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Tesco resumes dividend as investors hail 'turnaround'


Tesco was forced to scrap its dividend three years ago when an accounting mishap caused it to overstate its profits ahead of its interim results in 2014.

The retailer's United Kingdom like-for-like sales in the second quarter also experienced a 2.1 per cent uptick, although this was a slight slowdown on the 2.3 per cent recorded in the previous three months.

In recent days, Tesco has not been the favourite of many City analysts either, with Credit Suisse warning that it remains most at risk of the big four United Kingdom supermarkets from the continuing rise of discounters Aldi and Lidl, while Berenberg said that Tesco investment case hung on margin recovery in the United Kingdom business that looks challenging given the structural and competitive pressures in the market.

First-half adjusted operating profit before exceptional items of £759m was up 27.3% and also beat the £703m consensus, while statutory profit before tax rose nearly eightfold to £562m.

Operating profit climbed 71.8 percent from previous year to 885 million pounds, and adjusted operating profit grew 27.3 percent to 759 million pounds.

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.

"It's a significant milestone in the recovery of the business and one which demonstrates the confidence we and the board have in our plans", he told reporters.

The company had net debt of 3.3 billion pounds by August 26.

Tesco said sales growth in United Kingdom was driven by strong demand for its fresh food brands, which featured in over 70% of customer baskets.

The group's shares have added about two percent to their value over the past year, as compared with a near eight-percent rise in the Footsie.

Tesco's group profit had risen by 27.3% to £759M.

ETX Capital analyst Neil Wilson said Tesco's drive to keep down prices was giving the company "an edge over the other big players in terms of coping with discounters", such as growing German players in the United Kingdom market, Aldi and Lidl.

Tesco says it is well on its way to reaching its 2020 forecast, which includes 1.5 billion pounds (1.7 billion euro) in cost-saving measures. 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.

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