners 10.90 777 11.55 858
Paid 2021 special dividend 50.93 1 50.93 1
Dividends paid in the financial year 778 859
Proposed final dividend at financial year end 8.25 581 7.05 516
(a) Excludes £6m prior financial year final dividend waived (2023: £7m)
and includes the write-back of unclaimed dividends and forfeited shares of
£4m (2023: £5m).
(b) Excludes £2m interim dividend waived (2023: £2m).
The proposed final dividend was approved by the Board of Directors on 9 April
2024 and is subject to the approval of shareholders at the AGM. The proposed
dividend has not been included as a liability as at 24 February 2024. It will
be paid on 28 June 2024 to shareholders who are on the Register of members at
close of business on 17 May 2024.
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 7 June 2024.
Note 8 Earnings/(losses) per share and diluted earnings/(losses) per
share
For the 52 weeks ended 24 February 2024 there were 79 million (2023: 67
million) potentially dilutive share options and awards. As the Group has
recognised a profit for the year from its continuing operations, dilutive
effects have been considered in calculating diluted earnings per share.
52 weeks ended 24 February 2024 52 weeks ended 25 February 2023 (restated((a)))
Basic Dilutive share Diluted Basic Dilutive share Diluted
options and awards
options and awards
Profit/(loss) (£m)
Continuing operations((b)) 1,760 - 1,760 659 - 659
Discontinued operations (572) - (572) 78 - 78
Total 1,188 - 1,188 737 - 737
Weighted average number of shares (millions) 7,097 79 7,176 7,415 67 7,482
Earnings/(losses) per share (pence)
Continuing operations 24.80 (0.27) 24.53 8.89 (0.08) 8.81
Discontinued operations (8.06) 0.09 (7.97) 1.05 (0.01) 1.04
Total 16.74 (0.18) 16.56 9.94 (0.09) 9.85
(a) Comparatives have been restated following the adoption of IFRS 17 and
re-presented to disclose Banking operations as a discontinued operation. Refer
to Notes 1, 6 and 22 for further details.
(b) Excludes profits/(losses) attributable to non-controlling interests of
£4m (2023: £(1)m).
APM: Adjusted diluted earnings/(losses) per share
Continuing operations Notes 52 weeks 52 weeks
2024
2023
(restated((a)))
Profit before tax (£m) 2,289 882
Exclude: Adjusting items (£m) 3 (12) 1,072
Adjusted profit before tax (£m) 2,277 1,954
Adjusted profit before tax attributable to the owners of the parent (£m)((b)) 2,273 1,955
Taxation on adjusted profit before tax attributable to the owners of the 5 (593) (419)
parent (£m)
Adjusted profit after tax attributable to the owners of the parent (£m) 1,680 1,536
Basic weighted average number of shares (millions) 7,097 7,415
Adjusted basic earnings per share (pence) 23.67 20.71
Diluted weighted average number of shares (millions) 7,176 7,482
Adjusted diluted earnings per share (pence) 23.41 20.53
(a) Comparatives have been restated following the adoption of IFRS 17 and
re-presented to disclose Banking operations as a discontinued operation. Refer
to Notes 1, 6 and 22 for further details.
(b) Excludes profits/(losses) before tax from non-controlling interests of
£4m (2023: £(1)m).
Note 9 Property, plant and equipment
2024 2023
Land and Other((b)) Total Land and Other((b)) Total
buildings((a))
£m
buildings((a))
£m
£m £m
£m £m
Net carrying value
Opening balance 14,870 1,992 16,862 15,163 1,897 17,060
Foreign currency translation (124) (21) (145) 129 20 149
Additions((c)(d)) 445 753 1,198 591 661 1,252
Acquired through business combinations - - - 42 - 42
Reclassification 11 (7) 4 2 (4) (2)
Transfers (to)/from assets classified as held for sale 103 5 108 (53) (3) (56)
Transfer to disposal group classified as held for sale (1) (3) (4) - - -
Disposals (17) (11) (28) (52) (9) (61)
Depreciation charge for the year (449) (450) (899) (434) (448) (882)
Impairment losses((e)) (236) (95) (331) (686) (141) (827)
Reversal of impairment losses((e)) 395 61 456 168 19 187
Closing balance 14,997 2,224 17,221 14,870 1,992 16,862
Construction in progress included above((f)) 109 280 389 109 278 387
(a) The estimated fair value of land and buildings is £15.0bn (2023:
£15.6bn).
(b) Other assets consist of fixtures and fittings with a net carrying value
of £1,679m (2023: £1,496m), office equipment with a net carrying value of
£234m (2023: £201m) and motor vehicles with a net carrying value of £311m
(2023: £295m). Depreciation charge for the year is £(291)m (2023: £(292)m),
£(69)m (2023: £(71)m) and £(90)m (2023: £(85)m), respectively.
(c) Includes £65m of land and buildings related to obtaining control of The
Tesco Coral Limited Partnership, which was not impaired on acquisition (2023:
£248m of land and buildings related to
obtaining control of The Tesco Dorney Limited Partnership, which
was impaired by £(7)m on acquisition).
(d) Includes £107m (2023: £29m) relating to other property buyback and
store purchase transactions.
(e) Refer to Note 11.
(f) Construction in progress does not include land.
Commitments for capital expenditure contracted for, but not incurred, at 24
February 2024 were £160m (2023: £200m), principally relating to store
development.
Note 10 Leases
Group as lessee
In January 2024, the Group obtained control of The Tesco Coral Limited
Partnership, which held four stores and was previously accounted for as a
joint venture, following the withdrawal of the joint venture partner. The
transaction was treated as an asset acquisition, with non-cash consideration
of £54m, principally comprising the elimination of the loan to the joint
venture and derecognition of pre-existing right of use assets and lease
liabilities.
Right of use assets
2024 2023
Land and Other Total Land and Other Total
buildings
£m
£m
buildings
£m
£m
£m
£m
Net carrying value
Opening balance 5,387 113 5,500 5,634 86 5,720
Additions (including sale and leaseback transactions)((a)) 305 39 344 378 64 442
Acquired through business combinations - - - 4 - 4
Depreciation charge for the year (508) (36) (544) (501) (38) (539)
Impairment losses((b)) (213) (1) (214) (394) - (394)
Reversal of impairment losses((b)) 131 - 131 72 - 72
Derecognition on acquisition of property joint venture (17) - (17) (198) - (198)
Transfer to disposal group classified as held for sale (9) - (9) - - -
Other movements((c)) 289 (2) 287 392 1 393
Closing balance 5,365 113 5,478 5,387 113 5,500
(a) Prior year includes £70m right of use assets related to obtaining
control of The Tesco Dorney Limited Partnership.
(b) Refer to Note 11.
(c) Other movements include lease terminations, modifications and
reassessments, foreign exchange, reclassifications between asset classes and
entering into finance subleases.
Lease liabilities
The following table shows the discounted lease liabilities included in the
Group balance sheet and the contractual undiscounted lease payments:
2024 2023
£m
£m
Current 584 595
Non-current 7,038 7,132
Total lease liabilities 7,622 7,727
Total undiscounted lease payments 10,757 10,897
A reconciliation of the Group's opening to closing lease liabilities balance
is presented in Note 21.
Note 11 Impairment of non-current assets
Goodwill
The Group previously held £500m of goodwill associated with the Tesco Bank
segment. On classification of the Group's Banking operations as held for sale,
£211m of goodwill was allocated to the disposal group, £171m to the money
services business and £118m to the insurance business. Subsequent to this
allocation, an assessment of the Banking operations disposal group's fair
value less costs to sell resulted in a write down of that goodwill to £nil.
See Note 6 for further detail. There was no impairment of the goodwill
associated with money services and insurance.
There was no impairment of other goodwill balances in the current year (2023:
£nil).
Other non-current assets
The tables below summarise the Group's pre-tax impairment losses and reversals
on other non-current assets, aggregated by segment due to the large number of
individually immaterial store cash-generating units. This includes any
(losses)/reversals recognised immediately prior to classifying an asset or
disposal group as held for sale but excludes any changes in fair value less
costs to sell post classification as held for sale. There were no impairment
losses or reversals in the year (2023: £nil) with respect to investments in
joint ventures and associates and no impairments in other non-current assets
in either money services or insurance (2023: Tesco Bank segment £nil). All
impairment losses and reversals are classified as adjusting items.
UK & ROI Central Europe Total Net
52 weeks ended 24 February 2024 Impairment Impairment reversal Impairment Impairment reversal Impairment Impairment reversal Impairment (loss)/reversal
loss
£m
loss
£m
loss
£m
£m
£m
£m
£m
Group balance sheet
Other intangible assets (26) 13 - - (26) 13 (13)
Property, plant and equipment (306) 449 (25) 7 (331) 456 125
Right of use assets (187) 122 (27) 9 (214) 131 (83)
Investment property - - (1) - (1) - (1)
Total impairment (loss)/reversal of other non-current assets (519) 584 (53) 16 (572) 600 28
Group income statement
Cost of sales (518) 584 (46) 15 (564) 599 35
Administrative expenses (1) - (7) 1 (8) 1 (7)
Total impairment (loss)/reversal from continuing operations (519) 584 (53) 16 (572) 600 28
UK & ROI Central Europe Total Net
52 weeks ended 25 February 2023 Impairment Impairment reversal Impairment Impairment reversal Impairment Impairment reversal Impairment (loss)/reversal
loss
£m
loss
£m
loss
£m
£m
£m
£m
£m
Group balance sheet
Other intangible assets (28) 6 - 1 (28) 7 (21)
Property, plant and equipment (779) 181 (48) 6 (827) 187 (640)
Right of use assets (373) 65 (21) 7 (394) 72 (322)
Investment property (1) 2 - - (1) 2 1
Total impairment (loss)/reversal of other non-current assets (1,181) 254 (69) 14 (1,250) 268 (982)
Group income statement
Cost of sales (1,155) 245 (69) 14 (1,224) 259 (965)
Administrative expenses (26) 9 - - (26) 9 (17)
Total impairment (loss)/reversal from continuing operations (1,181) 254 (69) 14 (1,250) 268 (982)
The gross impairment losses and reversals for the Group largely reflect normal
fluctuations expected from store-level performance, as well as any specific
store closures. The net impairment reversal in the UK & ROI is primarily
due to a net improvement in performance across the portfolio, partially offset
by decreases in UK property fair values and fluctuations in discount rates.
The net impairment loss in Central Europe is primarily due to a net
deterioration of performance, partially offset by a reduction in discount
rates.
Impairment methodology
The impairment methodology is unchanged in the period from that described in
Note 14 of the Annual Report and Financial Statements 2023, other than in
regards to the determination of the groups of cash-generating units for
goodwill. The Group allocates goodwill to groups of cash-generating units
based on the lowest level at which goodwill is monitored by management. Tesco
Bank previously represented one group, however subsequent to the
classification of Banking operations as held for sale, the Group has
determined that money services and insurance represent two separate groups.
Key assumptions and sensitivity
Key assumptions
For value in use calculations, the key assumptions to which the recoverable
amounts are most sensitive are discount rates, long-term growth rates and
future cash flows (incorporating sales volumes, prices and costs). For fair
value less costs of disposal calculations, the key assumption is property fair
values.
The discount rates and long-term growth rates for each group of
cash-generating units to which goodwill has been allocated are:
UK* ROI Money services Insurance Tesco Bank
2024 2023 2024 2023 2024 2024 2023
%
%
%
%
%
%
%
Pre-tax discount rates 8.6 - 13.9 8.6 - 8.8 7.8 7.4 14.0 9.8 16.0
Post-tax discount rates 6.4 - 10.4 6.5 - 6.6 6.8 6.5 10.5 7.4 12.0
Long-term growth rates 2.0 2.0 2.0 2.0 1.7 1.7 1.7
* dunnhumby aggregated with the UK due to materiality.
The discount rates and long-term growth rates for the Group's portfolio of
store cash-generating units, aggregated by segment due to the large number of
individually immaterial store cash-generating units, are:
UK & ROI Central Europe
2024 2023 2024 2023
%
%
%
%
Pre-tax discount rates 7.8 - 8.5 7.4 - 8.6 8.2 - 12.6 8.0 - 16.8
Post-tax discount rates 6.4 - 6.8 6.5 6.5 - 8.3 6.3 - 11.1
Long-term growth rates 2.0 2.0 1.8 - 3.1 2.0 - 3.2
Sensitivity
The Group has carried out sensitivity analyses on the reasonably possible
changes in key assumptions in the impairment tests for (a) each group of
cash-generating units to which goodwill has been allocated and (b) for its
portfolio of store cash-generating units. Management has reduced the
reasonably possible movements in the future cash flows and long-term growth
rate sensitivities disclosed given the level of volatility seen in these
inputs has reduced compared to the prior year.
(a) Neither a reasonably possible increase of 1.0%pt in discount
rates, a 5.0% decrease in future cash flows nor a 0.5%pt decrease in long-term
growth rates would indicate impairment in any group of cash-generating units
to which goodwill has been allocated.
(b) While 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 table below summarises
the reasonably possible changes in key assumptions which most impact the
impairment of the Group's entire portfolio of store cash-generating units,
presented in aggregate due to the large number of individually immaterial
store cash-generating units. The impairment is not highly sensitive to the
probability weightings assigned to the cash flow scenarios.
Key assumption Reasonably possible change Impact on impairment 2024
£m
Post-tax discount rates* Increase of 1.0%pt for each geographic region Increase (429)
Decrease of 1.0%pt for each geographic region Decrease 389
Future cash flows Increase of 5.0% for each geographic region Decrease 154
Decrease of 5.0% for each geographic region Increase (164)
Long-term growth rates Increase of 0.5%pt for each geographic region Decrease 149
Decrease of 0.5%pt for each geographic region Increase (135)
Property fair values Increase of 10.0% for each geographic region Decrease 174
Decrease of 10.0% for each geographic region Increase (179)
* Sensitivities are applied to post-tax discount rates used to derive the
pre-tax discount rates.
Note 12 Cash and cash equivalents and short-term investments
Cash and cash equivalents
2024 2023
£m
£m
Cash at bank and on hand 2,300 2,426
Short-term deposits 40 39
Cash and cash equivalents in the Group balance sheet 2,340 2,465
Bank overdrafts (812) (900)
Cash and cash equivalents in the Group cash flow statement 1,528 1,565
Short-term investments
2024 2023
£m
£m
Money market funds, deposits and similar instruments 2,128 1,628
Cash and cash equivalents include £30m (2023: £87m) of restricted amounts
mainly relating to the Group's pension schemes and employee benefit trusts.
Note 13 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.
2024 2023
£m
£m
Current assets
Inventories (12) (18)
Trade and other receivables
Trade/other receivables 86 67
Accrued income 136 127
Current liabilities
Trade and other payables
Trade payables 138 112
Accruals - (5)
Note 14 Borrowings
Borrowings are classified as current and non-current based on their scheduled
repayment dates. Repayments of principal amounts are classified as current if
the repayment is scheduled to be made within one year of the balance sheet
date. During the 52-week period ended 24 February 2024, within continuing
operations the Group has made principal repayments of £775m (52 weeks ended
25 February 2023: £705m), and there have been £682m of borrowings issued (25
February 2023: £nil) comprising a €500m bond maturing February 2031 and
£250m bond maturing February 2035. Refer to Note 6 for borrowings issued in
the Banking operations disposal group.
Current
2024 2023
£m
£m
Bank loans and overdrafts 838 928
Borrowings* 698 842
1,536 1,770
Non-current
2024 2023
£m
£m
Borrowings* 5,683 5,581
* £nil of current (2023: £nil) and £143m of non-current borrowings (2023:
£137m) relate to borrowings issued by Tesco Bank.
Borrowing facilities
The Group has a £2.5bn undrawn committed facility available as at 24 February
2024 (25 February 2023: £2.5bn), in respect of which all conditions precedent
had been met as at that date, consisting of a syndicated revolving credit
facility expiring in more than two years. The cost of the facility is linked
to three ESG targets and incurs commitment fees at market rates which would
provide funding at floating rates.
In addition, Tesco Bank has a separate £200m committed repurchase facility,
maturing in 2024.
There were no withdrawals from either facility during the year (2023: £nil).
Note 15 Insurance
Balances disclosed in this note relate to the Group's subsidiary, Tesco
Underwriting Limited (TU), part of the Tesco Bank operating segment.
Insurance contract liabilities and reinsurance contract assets
The breakdown of portfolios and groups of insurance contracts issued and
reinsurance contracts held is set out in the table below:
2024 2023 (restated((a)))
Insurance contract liabilities Reinsurance contracts held Insurance contract liabilities Reinsurance contracts held
£m £m Net (liabilities)/ £m £m Net (liabilities)/
assets assets
£m £m
(Liabilities)/assets for remaining coverage (260) (178) (438) (274) (107) (381)
(Liabilities)/assets for incurred claims (266) 303 37 (227) 242 15
(526) 125 (401) (501) 135 (366)
Contracts measured under PAA (364) 62 (302) (290) 63 (227)
Contracts not measured under PAA((b)) (162) 63 (99) (211) 72 (139)
(526) 125 (401) (501) 135 (366)
(a) Following the Group's adoption of IFRS 17, comparatives have been
restated. Refer to Notes 1 and 22 for further details.
(b) Contracts not measured under the premium allocation approach (PAA) are
measured using the general measurement model.
Measurement components of insurance contract liabilities and reinsurance
contract assets are set out in the table below. The estimate of the present
value of future cash flows is adjusted for events since the actuarial
valuation:
At 24 February 2024 At 25 February 2023 (restated*)
Present value of future cash flows Present value of future cash flows
£m Risk adjustment £m Risk adjustment
£m £m
CSM Total CSM Total
£m £m £m £m
Insurance contract liabilities (437) (16) (73) (526) (417) (18) (66) (501)
Reinsurance contract assets 95 6 24 125 96 7 32 135
Net (liabilities)/assets (342) (10) (49) (401) (321) (11) (34) (366)
* Following the Group's adoption of IFRS 17, comparatives have been restated.
Refer to Notes 1 and 22 for further details.
Note 16 Financial instruments
In the current year, the tables below exclude the assets and liabilities of
the Banking operations disposal group classified as held for sale.
The expected maturity of financial assets and liabilities is not considered to
be materially different to their current and non-current classification.
Fair value of financial assets and liabilities measured at amortised cost
The table excludes cash and cash equivalents, short-term investments, trade
receivables/payables, other receivables/payables, accruals and deposits from
banks where the carrying values approximate fair value. The levels in the
table refer to the fair value measurement.
2024 2023 (restated((a)))
Level Carrying Fair Carrying Fair
value
value((b))
value
value((b))
£m
£m
£m
£m
Financial assets measured at amortised cost
Loans and advances to customers((c)) 3 - - 6,977 6,954
Investments in debt instruments at amortised cost((d)) 1 and 2 1,033 838 1,093 1,097
Joint ventures and associates loan receivables((e)) 2 96 97 106 111
Financial liabilities measured at amortised cost
Borrowings
Amortised cost((f)) 1 (5,067) (4,794) (5,227) (4,882)
Bonds in fair value hedge relationships 1 (2,152) (2,211) (2,124) (2,167)
Customer deposits((c)) 3 - - (5,770) (5,640)
(a) Comparatives have been restated following the adoption of IFRS 17. Refer
to Notes 1 and 22 for further details.
(b) Refer to the fair value measurement section below for details on Level 2
and 3 methodology.
(c) Loans and advances to customers and customer deposits have been
transferred to the Banking operations disposal group classified as held for
sale. Refer to Note 6 for further details.
(d) These are principally Level 1 instruments.
(e) Joint ventures and associates loan receivables carrying amounts of £96m
(2023: £106m) are presented in the Group balance sheet net of deferred
profits of £nil (2023: £38m) historically arising from the sale of property
assets to joint ventures.
(f) Comparative fair values have been restated from £(5,496)m to
£(4,882)m for a revision in the fair value methodology applied to certain
index-linked bonds, with no impact on their carrying values.
The following tables present the Group's financial assets and liabilities that
are measured at fair value, 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 (that is, unobservable inputs) (Level 3).
Level 2 assets and liabilities are valued by discounting future cash flows
using externally sourced market yield curves, including interest rate curves
and foreign exchange rates from highly liquid markets. Refer to the Level 3
Instruments section below for details on Level 3 valuation methodology.
At 24 February 2024 Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
Assets
Investments at fair value through other comprehensive income 682 - 19 701
Short-term investments at fair value through profit or loss 889 - - 889
Cash and cash equivalents at fair value through profit or loss - 35 - 35
Investments at fair value through profit or loss - - 18 18
Derivative financial instruments:
Interest rate swaps - 29 15 44
Cross-currency swaps - - 182 182
Index-linked swaps - - 583 583
Foreign currency forward contracts - 25 - 25
Diesel forward contracts - 2 - 2
Total assets 1,571 91 817 2,479
Liabilities
Derivative financial instruments:
Interest rate swaps - (9) (96) (105)
Cross-currency swaps - - (139) (139)
Foreign currency forward contracts - (20) - (20)
Diesel forward contracts - (2) - (2)
Total liabilities - (31) (235) (266)
Net assets/(liabilities) 1,571 60 582 2,213
At 25 February 2023 Level 1 Level 2 Level 3 Total
£m
£m
£m
£m
Assets
Investments at fair value through other comprehensive income 565 - 14 579
Short-term investments at fair value through profit or loss 660 - - 660
Cash and cash equivalents at fair value through profit or loss - 32 - 32
Investments at fair value through profit or loss - - 20 20
Derivative financial instruments:
Interest rate swaps - 123 - 123
Cross-currency swaps - 41 170 211
Index-linked swaps - 119 432 551
Foreign currency forward contracts - 41 - 41
Diesel forward contracts - 4 - 4
Total assets 1,225 360 636 2,221
Liabilities
Derivative financial instruments:
Interest rate swaps - (73) (86) (159)
Cross-currency swaps - (4) (137) (141)
Foreign currency forward contracts - (72) - (72)
Diesel forward contracts - (15) - (15)
Total liabilities - (164) (223) (387)
Net assets/(liabilities) 1,225 196 413 1,834
During the financial year, there were no transfers (2023: no transfers)
between Level 1 and Level 2 fair value measurements.
Level 3 Instruments
For Level 3 assets and liabilities, uncollateralised derivatives are valued as
per Level 2 but include certain data sources which are significantly less
liquid; whilst unlisted investments are valued based on less observable inputs
such as recent funding rounds. Uncollateralised derivative financial
instruments are held by the Group as part of financial risk management, and
include interest rate and inflation swaps, cross-currency swaps and foreign
exchange and diesel forward contracts. These are valued using relevant inputs
which are considered observable (Level 2), such as forward rates and foreign
exchange rates from available market data, with credit risk adjustments being
incorporated in the derivative valuations, taking into account the default
risk of either party using market data such as credit default swaps.
Unobservable inputs (Level 3) relate to the funding valuation adjustment
(FVA), which is the estimate of the adjustment to the fair value that a market
participant would make to account for funding costs. These are calculated on
the future valuation of the derivative, based on the best estimate available
to management of suitable relevant cost of funds. A 10 basis points increase
in the cost of funds would increase the FVA by £12m (2023: £11m).
The following table presents the changes in Level 3 instruments:
2024 2023
Uncollateralised derivatives Unlisted Uncollateralised derivatives Unlisted
£m
£m
investments investments
£m
£m
At the beginning of the year 379 34 749 14
Gains/(losses) recognised in finance costs((a)) 9 (2) (114) -
Gains/(losses) recognised in other comprehensive income not reclassified to - - - 2
the income statement
Gains/(losses) recognised in other comprehensive income that may subsequently 15 - 6 -
be reclassified to the income statement
Additions - 5 - -
Disposals - - (39) -
Transfers of assets/(liabilities) to Level 3((b)(c)) 142 - (223) 18
At the end of the year 545 37 379 34
(a) All gains or losses are unrealised.
(b) There were £nil transfers of unlisted investments (2023: £18m) and
£142m of derivative assets (2023: £(223)m derivative liabilities) to Level 3
from Level 2 and £nil (2023: £nil) to Level 3 from Level 1. Transfers to
Level 3 relate to the FVA applied to all uncollateralised cross-currency,
interest rate and inflation rate swaps fair value previously classified as
Level 2 due to FVA being considered unobservable inputs (Level 3).
(c) There were £nil transfers from Level 3 to Level 2 (2023: £nil) and
£nil transfers from Level 3 to Level 1 (2023: £nil).
Note 17 Share-based payments
The table below shows amounts charged to the Group income statement in respect
of share-based payments:
2024 2023
£m £m
Income statement
Equity-settled share-based payment charge* 123 101
Cash-settled National Insurance contributions* 5 11
128 112
* Includes £8m (2023: £2m) in relation to discontinued operations.
The table below shows amounts included in the Group cash flow statement in
relation to share-based payments and own shares purchased for share schemes:
2024 2023
£m £m
Share-based payment charge included in income statement (128) (112)
Share-based payments non-cash movement 78 59
Increase/(decrease) in trade and other payables* 50 53
Included in Group operating cash flows - -
Cash paid to purchase own shares including related fees and taxes (146) (134)
Cash received from employees exercising SAYE options 53 48
Included in Group financing cash flows (93) (86)
* Shares withheld from employees in order to settle their tax liability and
National Insurance.
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 scheme within the Group is the Tesco PLC
Pension Scheme (the Scheme), a UK scheme closed to future accrual. The latest
triennial actuarial pension funding valuation for the Scheme as at 31 March
2022 using a projected unit credit method showed a funding surplus of £0.9bn.
The Scheme remained in a funding surplus as at 24 February 2024.
IFRIC 14
For schemes in an accounting surplus position, these surpluses are recognised
on the balance sheet in line with IFRIC 14, as the Group has an unconditional
legal right to any future economic benefits by way of future refunds following
a gradual settlement.
Movement in the Group pension surplus/(deficit) during the financial period
Net defined benefit
surplus/(deficit)
2024 2023
£m
£m
Opening balance (391) 2,847
Current service cost (15) (24)
Finance income/(cost) (18) 80
Included in the Group income statement (33) 56
Remeasurement gain/(loss):
Financial assumptions gain/(loss) 720 7,652
Demographic assumptions gain/(loss) 261 (228)
Experience gain/(loss) (182) (1,244)
Return on plan assets excluding finance income (1,050) (9,518)
Foreign currency translation - (3)
Included in the Group statement of comprehensive income/(loss) (251) (3,341)
Employer contributions 15 24
Additional employer contributions 24 20
Benefits paid 5 3
Other movements 44 47
Closing balance (631) (391)
Withholding tax on surplus((a)) (4) (3)
Closing balance, net of withholding tax (635) (394)
Consisting of:
Schemes in deficit (657) (400)
Schemes in surplus((b)) 22 6
Deferred tax asset/(liability)((c)) 162 100
Surplus/(deficit) in schemes at the end of the period, net of deferred tax (473) (294)
(a) Recognised through other comprehensive income in remeasurements of
defined benefit pension schemes.
(b) Schemes in surplus in the UK are presented on the balance sheet net of a
35% withholding tax.
(c) Including £(2)m deferred tax liability relating to the ROI scheme in
surplus where no withholding tax is applicable (2023: £nil).
Scheme principal assumptions
The principal assumptions, on a weighted average basis, used by external
actuaries to value the defined benefit obligation of the Scheme were as
follows:
2024 2023
% %
Discount rate((a)) 5.1 4.9
Price inflation 2.9 3.0
Rate of increase in deferred pensions((b)) 2.5 2.6
Rate of increase in pensions in payment((b))
Benefits accrued before 1 June 2012 2.8 2.9
Benefits accrued after 1 June 2012 2.5 2.5
a) The discount rate for the Scheme is determined by reference to market
yields of high-quality corporate bonds of suitable currency and term to the
Scheme cash flows and extrapolated based on the trend observable in corporate
bond yields.
b) In excess of any guaranteed minimum pension (GMP) element.
2024 2023
Financial assumptions - Increase/(decrease) in UK defined benefit obligation Discount rate Inflation rate Discount rate Inflation rate
£m
£m
£m
£m
Impact of 0.1% increase of the assumption (191) 167 (213) 201
Impact of 0.1% decrease of the assumption 191 (167) 226 (201)
Impact of 1.0% increase of the assumption (1,686) 1,770 (1,921) 2,147
Impact of 1.0% decrease of the assumption 2,153 (1,483) 2,498 (1,783)
Movements in the defined benefit obligation from discount rate and inflation
rate changes may be partially offset by movements in assets.
Note 19 Share capital and other reserves
Share capital
2024 2023
Ordinary shares of 6 ⅓p each Ordinary shares of 6 ⅓p each
Number £m Number £m
Allotted, called-up and fully paid:
At the beginning of the year 7,318,341,195 463 7,637,986,531 484
Shares cancelled (279,410,755) (18) (319,645,336) (21)
At the end of the year 7,038,930,440 445 7,318,341,195 463
No shares were issued during the current or prior 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 the Company.
Other reserves
The tables below set out the movements in other reserves:
Capital redemption reserve Hedging Translation Own shares Merger Insurance finance reserve((c)) Total
£m
reserve((a))
reserve
held((b))
£m
£m
£m reserve £m £m
£m
At 25 February 2023 (as previously reported) 43 27 322 (359) 3,090 - 3,123
Cumulative adjustment on initial application of IFRS 17 (net of tax) - - - - - 16 16
At 25 February 2023 (restated)((c)) 43 27 322 (359) 3,090 16 3,139
Other comprehensive income/(loss)
Retranslation of net assets of overseas subsidiaries, joint ventures and - - (116) - - - (116)
associates, net of hedging instruments
Gains/(losses) on cash flow hedges - (14) - - - - (14)
Cash flow hedges reclassified and reported in the Group income statement - (56) - - - - (56)
Finance income/(expenses) from insurance contracts issued((c)) - - - - - (4) (4)
Finance income/(expenses) from reinsurance contracts held((c)) - - - - - 1 1
Tax relating to components of other comprehensive income - (5) - - - 1 (4)
Total other comprehensive income/(loss) - (75) (116) - - (2) (193)
Transfer from hedging reserve to retained earnings - 44 - - - - 44
Inventory cash flow hedge movements
(Gains)/losses transferred to the cost of inventory - 79 - - - - 79
Total inventory cash flow hedge movements - 79 - - - - 79
Transactions with owners
Own shares purchased for cancellation - - - (752) - - (752)
Own shares cancelled 18 - - 752 - - 770
Own shares purchased for share schemes - - - (140) - - (140)
Share-based payments - - - 184 - - 184
Total transactions with owners 18 - - 44 - - 62
At 24 February 2024 61 75 206 (315) 3,090 14 3,131
(a) Movements in cost of hedging reserve in the 52 weeks ended and balances
as at 24 February 2024 were £nil (25 February 2023: £nil).
(b) Includes 70.0 million shares held by the Employee Benefit Trust (2023:
55.6 million). Number of shares held by the Employee Benefit Trust represents
0.99% of called-up share capital at the end of the year (2023: 0.76%).
(c) Comparatives have been restated following the adoption of IFRS 17. Refer
to Notes 1 and 22 for further details.
Capital redemption reserve Hedging Translation Own shares Merger Insurance finance reserve((c)) Total
£m
reserve((a))
reserve
held((b))
£m
£m
£m reserve( £m £m
) £m
At 26 February 2022 (as previously reported) 22 130 202 (365) 3,090 - 3,079
Cumulative adjustment on initial application of IFRS 17 (net of tax) - - - - - 1 1
At 26 February 2022 (restated((c))) 22 130 202 (365) 3,090 1 3,080
Other comprehensive income/(loss)
Retranslation of net assets of overseas subsidiaries, joint ventures and - - 120 - - - 120
associates, net of hedging instruments
Gains/(losses) on cash flow hedges - 63 - - - - 63
Cash flow hedges reclassified and reported in the Group income statement - (61) - - - - (61)
Finance income/(expenses) from insurance contracts issued((c)) - - - - - 39 39
Finance income/(expenses) from reinsurance contracts held((c)) - - - - - (20) (20)
Tax relating to components of other comprehensive income - 22 - - - (4) 18
Total other comprehensive income/(loss) - 24 120 - - 15 159
Inventory cash flow hedge movements
(Gains)/losses transferred to the cost of inventory - (127) - - - - (127)
Total inventory cash flow hedge movements - (127) - - - - (127)
Transactions with owners
Own shares purchased for cancellation - - - (758) - - (758)
Own shares cancelled 21 - - 795 - - 816
Own shares purchased for share schemes - - - (188) - - (188)
Share-based payments - - - 157 - - 157
Total transactions with owners 21 - - 6 - - 27
At 25 February 2023 43 27 322 (359) 3,090 16 3,139
Refer to previous table for footnotes.
Own shares held
The table below presents the reconciliation of own shares purchased for
cancellation between the Group statement of changes in equity and the Group
cash flow statement:
2024 2023
Own shares purchased for cancellation £m £m
Included in the Group statement of changes in equity((a)) (752) (758)
Payments in relation to prior year financial liabilities - (23)
Included in the Group cash flow statement((b)) (752) (781)
(a) 279.4 million (2023: 319.6 million) shares, representing 4.0% of the
called-up share capital as at 24 February 2024 (25 February 2023: 4.4%), with
total consideration of £752m (2023: £795m) including expenses of £2m (2023:
£9m), were cancelled and charged to retained earnings.
(b) 279.4 million (2023: 314.8 million) shares purchased at an average price
of £2.69 per share (2023: £2.48).
Insurance finance reserve
Insurance finance reserve includes the impact of changes in market discount
rates on insurance and reinsurance contract assets and liabilities.
Note 20 Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the Group and its joint ventures and associates are
disclosed below:
Transactions
Joint ventures
2024 2023
£m
£m
Sales to related parties 606 599
Purchases from related parties 126 122
Dividends received 9 14
Injection of equity funding 9 10
Sales to related parties consist of service/management fees and loan interest.
Transactions between the Group and the Group's pension plans are disclosed in
Note 18.
Balances
Joint ventures
2024 2023
£m
£m
Amounts owed to related parties (7) (7)
Amounts owed by related parties 80 27
Lease liabilities payable to related parties((a)) (1,844) (1,950)
Loans to related parties (net of deferred profits)((b)) 96 106
(a) Lease liabilities payable to related parties represent leases entered
into by the Group for properties held by joint ventures.
(b) Loans to related parties of £96m (2023: £106m) are presented net of
deferred profits of £nil (2023: £38m), historically arising from the sale of
property assets to joint ventures.
For loans to related parties, a 12-month ECL allowance is recorded on initial
recognition. In the current and prior financial years, the ECL allowance was
immaterial.
Amounts owed to and owed by related parties are measured at amortised cost and
the carrying values approximate fair value. The undiscounted cash flow amounts
owed to related parties are due within one year and do not differ from the
amounts included in the table above.
There were no transactions or balances held with associates in the current or
prior financial year.
Note 21 Analysis of changes in net debt
The Net debt APM, as defined in the Glossary, excludes the net debt of Tesco
Bank and includes the net debt of Retail 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.
2024 2023
Group Tesco Bank Retail Group Tesco Bank Retail
£m £m £m £m £m £m
Bank and other borrowings, excluding overdrafts((a)) (6,407) (380) (6,027) (6,451) (375) (6,076)
Lease liabilities (7,622) (2) (7,620) (7,727) (23) (7,704)
Net financing derivatives 544 (3) 547 472 (9) 481
Share purchase obligations - - - (55) - (55)
Liabilities from financing activities (13,485) (385) (13,100) (13,761) (407) (13,354)
Cash and cash equivalents in the balance sheet 2,340 442 1,898 2,465 444 2,021
Overdrafts((b)) (812) - (812) (900) - (900)
Cash and cash equivalents (including overdrafts) in the cash flow statement 1,528 442 1,086 1,565 444 1,121
Short-term investments 2,128 - 2,128 1,628 - 1,628
Joint venture loans 96 - 96 106 - 106
Interest and other receivables 23 - 23 8 - 8
Net operating and investing derivatives 26 23 3 71 114 (43)
Net debt of disposal group((c)) (182) (182) - (14) - (14)
Exclude: Share purchase obligations - - - 55 - 55
Net debt APM (9,764) (10,493)
(a) Retail bank and other borrowings is presented net of a £235m long-term
intercompany loan with Tesco Bank (2023: £235m).
(b) Overdraft balances are included within borrowings in the Group balance
sheet, and within cash and cash equivalents in the Group cash flow statement.
Refer to Note 12.
(c) £(14)m of items within net debt in the prior year relate to residual
properties and leases with respect to the Group's operation in Poland.
The table below sets out the movements in liabilities arising from financing
activities:
Bank and other borrowings, excluding overdrafts Lease liabilities Net financing derivatives((a)) Share purchase obligations((b)) Liabilities from Group financing activities((c))
£m £m £m £m £m
At 25 February 2023 (6,451) (7,727) 472 (55) (13,761)
Cash flows arising from financing activities (457) 627 4 807 981
Cash flows arising from operating activities:
Interest paid 308 373 125 - 806
Non-cash movements:
Fair value gains/(losses) (124) - 50 - (74)
Foreign exchange 101 46 - - 147
Interest income/(charge) (333) (373) (108) - (814)
Acquisitions and disposals - 3 - - 3
Lease additions, terminations, modifications and reassessments - (588) - - (588)
Share purchase agreements - - - (752) (752)
Transfer to disposal group 549 17 1 - 567
At 24 February 2024 (6,407) (7,622) 544 - (13,485)
(a) Net financing derivatives comprise those derivatives which hedge the
Group's exposures in respect of lease liabilities and borrowings. Net
operating and investing derivatives, which form part of the Group's Net debt
APM, are not included.
(b) Share purchase obligations form part of the liabilities arising from the
Group's financing activities, but do not form part of Net debt. Cash flows
arising from financing activities exclude £(91)m (2023: £(29)m) cash
outflows relating to other cancellable arrangements and prepayments, and £53m
(2023: £48m) cash received from employees exercising SAYE options.
(c) Liabilities from Group financing activities include liabilities from
share purchase obligations of £nil (2023: £(55)m) and exclude net operating
and investing derivatives of £26m (2023: £71m).
Bank and other borrowings, excluding overdrafts Lease liabilities Net financing derivatives((a)) Share purchase obligations((b)) Liabilities from Group financing activities((c))
£m £m £m £m £m
At 26 February 2022 (6,825) (7,958) 553 (73) (14,303)
Cash flows arising from financing activities 709 593 139 886 2,327
Cash flows arising from operating activities:
Interest paid 241 373 44 - 658
Non-cash movements:
Fair value gains/(losses) 199 - (170) - 29
Foreign exchange (160) (45) - - (205)
Interest income/(charge) (227) (373) (55) - (655)
Acquisitions and disposals((d)) (388) 381 (39) - (46)
Lease additions, terminations, modifications and reassessments - (698) - - (698)
Share purchase agreements - - - (868) (868)
At 25 February 2023 (6,451) (7,727) 472 (55) (13,761)
(a)-(c) Refer to previous table for footnotes.
(d) Acquisitions and disposals in the prior year include a derecognition of
£385m of lease liabilities and an increase of £(384)m in borrowings and
£(39)m in net financing derivatives from the acquisition of The Tesco Dorney
Limited Partnership.
Note 22 Changes in accounting policies - IFRS 17 'Insurance contracts'
This note explains the impact of the adoption of IFRS 17 'Insurance contracts'
on the Group's financial position, financial performance and cash flows. IFRS
17 primarily impacts Tesco Bank and there is no material impact on the Retail
segment.
IFRS 17 is effective for the accounting period commencing 26 February 2023.
IFRS 17 has been applied fully retrospectively and comparatives for prior
periods have been restated from a transition date of 27 February 2022. Refer
to Note 1 for the Group's insurance accounting policies.
The Group applies the premium allocation approach to measure its portfolio of
insurance contracts issued and reinsurance contracts purchased, except for
claims liabilities acquired as part of the acquisition of Tesco Underwriting
Limited on 4 May 2021. Unlike post-acquisition contracts issued with a term of
one year, the Group has applied the general measurement model (GMM) to the
acquired claims liabilities because the settlement of these claims and their
associated insurance risk will spread over multiple years. This measurement
leads to the recognition of revenue and expenses in relation to these acquired
claims over a longer period of time. It includes a contractual service margin
(CSM), which represents the difference between the consideration paid for the
acquired claims at acquisition and the risk-adjusted discounted fulfilment
cash flows and will be allocated to the Group income statement over time to
reflect the pattern of actual claims settlement.
To aid comparability, the tables below also include the impact of the
restatements resulting from the classification of the Group's Banking
operations ('Banking operations') as a discontinued operation, as described in
Note 6.
Group income statement restatement
The table below sets out the impact of IFRS 17 and restatements to present
Banking operations as a discontinued operation on the comparative period Group
income statement for the 52 weeks ended 25 February 2023.
Reported((a)) IFRS 17 restatements Discontinued operation((b)) Restated
Total Total
£m Reclassification Remeasurements Re-presentation £m
£m £m £m
Continuing operations
Revenue from sale of goods and services 65,453 (21) - (568) 64,864
Insurance revenue 309 21 128 - 458
Revenue 65,762 - 128 (568) 65,322
Cost of sales (61,877) 5 1 355 (61,516)
Insurance service expenses (175) (84) (149) - (408)
Net expenses from reinsurance contracts held (49) - 12 - (37)
Gross profit/(loss) 3,661 (79) (8) (213) 3,361
Administrative expenses (2,136) 79 - 106 (1,951)
Operating profit/(loss) 1,525 - (8) (107) 1,410
Share of post-tax profits of joint ventures and associates 8 - - - 8
Finance income 85 - 2 - 87
Finance costs (618) - (5) - (623)
Profit/(loss) before tax 1,000 - (11) (107) 882
Taxation (247) - 3 20 (224)
Profit/(loss) for the year from continuing operations 753 - (8) (87) 658
Discontinued operations
Profit/(loss) for the year from discontinued operations (9) - - 87 78
-
Profit/(loss) for the year 744 - (8) - 736
Attributable to:
Owners of the parent 745 - (8) - 737
Non-controlling interests (1) - - - (1)
744 - (8) - 736
Earnings per share from continuing and discontinued operations
Basic 10.05p - (0.11)p - 9.94p
Diluted 9.96p - (0.11)p - 9.85p
Earnings per share from continuing operations
Basic 10.17p - (0.11)p (1.17)p 8.89p
Diluted 10.08p - (0.11)p (1.16)p 8.81p
(a) The income statement has been re-presented to separately present
insurance revenue, insurance service expenses and net expenses from
reinsurance contracts held.
(b) In addition to the adoption of IFRS 17, comparatives have also been
re-presented to present Banking operations as a discontinued operation. Refer
to Notes 1 and 6 for further details.
IFRS 17 impact Description
Reclassification Primarily relates to directly attributable insurance expenses, previously
included in administrative expenses and cost of sales, which were reclassified
to insurance service expenses.
Remeasurements Primarily relates to the impact of acquired claims and other remeasurements
under IFRS 17. Under the GMM, the profit in relation to acquired claims is
deferred on the balance sheet at the transition date and recognised in the
income statement in subsequent periods. The unwinding of the related CSM
balance accordingly increased revenue and profit in the comparative period.
However, this increase was offset by the deferral of net gains on the release
of claims reserves in relation to acquired claims.
Group balance sheet restatement
The table below sets out the impact of IFRS 17 on the transition balance sheet
at 27 February 2022 and on the comparative period balance sheet as at 25
February 2023.
25 February 2023 26 February 2022
Reported Reclassification Remeasurements Restated Reported Reclassification Remeasurements Restated
£m £m £m £m £m £m £m £m
Non-current assets
Reinsurance contract assets 145 (36) 26 135 184 (46) 33 171
Deferred tax assets 82 - 2 84 85 - 3 88
Current assets
Trade and other receivables 1,315 (80) - 1,235 1,263 (45) - 1,218
Loans and advances to customers 4,052 (105) 1 3,948 3,349 (100) 2 3,251
Reinsurance contract assets 72 (72) - - 61 (61) - -
Current liabilities
Trade and other payables (9,818) 53 3 (9,762) (9,181) 138 3 (9,040)
Insurance contract liabilities (570) 106 (37) (501) (623) 87 (52) (588)
Non-current liabilities
Trade and other payables (153) 99 - (54) (53) - (1) (54)
Insurance contract liabilities (35) 35 - - (27) 27 - -
Net assets impact - (5) - (12)
Equity
Other reserves 3,123 - 16 3,139 3,079 - 1 3,080
Retained earnings 3,490 - (21) 3,469 6,932 - (13) 6,919
Equity impact - (5) - (12)
IFRS 17 impact Description
Reclassification Before the transition, the rights and obligations arising from a portfolio of
insurance contracts and reinsurance contracts were presented in various line
items in the Group balance sheet depending on their nature. IFRS 17 requires
all insurance and reinsurance related balances to be classified within either
insurance contract liabilities or reinsurance contract assets. Premiums
receivable, previously included in loans and advances to customers, were
reclassified to insurance contract liabilities (2023: £105m and 2022:
£100m); and funds withheld arising from quota share arrangements, previously
included in trade and other payables, were reclassified to reinsurance
contract assets (2023: £124m and 2022: £115m). All other relevant balances
have also been reclassified accordingly.
All insurance contract liabilities have been classified as current and all
reinsurance contract assets as non-current, as contracts are now considered on
a portfolio basis rather than on an individual contract basis and are not
permitted to be split between current and non-current.
Remeasurements Primarily relates to the recognition and allocation of CSM in relation to
acquired claims, deferred acquisition cost balances and the impact of the risk
adjustment and discounting.
Group cash flow statement restatement
The table below sets out the impact of IFRS 17 and restatements to present
Banking operations as a discontinued operation on the comparative period Group
cash flow statement for the 52 weeks ended 25 February 2023.
52 weeks ended 25 February 2023
Reported IFRS 17 impact Discontinued operations Restated
£m
re-presentation*
£m £m
Cash flows generated from/(used in) operating activities
Operating profit/(loss) of continuing operations 1,525 (8) (107) 1,410
Operating profit/(loss) of discontinued operations (9) - 107 98
Tesco Bank (increase)/decrease in loans and advances to customers (696) 6 - (690)
Tesco Bank (increase)/decrease in trade, reinsurance and other receivables 60 23 - 83
Tesco Bank increase/(decrease) in customer and bank deposits, trade, insurance 369 (21) - 348
liabilities and other payables
Tesco Bank increase/(decrease) in provisions (7) - - (7)
Tesco Bank (increase)/decrease in working capital (274) 8 - (266)
Cash generated from/(used in) operations impact - -
* In addition to the adoption of IFRS 17, comparatives have been
re-presented to present Banking operations as a discontinued operation. Refer
to Notes 1 and 6 for further details.
IFRS 17 has no impact on net cash generated from operating, investing and
financing activities for the year, or cash and cash equivalents at the end of
the year.
Note 23 Contingent liabilities
As previously reported, Tesco Stores Limited (TSL) (along with all the major
supermarkets) has received claims from current and former hourly-paid store
colleagues alleging that they do equal work to that of colleagues working in
its distribution centres and that differences in terms and conditions relating
to pay are not objectively justifiable (the Equal Pay Claims). The claimants
are seeking the differential between the pay terms looking back, and
equivalence of pay terms moving forward. As at the date of this disclosure,
there are approximately 49,000 claims against TSL, with the number of claims
expected to continue to increase as the litigation progresses.
UK equal pay law provides that an employee is entitled to the same terms in
relation to pay as those of a comparator of the opposite sex in the same
employment if they are employed to do equal work. The legislation achieves
this by implying a clause into the contract of employment, which has the
effect of importing into the employee's contract the more favourable term(s)
of the comparator.
Equal pay claims are typically heard in three stages and the claimants have to
win at every stage in order to succeed. The first stage is comparability,
which is effectively a technical gateway to the claims proceeding. The
claimants have to show that there is a valid basis in law for comparing their
pay and the pay of any comparator. One of the legal bases here is that pay
terms are set by the same body. Following a European court ruling on this, TSL
has made a concession on comparability.
The subsequent stages comprise an equal work assessment and the consideration
of TSL's material factor defences (non-discriminatory reasons for
differentials in pay terms). The Equal Pay Claims have been split into three
tranches (with tranche 1 being heard first) and the stages apply to each
tranche. Although the claims that have been heard to date involve female
claimants, male store workers (being close to 50% of the current store worker
population) may also bring claims by comparing themselves against any
successful female claimants. Male claimants who have pre-emptively brought
such claims currently make up approximately 45% of the Equal Pay Claims
against TSL in the employment tribunal. The ultimate determination of all
claims is likely to take many years, including as a result of appeals.
At present, the total number of Equal Pay Claims that may be received, the
merits, and likely outcome of those claims and of TSL's defences to them, and
the potential impact on the Group, are subject to various and substantial
uncertainties. There are multiple factual and legal defences to these claims
and the Group intends to defend them vigorously, while at the same time taking
appropriate steps to mitigate the risks. The Group therefore cannot make an
assessment of the likely outcome of the litigation, or the potential quantum
of its liability or the potential impact on the Group at this stage. Depending
on the outcome at the various stages of the Equal Pay Claims, and dependent on
the number of any ultimately successful claims, the potential quantum of its
liability could be material.
There are a number of other 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.
Note 24 Events after the reporting period
There were no material events after the reporting period requiring disclosure.
Glossary - Alternative performance measures
Introduction
In the reporting of financial information, the Directors have adopted various
Alternative performance measures (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
measures.
Purpose
The Directors believe that these APMs assist in providing additional useful
information on the trends, performance and position of the Group. APMs aid
comparability between geographical units or provide measures that are widely
used across the industry. They also aid comparability between reporting
periods; adjusting for certain costs or incomes that derive from events or
transactions that fall within the normal activities of the Group but which, by
virtue of their size or nature, are adjusted, can provide a helpful
alternative perspective on year-on-year trends, performance and position that
aids comparability over time.
The alternative view presented by these APMs is consistent with how management
views the business, and how it is reported internally to the Board and
Executive Committee for performance analysis, planning, reporting,
decision-making and incentive-setting purposes.
Further information on the Group's adjusting items, which is a critical
accounting judgement, can be found in Note 3.
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.
All income statement measures are presented on a continuing operations basis.
Changes to APMs
To align with how management consider property disposals, store buybacks, and
properties acquired through business combinations, the Directors have amended
the Retail free cash flow and Capex definitions to exclude store property
purchases. These transactions are excluded because of their unpredictable or
irregular timing.
During the financial year, Tesco Bank paid a £250m special dividend that
represented a one-off return of excess capital from the Bank to the Retail
segment. As this is not expected to recur, management have excluded it from
the Retail free cash flow measure, as this best helps comparability of the
Retail segment over time.
In addition to the change described above, the Retail free cash flow
description and reconciliation has been simplified to list the investing cash
flows that are included in the APM rather than those that are excluded.
The Directors have clarified the definition of Net debt in light of Banking
operations (within the Tesco Bank segment) being classified as discontinued.
Net debt continues to exclude Tesco Bank. Only Retail continuing and
discontinued operations are included in Net debt.
The Directors have also removed Net interest margin from the APMs, as it no
longer forms part of how management considers the long-term performance of the
business.
Group APMs
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition and purpose
Income statement
Revenue measures
Sales Revenue - Fuel sales - Excludes the impact of fuel sales made at petrol filling stations to
demonstrate the Group's performance in the Retail and financial services
businesses. It removes volatilities outside of the control of management,
associated with the movement in fuel prices.
- This is a key management incentive metric.
- This measure is also presented on a Retail and Tesco Bank basis.
Growth in sales No direct equivalent - Ratio N/A - Growth in sales is a ratio that measures year-on-year movement in
Group sales for continuing operations for 52 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 (LFL) No direct equivalent - Ratio N/A - 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.
APM Closest equivalent Adjustments to reconcile to IFRS measure Definition and purpose
IFRS measure
Profit measures
Adjusted operating profit Operating profit from continuing operations((a)) - Adjusting items((b)) - Adjusted operating profit is the headline measure of the
Group's performance, based on operating profit from continuing operations
before the impact of adjusting items. Refer to the APM Purpose section of the
Glossary for further information on adjusting items.
- Amortisation of acquired intangibles is included within adjusting
items because it relates to historical inorganic business combinations and
does not reflect the Group's ongoing trading performance (related revenue and
other costs from acquisitions are not adjusted).
- This is a key management incentive metric.
- This measure is also presented on a Retail basis.
Adjusted total finance costs Finance costs - Adjusting items((b)) - Adjusting items within finance costs include net pension finance
income/costs and fair value remeasurements on financial instruments. Net
pension finance income/costs are impacted by corporate bond yields, which can
fluctuate significantly and are reset each year based on external market
factors that are outside management's control. Fair value remeasurements are
impacted by changes to credit risk and various market indices, applying to
financial instruments resulting from liability management exercises, which can
fluctuate significantly outside of management's control. This measure helps to
provide an alternative view of year-on-year trends in the Group's finance
costs.
Adjusted profit before tax Profit before tax - Adjusting items((b)) - This measure is the summation of the impact of all adjusting items
on profit before tax. Refer to the APM Purpose section of the Glossary.
Adjusted operating margin No direct equivalent - Ratio N/A - Operating margin is calculated as adjusted operating profit divided
by revenue. Progression in operating margin is an important indicator of the
Group's operating efficiency.
Adjusted diluted earnings Diluted earnings per share from continuing operations - Adjusting items((b)) - This metric shows the adjusted profit after tax from continuing
operations attributable to owners of the parent divided by the weighted
per share average number of ordinary shares in issue during the financial period,
adjusted for the effects of dilutive share options.
Retail EBITDA (earnings before adjusting items, interest, tax, depreciation Retail operating profit from continuing operations((a)) - Adjusting items((b)) - This measure is widely used by analysts, investors and other users of
and amortisation)
the accounts to evaluate comparable profitability of companies, as it excludes
- Depreciation and amortisation the impact of differing capital structures and tax positions, variations in
tangible asset portfolios and differences in identification and recognition of
intangible assets. It is used to derive the Net debt/EBITDA and Total
indebtedness ratios, and Fixed charge cover APMs.
Tax measures
Adjusted effective tax rate Effective tax rate - Adjusting items((b)) - Adjusted effective tax rate is calculated as total income tax
credit/(charge) excluding the tax impact of adjusting items, divided by
adjusted profit before tax. This APM provides an indication of the ongoing tax
rate across the Group.
(a) Operating profit is presented on the Group income statement. It is not
defined per IFRS, however, is a generally accepted profit measure.
(b) Refer to Note 3.
APM Closest equivalent Adjustments to reconcile Definition and purpose
IFRS measure
to IFRS measure
Balance sheet measures
Net debt No direct equivalent - N/A - Net debt excludes the net debt of Tesco Bank and includes the net debt of
Retail discontinued operations to reflect the net debt obligations of the
Retail business.
- Net debt comprises bank and other borrowings, lease liabilities and net
derivative financial instruments, offset by cash and cash equivalents,
short-term investments, joint venture loans, and interest and other
receivables.
- 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.
Net debt/EBITDA ratio No direct equivalent - Ratio N/A - Net debt/EBITDA ratio is calculated as Net debt divided by the rolling
12-month Retail EBITDA. It is a measure of the Group's ability to meet its
payment obligations, showing how long it would take the Group to repay its
current net debt if both net debt and EBITDA remained constant. It is widely
used by analysts and credit rating agencies.
Total indebtedness No direct equivalent - N/A - Total indebtedness is Net debt plus the IAS 19 deficit in any pension
schemes (net of associated deferred tax) to provide an overall view of the
Group's obligations, including the long-term commitments to the Group's
pension schemes. Pension surpluses are not included. It is an important
measure of the long-term obligations of the Group and is a measure widely used
by credit rating agencies.
Total indebtedness ratio No direct equivalent - Ratio N/A - Total indebtedness ratio is calculated as Total 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 cover No direct equivalent - Ratio N/A - Fixed charge cover is calculated as the rolling 12-month Retail EBITDA
divided by the sum of net finance costs (excluding net pension finance costs,
finance charges payable on lease liabilities, capitalised interest and fair
value remeasurements on financial instruments) 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.
Capex Property, plant and equipment, intangible asset, and investment property - Additions relating to property buybacks and store purchases - Capex excludes additions arising from business combinations, buybacks of
additions, excluding those from business combinations
properties (typically stores), purchases of store properties, as well as
- Additions relating to decommissioning provisions and similar items additions relating to decommissioning provisions and similar items.
- Property buybacks and purchases of store properties are variable in timing,
with the number and value of transactions dependent on opportunities that
arise within any given financial year. Excluding property buybacks and store
property purchases therefore gives an alternative view of trends in capital
expenditure in the Group's ongoing trading operations.
- Additions relating to decommissioning provisions and similar items are
adjusted because they do not result in near-term cash outflows.
Cash flow measures
Retail free cash flow No direct equivalent - N/A Retail free cash flow includes:
- Continuing cash flows from operating activities of the Retail business
less adjusting Retail operating cash flows.
- Retail investing cash flows relating to: the purchase of property, plant
and equipment, investment property and other long-term assets (excluding
property buybacks and store purchases); purchase of intangible assets and
investment property; dividends received from Tesco Bank (excluding special
dividends); dividends received from joint ventures and associates; and
interest received.
- Financing cash flows relating to: market purchase of shares net of
proceeds from shares issued in relation to share schemes; and Retail repayment
of obligations under leases.
- Directors and management believe this provides a view of free cash flow
generated by the Group's retail trading operations that is more predictable
and comparable over time, and reflects the cash available to shareholders.
- This is a key management incentive metric.
(a) Operating profit is presented on the Group income statement. It is not
defined per IFRS, however, is a generally accepted profit measure.
(b) Refer to Note 3.
APMs: Reconciliation of income statement measures
Retail EBITDA
Continuing operations Notes APM APM
2024 2023
(restated*)
£m £m
Operating profit 2 2,821 1,410
Exclude: Adjusting items 2 8 1,099
Adjusted operating profit 2 2,829 2,509
Exclude: Tesco Bank adjusted segmental profit 2 (148) (22)
Exclude: Tesco Bank adjusted operating profit from discontinued operations 2 79 -
Retail adjusted operating profit 2 2,760 2,487
Include: Retail depreciation and amortisation before adjusting items 2 1,602 1,570
Retail EBITDA 4,362 4,057
* Comparatives have been restated following the adoption of IFRS 17 and
to present Banking operations as a discontinued operation. Refer to Notes 1, 6
and 22 for further details.
APMs: Reconciliation of balance sheet measures
Net debt
A reconciliation of Net debt is provided in Note 21.
Reconciliation from Retail free cash flow to Net debt
Notes APM APM
2024 2023
£m £m
Opening Net debt 21 (10,493) (10,516)
Retail free cash flow 2,063 2,133
Other cash movements:
Own shares purchased for cancellation 2 (752) (781)
Dividends paid to equity owners 2 (778) (859)
Special dividends received from Tesco Bank 2 250 -
Adjusting items included in operating cash flow activities 2 (98) (61)
Retail repayments of capital element of obligations under leases 2 623 589
Retail interest paid on lease liabilities 372 371
Retail net other interest paid/(received) 2 188 202
Retail proceeds from sale of property, plant and equipment, investment 2 55 341
property, intangible assets and assets held for sale
Cash outflows attributable to property buybacks and store purchases 2 (121) (75)
Other investing cash movements 2 (2) (281)
Non-cash movements in Net debt:
Retail fair value movements (71) (18)
Retail foreign exchange movements 126 (191)
Retail net interest charge (161) (187)
Retail non-cash movements in lease liabilities (914) (1,113)
Retail movement in net debt of disposal group 14 -
Retail non-cash movement arising from acquisitions and disposals (68) (46)
Other non-cash movements 3 (1)
Closing Net debt 21 (9,764) (10,493)
Net debt/EBITDA and Total indebtedness ratio
Notes APM APM
2024 2023
£m (restated*)
£m
Net debt 21 9,764 10,493
Retail EBITDA 4,362 4,057
Net debt/EBITDA ratio 2.2 2.6
Net debt 21 9,764 10,493
Include: Defined benefit pension deficit, net of deferred tax 18 493 300
Total indebtedness 10,257 10,793
Retail EBITDA 4,362 4,057
Total indebtedness ratio 2.4 2.7
* Comparatives have been restated following the adoption of IFRS 17 and
to present Banking operations as a discontinued operation. Refer to Notes 1, 6
and 22 for further details.
Fixed charge cover
Notes APM APM
2024 2023
£m (restated*)
£m
Net finance costs 4 538 536
Exclude: Net pension finance income/(costs) 4 (18) 80
Exclude: Fair value remeasurements of financial instruments 4 38 (53)
Adjusted total finance costs 558 563
Exclude: Finance charges payable on lease liabilities 4 (373) (371)
Adjusted total finance cost, excluding capitalised interest and finance 185 192
charges payable on lease liabilities
Include: Total lease liability payments 1,000 966
Exclude: Discontinued operations total lease liability payments (3) (2)
1,182 1,156
Retail EBITDA 4,362 4,057
Fixed charge cover (ratio) 3.7 3.5
* Comparatives have been restated following the adoption of IFRS 17 and to
present Banking operations as a discontinued operation. Refer to Notes 1, 6
and 22 for further details.
Capex
Notes APM APM
2024 2023
£m £m
Property, plant and equipment additions((a)) 9 1,198 1,252
Other intangible asset additions((a)) 275 277
Exclude: Additions from obtaining control of property joint venture((b)) (65) (248)
Exclude: Additions from property buybacks (78) (29)
Exclude: Additions from store purchases (29) -
Exclude: Additions relating to decommissioning provisions and similar items 13 (17)
Capex 1,314 1,235
(a) Excluding amounts acquired through business combinations.
(b) Acquisition of The Tesco Coral Limited Partnership in 2024 and The Tesco
Dorney Limited Partnership in 2023.
APMs: Reconciliation of cash flow measures
Notes APM APM
2024 2023
£m £m
Cash generated from/(used in) operating activities 2 3,839 3,722
Exclude: Cash (generated from)/used in operating activities in Tesco Bank 2 35 -
Exclude: Cash (generated from)/used in operating activities in discontinued 2 (162) 30
operations
Retail cash generated from/(used in) operating activities 2 3,712 3,752
Exclude: Retail adjusting net cash (generated from)/used in operating 2 98 61
activities
Retail adjusted cash generated from/(used in) operating activities 3,810 3,813
Include the following cash flows generated from/(used in) investing
activities:
Retail purchase of property, plant and equipment, investment property and 2 (1,039) (902)
other long-term assets - other capital expenditure((a))
Retail purchase of intangible assets 2 (250) (241)
Dividends received from joint ventures and associates 2 9 14
Dividends received from Tesco Bank((b)) 2 - 54
Retail interest received 2 249 70
Include the following cash flows generated from/(used in) financing
activities:
Own shares purchased for share schemes 2 (93) (86)
Retail repayment of capital element of obligations under leases 2 (623) (589)
Retail free cash flow 2,063 2,133
(a) Excludes property buybacks and store purchases.
(b) Excludes Tesco Bank special dividends.
The following table reconciles the Retail free cash flow APM to that
previously presented for remuneration purposes.
Notes APM APM
2024 2023
£m £m
Retail free cash flow 2 2,063 2,133
Retail proceeds from sale of property, plant and equipment, investment 2 55 341
property, intangible assets and assets classified as held for sale
Retail purchase of property, plant and equipment and investment property - 2 (59) (54)
property buybacks and store purchases
Retail cash outflows exceeding the incremental increase in assets in a 2 (62) (21)
property buyback
Retail disposal of subsidiaries, net of cash disposed 2 15 -
Retail acquisition of businesses, net of cash acquired 2 (17) (66)
Special dividend received from Tesco Bank 2 250 -
Retail (investments in)/proceeds from sale of joint ventures and associates 2 - (10)
Retail (investments in)/proceeds from sale of other investments 2 - (205)
Retail adjusting net cash generated from/(used in) operating activities 2 (98) (61)
Memo: Retail free cash flow including cash flows from acquisitions and 2,147 2,057
disposals, cash flows from the sale or buyback of properties and Retail
adjusting cash flows from operating activities
Glossary - Other
Dividend per share
This is calculated as interim dividend per share paid plus final dividend per
share declared in respect of that financial year.
Expected credit loss (ECL)
Credit loss represents the portion of the debt that a company is unlikely to
recover. The expected credit loss is the projected future losses based on
probability-weighted calculations.
ESG
Environmental, social and governance.
MTN
Medium-term note.
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.
Retail capital employed
This is calculated as Retail net assets excluding the pension deficit/surplus
net of deferred tax, net assets of the disposal group and non-current assets
classified as held for sale less Net debt.
Retail return on capital employed (ROCE)
Retail adjusted operating profit divided by the average of opening and closing
Retail capital employed.
Total capital ratio
This is calculated by dividing total regulatory capital by total
risk‐weighted assets.
Supplementary information (unaudited)
One-year like-for-like sales performance (exc. VAT, exc. fuel)
Like-for-like sales
Q1 Q2 Q3 Q4 H1 H2 FY
2023/24
2023/24
2023/24
2023/24
2023/24 2023/24 2023/24
UK & ROI 8.8% 8.0% 7.3% 5.2% 8.4% 6.2% 7.3%
UK 9.0% 8.4% 7.9% 5.8% 8.7% 6.8% 7.7%
ROI 7.3% 6.5% 8.3% 5.4% 6.9% 6.7% 6.8%
Booker 8.4% 6.6% 3.9% 2.5% 7.5% 3.2% 5.4%
Central Europe 1.1% 0.7% (1.4)% 0.2% 0.9% (0.5)% 0.2%
Total Retail 8.2% 7.5% 6.6% 4.8% 7.8% 5.7% 6.8%
Total sales performance (exc. VAT, exc. fuel)
Actual rates Constant rates
H1 H2 FY H1 H2 FY
2023/24 2023/24 2023/24 2023/24 2023/24 2023/24
UK & ROI 8.9% 6.3% 7.6% 8.8% 6.4% 7.6%
UK 9.1% 7.2% 8.1% 9.1% 7.2% 8.1%
ROI 13.0% 6.1% 9.3% 10.0% 7.3% 8.5%
Booker 6.9% 2.2% 4.6% 6.9% 2.2% 4.6%
Central Europe 6.7% (0.2)% 3.1% 1.4% (0.1)% 0.6%
Total Retail 8.7% 5.8% 7.3% 8.2% 5.9% 7.0%
Country detail - Retail
Revenue (exc. VAT, inc. fuel)
Local currency £m Average exchange Closing exchange
(m) rate rate
UK 50,907 50,907 1.0 1.0
ROI 3,340 2,891 1.2 1.2
Booker 9,082 9,082 1.0 1.0
Czech Republic 43,384 1,554 27.9 29.7
Hungary 665,208 1,512 440.0 455.5
Slovakia 1,652 1,430 1.2 1.2
UK sales area by size of store
24 February 2024 25 February 2023
Store size (sq. ft.) No. of stores Million sq. ft. % of total No. of stores Million sq. ft. % of total
sq. ft. sq. ft.
0-3,000 2,675 5.8 14.9% 2,605 5.6 14.6%
3,001-20,000 279 2.9 7.5% 276 2.9 7.6%
20,001-40,000 288 8.3 21.3% 286 8.2 21.2%
40,001-60,000 182 8.8 22.6% 182 8.8 22.8%
60,001-80,000 119 8.4 21.6% 119 8.4 21.6%
80,001-100,000 45 3.7 9.5% 45 3.7 9.6%
Over 100,000 8 1.0 2.6% 8 1.0 2.6%
Total* 3,596 38.9 100.0% 3,521 38.6 100.0%
* Excludes Booker and franchise stores.
Group space summary
Actual Group space - store numbers((a))
2022/23 Openings Closures/ Net gain/ 2023/24 Repurposing/
disposals
year end (reduction)((b)) year end extensions((c))
Large((d)) 806 7 (4) 3 809 -
Convenience((d)) 1,997 60 (9) 51 2,048 -
Dotcom only 6 - - - 6 -
Total Tesco 2,809 67 (13) 54 2,863 -
One Stop((e)) 712 27 (6) 21 733 -
Booker 191 - (1) (1) 190 -
UK((e)) 3,712 94 (20) 74 3,786 -
ROI 166 5 (1) 4 170 -
UK & ROI((e)) 3,878 99 (21) 78 3,956 -
Czech Republic((e)) 187 2 (5) (3) 184 6
Hungary 197 - - - 197 21
Slovakia((e)) 157 12 - 12 169 9
Central Europe((e)) 541 14 (5) 9 550 36
Group((e)) 4,419 113 (26) 87 4,506 36
UK (One Stop) 291 43 (17) 26 317 -
Czech Republic 124 3 (8) (5) 119 -
Slovakia 25 6 (31) (25) - -
Franchise stores 440 52 (56) (4) 436 -
Total Group 4,859 165 (82) 83 4,942 36
Actual Group space - '000 sq. ft.((a))
2022/23 Openings Closures/ Repurposing/ Net gain/ 2023/24
disposals
year end extensions((c)) (reduction) year end
Large((d)) 31,427 128 (50) - 78 31,505
Convenience((d)) 5,344 151 (40) - 111 5,455
Dotcom only 716 - - - - 716
Total Tesco 37,487 279 (90) - 189 37,676
One Stop((e)) 1,169 49 (10) - 39 1,208
Booker 8,181 - (87) - (87) 8,094
UK((e)) 46,837 328 (187) - 141 46,978
ROI 3,478 38 (17) - 21 3,499
UK & ROI((e)) 50,315 366 (204) - 162 50,477
Czech Republic((e)) 4,146 20 (22) (43) (45) 4,101
Hungary 5,670 - - (298) (298) 5,372
Slovakia((e)) 3,147 67 - (1) 66 3,213
Central Europe((e)) 12,963 87 (22) (342) (277) 12,686
Group((e)) 63,278 453 (226) (342) (115) 63,163
UK (One Stop) 420 61 (22) - 39 459
Czech Republic 114 3 (9) - (6) 108
Slovakia 23 6 (29) - (23) -
Franchise stores 557 70 (60) - 10 567
Total Group 63,835 523 (286) (342) (105) 63,730
(a) Continuing operations.
(b) The net gain/(reduction) reflects the number of store openings less the
number of store closures/disposals.
(c) Repurposing of retail selling space.
(d) 2022/23 UK store numbers have been updated to reflect an extension of a
Convenience store to a Large store and to reflect the conversion of Jack's
stores last year.
(e) Excludes franchise stores.
Group space forecast to 22 February 2025 - '000 sq. ft.((a))
2023/24 Openings Closures/ disposals Repurposing/ Net gain/ 2024/25
year end
year end extensions((b)) (reduction)((c))
Large 31,505 61 - 5 66 31,571
Convenience 5,455 201 (29) - 172 5,627
Dotcom only 716 - - - - 716
Total Tesco 37,676 262 (29) 5 238 37,914
One Stop((d)) 1,208 57 (13) - 44 1,252
Booker 8,094 - - - - 8,094
UK((d)) 46,978 319 (42) 5 282 47,260
ROI 3,499 100 - - 100 3,599
UK & ROI((d)) 50,477 419 (42) 5 382 50,859
Czech Republic((d)) 4,101 61 - (38) 23 4,124
Hungary 5,372 2 - (108) (106) 5,266
Slovakia((d)) 3,213 51 - (31) 20 3,233
Central Europe((d)) 12,686 114 - (177) (63) 12,623
Group((d)) 63,163 533 (42) (172) 319 63,482
UK (One Stop) 459 129 (14) - 115 574
Czech Republic 108 1 (4) - (3) 105
Slovakia - - - - - -
Franchise stores 567 130 (18) - 112 679
Total Group 63,730 663 (60) (172) 431 64,161
(a) Continuing operations.
(b) Repurposing of retail selling space.
(c) The net gain/(reduction) reflects the number of store openings less the
number of store closures/disposals and repurposing/extensions.
(d) Excludes franchise stores.
Tesco Bank income statement
2024((a) 2023((a))
) (restated((b)))
£m £m
Revenue
Interest income 94 38
Fees and commissions income 203 170
Insurance revenue 514 458
811 666
Direct costs
Interest payable (67) (34)
Fees and commissions expense (1) -
Insurance service expenses((c)) (454) (408)
Net expenses from reinsurance contracts held (48) (37)
(570) (479)
Other income/(expenses) (1) (5)
Gross profit 240 182
Other expenses
Staff costs (50) (46)
Premises and equipment (37) (36)
Other administrative expenses (72) (64)
Depreciation and amortisation((c)) (12) (14)
Adjusted operating profit 69 22
Adjusting items((d)) (3) (5)
Operating profit/(loss) 66 17
Finance income/(costs): movements on derivatives and hedge accounting 5 -
Finance income/(costs): interest (15) (8)
Finance income/(costs): insurance (6) (3)
Profit/(loss) before tax from continuing operations 50 6
Discontinued operations
Profit/(loss) before tax from discontinued operations (665) 107
Profit/(loss) before tax (615) 113
(a) These results are for the 12 months ended 29 February 2024 and the
previous period represents the 12 months ended 28 February 2023.
(b) Comparatives have been restated following the adoption of IFRS 17 and
re-presented to disclose Banking operations as a discontinued operation. Refer
to Notes 1, 6 and 22 for further details.
(c) Depreciation and amortisation of £(5)m (2023: £(5)m) form part of
insurance service expenses.
(d) Adjusting items of £nil in 2024 (2023: £(5)m) relate to operational
restructuring changes, as part of the multi-year 'Save to Invest' programme.
Refer to Note 3 for further details.
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