Tesco 2012 Annual Report Download - page 6

We have moved to address performance issues in the UK. The
challenge of refocusing the UK business to ensure it sustains healthy
market leadership is important enough to make it worth giving
up some profit in the short term to safeguard the business in the
long term. We laid out in April how we intend to do this.
Elsewhere, we have continued the substantial re-orientation of the
US business to give it the best possible opportunity to secure its future
with all the potential for longer-term growth that would bring. We have
announced our intention to exit from Japan. We are willing to invest
for the long term but where we cannot see a profitable, scalable
business earning good returns within an acceptable timescale, we
prefer to pursue better opportunities. And we have slowed down the
development of Tesco Bank to increase its focus on quality, service
and risk management.
These are substantial changes, in management, organisation and
business and they need to be seen as part of a continuing process
of moving the company forward, making changes where necessary
to ensure long-term stability and sustainable profitability.
Governance
Governance is the framework that articulates a company’s values and
supports its behaviours. During the year, we updated our governance
framework and processes as described in more detail on page 50.
An important aspect of these changes was the creation of the Board
Corporate Responsibility Committee to ensure that the Board
maintains a strategic focus on corporate responsibility in its widest
sense, reflecting the importance to the Group of how it engages
externally. When a company has significant economic and social scale
it is essential that it reflects on the full nature of its accountability
for its activities, and how it should discharge that responsibility to the
communities in which it operates. This will be an important focus for
the new Committee.
There have been a number of changes to the Board. In addition to
Sir David Reid, David Potts retired during the year, Richard Brasher
stepped down from the Board in March, and Andrew Higginson will
retire in September. We thank them all for their contribution to the
business over the years. We are also pleased to welcome Deanna
Oppenheimer to the Board as a Non-executive Director. Deanna
brings valuable international, retail, banking and digital experience
to our Board.
Financial results
In the year, we delivered sales growth of 7.4%. Profit growth was
modest, with a strong international performance largely offset by a
reduction in UK profits. Trading profit grew by 1.3%, and profit before
tax grew by 5.3%. Return on capital employed improved from 12.9%
last year to 13.3%, and we continued our long record of dividend
growth for shareholders, with the full year dividend up 2.1% to 14.76p.
The fact that in a year when economic headwinds have been evident
in practically every part of the globe our business increased sales,
profits, return on capital and dividends speaks for its overall resilience.
Looking ahead
Last year was a challenging one for the business and we are acutely
aware that this was reflected for our shareholders in the share price.
We will continue in 2012/13 to address long-standing business issues
in the UK and elsewhere in order to secure future prosperity as well as
ensuring that our financial and human resources are developed and
deployed where they are able most effectively to generate future
growth and returns.
If I have one overriding impression of Tesco after six months, it is that
here is a truly international business, deploying its expertise across the
world to drive opportunity, growth and returns, all of which ultimately
benefit the UK. I look forward to being part of it.
Sir Richard Broadbent
Chairman
Chairman’s statement
2 Tesco PLC Annual Report and Financial Statements 2012