Tesco has reported a jump in first-half profit and announced that it is reintroducing dividend payments – a significant step for the retailer that has been marred by a massive accounting scandal.
The company on Wednesday reported a 27.3 per cent rise in profits for the first half of its financial year and a seventh consecutive year of underlying sales growth in its UK market. Overall group sales rose 3.3 per cent during the period to £25.5bn.
"We are continuing to make strong progress,” said chief executive Dave Lewis. “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,” he added.
The figures also point to Tesco’s success in navigating the current inflationary trading environment as well as fragile consumer confidence in the aftermath of last year’s Brexit vote.
Operating profit before one-off items hit £759m for the six months to 26 August, which was up from £596m in the same period in 2016 and well ahead of the £700m forecast by analysts, according to Reuters.
“Tesco’s surging profits are a huge achievement and a shot across the bows to the brand’s would-be obituary writers,” said John Ibbotson, director of the retail consultancy Retail Vision.
The retailer also said that it would start paying an interim dividend of 1p.
“[This] reflects our confidence that we can build on our strong performance to date and in doing so, create long-term, sustainable value for all of our stakeholders,” said Mr Lewis.
Tesco has endured a turbulent few years.
In September 2014, the company admitted that it had identified a £250m overstatement of first-half profits for that year. The UK’s supermarket watchdog later found that Tesco had deliberately and repeatedly withheld money owed to suppliers to boost its sales performance artificially – a serious breach of supermarket regulations.
Scores of investors sued the company in the aftermath, alleging that they had lost millions because they bought shares on the basis of misleading accounts. Tesco shares lost almost half of their value in the months after the scandal broke. A trial relating to the matter is currently ongoing.
