Tesco Plc reports 100% growth in operating profit to £2.821 billion in FY 23/24

LONDON: Tesco Plc has announced its financial results for the fiscal year 23/24, showcasing significant gains across various financial metrics. The retail giant reported group sales of £61.477 billion, marking a 7.4% increase at actual rates compared to the previous year’s £57.216 billion.

This growth remained consistent at constant rates with a 7.2% rise, reflecting Tesco’s strong sales performance despite market fluctuations.

Adjusted operating profit saw an impressive 12.8% jump to £2.829 billion, up from £2.509 billion in FY 22/23. The retail sector contributed £2.760 billion, an 11.0% increase, while Tesco Bank’s profits soared by 213.6%, reaching £69 million.

However, retail free cash flow experienced a slight dip of 3.3%, totaling £2,063 million. Net debt was reduced by 6.9%, bringing it down to £9,764 million from the previous year’s £10,493 million.

Shareholders have a reason to celebrate as the adjusted diluted earnings per share (EPS) climbed by 14.0% to 23.41p, and the dividend per share also saw an 11.0% increase to 12.10p.

On the statutory front, Tesco’s revenue, inclusive of VAT and fuel, rose by 4.4% to £68.187 billion.

Retail cash generated from operating activities saw a marginal decrease of 1.1%, amounting to £3,712 million. Diluted EPS significantly outperformed the previous year’s figures, with a 178.4% increase to 24.53p.

Including discontinued operations, the profit for the year after tax was £1,192 million, a 62.0% increase, and diluted EPS rose by 68.1% to 16.56p.

These results underscore Tesco’s successful strategy and operational efficiency, positioning the company as a formidable player in the retail sector amidst challenging economic conditions.

Ken Murphy, Chief Executive Tesco Plc, said, “This strong performance reflects the hard work of colleagues across the whole Tesco Group, and their commitment to serving our customers.  Customers are choosing to shop more at Tesco, which is reflected in growing market share as they respond to the improvements we’ve made to the value and quality of our products.

Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year. 

We have continued to invest in helping customers where it matters most, cutting prices on more than 4,000 products and doubling down on our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices.  Customer perception of the quality of our products is growing ahead of the market and we continue to win customers from premium retailers, with sales of Tesco Finest now exceeding £2bn.

We have strong momentum in our business, and are encouraged by signs of improving consumer sentiment.  We’re excited about the opportunities ahead, with the right plans to keep winning with customers, as well as a great team to deliver them.”

CAPITAL RETURN PROGRAMME

Since launching capital return programme in October 2021, Tesco have now purchased £1.8bn worth of shares, including £750m in the twelve months to April 2024.  “We continue to see the buyback programme as an ongoing and critical driver of shareholder returns and we are pleased to announce that we will buy back £1.0bn worth of shares over the next twelve months, including £250m funded by the special dividend paid by Tesco Bank in August 2023.  A further update on our plans for the return of the proceeds generated from the sale of our banking operations will be provided following completion”.

OUTLOOK

“The investments we’ve made to date have strengthened our offer to customers, made us more efficient, and more digitally capable, establishing a strong foundation for future growth.  We are building a consistent track record of delivery against the performance framework we set out in October 2021.

For the 2024/25 financial year, we expect retail adjusted operating profit of at least £2.8bn.  In addition, we expect total adjusted operating profit from the retained Tesco Bank business of around £80m, which includes a part-year amount of partnership income, based on the completion of the transaction towards the end of this calendar year.  We expect to generate retail free cash flow within our guidance range of £1.4bn to £1.8bn.”