Published: Thu, October 05, 2017
Markets | By Erika Turner

Tesco reports 27% profits increase

Tesco reports 27% profits increase

Like-for-like sales, excluding new store openings, increased by 2.1 per cent in the second quarter, with pre-tax profits also rising to £562 million for the first half of the year.

Alastair Lockhart, insight director at shopper marketing agency Savvy, said Tesco's reintroduction of a dividend is the latest in a series of milestones that confirms not only momentum, but pace in the retailer's recovery. "Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago".

Chief Executive Dave Lewis explained that the announcement reflected the confidence that they could build on their strong performance to date and that in doing so, they could create long-term sustainable value for all of their stakeholders. Earnings per share before items were 5.46 pence, compared to prior year's 3.19 pence.

The U.K.'s biggest grocer by market share made a pretax profit of 562 million pounds ($744.5 million) for the 26 weeks ended August 26, compared with a pretax profit of GBP71 million a year earlier. On a constant currency basis, revenues grew 1.4 percent.

Group sales were up 3.3% at £25.2bn.

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The UK blue chip index closed 0.4 percent higher at 7,468.11 points on Tuesday, boosted by a slide in the pound after weaker construction sector activity and rumbling uncertainty over Brexit negotiations.

Further, the company announced the restoration of the dividend, citing the improved performance in the business and the Board's confidence in its plans.

The last payout was in 2014, after the giant admitted to overstating profits by around £250m.

Hargreaves Lansdown analyst, Laith Khalaf, said there were not "many things more telling about the health of company than its ability to pay a dividend, and Tesco's return to the register after a three-year hiatus speaks volumes about the progress the company has made". Media reports suggest that the Competition and Markets Authority (CMA) is expected to give its provisional findings by next month and a final decision by December.

Tesco's share price was subdued yesterday, shedding 0.27 percent to close at 186.65, underperforming the broader United Kingdom market, with the benchmark FTSE 100 index ending the session in positive territory.

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