Tesco 2005 Annual Report Download - page 4

2Tesco PLC
Operating and financial review
Strategy The Group’s four-part strategy –
to grow the core UK business, be as strong in
non-food as in food, develop retailing services
and become a successful international retailer,
was laid down in 1997 and it has been the
foundation of Tesco’s success in recent years.
Our performance this year demonstrates this
very well. Our new growth businesses – in
international, in non-food and in retailing
services – have contributed as much profit
as the entire business was making in 1997.
We have continued to make strong progress
with all four parts of our strategy – by keeping
our focus on trying to improve what we do
for customers:
• making their shopping trip
as easy as possible
• constantly seeking to reduce our
prices to help them spend less
• offering the convenience of
either large or small stores
• bringing simplicity and value
to complicated markets.
Group performance Group sales, including VAT,
increased by 10.5% to £37.1bn (2004 – £33.6bn).
At constant exchange rates, sales grew by 11.5%.
Group underlying pre-tax profit increased by
18.8% to £2,029m (2004 – £1,708m).
UK Sales increased by 9.8% to £29.5bn. On a
52 week basis sales increased by 11.9%, with
like-for-like growth of 9.0% (including volume of
8.9%) and 2.9% from net new stores. Inflation of
0.1%, was entirely driven by cost increases in our
petrol business. We saw deflation in our stores
as we invested in lower prices for customers.
Petrol had a significant impact on sales growth
in the year, with volumes growing exceptionally
strongly from the second quarter onwards, helped
by our efforts to keep fuel prices down during a
period of rising oil prices. Like-for-like sales growth
during the year, excluding petrol, was 7.5%.
This operating and financial review analyses the performance of
the Tesco Group in the financial year ended 26 February 2005. It
also explains other aspects of the Group’s results and operations,
including strategy and risk management.
01 02 0403
SALES PERFORMANCE
£m
28,280
25,401
22,585
23,101
33,557 26,876
05
37,070 29,511
21,454 19,711
GROUP
UK
01 0302
UK SALES GROWTH %
7.7
8.8
8.4
4.0
04
16.3 14.2 6.7
05
11.9 9.0
6.0 4.7
TOTAL
LIKE-FOR-LIKE
53rd WEEK
Group summary
2005 2004
52 wks 53 wks Change
£m £m %
Group sales
(including value added tax) 37,070 33,557 10.5
Underlying profit on
ordinary activities
before tax†2,029 1,708 18.8
Profit on ordinary activities
before taxation 1,962 1,600 22.6
Underlying diluted
earnings per share (p)†18.30 16.31 12.2
Diluted earnings
per share (p) 17.50 14.93 17.2
Dividend per share (p) 7.56 6.84 10.5
UK performance
2005 2004
52 wks 53 wks Change
£m £m %
Sales
(including value added tax) 29,511 26,876 9.8
Underlying operating profit†1,694 1,526 11.0
Operating margin‡6.2% 6.2%
Rest of Europe performance
2005 2004
52 wks 53 wks Change
£m £m %
Sales
(including value added tax) 4,349 3,834 13.4
Underlying operating profit†218 184 18.5
Operating margin‡5.7% 5.4%
Asia performance
2005 2004
Change
£m £m %
Sales
(including value added tax) 3,210 2,847 12.8
Underlying operating profit†152 122 24.6
Operating margin‡5.0% 4.6%
†Excluding net profit/(loss) on disposal of fixed assets,
integration costs and goodwill amortisation.
‡Operating margin is calculated using sales excluding
value added tax.