REG - Tesco PLC - Interim Results 2016/17 <Origin Href="QuoteRef">TSCO.L</Origin> - Part 1

TescoAnnouncement

05/10/2016 07:05

RNS Number : 7004L
Tesco PLC
05 October 2016
Interim Results 2016/17
STRONG FIRST HALF PROGRESS;
CLEAR PLAN TO CREATE LONG-TERM VALUE
Group sales1,2
Operating profit pre exceptionals2,3
Operating profit2
Retail operating cash flow2,4
Net debt4,5
24.4bn
up 3.3%
596m
up 60.2%
515m
up 38.4%
955m
up 20.7%
(4.4)bn
down 49.3% y-o-y
down 14.8% vs year-end
Headlines
Positive like-for-like sales and volume growth in all regions across the Group
 UK like-for-like sales growth of 0.6% and Group like-for-like sales growth of 1.0%6
 UK volumes up 2.1%; UK transactions up 1.6% 
 International volumes up 3.3%; International transactions up 0.3%
Significant progress against all three priorities 
 Competitive in the UK - all key customer metrics improving relative to the market
 More secure balance sheet - net debt reduced by further 0.8bn since year-end
 Rebuilding trust - brand health returned to highest level in more than four years7
Customer, colleague and supplier partner measures all improving
 Most improved retailer in terms of customer recommendations8
 78% of colleagues recommend us as a 'great place to work' (up from 70% in 1H 2014/15)
 Very strong improvement in UK supplier satisfaction measure at 78% (up from 51% in 2014/15)
Well-placed against our plans - on track to deliver 1.2bn Group operating profit before exceptional items for the full year 
 Rebuilding profitability whilst investing in our customer offer
 Group operating profit before exceptional items up 60% in the first half
 Exclusive fresh food brands performing ahead of plan; investment part-offset by mix benefit
Sharing our ambition to deliver 3.5-4.0% Group operating margin by 2019/20
 Underpinned by six strategic drivers, we will strengthen our customer offer whilst creating long-term, sustainable value for shareholders
 Includes 1.5bn further operating cost reductions, to be realised through a more efficient and responsive distribution system, a simpler store operating model & goods not for resale savings
 Total capex will average 1.4bn per year to support this programme
Statutory results: statutory revenue 27.3bn, up 1.4%; statutory profit before tax 71m, down (28.3)%
Dave Lewis, Chief Executive:
"We have made further strong progress in the first half, with positive like-for-like sales growth across all parts of the Group as we re-invest in our customer offer whilst rebuilding profitability in a sustainable way. 
The entire Tesco team is focused on serving shoppers a little better every day. We are more competitive across our offer. Prices are more than 6% lower than two years ago, availability and service have never been better and our range is more compelling. Our new fresh food brands are performing ahead of expectations, improving our value proposition and further removing reasons for customers to shop elsewhere. 
Whilst the market is uncertain, we have made significant progress against the priorities we set out two years ago, stabilising the business and positioning us well for the future. Today, we are sharing the plans we have in place to become even more competitive for our customers, even simpler for colleagues and an even better partner for our suppliers, whilst creating long-term, sustainable value for our shareholders.
Like-for-like sales performance6:
1H
2015/16
2H
2015/16
FY
2015/16
1Q
2016/17
2Q
2016/17
1H
2016/17
UK & ROI
(1.3)%
(0.1)%
(0.7)%
0.3%
0.9%
0.6%
 UK
(1.1)%
(0.1)%
(0.6)%
0.3%
0.9%
0.6%
 ROI
(3.7)%
0.0%
(1.9)%
0.3%
0.1%
0.2%
International
0.6%
3.2%
2.0%
3.0%
2.1%
2.6%
 Europe
2.6%
3.6%
3.1%
2.8%
1.3%
2.0%
 Asia
(1.7)%
2.9%
0.6%
3.3%
3.0%
3.2%
Group
(0.9)%
0.6%
(0.1)%
0.9%
1.1%
1.0%
Headline Group results
The Group has defined its alternative performance measures in the Glossary on page 43.
26 weeks ended 27 August 2016 
On a continuing operations basis
1H
2016/17
1H
2015/16
Year-on-year change
(Constant
exchange rates)
Year-on-year change
(Actual
exchange rates)
Group sales (exc. VAT, exc. fuel)1
24,402m
23,684m
1.3%
3.3%
Fuel
2,936m
3,282m
(10.9)%
(10.5)%
Statutory revenue (exc. VAT, inc. fuel)
27,338m
26,966m
(0.4)%
1.4%
Group operating profit before exceptional items3
- UK & ROI9
- International
- Tesco Bank
596m
389m
118m
89m
372m
164m
122m
86m
56.7%
134.1%
(9.8)%
3.5%
60.2%
137.2%
(3.3)%
3.5%
Include exceptional items
(81)m
-
Group operating profit
515m
372m
34.4%
38.4%
Group profit before tax before exceptional items and net pension finance costs 
410m
183m
124.0%
Group statutory profit before tax
71m
99m
(28.3)%
Diluted EPS before exceptional items
3.16p
0.60p
426.7%
Diluted EPS before exceptional items and net pension finance costs
3.74p
1.42p
163.4%
Diluted EPS
0.42p
0.60p
(30.0)%
Capex
0.5bn
0.4bn
up 24.2%
Net debt4,5
(4.4)bn
(8.6)bn
down 49.3%
Cash generated from retail operations2,4
1.0bn
0.8bn
up 20.7%
Notes
1. Group sales exclude VAT and fuel. Sales growth shown on a comparable 26 week basis. 
2. For continuing operations. 
3. Exceptional items are excluded by virtue of their size and nature in order to better reflect management's view of the performance of the Group. Full detail of exceptional items can be found in Note 4 on page 27.
4. In order to provide further analysis of the Group cash flow statement, net debt and retail operating cash flow, which exclude the impact of Tesco Bank, are separately disclosed.
5. Includes both continuing and discontinued operations.
6. Like-for-like is the growth in sales from stores that have been open for at least a year at a constant foreign exchange rate and includes online sales. 
7. As per YouGov BrandIndex, August 2016.
8. As per the periodic Customer Spotlight Tracker.
9. The elimination of intercompany transactions between continuing operations and the discontinued Turkey operation, as required by IFRS 5 and IFRS 10, has resulted in a reduction to the prior period UK & ROI operating profit of (2)m.
Update on our priorities
The progress we have made against the three priorities first set out in October 2014 has enabled us to stabilise the Group. We are more competitive, our balance sheet is more secure and we are rebuilding trust and transparency in the Tesco brand.
1. Regaining competitiveness in core UK business:
 seventh consecutive quarter of both volume and transaction growth; outperformed the market in volume growth in all food categories
 introduced seven new, exclusive fresh food brands delivering market-leading price and quality across the range; 80% of customers making repeat purchases of these products
 all key customer metrics stronger against competitors; maintained record availability and rated as number one by customers for checkout waiting time
 clearer, lower and more stable prices - now more than 6% lower than September 2014 on a typical customer basket; number of products on multibuy promotions reduced by 27% year-on-year
 ongoing range refinement, improved product adjacencies and around 10% increase in own-label space in our larger shops; new range simplification in convenience stores 
 3,000 more customer-facing colleagues since February 2016; customer service rating most improved relative to the market 
 sales of Harris + Hoole, Dobbies and Giraffe completed and sale of Euphorium agreed, supporting our greater focus on the core UK business
2. Protecting and strengthening the balance sheet:
 generated 1.0bn retail operating cash flow, including an underlying 0.1bn working capital inflow 
 regained full ownership of six superstores in the half, in line with our aim to reduce exposure to inflation-linked and fixed-uplift rental agreements
 maintained focus on strong capital discipline; on track for 1.25bn capital expenditure this year 
 agreed the sale of our business in Turkey, which will contribute a 110m reduction in total indebtedness and avoid incremental cash investment
 repaid two medium-term notes totalling 1.2bn at maturity following half-year end
 long-term pension deficit funding agreement with Trustee in place; IAS 19 pension deficit up (3.2)bn to (5.9)bn due to lower bond yields
3. Rebuilding trust and transparency:
 continued to build trusted, transparent and long-term relationships with suppliers; 78% of UK suppliers satisfied with experience of working with Tesco, an 18% year-on-year improvement
 recognised as most improved retailer in the Groceries Code Adjudicator 2016 Annual Survey
 'BrandIndex', an external measure of brand health, at highest level for more than four years 
 introduced 'Free Fruit for Kids' initiative in our large stores, helping customers live more healthily
 donated 12m to local community projects chosen by customers through 'Bags of Help' scheme
 ranked number one supermarket for reducing food waste by The Grocer 
 introduced long-term 'Fair For Farmers Guarantee' on all our own-label fresh milk 
 helping colleagues simplify the way we work in shops; 78% of colleagues recommend us as a 'great place to work', up from 70% two years ago
Looking ahead
Whilst we expect the market to remain challenging and uncertain, we have clear plans which will enable us to deliver more value for all of our stakeholders: customers, colleagues, suppliers and shareholders.
Today, we are sharing our ambition to deliver a Group operating margin of between 3.5% and 4.0% by our 2019/20 financial year. This ambition is underpinned by six strategic drivers including the identification of 1.5bn further operating cost reductions which we will secure over the next three years. This will enable us to further invest in our offer for customers, offset expected inflationary pressures on costs and continue to rebuild profitability. Alongside these cost reductions, we will be looking to further differentiate our brand, continue our focus on strong cash generation, maximise the margin mix from our sales, maximise the value of our property portfolio and continue to innovate both in how we operate the business and in our offer for customers.
Some of these initiatives will require investment and as a result we expect our total capital expenditure to average 1.4bn per annum over the period to 2019/20. The benefits of the initiatives should start to become evident over the coming months, however given their nature and profile, the margin improvement will likely be more weighted towards the end of the plan.
Dave Lewis, Chief Executive, will share further details of the six strategic drivers as part of our interim results presentation to investors and analysts at 9am today, which will be webcast as detailed on page 9. 
Financial Results
The results of Kipa, our business in Turkey, have been classified as discontinued operations following the announcement of its sale (subject to regulatory clearances) on 10 June 2016.
 
Sales:
On a continuing operations basis
UK & ROI
International1
Tesco Bank
Group
Sales 
(exc. VAT, exc. fuel)
18,614m
5,285m
503m
24,402m
Change at constant exchange rates2 %
0.6%
3.2%
5.3%
1.3%
Change at actual exchange rates2 %
1.2%
10.9%
5.3%
3.3%
Like-for-like sales (exc. VAT, exc. fuel)
0.6%
2.6%
-
1.0%
Statutory revenue
(exc. VAT, inc. fuel)
21,449m
5,386m
503m
27,338m
Includes: Fuel
2,835m
101m
-
2,936m
1. International consists of Central Europe (Czech Republic, Hungary, Poland and Slovakia), Malaysia and Thailand.
2. Sales change shown on a comparable 26 week basis; statutory Group sales change was 3.0% at actual exchange rates and 1.0% at constant exchange rates.
Group sales grew by 1.3% at constant exchange rates with positive like-for-like sales growth in all regions. At actual exchange rates, sales grew by 3.3% including a 2.0% foreign exchange translation effect principally due to the strength of European currencies relative to Sterling. 
We delivered positive like-for-like sales growth in the combined UK & ROI business for the half for the first time since 2010/11, driven by sustained volume growth in both markets. 
In the UK, like-for-like sales grew by 0.6% and, including a small contribution from net new store openings, total sales grew by 0.7%. Our continued investment in lowering prices and further falls in commodity prices contributed to sustained deflation throughout the half.
We have delivered continued improvement across all aspects of our customer offer in the half. In addition to further strong improvements in measures of colleague service and helpfulness, we have maintained record levels of availability, supported by the work carried out last year to ensure our product ranges were simpler and more relevant for customers. We have continued to reduce and simplify our product range in the half, grouping products around meal solutions in our larger stores and streamlining our convenience store ranges. Customers in the UK recognised the further improvements across our offer in service, availability, range and price by voting us 'Britain's Favourite Supermarket' at the Grocer Gold Awards in June 2016. 
The value of our food sales in the UK grew for the first time since 2013 in the second quarter and we outperformed the market on volume growth in all food categories. The seven exclusive fresh food brands we launched in March 2016 led to a sales volume growth outperformance of the market in 'produce' and 'meat' of 6% and these brands continue to be cheaper, on average, than comparable lines in the rest of the market. 
All formats - including our largest, Extra format - saw an improving trend in like-for-like sales performance throughout the half. The rate of online grocery sales growth moderated, as planned, due to the changes we have made to improve the sustainability of our offer.
In a market that remains highly competitive, like-for-like sales in the Republic of Ireland grew 0.2% as customer perceptions of our proposition improved significantly year-on-year. Whilst top-line growth in value terms was held back by our continued investment in lower prices, we retain our leading position in the market in volume terms thanks to a strong performance in fresh food.
International sales grew by 3.2% at constant exchange rates, including a net positive contribution from new store openings in Asia which offset the impact of store closures in Europe. Like-for-like sales grew by 2.6% overall with positive growth in both Europe and Asia. 
Our business in Thailand delivered a strong performance, driven principally by improvements in our fresh food offer. Sales are growing across all store formats and we are maintaining our strong market share position.
In Europe, we harmonised more of our product offering and promotions across each of the countries we operate in and inspired customers with new events and improvements in our fresh food offer. We continued to invest in reducing prices for customers, contributing to ongoing deflation. In Hungary, we responded effectively to the repeal of the legislation which had previously enforced Sunday closures.
Group statutory revenue of 27.3bn includes sales of fuel, which declined by around (10)% year-on-year, principally due to retail price deflation. Further information on sales performance is included in Appendices 1 to 3 starting on page 46 of this statement.
Operating profit before exceptional items:
On a continuing operations basis
UK & ROI
International
Tesco Bank
Group
Operating profit before exceptional items
389m
118m
89m
596m
Change at constant exchange rates %
134.1%
(9.8)%
3.5%
56.7%
Change at actual exchange rates %
137.2%
(3.3)%
3.5%
60.2%
Operating profit margin before exceptional items
1.81%
2.19%
17.69%
2.18%
Change at constant exchange rates (bp)
104bp
(29)bp
(30)bp
79bp
Change at actual exchange rates (bp)
105bp
(30)bp
(30)bp
80bp
Operating profit 
365m
128m
22m
515m
Group operating profit before exceptional items was 596m, up 56.7% at constant exchange rates, as we continue to rebuild profitability whilst investing in the customer offer. Statutory operating profit of 515m includes the impact of exceptional items, which are described in more detail in Note 4 on page 27. 
UK & ROI operating profit before exceptional items was 389m, with a margin improvement of 23 basis points on the second half of 2015/16, despite a significant net investment in the quality and price of our new exclusive fresh food brands. In addition to the benefit of a strong volume performance across the new brands, our overall profitability also benefited from a favourable product mix. As a result, our first half profitability was ahead of our initial plan.
Our long-term sustainable partnerships with suppliers are supporting us to innovate and add value to the customer offer whilst helping us to identify initiatives to leverage our scale and reduce costs. For example, we have been able to work with our fresh fruit and vegetable growers to ensure that we can change our trading strategy at a market-leading pace following unexpected crop surpluses, enabling us to offer great seasonal deals for customers and utilise a much greater proportion of the growers' output, reducing waste.
We are continuing to optimise our store operating model, improving the customer experience with the introduction of new customer service desks, changing replenishment hours and revising trading hours. To support a greater focus on our core business, the sales of Giraffe, Dobbies and Harris + Hoole were completed in the half and the sale of Euphorium was agreed.
International operating profit before exceptional items decreased by (9.8)% at constant exchange rates to 118m, largely driven by continuing investments in our customer offer and an intensely competitive environment, particularly in Poland and the Czech Republic. We are continuing to make operational changes across both Europe and Asia in order to further improve the shopping trip for customers, simplify the way we work and generate cost savings.
Whilst we note the European Commission's investigation into the introduction of a new retail tax in Poland from September, we remain cautious about further legislative changes in our European markets.
Further information on operating profit performance is included in Note 2 on page 20 of this statement.
Exceptional items in operating profit:
This year
Last year
Restructuring and redundancy
(95)m
-
Tesco Bank customer redress 
(45)m
-
Property transactions
59m
-
Total exceptional items in operating profit
(81)m
- 
Exceptional items are excluded from our headline performance measures by virtue of their size and nature, in order to better reflect management's view of the performance of the Group. In the current year, the net effect of exceptional items on operating profit is (81)m.
The majority ((73)m) of the restructuring and redundancy charge relates to changes to store colleague structures and working practices in the UK & ROI business. The remaining (22)m relates to simplification and head office relocation costs for Tesco Bank. 
The (45)m charge for customer redress principally relates to a provision for settlement of claims in Tesco Bank relating to prior years, following the updated guidance published by the Financial Conduct Authority.
Finally, the property profit of 59m relates to the sale of a number of properties and a development site in the UK & ROI business, in addition to the Liberec Forum shopping centre in the Czech Republic, for combined proceeds of 240m.
Further detail can be found in Note 4 on page 27 of this statement.
Joint ventures and associates:
This year
Last year
Share of post-tax profits from JVs and associates
2m
13m
Our share of post-tax profits from joint ventures and associates was 2m, a decline of (11)m year-on-year due to lower profits recognised from UK property joint ventures and a higher level of losses in our partnership with China Resources (Holdings) Company Ltd.
Finance income and finance costs:
This year
Last year
Interest receivable and similar income
26m
10m
IAS 32 and 39 'Financial instruments' - fair value remeasurements
57m
34m
Finance income 
83m
44m
Interest payable
(274)m
(252)m
Capitalised interest
3m
6m
IAS 19 net pension finance costs
(58)m
(84)m
Finance costs
(329)m
(330)m
Exceptional charge:
Translation of Korea proceeds
(200)m
-
Statutory finance costs
(529)m
(330)m
Finance income increased to 83m, principally due to a favourable impact from the mark-to-market of financial instruments.
 
Interest payable rose to (274)m due to the debt acquired as part of our February 2016 agreement to regain sole ownership of 49 stores and two distribution centres. Following the end of the half-year, we repaid two medium term notes at maturity in September 2016 at a cost of 1.2bn, which will result in a net annualised cash interest saving of 36m.
Net pension finance costs are calculated, as required by IAS 19, with reference to the pension deficit at the start of the year. As such, the reduction of 26m to (58)m is the result of the lower IAS 19 pension deficit in February 2016 vs February 2015.
A further exceptional non-cash loss of (200)m arose on the translation of the proceeds from the sale of our Homeplus business in Korea which are held in GBP money market funds in a non-Sterling denominated subsidiary. This does not represent any economic cost to the Group.
Further detail can be found in Note 5 on page 28 of this statement.
Group tax:
On a continuing operations basis
This year
Last year
Tax on profit before exceptional items
(98)m
(52)m
Tax on profit
(40)m
(52)m
Tax on profit before exceptional items was (98)m with an effective rate of tax for the Group of 28%. This tax rate is higher than the UK statutory rate mainly due to the higher effective tax rates in overseas jurisdictions and the impact of the banking surcharge tax, which was introduced in January 2016 and imposes an additional 8% levy on the profits of banking companies.
Following enactment of the Finance Act 2016 after the end of the half-year in September, reducing the UK corporation tax rate from 18% to 17% in 2020, the effective underlying tax rate for the full year is now expected to be in the region of 25%. 
Earnings per share:
On a continuing operations basis
This year
Last year
Diluted earnings per share before exceptional items 
3.16p
0.60p
Diluted earnings per share before exceptional items and net pension finance costs
3.74p
1.42p
Diluted earnings per share
0.42p
0.60p
Diluted earnings per share before exceptional items were 3.16p, significantly higher than last year due to improved underlying profitability. Diluted earnings per share before exceptional items and net pension finance costs were 3.74p and were also significantly higher than last year. Statutory diluted earnings per share were 0.42p, down (30.0)% on last year, due to a higher level of exceptional items this year. 
Summary of total indebtedness1:
Aug 2016
Feb 2016
Movement
Net debt (excludes Tesco Bank)
(4,352)m
(5,110)m
758m
Discounted operating lease commitments
(7,771)m
(7,787)m
16m
Pension deficit, IAS 19 basis (post-tax)
(5,853)m
(2,612)m
(3,241)m
Total indebtedness
(17,976)m
(15,509)m
(2,467)m
1. Total indebtedness is defined in the glossary on page 43. Discounted operating lease commitments exclude Turkey.
Total indebtedness was (18.0)bn, an increase of (2.5)bn since February 2016 due to a rise in the pension deficit, as measured by IAS19. Net debt reduced by 0.8bn as the cash we generated from operations and business disposals, more than offset capital and other expenditure. 
We aim to increase the proportion of owned property and reduce exposure to index-linked and fixed-uplift rent inflation over the long-term. Following the re-acquisition of 70 stores and two distribution centres last year, we regained ownership of a further six stores, increasing freehold assets by another 112m. Excluding Turkey, discounted operating lease commitments were slightly down on last year, despite the extension of a number of leases.
In November 2015, we replaced our UK defined benefit pension scheme with a defined contribution pension scheme, significantly reducing future pension risk and giving greater certainty on future cash requirements. To calculate the pension deficit for accounting purposes, we are required to use corporate bond yields as the basis for the discount rate of our long-term liabilities, irrespective of the mix of our assets and their expected returns. The sharp decrease in corporate bond yields since the year-end - the biggest six-monthly fall recorded since the iBoxx corporate bond index was first introduced in 2000 - has therefore driven a rise of more than 50% in the accounting valuation of our liabilities, increasing our reported accounting net deficit from (2.6)bn to (5.9)bn. Our defined benefit pension scheme assets have performed well and we are progressing with our asset de-risking strategy, which aims to reduce risks from changes in interest rates and inflation. 
In accordance with last year's long-term deficit funding agreement with the Trustee of 270m per annum, a cash contribution of 126m was made to the scheme. The next triennial actuarial valuation will be conducted as at March 2017 and is due to be reported in 2018. Further detail can be found in Note 15 on page 38 of this statement.
As announced in June 2016, the sale of our business in Turkey, which is subject to usual local regulatory approvals, is expected to further reduce total indebtedness by 110m. 
Summary retail cash flow: 
This year
Last year
Cash flow from continuing operations excluding working capital 
850m
1,048m
(Increase)/decrease in working capital 
- impact from exceptional items
(26)m
(388)m
- cash impact of new approach to supplier payments
-
(231)m
- underlying decrease in working capital
131m
362m
Cash generated from operations - continuing operations
955m
791m
Cash generated from operations - discontinued operations
9m
214m
Cash generated from operations
964m
1,005m
Interest paid
(203)m
(173)m
Corporation tax paid
(17)m
(53)m
Net cash generated from retail operating activities
744m
779m
Cash capital expenditure
(541)m
(498)m
Free cash flow
203m
281m
Other investing activities
(404)m
507m
Net cash from/(used in) financing activities and intra-Group funding and intercompany transactions
264m
(560)m
Net increase in cash and cash equivalents
63m
228m
Include cash movements in debt items
867m
448m
Fair value and other non-cash movements
(172)m
(783)m
Movement in net debt
758m
(107)m
Excluding working capital,we generated 0.9bn cash from continuing retail operations, (0.2)bn lower than last year, principally due to providing colleagues with the option of receiving the 2015/16 Turnaround Bonus in cash rather than shares, reducing the dilutive impact of new share issuance. On an underlying basis, the benefit of stock flow initiatives and trading term standardisation, combined with offsetting seasonal timing impacts, has contributed to a net working capital inflow of 131m. Including working capital, cash generated from continuing retail operations was 955m, up 21% on last year.
Interest paid rose by (30)m due to the debt acquired as part of our February 2016 agreement to regain sole ownership of 49 stores and two distribution centres. As mentioned above, following the end of the half year, we repaid two medium term notes at maturity in September 2016 at a cost of 1.2bn, which will reduce cash interest costs by a net annualised saving of 36m.
Cash tax paid of (17)m is net of refunds received of taxes previously paid, as we continue to reach settlement of historic enquiries into tax returns in a number of jurisdictions. 
A reconciliation between the Retail and Group cash flows can be found in Note 2 on page 24.
Capital expenditure and space:
Group
UK & ROI
International
Tesco Bank
This year
Last year
YOY Change
This year
Last year
This year
Last year
This year
Last year
Capital expenditure (bn)
0.5
0.4
0.1
0.3
0.3
0.1
0.1
0.0
0.0
Gross space added (m sq ft)1,2
0.3
0.3
-
0.1
0.0
0.2
0.2
n/a
n/a
Net space added (m sq ft)1
(1.8)
(1.0)
(0.8)
(1.6)
(0.9)
(0.2) 
(0.1)
n/a
n/a
1. Excluding franchise stores.
2. 'Gross space added' excludes repurposing/extensions.
In line with our increased focus on capital discipline, capital expenditure was 0.5bn in the half, similar to last year, and planned expenditure for the full year remains at around 1.25bn. We expect to refresh more than 200 stores in the UK this year, the vast majority of which will be completed in the second half. 
Overall, net space reduced by (1.8)msquare feet, principally due to the disposal of (1.7)m square feet from the sale of Dobbies garden centres. We opened 0.3m square feet of selling space, mainly in Thailand. In the year, we intend to repurpose around 1.0m square feet across the Group as we create compelling shopping destinations for customers which are simpler to operate.
Further details of current and forecast space can be found in Appendix 5, starting on page 48. 
Tesco Bank
This year
Last year
YOY Change
Revenue
503m
478m
5.2%
Operating profit before exceptional items
89m
86m
3.5%
Statutory operating profit
22m
86m
(74.4)%
Lending to customers
9,262m
8,297m
11.6%
Customer deposits
8,107m
6,581m
23.2%
Net interest margin
3.9%
4.2%
(0.3)%
Risk asset ratio
19.9%
19.1%
0.8%
Tesco Bank continues to develop its suite of products and services to best meet the needs of Tesco customers. In the half, these innovations included the launch of a premium credit card, the introduction of digital signatures to simplify the loans process and the further roll out of PayQwiq, an app which allows customers to pay with their phones in our shops. 
Active customer account numbers in Tesco Bank rose by 2%, with continued strong growth in both customer lending and deposits. Operating profit before exceptional items increased year-on-year as the impact of the European Commission cap on interchange income was more than offset by an improved underlying trading performance and proceeds from the sale of non-performing debt. Exceptional items relating to Tesco Bank are detailed in Note 4 on page 27 and included an increase in the provision for customer redress and a restructuring charge. Statutory operating profit, as shown above, is after these exceptional items.
Risk weighted assets have risen in line with lending and the Core Tier 1 ratio has remained stable at 16.6%. The balance sheet remains strong and well-positioned to support future lending growth from both a liquidity and capital perspective.
An income statement for Tesco Bank can be found in Appendix 6 on page 51 of this statement. Balance sheet and cash flow detail for Tesco Bank can be found within Note 2 starting on page 21 of this statement. Tesco Bank's Interim results are also published today and are available at www.corporate.tescobank.com
Contacts
Investor Relations:
Chris Griffith
01707 912 900
Media:
Ed Young
01707 918 701
Philip Gawith, Teneo Blue Rubicon
0207 420 3143
This document is available at www.tescoplc.com/interims2016.
A meeting for investors and analysts will be held today at 9.00am at London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS. Access will be by invitation only. For those unable to attend, there will be a live webcast available on our website at www.tescoplc.com/interims2016. This will include all Q&A and will also be available for playback after the event. All presentation materials, including a transcript, will be made available on our website.
An interview with Dave Lewis, Chief Executive, and Alan Stewart, Chief Financial Officer, discussing the Interim results is available now to download in video, audio and transcript form at www.tescoplc.com/interims2016.
ADDITIONAL DISCLOSURES
Risks and Uncertainties
As with any business, risk assessment and the implementation of mitigating actions and controls are critical to successfully achieving the Group's strategy. The Tesco Board has overall responsibility for risk management and internal controls within the context of achieving the Group's objectives. At the Group level each principal risk has an Executive Owner. The CEO has overall accountability for the control and management of risk. The principal risks and uncertainties faced by the Group remain those set out in our 2016 Annual Report and Financial Statements: people; customer proposition; transformation of the economic model; liquidity; competition and markets; brand, reputation and trust; technology; data security and data privacy; regulatory and compliance; and safety.
The Group also faces risks and uncertainties as a result of the Serious Fraud Office and other investigations, and the litigation risk associated with the matters under investigation as described in Note 18 of this release (Contingent Liabilities) and in our 2016 Annual Report and Financial Statements. 
On 23 June 2016, the United Kingdom (UK) voted to leave the European Union (EU). The exact nature, process and timing of the UK's exit from the EU are unknown. This has to date created business uncertainty: The UK's future approach to EU freedom of movement; market volatility; fluctuations in foreign exchange rates; changes to commodity prices; and interest rates, all of which may impact the Group. Adjustments to the long-term outlook for UK interest rates might also affect UK Pension IAS 19 liabilities and related charges. 
The risks and uncertainties associated with exiting from the EU have been considered by the Board and plans are in place. The Board continues to monitor the impact of the referendum but does not currently believe there will be a material adverse impact on the Group's results or financial position in the current financial year.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Interim Results for the six month period ended 27 August 2016 in accordance with applicable law, regulations and accounting standards. The Directors confirm that to the best of their knowledge the condensed consolidated interim financial statements have been prepared in accordance with IAS 34: 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
 an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
 material related party transactions in the first six months of the year and any material changes in the related party transactions described in the last annual report.
The Directors of Tesco PLC are listed in the Tesco PLC 2016 Annual Report and Financial Statements, with the exception of Steve Golsby who was appointed a Non-executive Director of the Company on 1 October 2016. A list of current directors is maintained on the Tesco PLC website at: www.tescoplc.com.
By order of the Board
Directors
John Allan* - Chairman
Dave Lewis - Chief Executive
Alan Stewart - Chief Financial Officer
Mark Armour*
Richard Cousins* - Senior Independent Director
Steve Golsby* 
Byron Grote*
Mikael Olsson*
Deanna Oppenheimer*
Simon Patterson*
Alison Platt*
Lindsey Pownall*
*Non-executive Directors
Company Secretary
Robert Welch 
4 October 2016
This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016.
Disclaimer
This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and operating margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the 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. Tesco does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances.
TESCO PLC 
Group income statement
26 weeks ended
27 August 2016
26 weeks ended
29 August 2015
Notes
Before exceptional items
m
Exceptional items 
(Note 4) 
m
Total
m
Before exceptional items
m
Exceptional
items 
(Note 4) 
m
Total
m
Continuing operations
Revenue
2
27,338
-
27,338
26,966
-
26,966
Cost of sales
(25,877)
(118)
(25,995)
(25,687)
-
(25,687)
Gross profit/ (loss)
1,461
(118)
1,343
1,279
-
1,279
Administrative expenses
(865)
(17)
(882)
(916)
-
(916)
Profits arising on property-related items
-
54
54
9
-
9
Operating profit/ (loss)
2
596
(81)
515
372
-
372
Share of post-tax profits/ (losses) of joint ventures and associates
2
-
2
13
-
13
Finance income
5
83
-
83
44
-
44
Finance costs
5
(329)
(200)
(529)
(330)
-
(330)
Profit/ (loss) before tax
352
(281)
71
99
-
99
Taxation
6
(98)
58
(40)
(52)
-
(52)
Profit/ (loss) for the period from continuing operations
254
(223)
31
47
- 
47
Discontinued operations
Profit/ (loss) for the period from discontinued operations
7
(18)
(113)
(131)
4 
(419)
(415)
Profit/ (loss) for the period 
236
(336)
(100)
51
(419)
(368)
Attributable to:
Owners of the parent
240
(331)
(91)
54
(419)
(365)
Non-controlling interests
(4)
(5)
(9)
(3)
-
(3)
236
(336)
(100)
51
(419)
(368)
Earnings/ (losses) per share from continuing and discontinued operations
Basic
9
2.95p
(1.12)p
0.66p
(4.49)p
Diluted
9
2.95p
(1.12)p
0.66p
(4.47)p
Earnings/ (losses) per share from continuing operations
Basic
9
3.16p
0.42p
0.60p
0.60p
Diluted
9
3.16p
0.42p
0.60p
0.60p
The notes on pages 19 to 41 form part of these condensed consolidated interim financial statements.
TESCO PLC
Group statement of comprehensive income/ (loss)
26 weeks ended 27 August 2016
Note
26 weeks
2016
m
26 weeks
2015
m
Items that will not be reclassified to income statement
Remeasurements on defined benefit pension schemes
15
(3,983)
(308)
Tax on items that will not be reclassified
716
66
(3,267)
(242)
Items that may subsequently be reclassified to income statement
Change in fair value of available-for-sale financial assets and investments 
75
-
Currency translation differences:
Retranslation of net assets of overseas subsidiaries
648
(434)
Gains/ (losses) on cash flow hedges:
Net fair value gains/ (losses)
330
(4)
Reclassified and reported in the Group income statement
(300)
(59)
Tax on items that may be reclassified
(34)
27
719
(470)
Total other comprehensive income/ (loss) for the period
(2,548)
(712)
Profit/ (loss) for the period
(100)
 (368)
Total comprehensive income/ (loss) for the period
(2,648)
(1,080)
Attributable to:
Owners of the parent
(2,639)
(1,075)
Non-controlling interests
(9)
(5)
Total comprehensive income/ (loss) for the period
(2,648)
(1,080)
Total comprehensive income/ (loss) attributable to owners of the parent arises from:
Continuing operations
(2,517)
(428)
Discontinued operations
(122)
(647)
(2,639)
(1,075)
The notes on pages 19 to 41 form part of these condensed consolidated interim financial statements.
TESCO PLC
Group balance sheet
E
Notes
27 August 
2016 
m
27 February
2016
m
29 August 
2015
m
Non-current assets
Goodwill and other intangible assets
10
2,818
2,874
3,122
Property, plant and equipment
11
17,613
17,900
16,421
Investment property
68
78
77
Investments in joint ventures and associates
864
785
852
Other investments
1,099
1,135
879
Loans and advances to customers
5,278
4,723
4,376
Derivative financial instruments
1,929
1,532
1,252
Deferred tax assets
686
49
671
30,355
29,076
27,650
Current assets
Inventories
2,505
2,430
2,620
Trade and other receivables
1,713
1,607
1,605
Loans and advances to customers
3,984
3,819
3,917
Derivative financial instruments
312
176
79
Current tax assets
41
15
16
Short-term investments
4,435
3,463
300
Cash and cash equivalents
3,355
3,082
2,186
16,345
14,592
10,723
Assets of the disposal groups and non-current assets classified as held for sale 
7
472
236
5,154
16,817
14,828
15,877
Current liabilities
Trade and other payables
(8,799)
(8,568)
(8,483)
Borrowings
12
(3,025)
(2,826)
(1,219)
Derivative financial instruments and other liabilities
(94)
(62)
(70)
Customer deposits and deposits from banks
(8,281)
(7,479)
(7,026)
Current tax liabilities
(492)
(419)
(181)
Provisions
(376)
(360)
(324)
(21,067)
(19,714)
(17,303)
Liabilities of the disposal groups classified as held for sale
7
(201)
-
(1,528)
Net current liabilities 
(4,451)
(4,886)
(2,954)
Non-current liabilities
Borrowings
12
(11,130)
(10,711)
(11,385)
Derivative financial instruments and other liabilities
(994)
(889)
(905)
Post-employment benefit obligations
15
(7,123)
(3,175)
(5,196)
Deferred tax liabilities
(80)
(135)
(472)
Provisions
(666)
(664)
(580)
(19,993)
(15,574)
(18,538)
Net assets
5,911
8,616
6,158
Equity
Share capital
409
407
406
Share premium
5,095
5,095
5,095
All other reserves
501
(141)
(878)
Retained earnings
(75)
3,265
1,540
Equity attributable to owners of the parent
5,930
8,626
6,163
Non-controlling interests
(19)
(10)
(5)
Total equity 
5,911
8,616
6,158
The notes on pages 19 to 41 form part of these condensed consolidated interim financial statements
TESCO PLC
Group statement of changes in equity
All other reserves
Share
capital
m
Share
premium 
m
Other
reserves
m
Capital
Redemption
reserve 
m
Hedging 
reserve
m
Translation
reserve
m
Treasury 
shares 
m
Retained 
earnings 
m
Total 
m
Non-
controlling 
interests 
m
Total 
equity 
m
At 27 February 2016
407
5,095
40
16
211
(401)
(7)
3,265
8,626
(10)
8,616
Profit/ (loss) for the period
-
-
-
-
-
-
-
(91)
(91)
(9)
(100)
Other comprehensive income/ (loss)
Change in fair value of available-for-sale financial assets and investments
-
-
-
-
-
-
-
75
75
-
75
Currency translation differences
-
-
-
-
-
648
-
-
648
-
648
Remeasurements on defined benefit pension schemes
-
-
-
-
-
-
-
(3,983)
(3,983)
-
(3,983)
Gains/ (losses) on cash flow hedges
-
-
-
-
30
-
-
-
30
-
30
Tax relating to components of other comprehensive income 
-
-
-
-
(5)
(14)
-
701
682
-
682
Total other comprehensive income/ (loss)
-
-
-
-
25
634
-
(3,207)
(2,548)
-
(2,548)
Total comprehensive income/ (loss)
-
-
-
-
25
634
-
(3,298)
(2,639)
(9)
(2,648)
Transactions with owners
Purchase of treasury shares
-
-
-
-
-
-
(23)
-
(23)
-
(23)
Share-based payments
-
-
-
-
-
-
6
(42)
(36)
-
(36)
Issue of shares
2
-
-
-
-
-
-
-
2
-
2
Dividends
-
-
-
-
-
-
-
-
-
-
-
Changes in non-controlling interests
-
-
-
-
-
-
-
-
-
-
-
Total transactions with owners 
2
-
-
-
-
-
(17)
(42)
(57)
-
(57)
At 27 August 2016
409
5,095
40
16
236
233
(24)
(75)
5,930
(19)
5,911
The notes on pages 19 to 41 form part of these condensed consolidated interim financial statements.
All other reserves
Share
capital
m
Share
premium 
m
Other
reserves
m
Capital
redemption
reserve 
m
Hedging 
reserve
m
Translation
reserve
m
Treasury 
shares 
m
Retained 
earnings 
m
Total
m
Non-
controlling 
interests 
m
Total 
equity 
m
At 28 February 2015
406
5,094
40
16
35
(488)
(17)
1,985
7,071
-
7,071
Profit/ (loss) for the period
-
-
-
-
-
-
-
(365)
(365)
(3)
(368)
Other comprehensive income/ (loss)
Change in fair value of available-for-sale financial assets and investments
-
-
-
-
-
-
-
-
-
-
-
Currency translation differences
-
-
-
-
-
(432)
-
-
(432)
(2)
(434)
Remeasurements on defined benefit pension schemes
-
-
-
-
-
-
(308)
(308)
-
(308)
Gains/ (losses) on cash flow hedges
-
-
-
-
(63)
-
-
-
(63)
-
(63)
Tax relating to components of other comprehensive income 
-
-
-
-
12
15
-
66
93
-
93
Total other comprehensive income/ (loss)
-
-
-
-
(51)
(417)
-
(242)
(710)
(2)
(712)
Total comprehensive income/ (loss)
-
-
-
-
(51)
(417)
-
(607)
(1,075)
(5)
(1,080)
Transactions with owners
Purchase of treasury shares
-
-
-
-
-
-
(4)
-
(4)
-
(4)
Share-based payments
-
-
-
-
-
-
8
162
170
-
170
Issue of shares
-
1
-
-
-
-
-
-
1
-
1
Dividends
-
-
-
-
-
-
-
-
-
-
-
Changes in non-controlling interests
-
-
-
-
-
-
-
-
-
-
-
Total transactions with owners 
-
1
-
-
-
-
4
162
167
-
167
At 29 August 2015
406
5,095
40
16
(16)
(905)
(13)
1,540
6,163
(5)
6,158
The notes on pages 19 to 41 form part of these condensed consolidated interim financial statements.
TESCO PLC
Group cash flow statement
26 weeks ended 27 August 2016
Note
26 weeks
2016
m
26 weeks
2015
m
Cash flows from operating activities
Operating profit of continuing operations
2
515
372
Operating profit/ (loss) of discontinued operations
(118)
51
Depreciation and amortisation
2
630
724
(Profit)/ loss arising on sale of property, plant and equipment and intangible assets
(18)
4
Profit arising on sale of joint ventures and associates
(5)
(6)
Net reversal of impairment of other investments
(5)
(7)
Impairment of loans/ investments in joint ventures and associates
-
2
Net impairment charge of property, plant and equipment and intangible assets
110
38
Adjustment for non-cash element of pensions charge
4
104
Additional contribution into pension schemes
(111)
(93)
Share-based payments
(57)
166
Tesco Bank non-cash items included in operating profit
28
22
(Increase)/ decrease in inventories
(69)
107
Decrease/ (increase) in development stock
4
(6)
(Increase)/ decrease in trade and other receivables
(116)
50
Increase in trade and other payables
353
36
Decrease in provisions
(57)
(381)
Tesco Bank increase in loans and advances to customers
(744)
(605)
Tesco Bank increase in trade and other receivables
(29)
(128)
Tesco Bank increase in customer and bank deposits, trade and other payables
764
131
Tesco Bank increase/ (decrease) in provisions
41
(11)
Decrease/ (increase) in working capital
147
(807)
Cash generated from operations
1,120
570
Interest paid
(205)
(175)
Corporation tax paid 
(15)
(48)
Net cash generated from operating activities
900
347
The notes on pages 19 to 41 form part of these condensed consolidated interim financial statements.
26 weeks ended 27 August 2016
Note
26 weeks
2016
m
26 weeks
2015
m
Net cash generated from operating activities
900
347
Cash flows from investing activities 
Purchase of property, plant and equipment, investment property and non-current assets classified as held for sale
(486)
(433)
Purchase of intangible assets
(76)
(80)
Disposal of subsidiaries, net of cash disposed
211
-
Acquisition of subsidiaries, net of cash acquired
(12)
(23)
Proceeds from sale of joint ventures and associates
-
129
Proceeds from sale of property, plant and equipment, investment property, intangible assets and non-current assets classified as held for sale
239
147
Net decrease in loans to joint ventures and associates
16
3
Investments in joint ventures and associates
-
(77)
Net (investments in)/ proceeds from sale of short-term investments
(970)
293
Net proceeds from sale of other investments
157
110
Dividends received from joint ventures and associates
11
18
Interest received
9
1
Net cash (used in)/ from investing activities
(901)
88
Cash flows from financing activities 
Proceeds from issue of ordinary share capital
-
1
Increase in borrowings
213
418
Repayment of borrowings
(31)
(869)
Net cash flows from derivative financial instruments
104
186
Repayments of obligations under finance leases
(5)
(7)
Net cash from/ (used in) financing activities
281
(271)
Net increase in cash and cash equivalents 
280
164
Cash and cash equivalents at beginning of the period
3,082
2,174
Effect of foreign exchange rate changes
4
(31)
Cash and cash equivalents including cash held in disposal groups at the end of the period
3,366
2,307
Cash held in disposal groups
7
(11)
(121)
Cash and cash equivalents at the end of the period 
3,355
2,186
The notes on pages 19 to 41 form part of these condensed consolidated interim financial statements.
The unaudited condensed consolidated interim financial statements for the 26 weeks ended 27 August 2016 were approved by the Directors on 4 October 2016.
Note 1 Basis of preparation
These condensed consolidated interim financial statements for the 26 weeks ended 27 August 2016 have been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct Authority, and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. The accounting policies applied are consistent with those described in the Annual Report and Group financial statements 2016. There are no new or amended standards effective in the period which have had a material impact on the condensed consolidated interim financial statements. The financial period represents the 26 weeks ended 27 August 2016 (prior period 26 weeks ended 29 August 2015, prior financial year 52 weeks ended 27 February 2016).
The condensed consolidated interim financial statements for the current period and prior financial year do not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for the prior financial year has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
The Directors consider that the Group has adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the condensed consolidated interim financial statements.
Discontinued operations
In accordance with IFRS 5 'Non-current assets held for sale and discontinued operations', the net results of the Group's Kipa business in Turkey ('Turkey' or 'Turkish operations') and the Group's Homeplus business in Korea ('Korea' or 'Korean operations') are presented within discontinued operations in the Group income statement (for which the comparatives have been restated for Turkey) and the assets and liabilities of these businesses are presented separately in the Group balance sheet. Refer to Note 7 for further details.
Use of alternative performance measures
The Directors have adopted various alternative performance measures to provide additional useful information on the underlying trends, performance and position of the Group. These measures are used for performance analysis. The alternative performance measures are not defined by IFRS and therefore may not be directly comparable with other companies' alternative performance measures. These measures are not intended to be a substitute for, or superior to, IFRS measurements.
Diluted earnings per share from continuing operations before exceptional items
This relates to profit after tax before exceptional items attributable to owners of the parent divided by the weighted average number of ordinary shares in issue during the financial period adjusted for the effects of potentially dilutive options.
Diluted earnings per share from continuing operations before exceptional items and net pension finance costs
This relates to profit after tax before exceptional items and net pension finance costs attributable to owners of the parent divided by the weighted average number of ordinary shares in issue during the financial period adjusted for the effects of potentially dilutive options.
Exceptional items
Exceptional items relate to certain costs or incomes that derive from events or transactions that fall within the normal activities of the Group but which, individually or, if of a similar type, in aggregate, are excluded from the Group's alternative performance measures by virtue of their size and nature in order to better reflect management's view of the performance of the Group. The tax impact on exceptional items is included within the Group income statement.
The Group exercises judgement in assessing whether items should be classified as exceptional. This assessment covers the nature of the item, cause of occurrence and the scale of impact of that item on reported performance. Reversals of previous exceptional items are assessed based on the same criteria.
Free cash flow
Free cash flow is net cash generated from/ (used in) operating activities less capital expenditure on property, plant and equipment, investment property and intangible assets.
Net debt
Net debt excludes the net debt of Tesco Bank but includes that of the discontinued operations. Net debt comprises bank and other borrowings, finance lease payables, net derivative financial instruments, joint venture loans and other receivables and net interest receivables/ payables, offset by cash and cash equivalents and short-term investments.
Operating margin
Operating margin is based on operating profit before exceptional items and on revenue.
Operating profit before exceptional items
This is the headline measure of the Group's performance, and is based on operating profit before the impact of exceptional items.
Profit before tax before exceptional items and net pension finance costs
This measure excludes exceptional items and the net finance costs of the defined benefit pension deficit as the costs are impacted by corporate bond yields, which can fluctuate significantly.
Profit/ (losses) arising on property-related items
These relate to the Group's property activities including gains and losses on disposal of property assets, development property built for resale and property joint ventures; costs resulting from changes in the Group's store portfolio and distribution network, including pre-opening and post closure costs; and income/ (charges) associated with impairment of non-trading property and related onerous contracts.
Revenue excl. fuel
This is the headline measure of revenue for the Group. It excludes the impact of sales, predominantly fuel sales, made at petrol filling stations, due to the volatilities associated with movements in fuel prices.
Total indebtedness
Net debt plus the IAS19 deficit in the pension schemes (net of associated deferred tax) plus the present value of future minimum rentals payable under non-cancellable operating leases.
Note 2 Segmental reporting
The Group's operating segments are determined based on the Group's internal reporting to the Chief Operating Decision Maker ('CODM'). The CODM has been determined to be the Group Chief Executive Officer, 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 segments:
 Retailing and associated activities ('Retail') in:
 UK & ROI - the United Kingdom and Republic of Ireland; and
 International - Czech Republic, Hungary, Poland, Slovakia, Malaysia and Thailand;
 Retail banking and insurance services through Tesco Bank in the UK ('Tesco Bank').
This presentation reflects how the Group's operating performance is reviewed internally by management.
In addition, the retailing and associated activities in Turkey have been classified as discontinued operations in the current period; their performance in this period and comparative periods is therefore part of discontinued operations as presented in Note 7 and excluded from segmental performances below.
The CODM uses operating profit before exceptional items, as reviewed at monthly Executive Committee meetings, as the key measure of the segments' results as it better reflects the segments' underlying performance for the financial period under evaluation. Operating profit before exceptional items is a consistent measure within the Group as defined within Note 1. Refer to Note 4 for exceptional items. Inter-segment revenue between the operating segments is not material.
Income statement
The segment results and the reconciliation of the segment measures to the respective statutory items included in the Group income statement are as follows:
26 weeks ended 27 August 2016
At constant exchange rates(a)
UK & ROI
m
International
m
Tesco
Bank
m
Total at constant
exchange
m
Foreign
exchange
m
Total at actual
exchange
m
Continuing operations
Revenue excl. fuel
18,508
4,918
503
23,929
473
24,402
Revenue
21,339
5,011
503
26,853
485
27,338
Operating profit before exceptional items(b)
384
110
89
583
13
596
Exceptional items
(24)
8
(67)
(83)
2
(81)
Operating profit
360
118
22
500
15
515
Operating margin(c)
1.8%
2.2%
17.7%
2.2%
2.2%
26 weeks ended 27 August 2016
At actual exchange rates(d)
UK & ROI
m
International
m
Tesco
Bank
m
Total at actual
exchange
m
Continuing operations
Revenue excl. fuel
18,614
5,285
503
24,402
Revenue
21,449
5,386
503
27,338
Operating profit before exceptional items(b)
389
118
89
596
Exceptional items
(24)
10
(67)
(81)
Operating profit
365
128
22
515
Operating margin(c)
1.8%
2.2%
17.7%
2.2%
Share of post-tax profits/ (losses) of joint ventures and associates 
2
Finance income
83
Finance costs
(529)
Profit/ (loss) before tax
71
(a) Constant exchange rates are the average actual periodic exchange rates for the previous financial period.
(b) Intercompany recharges totalling 1m between continuing operations and the Turkey discontinued operations have been eliminated.
(c)  Operating margin is based on operating profit before exceptional items and on revenue.
(d) Actual exchange rates are the average actual periodic exchange rates for that financial period.
26 weeks ended 29 August 2015
At actual exchange rates*
UK & ROI
m
International
m
Tesco
Bank
m
Total at actual
exchange
m
Continuing operations
Revenue excl. fuel
18,394
4,812
478
23,684
Revenue
21,581
4,907
478
26,966
Operating profit before exceptional items**
164
122
86
372
Exceptional items
-
-
-
-
Operating profit
164
122
86
372
Operating margin***
0.8%
2.5%
18.0%
1.4%
Share of post-tax profits/ (losses) of joint ventures and associates 
13
Finance income
44
Finance costs
(330)
Profit/ (loss) before tax 
99
* Actual exchange rates are the average actual periodic exchange rates for that financial period.
** Intercompany recharges totalling 2m between continuing operations and the Turkey discontinued operations have been eliminated.
*** Operating margin is based on operating profit before exceptional items and on revenue.
Balance sheet
The following tables showing segment assets and liabilities exclude those balances that make up net debt (cash and cash equivalents, short-term investments, joint venture loans and other receivables, bank and other borrowings, finance lease payables, derivative financial instruments and net debt of the disposal groups). Net debt balances have been included within the unallocated segment to reflect how the Group manages these balances. Intercompany transactions have been eliminated, other than intercompany transactions with Tesco Bank in net debt.
At 27 August 2016
UK & ROI
m
International
m
Tesco
Bank
m
Other/
unallocated
m
Total
m
Goodwill and other intangible assets
1,363
320
1,135
-
2,818
Property, plant and equipment and investment property
12,527
5,080
74
-
17,681
Investments in joint ventures and associates
5
766
93
-
864
Other investments
-
-
956
143
1,099
Loans and advances to customers - non-current
-
-
5,278
-
5,278
Deferred tax assets
625
61
-
-
686
Non-current assets(a)
14,520
6,227
7,536
143
28,426
Inventories and trade and other receivables(b)
2,619
1,119
343
-
4,081
Trade and other payables
(6,686)
(1,904)
(209)
-
(8,799)
Loans and advances to customers - current
-
-
3,984
-
3,984
Customer deposits and deposits from banks
-
-
(8,281)
-
(8,281)
Total provisions
(806)
(137)
(99)
-
(1,042)
Deferred tax liabilities
-
(51)
(29)
-
(80)
Net current tax
(463)
(8)
20
-
(451)
Post-employment benefit obligations
(7,102)
(21)
-
-
(7,123)
Assets held for sale and of the disposal groups(c)
88
136
-
237
461
Liabilities of the disposal groups(c)
-
-
-
(126)
(126)
Net debt(d)
-
-
(787)
(4,352)
(5,139)
Net assets
2,170
5,361
2,478
(4,098)
5,911
(a) Excludes derivative financial instrument non-current assets of 1,929m (27 February 2016: 1,532m, 29 August 2015: 1,252m).
(b) Excludes loans to joint ventures of 136m (27 February 2016: 149m, 29 August 2015: 149m) and interest and other receivables of 1m (27 February 2016: 1m, 29 August 2015: nil).
(c) Excludes net debt of the disposal groups of 64m (27 February 2016: nil, 29 August 2015: 121m). Refer to Note 7.
(d) Refer to Note 16.
At 27 February 2016 
UK & ROI
m
International
m
Tesco
Bank
m
Other/
unallocated
m
Total
m
Goodwill and other intangible assets
1,391
309
1,174
-
2,874
Property, plant and equipment and investment property
12,815
5,085
78
-
17,978
Investments in joint ventures and associates
5
704
76
-
785
Other investments
-
-
984
151
1,135
Loans and advances to customers - non-current
-
-
4,723
-
4,723
Deferred tax assets
-
49
-
-
49
Non-current assets(a)
14,211
6,147
7,035
151
27,544
Inventories and trade and other receivables(b)
2,557
1,016
314
-
3,887
Trade and other payables
(6,580)
(1,736)
(252)
-
(8,568)
Loans and advances to customers - current
-
-
3,819
-
3,819
Customer deposits and deposits from banks
-
-
(7,479)
-
(7,479)
Total provisions
(837)
(129)
(58)
-
(1,024)
Deferred tax liabilities
(64)
(39)
(32)
-
(135)
Net current tax
(403)
(3)
2
-
(404)
Post-employment benefit obligations
(3,153)
(22)
-
-
(3,175)
Assets held for sale and of the disposal groups(c)
165
71
-
-
236
Liabilities of the disposal groups(c)
-
-
-
-
-
Net debt(d)
-
-
(975)
(5,110)
(6,085)
Net assets
5,896
5,305
2,374
(4,959)
8,616
Refer to previous table for footnotes.
At 29 August 2015 
UK & ROI
m
International
m
Tesco
Bank
m
Other/
unallocated
m
Total
m
Goodwill and other intangible assets
1,633
297
1,192
-
3,122
Property, plant and equipment and investment property
11,681
4,738
79
-
16,498
Investments in joint ventures and associates
15
759
78
-
852
Other investments
-
-
738
141
879
Loans and advances to customers - non-current
-
-
4,376
-
4,376
Deferred tax assets
585
86
-
-
671
Non-current assets(a)
13,914
5,880
6,463
141
26,398
Inventories and trade and other receivables(b)
2,689
1,025
362
-
4,076
Trade and other payables
(6,499)
(1,615)
(369)
-
(8,483)
Loans and advances to customers - current
-
-
3,917
-
3,917
Customer deposits and deposits from banks
-
-
(7,026)
-
(7,026)
Total provisions
(739)
(86)
(79)
-
(904)
Deferred tax liabilities
(408)
(26)
(38)
-
(472)
Net current tax
(137)
(6)
(22)
-
(165)
Post-employment benefit obligations
(5,179)
(17)
-
-
(5,196)
Assets held for sale and of the disposal groups(c)
182
10
-
4,841
5,033
Liabilities of the disposal groups(c)
-
-
-
(1,528)
(1,528)
Net debt(d)
-
-
(904)
(8,588)
(9,492)
Net assets
3,823
5,165
2,304
(5,134)
6,158
Refer to previous table for footnotes.
26 weeks ended 27 August 2016
UK & ROI
m
International
m
Tesco
Bank
m
Total
continuing
operations
m
Discontinued
operations
m
Total
m
Capital expenditure (including acquisitions through
business combinations):
Property, plant and equipment*
289
90
4
383
2
385
Investment property
-
-
-
-
-
-
Goodwill, software and other intangible assets
49
7
12
68
-
68
Depreciation:
Property, plant and equipment
(333)
(168)
(7)
(508)
(5)
(513)
Investment property
(1)
-
-
(1)
-
(1)
Amortisation of intangible assets
(55)
(12)
(48)
(115)
(1)
(116)
Impairment of intangible assets
-
-
-
-
-
-
Impairment of goodwill
-
-
-
-
-
-
Impairment of property, plant and equipment and investment properties
(39)
(1)
-
(40)
(106)
(146)
Reversal of impairment of property, plant and equipment and investment properties
35
1
-
36
-
36
*  Includes nil (2015: 490m) of property, plant and equipment acquired through business combinations.
26 weeks ended 29 August 2015
UK & ROI
m
International
m
Tesco
Bank
m
Total
continuing
operations
m
Discontinued
operations
m
Total
m
Capital expenditure (including acquisitions through
business combinations):
Property, plant and equipment*
691
82
2
775
56
831
Investment property
-
-
-
-
-
-
Goodwill, software and other intangible assets
83
5
11
99
3
102
Depreciation:
Property, plant and equipment
(351)
(150)
(7)
(508)
(90)
(598)
Investment property
-
-
-
-
-
-
Amortisation of intangible assets
(71)
(11)
(38)
(120)
(6)
(126)
Impairment of intangible assets
(18)
-
-
(18)
-
(18)
Impairment of goodwill
-
-
-
-
-
-
Impairment of property, plant and equipment and investment properties
(22)
(17)
-
(39)
(1)
(40)
Reversal of impairment of property, plant and equipment and investment properties
19
1
-
20
-
20
Refer to previous table for footnotes.
Cash flow statement
The following tables provide further analysis of the Group cash flow statement, including a split of cash flows between Retail and Tesco Bank as well as continuing operations and discontinued operations. 
Retail
Tesco Bank
Tesco Group
2016
m
2015 
m
2016
m
2015 
m
2016
m
2015 
m
Operating profit of continuing operations*
493
286
22
86
515
372
Operating profit/ (loss) of discontinued operations
(118)
51
-
-
(118)
51
Depreciation and amortisation
575
679
55
45
630
724
ATM net income
(22)
(20)
22
20
-
-
(Profit)/ loss arising on sale of property, plant and equipment and intangible assets
(20)
5
2
(1)
(18)
4
Loss/ (profit) arising on sale of subsidiaries and other investments
4
-
(4)
-
-
-
Profit arising on sale of joint ventures and associates
(5)
(6)
-
-
(5)
(6)
Net reversal of impairment of other investments
(5)
(7)
-
-
(5)
(7)
Impairment of loans/ investments in joint ventures and associates
-
2
-
-
-
2
Net impairment charge of property, plant and equipment and intangible assets
110
38
-
-
110
38
Adjustment for non-cash element of pensions charge
4
104
-
-
4
104
Additional contribution into pension schemes
(111)
(93)
-
-
(111)
(93)
Share-based payments
(56)
160
(1)
6
(57)
166
Tesco Bank non-cash items included in operating profit
-
-
28
22
28
22
Cash flow from operations excluding working capital
849
1,199
124
178
973
1,377
Decrease/ (increase) in working capital
115
(194)
32
(613)
147
(807)
Cash generated from/ (used in) operations
964
1,005
156
(435)
1,120
570
Interest paid
(203)
(173)
(2)
(2)
(205)
(175)
Corporation tax (paid)/ received
(17)
(53)
2
5
(15)
(48)
Net cash generated from/ (used in) operating activities
744
779
156
(432)
900
347
*  Tesco Bank operating profit as per Bank income statement excluding ATM net income segmental adjustment. 
Retail
Tesco Bank
Tesco Group
2016
m
2015 
m
2016
m
2015 
m
2016
m
2015 
m
Net cash generated from/ (used in) operating activities
744
779
156
(432)
900
347
Purchase of property, plant and equipment, investment property and non-current assets classified as held for sale
(484)
(427)
(2)
(6)
(486)
(433)
Purchase of intangible assets
(57)
(71)
(19)
(9)
(76)
(80)
Alternative performance measure: Free cash flow
203
281
135
(447)
338
(166)
Disposal of subsidiaries, net of cash disposed
211
-
-
-
211
-
Acquisition of subsidiaries, net of cash acquired
(12)
(23)
-
-
(12)
(23)
Proceeds from sale of property, plant and equipment, investment property, intangible assets and non-current assets classified as held for sale
236
147
3
-
239
147
Proceeds from sale of joint ventures and associates
-
129
-
-
-
129
Net decrease in loans to joint ventures and associates
16
3
-
-
16
3
Investments in joint ventures and associates
-
(77)
-
-
-
(77)
Net (investments in)/ proceeds from sale of short-term investments
(970)
293
-
-
(970)
293
Net proceeds from sale of other investments 
95
16
62
94
157
110
Dividends received from joint ventures and associates
11
18
-
-
11
18
Interest received
9
1
-
-
9
1
Net cash (used in)/ from investing activities
(945)
9
44
79
(901)
88
Proceeds from issue of ordinary share capital
-
1
-
-
-
1
Increase in borrowings
213
118
-
300
213
418
Repayment of borrowings
(31)
(869)
-
-
(31)
(869)
Net cash flows from derivative financial instruments
104
186
-
-
104
186
Repayments of obligations under finance leases
(5)
(7)
-
-
(5)
(7)
Net cash from/ (used in) financing activities
281
(571)
-
300
281
(271)
Intra-Group funding and intercompany transactions
(17)
11
17
(11)
-
-
Net increase/ (decrease) in cash and cash equivalents
63
228
217
(64)
280
164
Cash and cash equivalents at the beginning of the period
2,528
1,558
554
616
3,082
2,174
Effect of foreign exchange rate changes
4
(31)
-
-
4
(31)
Cash and cash equivalents including cash held in disposal groups at the end of the period
2,595
1,755
771
552
3,366
2,307
Cash held in disposal groups*
(11)
(121)
-
-
(11)
(121)
Cash and cash equivalents at the end of the period
2,584
1,634
771
552
3,355
2,186
* This relates to the cash held within discontinued operations reported within assets of the disposal groups.
Continuing operations
Discontinued operations
Retail
2016
m
2015
m
2016
m
2015
m
2016
m
2015
m
Operating profit/ (loss)
493
286
(118)
51
375
337
Depreciation and amortisation
569
583
6
96
575
679
ATM net income
(22)
(20)
-
-
(22)
(20)
(Profit)/ loss arising on sale of property, plant and equipment and intangible assets
(24)
5
4
-
(20)
5
Loss arising on sale of subsidiaries & other investments
4
-
-
-
4
-
Profit arising on sale of joint ventures and associates
(5)
(6)
-
-
(5)
(6)
Net reversal of impairment of other investments
(5)
(7)
-
-
(5)
(7)
Impairment of loans/ investments in joint ventures and associates
-
2
-
-
-
2
Net impairment charge of property, plant and equipment and intangible assets
4
37
106
1
110
38
Adjustment for non-cash element of pensions charge
4
104
-
-
4
104
Additional contribution into pension schemes
(111)
(93)
-
-
(111)
(93)
Share-based payments
(57)
157
1
3
(56)
160
Cash flow from operations excluding working capital
850
1,048
(1)
151
849
1,199
Decrease/ (increase) in working capital
 105
(257)
10
63
115
(194)
Cash generated from operations
955
791
9
214
964
1,005
Interest paid
(195)
(149)
(8)
(24)
(203)
(173)
Corporation tax paid
(17)
(44)
-
(9)
(17)
(53)
Net cash generated from operating activities
743
598
1
 181
744
779
Purchase of property, plant and equipment, investment property and non-current assets classified as held for sale
(480)
(390)
(4)
(37)
(484)
(427)
Purchase of intangible assets
(57)
(68)
-
(3)
(57)
(71)
Alternative performance measure: Free cash flow
206
140
(3)
141
203
281
Note 3 Income and expenses
Continuing operations
2016
m
2015
m
Profit/ (loss) before tax is stated after charging/ (crediting) the following:
Property rental income, of which 17m (2015: 20m) relates to investment properties
(169)
(159)
Other rental income
(28)
(27)
Direct operating expenses arising on rental earning investment properties
9
11
Costs of inventories recognised as an expense
20,098
19,802
Inventory losses and provisions
570
549
Depreciation and amortisation 
624
628
Operating lease expenses, of which 42m (2015: 52m) relates to hire of plant and machinery
514
557
Net impairment losses on property, plant and equipment and investment property 
4
19
Impairment of goodwill, software and other intangibles
-
18
Impairment of investment in and loans to joint ventures and associates
-
2
Note 4 Exceptional items
Income statement
26 weeks ended 27 August 2016
Profit/ (loss) for the period includes the following exceptional items:
Exceptional items included in:
Cost
of sales
m
Administrative expenses
m
Property- related items
m
Total exceptional items included within operating profit 
m
Finance costs
m
Taxation
m
Exceptional items within discontinued operations 
m
Net restructuring and redundancy costs(a)
(73)
(17)
(5)
(95)
-
21
-
Provision for customer redress(b)
(45)
-
-
(45)
-
-
-
Property transactions(c)
-
-
59
59
-
37
-
Foreign exchange losses on GBP short-term investments held in overseas entities(d)
-
-
-
-
(200)
-
-
Exceptional items relating to discontinued operations(e)
-
-
-
-
-
-
(113)
Total
(118)
(17)
54
(81)
(200)
58
(113)
(a) This includes 73m relating to ongoing UK & ROI changes to store colleague structures and working practices and 22m relating to Tesco Bank business simplification and head office relocation costs. 
(b) Updated guidance from the Financial Conduct Authority ('FCA') proposing an extension to the expected Payment Protection Insurance ('PPI') settlement deadline, inclusion of items that had previously been out of scope for settlement and higher operational costs and claim rates than previously estimated, have resulted in a provision of 45m. 
(c) In the period, the Group has continued with its strategy of strengthening its balance sheet through the disposal of some properties and a development site in UK & ROI, and a mall in Central Europe, resulting in profit of 59m. There is a tax credit of 37m on these property disposals primarily due to a lower book value than tax value of assets disposed. Refer to item ** below for cash proceeds.
(d) The group holds 2.5bn of proceeds from the sale of the Korean operations in GBP money market funds in an intermediate entity with a Euro functional currency. The 200m loss represents foreign exchange losses arising on the revaluation of these sterling-denominated funds into Euros. The loss does not represent an economic loss to the Group since there is an offset within other comprehensive income.
(e) On 10 June 2016, the Group announced the proposed sale of its Turkish operations. This includes an impairment of 106m following a re-measurement of the assets and liabilities of the Turkish operations to fair value less costs to sell, 2m of costs to sell the Turkish operations and 5m loss due to foreign exchange movements on provisions held on previous disposals. Refer to Note 7 for further details.
Income statement
26 weeks ended 29 August 2015
Loss for the period includes the following exceptional items:
Exceptional items included in:
Cost of sales
m
Administrative expenses
m
Property
- related items
m
Total exceptional items included within operating profit 
m
Finance costs
m
Taxation
m
Exceptional items within discontinued operations 
m
Deferred tax and costs to sell - Korea
-
-
-
-
-
-
(419)
At 27 February 2016, in assessing whether income and expense items met the Group's criteria as exceptional for the full year, items totalling 4m reflected in operating profit as non-exceptional cost in the first half of the year were subsequently reclassified to exceptional. This is as a result of restructuring activities extended beyond the original scope in the prior year, as well as two further property transactions where the Group regained sole ownership of stores and distribution centres.
Cash flow statement
The table below shows the impact of exceptional items on the cash flow statement:
Cash flows from operating activities
Cash flows from investing activities
Exceptional items included in:
2016
m
2015
m
2016
m
2015
m
Restructuring costs and other exceptional costs including trading store redundancies*
(66)
(278)
-
-
Utilisation of onerous lease provisions
(48)
(123)
-
-
Property transactions**
13
-
227
-
Provision for customer redress***
(15)
(11)
-
-
Total
(116)
(412)
227
-
* Cash outflows on settlement of restructuring and redundancy costs.
** The proceeds from property transactions totalled 240m comprising, 227m net proceeds from the sale of a mall in Central Europe and other properties in the UK & ROI, and 13m for a development site in UK & ROI. Refer to item (c) above.
*** Settlement of claims for customer redress in Tesco Bank.
Note 5 Finance income and costs
Continuing operations
2016
m
2015
m
Finance income
Interest receivable and similar income
26
10
Financial instruments - fair value remeasurements
57
34
Total finance income
83
44
Finance costs
GBP MTNs and Loans
(114)
(86)
EUR MTNs
(67)
(61)
USD Bonds
(46)
(43)
Finance charges payable under finance leases and hire purchase contracts 
(4)
(5)
Other interest payable
(43)
(57)
Capitalised interest* 
3
6
Total finance costs before exceptional items and net pension finance costs
(271)
(246)
Net pension finance costs (Note 15)
(58)
(84)
Foreign exchange losses on GBP short-term investments held in overseas entities (Note 4)
(200)
-
Total finance costs
(529)
(330)
Net finance cost
(446)
(286)
* A deferred tax liability is recognised in respect of capitalised interest at the applicable rate in the country in which the interest is capitalised.
GBP MTNs and Loans
Interest payable on the 4% RPI GBP MTN 2016 includes nil (2015: (1)m) of Retail Price Index ('RPI') related accretion.
Interest payable on the 3.322% LPI GBP MTN 2025 includes 2m (2015: 3m) of RPI-related accretion.
Interest payable on the 1.982% RPI GBP MTN 2036 includes 1m (2015: nil) of RPI-related accretion.
Note 6 Taxation
Recognised in the Group income statement 
Continuing operations
2016
m
2015
m
UK 
(3)
31
Overseas
43
21
Taxation charge/ (credit)
40
52
The tax charge in the Group income statement is based on management's best estimate of the full year effective tax rate based on expected full year profits to 25 February 2017.
The Finance Bill 2016 includes legislation to reduce the main rate of corporation tax to 17% from 1 April 2020. This rate reduction had not been substantively enacted at thebalance sheet date and has therefore not been reflected in this condensed consolidated interim financial statements.
Note 7 Discontinued operations and non-current assets classified as held for sale
Assets and liabilities of the disposal groups and non-current assets classified as held for sale
27 August
2016
m
27 February
2016
m
29 August
2015
m
Assets of the disposal group - Turkey
248
-
-
Assets of the disposal groups - Korea and US
-
-
4,962
Non-current assets classified as held for sale
224
236
192
Total assets of the disposal groups and non-current assets classified as held for sale
472
236
5,154
Total liabilities of the disposal group - Turkey
(201)
-
-
Total liabilities of the disposal groups - Korea and US
-
-
(1,528)
Total net assets of the disposal groups and non-current assets classified as held for sale
271
236
3,626
The non-current assets classified as held for sale consist mainly of properties in the UK and Central Europe due to be sold within one year.
Discontinued operations
On 10 June 2016, the Group announced the proposed sale of its 95.5% controlling interest in Tesco Kipa Kitle Pazarlama Ticaret Lojistik ve Gda Sanayi A.. (referred to as 'Turkish operations' or Turkey') to Migros Ticaret A.('Migros'). In accordance with IFRS 5 'Non-current Assets Held for sale and Discontinued Operations', the assets and liabilities related to the Turkish operations have been classified as a disposal group held for sale within the period. The sale is subject to local regulatory approvals with completion expected in the financial year.
An impairment of 106m was recognised in property, plant and equipment, based on the expected realisable value on sale, immediately prior to reclassification of the business as a disposal group held for sale. These impairments have been included as exceptional items within discontinued operations. The gain/(loss) on disposal at completion will also reflect the impact of recycling of the Turkey currency translation reserve; at the period end the recycling would have reduced the profit/increased the loss on sale by 113m. 
The tables below show the results of the discontinued operations which are included in the Group income statement, Group balance sheet and Group cash flow statement respectively.
Income statement
2016
2015
Total*
m
Turkey
m
Korea
m
Total
m
Revenue
270
261
2,635
2,896
Expenses**
(288)
(286)
(2,564)
(2,850)
Profit/ (loss) before tax before exceptional items
(18)
(25)
71
46
Taxation
-
-
(42)
(42)
Profit/ (loss) after tax before exceptional items
(18)
(25)
29
4
Impairment losses - Turkey
(106)
-
-
-
Costs to sell and other provisions - Turkey
(2)
-
-
-
Deferred tax charge - Korea
-
-
(408)
(408)
Costs to sell and other items - Korea
-
-
(11)
(11)
Foreign exchange gain/ (loss) on tax liabilities on past disposals
(5)
-
-
-
Total profit/ (loss) after tax of discontinued operations***
(131)
(25)
(390)
(415)
*  These figures represent the results of Turkey for the current period and the foreign exchange gain/ (loss) of (5)m on the Group's tax liabilities relating to businesses previously disposed.
** Intercompany recharges totalling 1m (2015: 2m) between continuing operations and the Turkey discontinued operation have been eliminated, and intercompany recharges and intercompany loan interest totalling 39m between continuing operations and the Korea discontinued operation have been eliminated in 2015. These eliminations impact the performance of continuing and discontinued operations, reducing the profit/ (loss) before tax of continuing operations by 1m (2015: 41m), whilst increasing the profit/ (loss) before tax of Turkey and Korea discontinued operations by the same respective amounts.
*** Total profit/ (loss) after tax of discontinued operations includes losses of 6m attributable to non-controlling interests (2015: loss of 1m).
Loss per share impact from discontinued operations 
2016
Pence/share
2015
Pence/share
Basic
(1.54)p
(5.09)p
Diluted
(1.54)p
(5.07)p
Balance Sheet
Total Turkey 
2016
m
Assets of the disposal group
Goodwill and other intangible assets
10
Property, plant and equipment
135
Investment property
-
Inventories
55
Trade and other receivables
37
Cash and cash equivalents
11
Total assets of the disposal group
248
Trade and other payables
(115)
Borrowings
(75)
Other liabilities
(11)
Total liabilities of the disposal group
(201)
Total net assets of the disposal group 
47
Cash flow statement
Total Turkey 
2016
m
Total Turkey,
Korea & US
2015
m
Net cash flows from operating activities
1
181
Net cash flows from investing activities
(3)
14
Net cash flows from financing activities
12
(91)
Net cash flows from discontinued operations
10
104
Intra-Group funding and intercompany transactions
(3)
(60)
Net cash flows from discontinued operations, net of intercompany
7
44
Note 8 Dividends
2016
2015
Pence/
share
m
Pence/
share
m
Amounts recognised as distributions to owners in the financial period:
Prior financial period final dividend
-
-
-
-
Current financial period interim dividend
-
-
-
-
Dividends paid to equity owners in the financial period
-
-
-
-
Note 9 Earnings/ (losses) per share and diluted earnings/ (losses) per share
Basic earnings/ (losses) per share amounts are calculated by dividing the profit/ (loss) attributable to owners of the parent by the weighted average number of ordinary shares in issue during the financial period. 
Diluted earnings/ (losses) per share amounts are calculated by dividing the profit/ (loss) attributable to owners of the parent by the weighted average number of ordinary shares in issue during the financial period adjusted for the effects of potentially dilutive options. The dilutive effect is calculated on the full exercise of all potentially dilutive ordinary share options granted by the Group, including performance-based options which the Group considers to have been earned. 
As at the 27 August 2016 there were 3m (2015: 45m) potentially dilutive share options. As the Group has recognised a profit for the period from its continuing operations dilutive effects have been considered in calculating diluted earnings per share. 
2016
2015
Basic 
Potentially
dilutive share options 
Diluted
Basic 
Potentially
dilutive share options 
Diluted
Profit/ (loss) (m)
Continuing operations*
34
-
34
49
-
49
Discontinued operations**
(125)
-
(125)
(414)
-
(414)
Total
(91)
-
(91)
(365)
-
(365)
Weighted average number of shares (millions)
8,142
3
8,145
8,122
45
8,167
Earnings/ (losses) per share 
Continuing operations
0.42p
-
0.42p
0.60p
-
0.60p
Discontinued operations
(1.54)p
-
(1.54)p
(5.09)p
0.02p
(5.07)p
Total
(1.12)p
-
(1.12)p
(4.49)p
0.02p
(4.47)p
*  Excludes losses from non-controlling interests of 3m (2015: 2m).
**  Excludes losses from non-controlling interests of 6m (2015: 1m).
Alternative performance measure: Earnings/ (losses) and diluted earnings/ (losses) per share from continuing operations before exceptional items
2016
2015
Basic 
Potentially
dilutive share options 
Diluted
Basic 
Potentially
dilutive share options 
Diluted
Profit/ (loss) (m)
Continuing operations*
257
-
257
49
-
49
Discontinued operations**
(17)
-
(17)
5
-
5
Total
240
-
240
54
-
54
Weighted average number of shares (millions)
8,142
3
8,145
8,122
45
8,167
Earnings/ (losses) per share
Continuing operations
3.16p
-
3.16p
0.60p
-
0.60p
Discontinued operations
(0.21)p
-
(0.21)p
0.06p
-
0.06p
Total
2.95p
-
2.95p
0.66p
-
0.66p
*  Excludes losses from non-controlling interests before exceptional items of 3m (2015: 2m).
**  Excludes losses from non-controlling interests before exceptional items of 1m (2015: 1m).
Alternative performance measure: Diluted earnings/ (losses) per share from continuing operations before exceptional items and net pension finance costs
2016
2015
Profit before tax from continuing operations before exceptional items (m)
352
99
Add: Net pension finance costs (m) (Note 15)
58
84
Profit before tax from continuing operations before exceptional items and net pension finance costs (m)
410
183
Profit before tax from continuing operations before exceptional items and net pension finance costs attributable to the owners of the parent (m)
413
185
Taxation on profit before tax from continuing operations before exceptional items and net pension finance costs attributable to the owners of the parent (m)
(108)
(69)
Profit after tax from continuing operations before exceptional items and net pension finance costs attributable to the owners of the parent (m)
305
116
Diluted weighted average number of shares (millions)
8,145
8,167
Diluted earnings per share from continuing operations before exceptional items and net pension finance costs 
3.74p
1.42p
There have been no transactions involving ordinary shares between the reporting date and the date of approval of the condensed consolidated interim financial statements which would significantly change the earnings per share calculations shown above.
Note 10 Goodwill and other intangible assets
Goodwill and other intangible assets of 2,818m (27 February 2016: 2,874m, 29 August 2015: 3,122m) comprise 1,832m goodwill (27 February 2016: 1,827m, 29 August 2015: 1,768m), 925m software (27 February 2016: 975m, 29 August 2015: 1,268m) and other intangible assets 61m (27 February 2016: 72m, 29 August 2015: 86m). 
Goodwill
The impairment review methodology for goodwill is unchanged from that described in the 2016 Annual Report and Group financial statements. There were no indicators of goodwill impairment in the period; the annual goodwill impairment review will occur in the second half of the year.
The components of goodwill are as follows:
27 August 2016
27 February 2016
29 August 2015
m
m
m
Malaysia
77
70
63
Tesco Bank
802
802
802
Thailand
174
159
143
UK
750
767
731
Other
29
29
29
1,832
1,827
1,768
Note 11 Property, plant and equipment
Cost
Land and
buildings
m
Other*
m
Total
m
At 27 February 2016
22,557
10,468
33,025
Foreign currency translation
704
305
1,009
Additions**
241
144
385
Acquired through business combinations 
-
-
-
Reclassification
(21)
17
(4)
Classified as held for sale
(149)
(5)
(154)
Disposals
(497)
(262)
(759)
Transfer to disposal group classified as held for sale
(317)
(151)
(468)
At 27 August 2016
22,518
10,516
33,034
Accumulated depreciation and impairment losses
At 27 February 2016
7,198
7,927
15,125
Foreign currency translation
259
229
488
Charge for the period
195
318
513
Impairment losses
145
1
146
Reversal of impairment losses
(36)
-
(36)
Reclassification
(1)
(1)
(2)
Classified as held for sale
(43)
(3)
(46)
Disposals
(207)
(226)
(433)
Transfer to disposal group classified as held for sale
(232)
(102)
(334)
At 27 August 2016
7,278
8,143
15,421
Net carrying value 
At 27 August 2016
15,240
2,373
17,613
At 29 August 2015
13,928
2,493
16,421
Construction in progress included above***
At 27 August 2016
103
64
167
At 29 August 2015
197
75
272
* Other assets consist of fixtures and fittings with a net carrying value of 1,985m (29 August 2015: 2,123m), office equipment with a net carrying value of 124m (29 August 2015: 166m) and motor vehicles with a net carrying value of 264m (29 August 2015: 204m).
**  Includes 3m (29 August 2015: 7m) in respect of interest capitalised, principally relating to land and building assets. The capitalisation rate used to determine the amount of finance costs capitalised during the financial period was 4.9% (29 August 2015: 4.4%). Interest capitalised is deducted in determining taxable profit in the financial period in which it is incurred.
*** Construction in progress does not include land.
The impairment review methodology for property, plant and equipment is unchanged from that described in the 2016 Annual Report and Group financial statements. The United Kingdom's electorate decision to leave the European Union (Brexit) has resulted in increased uncertainty, including uncertainty over property fair values. Consequently, the Group assessed changes to the key factors affecting impairment, covering discount rates, trading performance, and a review of the impact of Brexit on property fair values, in conjunction with independent professional valuers. The review concluded that there were no indicators of impairment. The Group continues to monitor for any potential impacts of Brexit on property fair values and impairment.
As a result of the Group's decision to sell its Turkish operations an impairment charge has been recognised upon reclassification of these assets to assets of the disposal group. This impairment has been classified as an exceptional item; refer to Note 4 and Note 7 for further details.
Cost
Land and
buildings
m
Other*
m
Total
m
At 28 February 2015
25,298
11,493
36,791
Foreign currency translation
(544)
(234)
(778)
Additions**
128
213
341
Acquired through business combinations 
477
13
490
Reclassification
(30)
(8)
(38)
Classified as held for sale
(379)
(19)
(398)
Disposals
(295)
(60)
(355)
Transfer to disposal group classified as held for sale
(3,584)
(1,202)
(4,786)
At 29 August 2015
21,071
10,196
31,267
Accumulated depreciation and impairment losses
At 28 February 2015
8,021
8,330
16,351
Foreign currency translation
(120)
(147)
(267)
Charge for the period
214
384
598
Impairment losses
32
7
39
Reversal of impairment losses
(14)
(1)
(15)
Reclassification
(18)
(8)
(26)
Classified as held for sale
(279)
(16)
(295)
Disposals
(214)
(38)
(252)
Transfer to disposal group classified as held for sale
(479)
(808)
(1,287)
At 29 August 2015
7,143
7,703
14,846
Refer to previous table for footnotes.
Following a re-evaluation of the allocation of the prior period impairment between the components of cash generating units, the prior period movement table has been re-presented. There is no impact on the net carrying value, income statement, depreciation or impairment loss.
Commitments for capital expenditure contracted for, but not incurred, at 27 August 2016 were 271m (27 February 2016: 215m, 29 August 2015: 290m), principally relating to store development. This excludes balances associated with the discontinued operations in Korea and Turkey of nil (27 February 2016: nil, 29 August 2015: 11m).
Note 12 Borrowings
Current
Par value
Maturity
27 August 2016
m
27 February 2016
m
29 August 2015
m
Commercial paper, bank loans and overdrafts
-
-
971
845
1,203
Loans from joint ventures 
-
-
6
6
6
4% RPI MTN(a)
310m
Sep 2016
317
316
-
5.875% MTN
1,039m
Sep 2016
940
877
-
2.7% USD Bond
$500m
Jan 2017
381
361
-
5.4478% Term Loan
382m
Jan 2017
389
396
-
5.5457% Secured Bond(d)(e)
373m
Feb 2029
15
14
-
Finance leases
-
-
6
11
10
3,025
2,826
1,219
Refer to the next table for footnotes.
Non-current
Par value
Maturity
27 August 2016
m
27 February 2016
m
29 August 2015
m
4% RPI MTN(a)
310m
Sep 2016
-
-
312
5.875% MTN
1,039m
Sep 2016
-
-
869
2.7% USD Bond
$500m
Jan 2017
-
-
326
LIBOR +0.5% Term Loan
488m
Oct 2017
481
478
476
1.250% MTN
500m
Nov 2017
430
394
368
5.5% USD Bond
$850m
Nov 2017
687
666
621
5.2% Tesco Bank Retail Bond
125m
Aug 2018
131
132
134
3.375% MTN
750m
Nov 2018
656
595
562
LIBOR + 0.45% Tesco Bank Bond
150m
May 2019
150
150
150
1.375% MTN
1,250m
Jul 2019
1,066
990
913
5.5% MTN
350m
Dec 2019
363
353
363
1% RPI Tesco Bank Retail Bond
66m
Dec 2019
66
66
65
LIBOR + 0.65% Tesco Bank Bond
300m
Apr 2020
299
299
299
2.125% MTN
500m
Nov 2020
432
394
370
5% Tesco Bank Retail Bond
200m
Nov 2020
213
211
203
LIBOR + 0.65% Tesco Bank Bond
350m
May 2021
349
349
349
6.125% MTN
900m
Feb 2022
923
896
923
5% MTN
389m
Mar 2023
403
411
397
2.5% MTN
750m
Jul 2024
637
595
545
3.322% LPI MTN(b)
319m
Nov 2025
322
320
318
5.5457% Secured Bond(d)(e)
373m
Feb 2029
347
353
-
6.067% Secured Bond(d)
200m
Feb 2029
189
189
-
LIBOR + 1.2% Secured Bond(d)
50m
Feb 2029
30
30
-
6% MTN
200m
Dec 2029
261
257
265
5.5% MTN
200m
Jan 2033
263
259
266
1.982% RPI MTN(c)
264m
Mar 2036
266
265
263
6.15% USD Bond
$1,150m
Nov 2037
1,106
1,035
902
4.875% MTN
173m
Mar 2042
171
175
171
5.125% MTN(f)
600m
Apr 2047
515
486
559
5.2% MTN
279m
Mar 2057
275
275
275
Finance leases 
-
-
99
88
121
11,130
10,711
11,385
(a) The 4% RPI MTN is redeemable at par, including indexation for increases in the Retail Price Index (RPI) over the life of the MTN.
(b) The 3.322% Limited Price Inflation (LPI) MTN is redeemable at par, indexed for increases in the RPI over the life of the MTN. The maximum indexation of the principal in any one year is 5%, with a minimum of 0%.
(c) The 1.982% RPI MTN is redeemable at par, including indexation for increases in the RPI over the life of the MTN.
(d) The bonds are secured by a charge over the property, plant and equipment held within the Tesco Property Limited Partnership, a 100% owned subsidiary of Tesco PLC.
(e) This is an amortising bond which matures in Feb 2029. 15m is the principal repayment due within the next 12 months, and is payable quarterly. The remainder is payable in quarterly instalments until maturity in Feb 2029.
(f) The decrease in carrying value of the bond from 29 August 2015 to 27 February 2016 was due to a change of the hedge relationship from a fair value to a cash flow hedge, which was recognised in the statement of comprehensive income in the prior year. 
Borrowing facilities
The Group has the following undrawn committed facilities available at 27 August 2016, in respect of which all conditions precedent had been met as at that date:
27 August 2016
m
27 February 2016
m
29 August 2015
m
Expiring in less than one year
-
100
100
Expiring between one and two years
600
2,200
-
Expiring in more than two years
4,428
2,700
4,916
5,028
5,000
5,016
The current year undrawn committed facilities include 2.4bn (27 February 2016: 2.4bn, 29 August 2015: 2.4bn)of bilateral facilities and a 2.6bn (27 February 2016: 2.6bn, 29 August 2015: 2.6bn) revolving credit facility. During the period 1.8bn equivalent of bilateral facilities were refinanced in a tenor of three years to a final maturity of August 2019. 
All facilities incur commitment fees at market rates and would provide funding at floating rates.
Note 13 Financial instruments
The following table presents the Group's financial assets and liabilities that are measured at fair value at 27 August 2016, 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 (from prices) or indirectly (derived from prices) (Level 2); and
 inputs for the asset or liability that are not based on observable market data (from unobservable inputs) (Level 3).
27 August 2016
Level 1
m
Level 2
m
Level 3
m
Total
m
Assets
Available-for-sale financial assets
954
-
123
1,077
Derivative financial instruments:
 - Interest rate swaps and similar instruments
-
36
-
36
 - Cross currency swaps
-
1,272
-
1,272
 - Index-linked swaps
-
797
-
797
 - Forward contracts
-
136
-
136
Total assets
954
2,241
123
3,318
Liabilities
Derivative financial instruments:
 - Interest rate swaps and similar instruments
-
(484)
-
(484)
 - Cross currency swaps
-
(7)
-
(7)
 - Index-linked swaps
-
(520)
-
(520)
 - Forward contracts
-
(77)
-
(77)
Total liabilities
-
(1,088)
-
(1,088)
Total
954
1,153
123
2,230
27 February 2016
Level 1
m
Level 2
m
Level 3
m
Total
m
Assets
Available-for-sale financial assets
980
-
125
1,105
Derivative financial instruments:
 - Interest rate swaps and similar instruments
-
35
-
35
 - Cross currency swaps
-
935
-
935
 - Index-linked swaps
-
637
-
637
 - Forward contracts
-
101
-
101
Total assets
980
1,708
125
2,813
Liabilities
Derivative financial instruments:
 - Interest rate swaps and similar instruments
-
(406)
-
(406)
 - Cross currency swaps
-
(67)
-
(67)
 - Index-linked swaps
-
(421)
-
(421)
 - Forward contracts
-
(57)
-
(57)
Total liabilities
-
(951)
-
(951)
Total
980
757
125
1,862
29 August 2015
Level 1
m
Level 2
m
Level 3
m
Total
m
Assets
Available-for-sale financial assets
739
-
113
852
Derivative financial instruments:
 - Interest rate swaps and similar instruments
-
25
-
25
 - Cross currency swaps
-
549
-
549
 - Index-linked swaps
-
680
-
680
 - Forward contracts
-
77
-
77
Total assets
739
1,331
113
2,183
Liabilities
Derivative financial instruments:
 - Interest rate swaps and similar instruments
-
(330)
-
(330)
 - Cross currency swaps
-
(151)
-
(151)
 - Index-linked swaps
-
(443)
-
(443)
 - Forward contracts
-
(51)
-
(51)
Total liabilities
-
(975)
-
(975)
Total
739
356
113
1,208
There were no transfers between Levels 1 and 2 during the period (27 February 2016: no transfers, 29 August 2015: no transfers) and no transfers into or out of Level 3 fair value measurements (27 February 2016: no transfers, 29 August 2015: no transfers).
The Group's policy is to recognise transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer.
Carrying amounts versus fair values
The carrying amounts of the following financial assets and financial liabilities are a reasonable approximation of their fair value: cash and cash equivalents, short-term and other investments, other receivables, derivative financial assets/liabilities and deposits from banks (Tesco Bank). 
The carrying value and fair value of the remaining financial assets and liabilities are as follows:
27 August 2016
27 February 2016
29 August 2015
Carrying
Value
m
Fair 
Value
m
Carrying
Value
m
Fair 
Value
m
Carrying 
Value
m
Fair 
Value
m
Assets
Loans and advances to customers - Tesco Bank
9,262
9,437
8,542
8,822
8,293
8,338
Joint venture and associate loan receivables
137
164
149
163
148
153
Liabilities
Short-term borrowings:
- Amortised cost
(2,079)
(2,083)
(1,938)
(1,936)
(1,209)
(1,209)
- Bonds in fair value hedge relationships
(940)
(940)
(877)
(865)
-
-
Long-term borrowings:
- Amortised cost
(9,873)
(10,361)
(9,512)
(9,136)
(8,510)
(8,420)
- Bonds in fair value hedge relationships
(1,158)
(900)
(1,111)
(800)
(2,754)
(2,415)
Customer deposits - Tesco Bank
(8,107)
(8,138)
(7,397)
(7,405)
(6,580)
(6,566)
Finance lease liabilities 
(105)
(115)
(99)
(101)
(131)
(131)
Note 14 Commercial income
Commercial income relates to volume-related allowances, promotional and marketing allowances and various other fees and discounts received in connection with the purchase of goods for resale from suppliers. Most of the income received from suppliers relates to adjustments to a core cost price of a product, and as such is considered part of the purchase price for that product. Accounting for the amount and timing of recognition of commercial income may require the exercise of judgement, as detailed in the 2016 Annual Report and Group financial statements.
Commercial income is recognised when earned by the Group, which occurs when all obligations conditional for earning income have been discharged, and the income can be measured reliably based on the terms of the contract. The income is recognised as a credit within cost of sales. Where the income earned relates to inventories which are held by the Group at period ends, the income is included within the cost of those inventories, and recognised in cost of sales upon sale of those inventories. Amounts due relating to commercial income are recognised within other receivables, except in cases where the Group currently has a legally enforceable right of set-off and intends to offset amounts due from suppliers against amounts owed to those suppliers, in which case only the net amount receivable or payable is recognised. Accrued commercial income is recognised within accrued income when commercial income earned has not been invoiced at the balance sheet date.
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 and deferred income.
27 August 2016
m
27 February 2016
m
29 August 2015
m
Current assets
Inventories
(53)
(75)
(71)
Trade and other receivables
- Other receivables
188
201
83
- Accrued income
93
100
95
Current liabilities
Trade and other payables
- Trade payables
186
305
178
- Accruals and deferred income
(27)
(43)
(39)
The 27 February 2016 accruals and deferred income disclosure in this note included amounts that were unrelated to commercial income, and has therefore been amended accordingly.
Whilst the commercial income balances disclosed above are based on our contracts with suppliers, they only represent part of the overall economic relationship with the suppliers. Accordingly, these balances should be viewed together with other balances related to the purchase of goods in order to understand the overall economic impact to the Group.
Note 15 Post-employment benefits
Pensions
The Group operates a variety of post-employment benefit arrangements, covering both funded and unfunded defined benefit schemes and funded defined contribution schemes. The most significant of these are the funded defined benefit pension schemes for the Group's employees in the UK (now closed to future accrual) and the Republic of Ireland, and the funded defined contribution pension scheme for employees in the UK. Of these schemes, the UK defined benefit pension deficit represents 96% of the Group deficit (2015: 96%).
The principal plan within the Group is the Tesco PLC Pension Scheme (the 'Scheme'), which is a funded defined benefit pension scheme in the UK, the assets of which are held as a segregated fund and administered by the Trustee.
The Career Average section of the Scheme ('Pension Builder') was closed to new members and future accrual on 21 November 2015. The Final Salary section of the Scheme, which was closed to new entrants in 2001, was also closed to future accrual on 21 November 2015. In their place, a defined contribution scheme, Tesco Retirement Savings Plan, was opened on 22 November 2015 and is open to all Tesco colleagues in the UK.
At 31 March 2014, the deficit valuation arising from the triennial actuarial assessment was 2.8bn. A plan to contribute 270m a year has been agreed with the Trustee, to fund the UK deficit and to meet the expenses of the scheme.
UK Principal assumptions
The major assumptions, on a weighted average basis, used by the actuaries to value the defined benefit obligation as at 27 August 2016 were as follows:
27 August 2016 
%
27 February 2016
%
29 August 2015 
%
Discount rate
2.1
3.8
3.8
Price inflation
2.8
2.9
3.2
Rate of increase in deferred pensions*
1.8
1.9
2.2
Rate of increase in salaries
N/A
N/A
3.3
Rate of increase in pensions in payment*
 Benefits accrued before 1 June 2012
2.6
2.7
3.0
 Benefits accrued after 1 June 2012
1.8
1.9
2.2
Rate of increase in career average benefits
 Benefits accrued before 1 June 2012
N/A
N/A
3.2
 Benefits accrued after 1 June 2012
N/A
N/A
2.2
* In excess of any Guaranteed Minimum Pension ('GMP') element.
The rate of increase in salaries and career average benefits are no longer applicable, as the Scheme has closed to future accrual.
The main financial assumption is the discount rate. If the discount rate increased by 0.1% or 1.0%, the UK defined benefit obligation would decrease by approximately 533m or 4,620m respectively. If this assumption decreased by 0.1% or 1.0%, the UK defined benefit obligation would increase by approximately 533m or 6,673m respectively.
Summary of movements in Group deficit during the financial period
Changes in the Group deficit, including movements of discontinued operations up to classification as held for sale, are as follows:
27 August 2016
m
27 February 2016
m
29 August 2015
m
Deficit in schemes at beginning of the period
(3,175)
(4,842)
(4,842)
Current service cost
(22)
(570)
(386)
Past service credit
-
535
-
Net pension finance cost
(58)
(155)
(84)
Contributions by employer
128
656
374
Foreign currency translation
(18)
(8)
5
Remeasurements
(3,983)
1,164
(308)
Transfer to disposal group classified as held for sale*
5
45
45
Deficit in schemes at the end of the period
(7,123)
(3,175)
(5,196)
Deferred tax asset **
1,270
563
1,029
Deficit in schemes at the end of the period, net of deferred tax
(5,853)
(2,612)
(4,167)
*  Value after deferred tax is 5m (29 August 2015: 34m).
** The deferred tax assets in relation to the retirement benefit obligation has been partly offset with group deferred tax liabilities in the balance sheet.
Note 16 Analysis of changes in net debt
At
27 February 
2016
m
Cash 
flow
m
Fair value and foreign exchange movements
m
Interest (charge)/
income 
m
Other
non-cash
movements
m
Reclassifications of movements in net debt of the disposal group
m
At
27 August 
2016
m
Total Group
Cash and cash equivalents
3,082
280
4
-
-
 (11)
3,355
Short-term investments
3,463
970
2
-
-
-
4,435
Joint ventures loans
149
(16)
-
-
3
-
136
Interest and other receivables
1
(16)
-
16
-
-
1
Bank and other borrowings
(13,253)
(182)
(442)
(5)
-
75
(13,807)
Interest payables
(185)
205
(11)
(252)
-
-
(243)
Finance lease payables
(99)
5
(8)
-
(3)
-
(105)
Net derivative financial instruments
698
(104)
494
3
-
-
1,091
Net derivative interest
59
7
-
(4)
-
-
62
Net debt of the disposal group
-
-
-
-
-
(64)
(64)
Total Group
(6,085)
1,149
39
(242)
-
-
(5,139)
Tesco Bank
Cash and cash equivalents
554
217
-
-
-
-
771
Joint ventures loans
34
-
-
-
-
-
34
Bank and other borrowings
(1,441)
-
(3)
-
-
-
(1,444)
Interest payables
(1)
2
-
(2)
-
-
(1)
Net derivative financial instruments
(121)
-
(26)
-
-
-
(147)
Tesco Bank
(975)
219
(29)
(2)
-
-
(787)
Retail
Cash and cash equivalents
2,528
63
4
-
-
(11)
2,584
Short-term investments
3,463
970
2
-
-
-
4,435
Joint ventures loans
115
(16)
-
-
3
-
102
Interest and other receivables
1
(16)
-
16
-
-
1
Bank and other borrowings
(11,812)
(182)
(439)
(5)
-
75
(12,363)
Interest payables
(184)
203
(11)
(250)
-
-
(242)
Finance lease payables
(99)
5
(8)
-
(3)
-
(105)
Net derivative financial instruments
819
(104)
520
3
-
-
1,238
Net derivative interest
59
7
-
(4)
-
-
62
Net debt of the disposal group
-
-
-
-
-
(64)
(64)
Net debt
(5,110)
930
68
(240)
-
-
(4,352)
Net debt excludes the net debt of Tesco Bank but includes that of discontinued operations. Balances and movements in respect of the total Group and Tesco Bank are presented to allow reconciliation between the Group balance sheet and the Group cash flow statement.
Reconciliation of net cash flow to movement in net debt
27 August
2016
m
 29 August 
2015
m
Net increase in cash and cash equivalents
280
164
Elimination of Tesco Bank movement in cash and cash equivalents
(217)
64
Retail cash movement in other net debt items 
Net increase/ (decrease) in short-term investments
970
(293)
Net decrease in joint venture loans 
(16)
(3)
Net (increase)/ decrease in borrowings and lease financing 
(177)
758
Net cash flows from derivative financial instruments
 (104)
(186)
Net interest paid on components of net debt
194
172
Change in net debt resulting from cash flow
930
676
Retail net interest charge on components of net debt
(240)
(221)
Retail fair value and foreign exchange movements
68
31
Debt acquired on business combinations
-
(561)
Retail other non-cash movements
-
(32)
Decrease/ (increase) in net debt for the period
758
(107)
Opening net debt
(5,110)
(8,481)
Closing net debt
(4,352)
(8,588)
Note 17 Disposals
On 10 June 2016, the Group announced the proposed sale of its 95.5% controlling interest in its Turkish operations to Migros. The assets and liabilities related to the Turkish operations have been classified as a disposal group held for sale within the period. The sale is subject to local regulatory approvals with completion expected in the financial year. Refer to Note 7 for further information.
During the period, the Group sold its interests in Dobbies Garden Centres, Giraffe and Harris + Hoole and closed its Nutricentre business, further enhancing the focus of the UK retail business on its core strengths. The Group received 213m in cash net of costs incurred and cash disposed, of which 198m related to Dobbies, and recognised 1m in deferred consideration. The Group disposed of net assets of 243m and incurred costs to sell of 12m. In addition, the Group disposed of a 6.9% interest (on a fully diluted basis) in Lazada Group S.A. ('Lazada') for net cash consideration of US$115m (81m), retaining an 8.8% shareholding. The total loss of 4m from these transactions has been included within the Group's underlying results.
Note 18 Contingent liabilities
There are a number of contingent liabilities that arise in the normal course of business which if realised are not expected to result in a material liability to the Group. The Group recognises provisions for liabilities when it is more likely than not that a settlement will be required and the value of such a payment can be reliably estimated.
On 22 September 2014, the Group announced that it had identified an overstatement of its expected profit for the first half of the year, as contained in guidance it had issued in August 2014, relating to the recognition of commercial income and the deferral of costs. The Serious Fraud Office ('SFO') commenced an investigation into accounting practices at the Group on 29 October 2014.
On 9 September 2016, the SFO announced its decision to prosecute three former Group employees for fraud and false accounting, while the Group's position is still under consideration. The timing and outcome of the SFO investigation in relation to the Group remains unclear and there is the possibility of fines and/or other consequences. The Group is co-operating with the SFO.
The Group has reached agreements to settle both a class action and an opt out action brought by US investors who dealt through the American Depository Receipts ('ADRs') programme which represented approximately 2.46% of issued share capital. As previously reported, law firms in the UK have announced the intention of forming claimant groups to commence litigation against the Group for matters arising out of or in connection with its overstatement, and purport to have secured third party funding for such litigation. In this regard, the Group has received two letters before action from two law firms. No such litigation has yet been formally commenced and the Group is consequently unable to make any assessment of the likely outcome.
Prior to the disposal of its Korean operations ('Homeplus'), Tesco PLC provided guarantees in respect of thirteen Homeplus lease agreements in Korea in the event of termination of the relevant lease agreement by the landlord due to Homeplus's default. Entities controlled by MBK and CPPIB, as the purchasers of Homeplus, undertook to procure Tesco PLC's release from these guarantees following the disposal of Homeplus, which currently remains outstanding. The maximum potential liability as at 27 February 2016 under these guarantees was approximately KRW627bn (427m).
This liability decreases over time with all relevant leases expiring in the period between 2026 and 2033. Tesco PLC has the benefit of an indemnity from the purchasers of Homeplus for any claims made under such guarantees.
Note 19 Lease commitments
Operating lease commitments - Group as lessee
Future minimum rentals payable under non-cancellable operating leases are as follows:
27 August 2016
m
27 February 2016
m
29 August 2015
m
Within one year
1,266
1,296
1,163
Greater than one year but less than five years
3,890
3,918
4,172
After five years
7,751
7,831
8,669
Total minimum lease payments
12,907 
13,045
14,004
Future minimum rentals payable under non-cancellable operating leases after five years are analysed further as follows:
27 August 2016
m
27 February 2016
m
29 August 2015
m
Greater than five years but less than ten years
3,310
3,272
3,669
Greater than ten years but less than fifteen years
2,335
2,303
2,586
After fifteen years
2,106
2,256
2,414
Total minimum lease payments - after five years
7,751
7,831
8,669
The Group has used operating lease commitments from continuing operations discounted at 7% (27 February 2016: 7%, 29 August 2015: 7%) of 7,771m (27 February 2016: 7,814m, 29 August 2015: 9,091m) in its calculation of total indebtedness. Total operating lease commitments included for Turkey were 27m at 27 February 2016 and 41m at 29 August 2015.
Operating lease payments represent rentals payable by the Group for certain of its retail, distribution and office properties and other assets such as motor vehicles. The leases have varying terms, purchase options, escalation clauses and renewal rights. Purchase options and renewal rights where they occur are at market value. Escalation clauses are in line with market practices and include inflation linked, fixed rates, resets to market rents and hybrids of these.
The Group has lease break options on certain sale and leaseback transactions. These options are exercisable if the Group exercises an existing option to buy back, at market value and at a specified date, either the leased assets or the equity of the other joint venture partner. No commitment has been included in respect of the buy-back option as the option is at the Group's discretion. The Group is not obliged to pay lease rentals after that date, therefore minimum lease payments exclude those falling after the buy-back date. The current market value of these properties is 3.0bn (27 February 2016: 3.2bn, 29 August 2015: 4.0bn) and the total lease rentals, if they were to be incurred following the option exercise date, would be 2.5bn (27 February 2016: 2.6bn, 29 August 2015: 3.1bn) using current rent values. These lease break options are between 2016 and 2023.
The additional lease rentals if incurred following the option exercise date would be as follows:
27 August 2016
m
27 February 2016
m
29 August 2015
m
Within one year
36
45
10
Greater than one period but less than five years
82
72
189
Greater than five years but less than ten years
667
686
819
Greater than ten years but less than fifteen years
661
718
810
After fifteen years
1,054
1,115
1,245
Total contingent additional lease rentals
2,500
2,636
3,073
Operating lease commitments with joint ventures and associates
Since 1988 the Group has entered into several joint ventures and associates, and sold and leased back properties to and from these joint ventures and associates. The terms of these sale and leasebacks vary. However, common factors include: the sale of the properties to the joint venture or associate at market value; options within the lease for the Group to repurchase the properties at market value; market rent reviews; and 20 to 30 full-year lease terms. The Group reviews the substance as well as the form of the arrangements when determining the classification of leases as operating or finance. All of the leases under these arrangements are operating leases.
Independent review report to Tesco PLC
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 27 August 2016 which comprises the Group Income Statement, the Group Statement of Comprehensive Income, the Group Balance Sheet, the Group Statement of Changes in Equity, the Group Cash Flow Statement and related Notes 1 to 19. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review 
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 27 August 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
4 October 2016
Glossary
Alternative performance measures
The Directors use alternative performance measures as they believe these measures provideadditional useful information on the underlying trends, performance and position of the Group. These measures are used for performance analysis. The alternative performance measures are not defined by IFRS and therefore may not be directly comparable with other companies' alternative performance measures. These measures are not intended to be a substitute for, or superior to, IFRS measurements.
Diluted earnings per share from continuing operations before exceptional items
Profit after tax before exceptional items attributable to owners of the parent divided by the weighted average number of ordinary shares in issue during the financial period adjusted for the effects of potentially dilutive options. The dilutive effect is calculated on the full exercise of all potentially dilutive ordinary share options granted by the Group, including performance-based options which the Group considers to have been earned. 
Diluted earnings per share from continuing operations before exceptional items and net pension finance costs
Profit after tax before exceptional items and net pension finance costs attributable to owners of the parent divided by the weighted average number of ordinary shares in issue during the financial period adjusted for the effects of potentially dilutive options. The dilutive effect is calculated on the full exercise of all potentially dilutive ordinary share options granted by the Group, including performance-based options which the Group considers to have been earned. 
Exceptional items
Exceptional items relate to certain costs or incomes that derive from events or transactions that fall within the normal activities of the Group but which, individually or, if of a similar type, in aggregate, are excluded from the Group's alternative performance measures by virtue of their size and nature in order to better reflect management's view of the performance of the Group.
The Group exercises judgement in assessing whether items should be classified as exceptional. This assessment covers the nature of the item, cause of occurrence and the scale of impact of that item on reported performance. Reversals of previous exceptional items are assessed based on the same criteria.
Free cash flow
Free cash flow is net cash generated from/ (used in) operating activities less capital expenditure on property, plant and equipment, investment property and intangible assets.
Growth in sales
The year on year percentage movement in revenue excl. fuel for continuing operations excluding fuel for 26 weeks at a constant foreign exchange rate.
Like-for-like
Like-for-like is the growth in sales from stores that have been open for at least ayear at a constant foreign exchange rate and includes online sales.
Net debt
Net debt excludes the net debt of Tesco Bank but includes that of the discontinued operations. Net debt comprises bank and other borrowings, finance lease payables, net derivative financial instruments, joint venture loans and other receivables and net interest receivables/payables, offset by cash and cash equivalents, and short-term investments.
Operating margin
Operating margin is based on operating profit before exceptional items and on revenue.
Operating profit before exceptional items
This is the headline measure of the Group's performance, and is based on operating profit before the impact of exceptional items.
Profit before tax ('PBT') before exceptional items and net pension finance costs
This measure excludes exceptional items and the net finance costs of the defined benefit pension deficit as the costs are impacted by corporate bond yields, which can fluctuate significantly.
Profit/ (losses) arising on property-related items
These relate to the Group's property activities including gains and losses on disposal of property assets, development property built for resale and property joint ventures; costs resulting from changes in the Group's store portfolio and distribution network, including pre-opening and post-closure costs; and income/ (charges) associated with impairment of non-trading property and related onerous contracts.
Retail cash flow
Cash generated from/ (used in) operations for retail activities.
Revenue excl. fuel
This is the headline measure of revenue for the Group. It excludes the impact of sales, predominantly fuel sales, made at petrol filling stations, due to the volatilities associated with movements in fuel prices.
Total indebtedness
Net debt plus IAS19 deficit in the pension schemes (net of associated deferred tax) plus the present value of future minimum rentals payable under non-cancellable operating leases.
Glossary
Other
Capital expenditure ('Capex')
The additions to property, plant and equipment, investment property and intangible assets (excluding assets acquired under business combinations).
Capital employed
Net assets plus net debt plus dividend creditor less net assets of the disposal groups and non-current assets classified as held for sale.
Enterprise Value
This is calculated as market capitalisation plus net debt.
FTE
FTE refers to full time equivalents.
LPI
LPI refers to Limited Price Inflation.
Market capitalisation
The total value of all Tesco shares calculated as total number of shares multiplied by closing share price at period-end.
MTN
MTN refers to 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.
Pension deficit, IAS 19 basis (post tax)
This is post-employment benefit obligations net of the related deferred tax.
Return on capital employed ('ROCE')
Return divided by the average of opening and closing capital employed.
Return
Profit before exceptional items and interest, after tax (applied at effective rate of tax).
RPI
RPI refers to Retail Price Index.
Total shareholder return ('TSR')
The notional annualised return from a share, measured as the percentage change in the share price, plus the dividends paid with the gross dividends reinvested in Tesco shares. This is measured over both a one and five-year period.
Investor information
Registrar and shareholding enquiries 
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Lancing
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BN99 6DA 
Telephone 0371 384 2977 
Tesco PLC website 
The Directors are responsible for the maintenance and integrity of the financial information on our website. This information has been prepared under relevant accounting standards and legislation. Tesco information, including this press release is available on our website: 
www.tescoplc.com. 
Electronic communications 
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To register, log on to www.shareview.co.uk and click on 'register'. Your rights as a shareholder will not be affected in any way. If you have any questions about the service, please call 0371 384 2977. 
Security reminder 
Under the Companies Act 2006 we are obliged to hold the names and addresses of all shareholders on a register of members and give a copy of this list to the Registrar of Companies every year. The Registrar of Companies makes this list available to anyone who requests it and many companies use this information to market their services. We are aware that some of our shareholders have received unsolicited calls or correspondence from companies concerning investment matters. Tesco has no relationship with and does not endorse any of the services offered by these companies. Details of any facilities that we endorse are included in our communications. If you are concerned about any direct mailing or telephone calls purporting to be from Tesco, please contact us by writing to the Company Secretary, Tesco House, Shire Park, Welwyn Garden City, Hertfordshire, AL7 1GA or by calling us on 01992 632222. 
Customer services 
Tesco Customer Services 
Freepost SC02298 
Dundee
DD1 9NF 
Telephone 0800 505555 
Investor relations 
Investor relations department 
Tesco PLC
Tesco House 
Shire Park
Welwyn Garden City
Hertfordshire 
AL7 1GA
Telephone 01707 912922 
Secretary and registered office 
Mr Robert Welch 
Tesco PLC
Tesco House
Shire Park
Welwyn Garden City 
Hertfordshire
AL7 1GA
Telephone 01992 632222 
Financial Calendar 
2017 
Financial year-end 
25 February
Preliminary results announced*
12 April
* Please note that this date is provisional and subject to change.
Appendix 1
Total Sales Performance at Actual Rates (Exc. VAT, Exc. Fuel)
1H
2015/16
2H 
2015/16
FY
2015/16
1Q
2016/17
2Q
2016/17
1H 
2016/17
UK & ROI
(1.2)%
(0.6)%
(0.9)%
0.7%
1.7%
1.2%
 UK
(0.6)%
(0.3)%
(0.4)%
0.3%
1.0%
0.7%
 ROI
(13.5)%
(5.1)%
(9.3)%
8.7%
15.3%
11.9%
International
(4.3)%
(3.1)%
(3.7)%
5.6%
16.5%
10.9%
 Europe
(8.8)%
(3.6)%
(6.2)%
8.2%
15.1%
11.6%
 Asia
1.5%
(2.5)%
(0.5)%
2.8%
18.2%
10.1%
Tesco Bank
(0.8)%
2.4%
0.8%
3.5%
7.2%
5.3%
Group
(1.9)%
(1.0)%
(1.4)%
1.8%
4.7%
3.3%
Appendix 2
Total Sales Performance at Constant Rates (Exc. VAT, Exc. Fuel)
1H
2015/16
2H 
2015/16
FY
2015/16
1Q
2016/17
2Q
2016/17
1H 
2016/17
UK & ROI
(0.6)%
(0.3)%
(0.5)%
0.3%
1.0%
0.6%
 UK
(0.6)%
(0.3)%
(0.4)%
0.3%
1.0%
0.7%
 ROI
(2.2)%
0.3%
(1.0)%
0.2%
(0.3)%
(0.1)%
International
0.6%
3.1%
1.9%
3.6%
2.8%
3.2%
 Europe
2.4%
2.2%
2.3%
2.4%
1.2%
1.8%
 Asia
(1.7)%
4.3%
1.3%
5.0%
4.8%
4.9%
Tesco Bank
(0.8)%
2.4%
0.8%
3.5%
7.2%
5.3%
Group
(0.4)%
0.4%
0.1%
1.1%
1.5%
1.3%
Note
These results have been reported on a continuing operations basis and exclude the results from our operations in Turkey. Growth rates are all based on comparable days. For example, for the UK and ROI, these results are for the 26 weeks ending 27 August 2016 and 29 August 2015 respectively.
Appendix 3
Country Detail
Revenue
(Exc. VAT, Inc. Fuel)
Local
Currency 
(m)
m
Average exchange rate
Closing exchange rate
UK
20,465
20,465
1.000
1.000
ROI
1,223
984
1.243
1.171
Czech Republic
20,748
617
33.62
31.66
Hungary
294,389
757
388.8
361.9
Poland
5,388
996
5.409
5.069
Slovakia
690
555
1.243
1.171
Malaysia
2,181
389
5.612
5.293
Thailand
100,615
2,053
49.01
45.53
Memo:
Turkey
1,098
270
4.064
3.881
Appendix 4
UK Sales Area by Size of Store
August 2016
August 2015
No. of stores
Million
sq ft
% of total sq ft
No. of stores
Million
sq ft
% of total sq ft
0 - 3,000
2,504
5.2
13.0%
2,474
5.1
12.3%
3,001 - 20,000
283
3.4
8.6%
289
3.5
8.4%
20,001 - 40,000
277
8.1
20.4%
283
8.3
20.0%
40,001 - 60,000
181
9.2
23.1%
202
10.1
24.4%
60,001 - 80,000
130
8.7
21.9%
127
8.9
21.4%
80,001 - 100,000
45
4.2
10.6%
50
4.6
11.1%
Over 100,000
9
1.0
2.4%
9
1.0
2.4%
Total1
3,429
39.9
100.0%
3,434
41.4
100.0%
Note
1.Excludes franchise stores. 
Appendix 5
Actual Group Space - store numbers1
2015/16 year end
As at 27 Aug 2016
Net gain/
reduction2
Openings
Closures/
disposals
Repurposing/
extensions
 Extra
252
252
-
-
-
1
 Superstore
478
478
-
1
(1)
-
 Metro
177
176
(1)
-
(1)
-
 Express
1,732
1,734
2
8
(6)
-
 Dotcom only
6
6
-
-
-
-
 Total Tesco
2,645
2,646
1
9
(8)
1
 One Stop3
779
783
4
12
(8)
-
 Dobbies
36
-
(36)
-
(36)
-
 UK3
3,460
3,429
(31)
21
(52)
1
 ROI
149
148
(1)
-
(1)
-
UK & ROI3
3,609
3,577
(32)
21
(53)
1
 Czech Republic3
201
200
(1)
-
(1)
1
 Hungary
208
208
-
-
-
-
 Poland
440
437
(3)
-
(3)
-
 Slovakia
161
155
(6)
-
(6)
2
 Europe3
1,010
1,000
(10)
-
(10)
3
 Malaysia
62
65
3
3
-
1
 Thailand
1,815
1,869
54
56
(2)
9
 Asia
1,877
1,934
57
59
(2)
10
International3
2,887
2,934
47
59
(12)
13
Group3
6,496
6,511
15
80
(65)
14
 UK (One Stop)
134
146
12
16
(4)
-
 Czech Republic
103
100
(3)
-
(3)
-
Franchise stores
237
246
9
16
(7)
-
Group store numbers above exclude the 168 stores in Turkey as at 27 August 2016.
Notes
1. Continuing operations. 
2. The net gain/reduction reflects the number of store openings less the number of store closures/disposals. 
3.Excludes franchise stores.
Actual Group Space - '000 sq ft1
2015/16 year end
As at 27 Aug 2016
Net gain/
reduction
Openings
Closures/
disposals
Repurposing/
extensions
 Extra
17,846
17,841
(5)
-
-
(5)
 Superstore
14,002
14,038
36
59
(23)
-
 Metro
2,005
1,993
(12)
-
(12)
-
 Express
4,031
4,040
9
19
(10)
-
 Dotcom only
716
716
-
-
-
-
 Total Tesco
38,600
38,628
28
78
(45)
(5)
 One Stop2
1,256
1,268
12
23
(11)
-
 Dobbies
1,652
-
(1,652)
-
(1,652)
-
 UK2
41,508
39,896
(1,612)
101
(1,708)
(5)
 ROI
3,560
3,543
(17)
-
(17)
-
UK & ROI2
45,068
43,439
(1,629)
101
(1,725)
(5)
 Czech Republic2
5,558
5,506
(52)
-
(1)
(51)
 Hungary
6,931
6,931
-
-
-
-
 Poland
9,688
9,667
(21)
-
(21)
-
 Slovakia
3,969
3,870
(99)
-
(72)
(27)
 Europe2
26,146
25,974
(172)
-
(94)
(78)
 Malaysia
4,164
4,134
(30)
35
-
(65)
 Thailand
15,536
15,551
15
213
(11)
(187)
 Asia
19,700
19,685
(15)
248
(11)
(252)
International2
45,846
46,659
(187)
248
(105)
(330)
Group2
90,914
89,098
(1,816)
349
(1,830)
(335)
 UK (One Stop)
185
199
14
20
(6)
-
 Czech Republic
96
94
(2)
-
(2)
-
Franchise stores
281
293
12
20
(8)
-
Group space numbers above exclude the 3,489k sq ft in Turkey as at 27 August 2016.
Notes
1. Continuing operations. 
2. Excludes franchise stores.
Group Space Forecast to 25 February 2017 - '000 sq ft1
As at 27 Aug 2016
2016/17 year end
Net gain/
reduction
Openings
Closures/
disposals
Repurposing/
extensions
 Extra
17,841
17,740
(101)
-
-
(101)
 Superstore
14,038
14,090
52
52
-
-
 Metro
1,993
1,993
-
-
-
-
 Express
4,040
4,065
25
29
(4)
-
 Dotcom only
716
716
-
-
-
-
 Total Tesco
38,628
38,604
(24)
81
(4)
(101)
 One Stop2
1,268
1,264
(4)
29
(33)
-
 UK2
39,896
39,868
(28)
110
(37)
(101)
 ROI
3,543
3,543
-
-
-
-
UK & ROI2
43,439
43,411
(28)
110
(37)
(101)
 Czech Republic2
5,506
5,480
(26)
-
(26)
-
 Hungary
6,931
6,899
(32)
-
(2)
(30)
 Poland
9,667
9,578
(89)
-
(64)
(25)
 Slovakia
3,870
3,859
(11)
-
(11)
-
 Europe2
25,974
25,816
(158)
-
(103)
(55)
 Malaysia
4,134
3,952
(182)
-
-
(182)
 Thailand
15,551
15,510
(41)
305
-
(346)
 Asia
19,685
19,462
(223)
305
-
(528)
International2
45,659
45,278
(381)
305
(103)
(583)
Group2
89,098
88,689
(409)
415
(140)
(684)
 UK (One Stop)
199
264
65
65
-
-
 Czech Republic
94
94
-
-
-
-
Franchise stores
293
358
65
65
-
-
Notes
1. Continuing operations. 
2. Excludes franchise stores.
Appendix 6
Tesco Bank Income Statement
1H 
2016/171
m
1H
2015/161
m
Revenue
Interest receivable and similar income
301
283
Fees and commissions receivable
202
195
503
478
Direct Costs
Interest payable
(89)
(81)
Fees and commissions payable
(12)
(1)
(101)
(82)
Gross profit
402
396
Other expenses:
 Staff costs
(83)
(84)
 Premises and equipment
(37)
(40)
 Other administrative expenses
(108)
(108)
 Depreciation and amortisation
(44)
(43)
 Provisions for bad and doubtful debts
(41)
(35)
Operating profit before exceptional items
89
86
 Restructuring and other exceptional items2
(67)
-
Operating profit
22
86
Net finance costs: movements on derivatives and hedge accounting
(3)
(7)
Net finance costs: interest
(2)
(2)
Share of (loss)/profit of joint ventures and associates
5
2
Profit before tax
22
79
Notes
1. These results are for the 6 months ended 31 August 2016 and the previous period comparison is made with the 6 months ended 31 August 2015.
2. Restructuring and other exceptional items in 2016/17 consist of a 45m increase in customer redress provision and 22m restructuring costs.

This information is provided by RNS
The company news service from the London Stock Exchange
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