Tesco 1999 Annual Report Download - page 6

4 TESCO PLC ANNUAL REPORT 1999
Operating and financial review continued
UK operating profit was 7.0% higher at £919m (1998 –
£859m) and the operating margin fell 0.1% to 5.8%. This
reflects our strong trading performance in a very competitive
and challenging environment. We continue to invest to cut
prices and increase customer service, particularly through longer
opening hours and more service counters.
Store development and capital expenditure
In the UK we spent £350m on opening 25 new stores with a
total sales area of 635,000 sq ft. This comprised 20 superstores
and compact stores, one Metro, two Expresses and two Extras.
As part of our programme to improve our stores and introduce
non-food products, we have added over 200,000 sq ft through
extensions. We also completed major refits at an additional
18 stores.
In the year, we continued to build on the success of our first
Extra in Pitsea, Essex. We now have five Extras, including the
latest store at Peterborough, providing one-stop shopping
convenience for customers.
Express is also proving to be a promising format. We have 17
stores and during the year we announced our joint venture with
Esso to develop more petrol sites, the first of which opened
recently on the Fulham Road, Chelsea.
In 1999/2000, we plan to open around 26 stores with over
700,000 sq ft of new space, including 23 superstores and
compact stores, one Metro store and two Express stores.
830
685
603
837
680
99
98
97
96
95
(000 sq ft)
UK sales area
opened including
Express
Europe
In the rest of Europe (Central Europe and Republic of Ireland),
total sales rose by 24.9% to £1,285m (1998 – £1,029m).
In Central Europe, a fast growing market, we successfully
opened six more hypermarkets during the year, creating almost
600,000 sq ft of new modern retailing space. This included
three hypermarkets in Hungary, two in the Czech Republic
and one in Poland. In 1999/2000 we plan to open 10 more
hypermarkets adding a further one million sq ft.
In the Republic of Ireland our acquisition was nearly two years
ago and we have achieved the milestones we set ourselves whilst
meeting the undertakings made to the Government. We have
rebranded 30 stores and our customers have responded well.
Next year we expect to rebrand a further 20 stores and start to
build two new stores.
The business is performing strongly and remains full of
potential for the future.
Asia
In May we acquired a controlling interest in Lotus, a chain of
13 hypermarkets in Thailand with 1.6m sq ft of selling space.
In the 32 weeks to 31 December 1998, Lotus contributed
£170m to Group sales and reported a small operating loss of
£2m. In December 1998 we added a 14th store and over the
next three years we will develop the business further by
doubling the number of stores and providing a strong base for
profitable long term growth.
Asian performance
1999 1998 Change
£m £m %
Retail sales
(including value added tax) 170 ––
Operating loss 2 ––
European performance
1999 1998* Change
£m £m %
Retail sales
(including value added tax) 1,285 1,029 24.9
Operating profit 48 38 26.3
*52 weeks proforma