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TESCO PLC PRELIMINARY RESULTS 2009/10

Tesco

20 April 2010


STRONG RESULTS, STRONG GROWTH TO COME

52 weeks ended 27 February 2010
2009/10
Growth vs 2008/9
vs 52 weeks
vs 53 weeks
Group sales (inc. VAT)*
£62,537m
6.8%
5.2%
Group revenue (ex. VAT)
£56,910m
7.1%
5.6%
Group trading profit
£3,412m
12.3%
10.6%
Underlying profit before tax
£3,395m
10.1%
8.7%
Group profit before tax
£3,176m
10.4%
8.9%
Underlying diluted earnings per share
31.66p
9.1%**
7.7%**
Diluted earnings per share
29.19p
9.8%
8.3%
Dividend per share
13.05p
9.1%
9.1%
Terry Leahy, Chief Executive, comments:
“By remaining focused on our strategy Tesco has weathered the economic storm well. Across the Group, we have successfully adapted our cost structures and ranges to help customers save money when they’ve needed to and treat themselves when they’ve wanted to. Our positions in international markets and non-food meant we faced strong headwinds when the downturn came but it will be these parts of our business which will grow fastest as the recovery strengthens.
Across all parts of our strategy - UK, International, Non-food, Services – our business is now stronger than it was before the recession. With leaner operations, improved market shares, strategic acquisitions performing well and a strong organic development programme, we’re well-placed for sustained profitable growth. And with the balance sheet strengthening, we have strong foundations in place for improving returns on capital going forward.”
HIGHLIGHTS
· 12.3% growth in Group trading profit and 10.1% rise in underlying profit before tax
· Underlying diluted EPS growth of 9.1%**; dividend per share growth of 9.1%
· Opened 7.1m sq ft of new space in the year; 72% outside the UK
· Net debt reduction to £7.9bn, ahead of plan; further reductions planned in 2010/11
· Strong property profits; divestments totalling £1.8bn at attractive yields
· Reaffirmed commitment to increasing Return On Capital Employed
· Market share gains and encouraging like-for-like trends in international markets
· UK sales growth running ahead of the industry, driven by strong volumes
· 18% more UK households redeeming Clubcard vouchers than a year ago
· Leadership on climate change; 7.8% Group reduction in CO2 emissions from our baseline 2006/7 store and distribution portfolio
· 16,000 jobs to be created in Tesco this year including 9,000 in the UK
* Group sales (inc. VAT) excludes the accounting impact of IFRIC13 (Customer Loyalty Programmes)
** Underlying diluted EPS growth calculated on a constant tax rate basis
SUMMARY OF GROUP RESULTS
These results are for the 52 weeks ended 27 February 2010. The previous year comparison has been adjusted on a 52 week pro forma basis from the 53 week statutory basis. All growth rates are calculated at actual exchange rates.
Group
UK +
Asia
Europe
US
Tesco Bank
£m
LY
Growth %
£m
£m
£m
£m
£m
Sales (inc. VAT)*
62,537
58,570
6.8%
42,254
9,072
9,997
354
860
Growth %
4.2%
19.7%
(0.7)%
72.7%
n/m
UK LFL (ex. Petrol)
2.6%
UK LFL (ex. Petrol) VAT-adjusted
3.2%
Revenue (ex. VAT)
56,910
53,115
7.1%
38,558
8,439
8,704
349
860
Growth %
4.5%
19.7%
(1.0)%
71.9%
n/m
Revenue growth ex. Petrol %
8.6%
Trading profit***
3,412
3,039
12.3%
2,413
440
474
(165)
250
Growth %
6.7%
23.9%
(4.0)%
(17.9)%
n/m
Trading profit margin*
5.93%
5.68%
6.2%
5.2%
5.4%
(47.3)%
29.1%
Growth %
0.25%
0.1%
0.2%
(0.2)%
21.7%
n/m
Property profit
377
236
59.7%
Deduct: IAS & exceptional adjustments
(332)
(153)
Statutory/pro forma operating profit
3,457
3,122
10.7%
JVs and associates
33
110
(70.0)%
Net finance costs
(314)
(356)
(11.8)%
Statutory/pro forma profit before tax
3,176
2,876
10.4%
Add: IAS & exceptional adjustments
219
207
Underlying profit before tax**
3,395
3,083
10.1%
Dividend per share (pence)
13.05
11.96
9.1%
Group
UK
Asia
Europe
US
Tesco Bank
Capital expenditure (£bn)
3.1
1.5
0.8
0.6
0.1
0.1
Gross space added (million sq.ft.)
7.1
2.0
3.0
1.8
0.3
n/a
Group
Operating cashflow ex Tesco Bank (£bn)
5.4
IFRS pensions liability post-tax (£bn)
1.3
Net debt (£bn)
7.9
* Excludes the accounting impact of IFRIC13 (Customer Loyalty Programmes). On a statutory basis, Group revenue (ex. VAT) growth was 5.6% and Group profit before tax growth was 8.9%. Trading margin also excludes the accounting impact of IFRIC13
** Underlying profit excludes the impact of non-cash elements of IAS 19, 32, 39 and 17 (principally pension costs, the marking to market of financial instruments and the impact of annual uplifts in rents and rent-free periods), the amortisation charge on intangible assets arising on acquisition (Tesco Bank), and the accounting impact of IFRIC13 (Customer Loyalty Programmes). It also excludes exceptional costs relating to restructuring in Ireland and relating to the impairment of goodwill in Japan
*** Trading profit excludes property profits and makes the same additional adjustments as our underlying profit measure
+ The UK segment excludes Tesco Bank. Tesco Bank is reported separately in accordance with IFRS8 ‘Operating Segments’
GROUP RESULTS
These results are for the 52 weeks ended 27 February 2010. In the last full financial year, we reported a 53-week period for the UK, Republic of Ireland and the United States (US) and a 52-week period for the rest of the Group. Growth rates in these results are expressed for the UK, Republic of Ireland and US to coincide with the comparable 52 weeks last year.
Statutory numbers include the adoption of IFRIC 13 (Customer Loyalty Programmes). All other numbers are shown excluding IFRIC 13, consistent with internal management reporting. More information can be found in Note 1 to the preliminary consolidated financial information.
Group sales, including VAT, increased by 6.8% to £62.5bn. At constant exchange rates, sales increased by 6.1% (including petrol) and 7.7% (excluding petrol).
Underlying profit before tax rose to £3,395m, an increase of 10.1%. Group trading profit was £3,412m, up 12.3% on last year and Group trading margin, at 5.9%, rose 25 basis points. These were helped by the fact that Tesco Bank was fully consolidated in 2009/10 and accounted for as a joint venture for most of 2008/9.
Group operating profit rose by 10.7% to £3,457m. Group profit before tax increased 10.4% to £3,176m.
On a statutory 52 week basis (compared to 53 weeks last year), Group operating profit rose by 9.1% to £3,457m and Group profit before tax rose by 8.9% to £3,176m.
Cash Flow and Balance Sheet. Tesco liquidity has improved significantly during the year through strong cash generation, tight control of capex and working capital improvements arising from better inventory management. Net debt has consequently reduced by £1.7bn to £7.9bn. The strength of our property backed balance sheet was further demonstrated with profitable market leading sale and leaseback transactions. Group capital expenditure was £3.1bn (last year £4.7bn). This reduced level of spend was achieved whilst still delivering 8% growth in Group selling space. This year we plan to invest around £3.5bn in capital expenditure. Excluding Tesco Bank cash flow from operating activities totalled £5.4bn (£5.1bn in 2008/09), including a £0.6bn improvement in working capital. Excluding the effects of currency fluctuations, we expect to reduce net debt to £7.5bn by the end of the 2010/11 financial year. Finance costs and tax. Net finance costs, after net favourable IFRS adjustments of £103m*, reduced to £314m (£356m last year on a consistent 52 week basis). A reduction in the underlying interest charge is expected next year. Total Group tax has been charged at an effective rate of 26.4% (last year 26.7%). We expect the tax rate in 2010/11 to be around 26%. Dividend. Underlying diluted earnings per share increased by 9.2% to 16.62p in the second half, calculated using a constant tax rate. The Board has proposed a final dividend of 9.16p per share, taking the full-year dividend to 13.05p. This represents an increase of 9.1% on last year’s full-year dividend which is in line with the growth in underlying diluted earnings per share at constant exchange rates. The final dividend will be paid on 9th July 2010 to shareholders on the Register of Members at the close of business on 30th April 2010. Property. We are continuing to release value created through the long-term development of our property portfolio. In the year we completed deals with total proceeds of £1.8bn and we expect to divest a similar amount this year. The strong demand for these assets and the good yields achieved (initial yields between 5.0% and 5.2% for stores) demonstrate the strong underlying value of our property and the strength of the Tesco covenant. Profits from property
* £151m benefit from IAS 32 and IAS 39 (Fair value of derivatives) partially offset by £48m cost as a result of IAS 19 (Pensions) in the year were £377m. Our property mix remains strong - over 70% of our property is freehold – supported by substantial new capital investment in freehold assets each year. Our latest property assets valuation of £34.6bn reflects recent firming yields across the market and confirms that our assets are worth well in excess of their book value. Pension. Our award-winning defined-benefit career-average pension scheme is an important part of our competitive benefits package, which helps Tesco recruit and retain the best people. In the UK we have 160,000 employees in the scheme. As at February 2010, under the IAS 19 methodology of pension liability valuation, the scheme had a deficit on a post-tax basis of £1.3bn, compared to £1.4bn at half year. The last actuarial valuation of the scheme’s assets and liabilities showed a small and manageable deficit. Return on Capital Employed. We have continued to invest during the recession, which has put pressure on returns in the short-term but is enabling us to make good progress in all our markets. During the financial year 2009/10 our post-tax return on capital employed (ROCE) fell from 12.8%* to 12.1%.
Having raised ROCE from 10.2% in 2002/3 to 12.6% in 2005/6, we committed in April 2006 to increase ROCE a further 200 basis points to 14.6%. We are renewing this commitment with confidence that with the prospect of an improving global economy and recent significant investments in acquisitions and new space making a greater contribution going forward, returns will improve in the coming few years, starting in 2010/11. UPDATE ON STRATEGY We have continued to make good progress with our strategy, which has delivered pleasing growth in challenging times. By continuing to invest through the downturn – in both the customer offer and in our stores and infrastructure - we are now well placed to grow faster and improve shareholder returns as the global economic recovery strengthens. The strategy has five elements:
- be an international retailer
- maintain a strong core UK business
- be as strong in non-food as in food
- develop retailing services
- and put community at the heart of what we do
INTERNATIONAL In International we have delivered a resilient performance in the face of strong economic headwinds. Our businesses have made good progress – delivering for customers today and at the same time investing in the drivers of future growth. Our strategy is working – as shown by our strong market share performances – and we ended this year much stronger than we started it. Each of our businesses has adapted itself to the demands of its local market – with strong local management teams finding ways to lower costs and deliver great value for customers. Increasingly our international businesses are also utilising the scale and skill of the Tesco Group – with more international sourcing, Discount Brands now in seven markets, F&F clothing now in ten countries, Clubcard introduced in seven countries with more Clubcard holders internationally than in the UK - and the Tesco Operating Model sharing our global best practice to the benefit of all our businesses. After a very tough first half of the year we are now seeing encouraging sales trends across almost all our markets; we saw strong improvements in like-for-like sales in the fourth quarter compared to the third and 7 of our 13 markets have started 2010/11 with positive like-for-like sales growth. * In 2008/9, ROCE on a 52-week comparable basis was 12.7%. On a 53-week basis it was 12.8% (restated for the impact of IFRIC 13, IFRS 2 and goodwill adjustment) With clear signs that our international markets are starting to recover we are planning to resume a faster pace of new space opening in the coming year. In 2009/10 we opened 5.1 million square feet of new space and in 2010/11 we will open 8.5 million square feet in addition to nine shopping malls in China. The performance of our international businesses through this severe recession has provided reassurance on the quality and resilience of our assets and local management teams and strengthens our confidence in our international strategy and long-term growth prospects.
Asia
Asia Results
Actual rates
Constant rates
£m
% growth
% growth
Asia sales (inc. VAT)
£9,072m
19.7%
15.3%
Asia trading profit
£440m
23.9%
18.9%
Trading margin
5.2%
0.2%
0.2%
Our Asian markets offer a significant long-term opportunity. We have continued to invest through the downturn to ensure that we will be in an even stronger position as the economies recover. This year we opened 3.0 million square feet of new space across the region – an increase of more than 10% - and we plan to open 4.9 million square feet next year (excluding shopping malls). We have also continued to make good progress towards developing a strong brand in our most developed Asian markets with further expansion of Clubcard and our retailing services businesses.
Our team in Japan continues to make progress in developing the business. Our new convenience format is receiving good feedback from customers who like the focus on fresh food and new features helping us to differentiate our offer such as the in-store bakery, an extensive wine range and our first 400 own-label products – which after only a few months already account for 10% of sales.
Europe
Europe Results
Actual rates
Constant rates
£m
% growth
% growth
Europe sales (inc. VAT)
£9,997m
(0.7)%
(0.9)%
Europe trading profit
£474m
(4.0)%
(5.7)%
Trading margin
5.4%
(0.2)%
(0.3)%
Europe overall delivered a robust performance against strong economic headwinds in the form of increasing unemployment and price deflation. Sales growth varied across the region with a good contribution from new space helping sales grow in Poland and Turkey and stay stable in Czech Republic and Hungary. Significant price deflation and cross-border shopping driven by rapid movements in exchange rates resulted in sales declining in Slovakia and Ireland. Overall, however, the sales trends are now improving; each of our European businesses showed an improvement in like-for-like sales growth in the fourth quarter. We have made market share gains across our Central European markets by reducing costs and lowering prices for customers and by continuing to invest in new space. Profitability in the region as a whole declined slightly compared with last year but was resilient given the severity of recession. We are continuing to invest in the region, opening 1.8 million square feet of new space during the year – less than originally expected, primarily as a result of the economic environment. With the outlook improving we will be stepping up the rate of opening with a plan to add 3.1 million square feet of new space across the region in 2010/11.
United States
US Results
Actual rates
Constant rates
£m
% growth
% growth
US sales (inc. VAT)
£354m
72.7%
58.0%
US trading profit
£(165)m
(17.9)%
(7.9)%
In the United States, Fresh & Easy has been making good progress, despite prolonged weakness in the California, Nevada and Arizona economies. Customers are enthusiastic about our range, particularly the fresh food prepared in the Fresh & Easy kitchen, the store environment and the friendly service. As with any of our new businesses, we are adapting and improving our offer in response to customer feedback. During the year we have broadened the range in some key categories - like cereals and pet food - and added larger pack sizes for families. We have also introduced a range of lower priced house brands to help families on a budget. With the improvements to our range implemented and with the number of stores growing (145 stores by end of 2009/10), we launched media campaigns – in September 2009 and January 2010 - focusing on how Fresh & Easy can offer both high quality and low prices. A combination of increased customer awareness and the improvements we have made in-store helped to drive stronger positive like-for-like sales growth in the second half of the year. With growing sales and improvements in productivity, waste and distribution costs, store economics are improving steadily. Overall trading losses were in line with guidance provided last year and reflect the fact that Fresh & Easy has been built with the infrastructure to support hundreds of stores. We expect to open new stores at a rate of around one per week this year with a focus on areas where the local economy has been less severely hit and where we are seeing substantially stronger sales performance. One of the benefits of the downturn is a slightly softer property market; we are now able to buy more freehold properties and the overall cost of building a store has fallen by approximately 20%. A combination of new space and organic sales growth means that sales growth this year will be more than 50%. Although we do not expect losses to be much lower in 2010/11 we believe they have now peaked.
UK
UK Results **
£m
% growth
UK sales (inc. VAT)
£42,254m
4.2%*
UK trading profit
£2,413m
6.7%
Trading margin
6.2%
0.1%
* 5.5% sales growth ex-petrol
Our UK business delivered a solid performance in competitive market conditions. Sales growth in the second half moderated a little compared with the first half. Our relative performance was stronger in the second half with our competitors’ growth reflecting significantly reduced inflation in the industry. Excluding petrol and adjusting for VAT, like-for-like sales were 3.7% in the first half and 2.7% in the second half, driven by a strong volume performance. Achieving our target of opening 2 million square feet of new space during the year ensured that sales from new space made a good contribution to total sales growth, which was 6.5% for the first half and 5.7% for the second half (excluding petrol and adjusted for VAT).
We are growing faster than the industry as a whole and we have achieved this by remaining focused – as always - on customers. Our strategy of earning their loyalty by helping them to spend less – with low prices and affordable new products such as the Discount Brands – deflated sales growth initially but it was the right thing to do for customers. By encouraging and rewarding loyalty - through an increased investment in Clubcard - we have maintained steadier sales growth during the year than the industry as a whole, which has seen a significant slowdown with the steep decline in inflation. Delivering for customers through recession is not just about lowering prices and offering great promotions; it’s about delivering all elements of the shopping trip. Consequently, we have continued to invest in availability, service, range and quality with pleasing results:
picking measure and reduced evening gaps in fresh food by 18% but the resulting reduction in stock across our store network has made a significant contribution to our
improved working capital position.
** Tesco.com, Tesco Telecoms and dunhumby are included in the UK segment and Tesco Bank excluded from the UK segment under IFRS8.
checkout service. We trained more than 200,000 staff to help them respond better to customer needs and our ‘Every Comment Helps’ initiative, which encourages customers to give instant feedback via text or email, has given us the benefit of 60,000 customer comments to help us improve our offer and service.
· Tesco’s diverse and adaptable range allows us to offer a wide choice for every customer whatever their budget. Through the recession we have helped customers with lower-priced ranges such as Discount Brands and Market Value and we have also offered them affordable treats such as the Finest Restaurant Collection ready meals, which have been very popular. We continue to innovate with our range with over 2,600 new or improved own-brand food lines launched this year. As the economy starts to emerge from recession we are seeing customers buy more from our Finest range, which returned to positive like-for-like sales growth in the year.
Building on these improvements, our increased investment in Clubcard with ‘Double Points’ is giving customers even greater reward for their loyalty. ‘Double Points’ has encouraged more customers to sign up; a higher proportion of transactions are now using a Clubcard; and 18% more households are redeeming Clubcard vouchers than a year ago. We are also making Clubcard more valuable with improved partner deals and more accessible with innovations such as the contactless Clubcard ‘app’ for the iPhone.
One of our most important areas of continued investment through the downturn has been in our staff. We made good progress in the year: looking after our people when times were tough; refining roles, hours and training towards the customer; and finding more efficient ways of working to increase productivity. In our stores we have an industry-leading pay and benefits package and we are continuing to help our staff progress their careers. The result is excellent morale and productivity; in our internal “Viewpoint” stores staff survey, we improved on 24 out of the 25 measures; and building on an improvement programme which started in 2003 we further improved attendance levels in the year, putting an additional four million hours into our stores and depots.
Our customer strategy is sustainable for the long-term because we can differentiate Tesco in a unique way with Clubcard and because our low prices and improvements to the customer shopping trip are based on permanent productivity gains. Our UK Step Change programme met its £550m savings target for the year and next year this will be higher as part of a global Step Change target of £800m.
Our growth strategy for the UK is also sustainable as it is based on taking a balanced approach to the key building blocks of top-line growth; solid like-for-like performance and a consistent contribution from new stores.
Through the experience and expertise of our property teams we have developed over a number of years a good pipeline of new space opportunities. As a result we have the opportunity to unwind some of the work-in-progress we have built up and will be stepping up the rate of expansion in 2010/11. We will be investing £1.6 billion of capital in the UK economy this year and will create thousands of jobs including for the long-term unemployed through our regeneration partnerships.
Non-food has been resilient through the downturn. In some key categories we have made significant market share gains as more customers have been encouraged to try our non-food range and as some competitors have felt the strain. Group non-food sales rose 6.2% to £13.1bn, with £9.0bn in the UK and £4.1bn in International.
We delivered a very strong non-food performance in the
with steadily improving like-for-like sales growth during the year. A number of categories had particularly strong growth:
Clothing is now a strength across our international markets and a good example of how we are bringing global scale and skill to our international businesses. In our four Central European markets, clothing like-for-like sales grew 14% this year - following strong growth the previous year – in a market which has been declining overall in the recession. Joint buying – whereby 95% of the supplier base in Central Europe is the same as Ireland and the UK - has brought the benefits of Group expertise and scale, helping to improve quality and costs. The success of the F&F brand - for which customer awareness in Central Europe has grown in the last year from 34% to 61% - has helped Tesco become one of the largest clothing retailers across the four Central European markets in which we operate. The F&F brand has also now been launched in four Asian markets, taking the total number of countries to ten.
RETAILING SERVICES
Following the announcement in July 2008 of our intention to take full ownership of Tesco Bank, we set a target to grow the profitability of the services businesses from a little under £400m in 2007/8 to £1bn. This year we made good progress in attracting new customers and growing sales and profits while at the same time laying the foundations for further growth. Total Retailing Services sales were £3.6bn, up 4.2% on last year and profits were £540m*, up 17.6%.
Tesco Bank
Tesco Bank Results
£m
% growth
Tesco Bank revenue
£860m
(9.4)%**
Tesco Bank trading profit
£250m
13.1%**
Tesco Bank trading margin
29.1%
n/m
Overall, Tesco Bank has delivered a good performance in a challenging retail banking market. * Retailing Services profits comprises profits from Telecoms, dotcom, dunnhumby and Tesco Bank, including UK store ATM rental income ** on a 08/09 pro-forma basis Tesco Bank revenue was £949m and trading profit was £221m Bad debt levels rose during the year but have now stabilised and throughout have remained below industry averages. We have absorbed additional costs as we begin the process of moving the business onto its own infrastructure and build the team as we prepare the business for faster growth.
An income statement and balance sheet for Tesco Bank is available in the Investor Centre section of our corporate website – ( www.tesco.com/corporate - Presentations and results – Analyst packs).
tesco.com
Our online businesses – including dotcom grocery and Direct - delivered another strong performance, achieving a 14% increase in sales with profits rising 26% to £136m.
In a little over a decade we have built a substantial profitable business that has sales of £2.1bn and employs 20,000 people. Our website is the third most visited retail website in the UK and last year our online grocery business delivered over a billion items.
The number of active customers in our online grocery business has grown - to over one million – and basket size has increased. Record levels of availability and innovations such as price matching on substitutions are improving the customer experience and helping to reduce calls to the service centre. By implementing new technology which improves driving and routing efficiency we have reduced costs and carbon emissions by improving fuel consumption per order by over 20% in the last three years.
Tesco Direct extends the reach of our non-food offer to customers via the internet, by phone and catalogues. Customers can choose to have goods delivered to their home or they can pick them up at one of our 261 in-store Direct desks. Tesco Direct had another good year, growing sales by 28% and continuing on its path towards profitability.
This year has also seen two new online sites launched:
Tesco Telecoms
Profit from our telecoms business grew, driven primarily by Tesco Mobile, which achieved a 14% increase in customer numbers - to more than two million – in a declining pre-pay market. Tesco Mobile also successfully entered the ‘pay monthly’ market this year with innovative tariffs and generous credit rewards, picking up the ‘best tariff’ accolade at the 2009 Mobile Choice Awards. Tesco Mobile remained the number one pay-as-you-go operator for customer satisfaction throughout 2009. In December 2009, Tesco Mobile broadened its appeal further by becoming only the third UK operator to offer the iPhone, for which sales have been encouraging.
We have made good progress in rolling out our Phone Shops with 105 open at year end and a further 100 planned by the end of this year. The Phone Shops are transforming our ability to sell products that require an assisted sale – particularly contract mobile phones.
Also in 2009, we signed a wholesale broadband agreement with Cable & Wireless, which will enable us to re-launch our broadband offer to customers in 2010 with higher bandwidth speeds and lower prices.
dunnhumby
This year marks dunnhumby’s 20th anniversary. In addition to supporting Tesco’s Clubcard in seven countries around the world, dunnhumby serves other retailers and manufacturers in 26 international markets; in fact Tesco now represents only around 15% of sales. dunnhumby is growing fast - with profits up 28% in the year – helped by new engagements in the United States (Macy’s), Canada (Metro) and Colombia (Exito). dunnhumby now touches the lives of over 350 million consumers through its client relationships. COMMUNITY, ENVIRONMENT AND CORPORATE RESPONSIBILITY
Caring for the environment. We have made great progress this year in reducing CO2 emissions across our business globally. Emissions from our baseline 2007 store and distribution centre portfolio have fallen by 7.8% over the past year and new stores and distribution centres built since 2006/07 are on average emitting 28.8% less CO2 than their equivalents in 2006/07.
We have delivered on our promise to divert 100% of store waste in the UK from going directly to landfill.
In October, the Sustainable Consumption Institute held a conference to launch its first major report “Consumers: The Key to a Low-Carbon World”. At that conference, we committed ourselves to a new set of challenging long-term targets: to become a zero carbon business by 2050, to reduce the carbon impact of products in our supply chain by 30% by 2020 and to help our customers halve their own footprints by 2020.
We opened the world’s first zero-carbon supermarket in Ramsey, Cambridgeshire, in January this year, deploying a range of energy-efficiency measures, natural refrigeration and renewable energy technology.
Actively supporting local communities . During the year, we gave over £60m in cash donations to charities and contributions to community projects including cause-related marketing, gifts-in-kind, staff time and management costs. Once again, we have donated the equivalent of more than 1% of our profits to good causes.
Including our ‘Charity of the Year’ partnerships, which go from strength to strength, this year we raised over £7m for charity across the Group.
We have continued to roll out Community Champions right across the Group. Community Champions are staff members, who dedicate paid hours to coordinate store activities in their local communities. The Champions support local charities, organisations, schools and causes that local people really care about. We now have Champions in seven countries.
Buying and selling products responsibly. We are committed to buying and selling our products responsibly and treating our suppliers fairly. This not just the right thing to do, it is also in our business interest. We know that if you treat people decently they perform better. This approach also helps to improve the sustainability of our supply chain. By investing for the long-term in businesses that understand our needs, our customers benefit through better products and workers benefit through more stable and secure jobs. A third of our suppliers have been with us for at least five years and we are seeking to grow this proportion.
We have launched our ‘Trading Fairly’ programme and recruited our first ethical action managers in South Africa and Bangladesh, who work with our local suppliers to improve conditions across the supply chain. We have also introduced ‘Trading Fairly’ Awards for our produce and clothing suppliers, which reward suppliers making particularly strong efforts to improve conditions for workers.
We know that many of our customers want to buy products that support their local businesses and economy, particularly in the current economic climate. They are also concerned about the environmental impact of the products they buy. In the UK, we have dedicated local buying, marketing and technical teams in each of our regional buying offices. We stock more than 4,000 local lines and work with over 400 local and regional suppliers. In Poland, we sell more than 6,000 regional products.
Giving customers healthy choices. Across the Group we have exceeded our target of nutritional labelling on own brand products - we now label 100% of eligible products - giving customers the tools they need to make healthy choices.
As part of our strategy to encourage customers to lead more active lives we run a range of programmes around the world from aerobic competitions in Thailand to charity ‘Runs for life’ in Slovakia and the Czech Republic. This year we succeeded in getting 6.2 million people active across the world.
Creating good jobs and careers . We are dedicated to creating good jobs wherever we are. We will create 16,000 new jobs this year, including 9,000 in the UK. We also offer a wide range of competitive benefits. CONTACTS
Investor Relations: Mark George 01992 644800
Steve Webb 01992 644800
Press: Jonathan Church 01992 644645 Angus Maitland – The Maitland Consultancy 0207 379 5151
This document is available via the internet at www.tesco.com/investorcentre A meeting for investors and analysts will be held today at 9.00am at the Royal Bank of Scotland, 280 Bishopsgate, London EC2 4RB. Access will be by invitation only. Presentations from the meeting will be available at www.tesco.com/investorcentre An interview with Sir Terry Leahy discussing the Preliminary Results is available now to download in video, audio and transcript form at www.tesco.com/corporate.
ADDITIONAL DISCLOSURES:
Risks and Uncertainties
As with any business, risk assessment and the implementation of mitigating actions and controls are vital to successfully achieving the Group’s strategy. The Tesco Board has overall responsibility for risk management and internal control within the context of achieving the Group’s objectives. The principal risks and uncertainties faced by the Group include;
Greater detail on these risks and uncertainties will be set out in the 2010 Annual Report, the publication of which will be announced in due course.
Statement of Directors’ Responsibilities
The Directors confirm that to the best of their knowledge this preliminary consolidated financial information has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority, International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations, as endorsed by the European Union (EU). The accounting policies applied are consistent with those described in the 2009 Annual Report, apart from those arising from the adoption of new International Financial Reporting Standards and Interpretations (see basis of preparation in the preliminary consolidated financial information). In preparing the preliminary consolidated financial information, the Directors have also made reasonable and prudent judgements and estimates and prepared the preliminary consolidated financial information on the going concern basis. The preliminary consolidated financial information and management report contained herein give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group. The Directors of Tesco PLC as at the date of this announcement are as set out below.
The Board
Directors
David Reid * Rodney Chase* CBE
Chairman Deputy Chairman
Sir Terry Leahy Richard Brasher
Chief Executive
Philip Clarke Andrew Higginson
Tim Mason Laurie McIlwee
Lucy Neville-Rolfe CMG David Potts
Charles Allen * CBE Patrick Cescau*
Karen Cook * Dr Harald Einsmann*
Ken Hanna * Ken Hydon*
Jacqueline Tammenoms Bakker *
* Non-executive Directors
Company Secretary
Jonathan Lloyd

For more information please contact the Tesco Press Office on 01992 644645

Tesco is the UK's largest retailer and one of the world's leading international retailers. Tesco has around 5,000 stores worldwide, employing over 500,000 people in the 14 countries in which it operates. Our core purpose is to create value for customers to earn their lifetime loyalty. Our success depends on people: the people who shop with us and the people who work with us.