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Tesco to pay first dividend since 2014-15 crisis

  • The firm reported a 27.3 percent rise in first-half profit and a seventh straight quarter of underlying sales growth in its home market.
  • Tesco made operating profit before one off items of 759 million pounds ($1.01 billion) for the six months to Aug. 26.

Britain's biggest retailer Tesco said on Wednesday it would pay a dividend for the first time since the 2014-15 year when it was mired in crisis, signalling it has reached the next stage of its recovery.

The firm reported a 27.3 percent rise in first-half profit and a seventh straight quarter of underlying sales growth in its home market, successfully navigating an inflationary trading environment.

An interim dividend of 1 pence will be paid which "reflects improved performance and board confidence," the company said.

Tesco's Chief Financial Officer Alan Stewart told CNBC on Wednesday that the business was trying to protect consumers from rising costs.

"Inflation is really something we've worked with suppliers to mitigate ... And we're not passing on as much inflation. More than a hundred of our suppliers have seen more than doubled volumes so as we improve our business, so we see our suppliers benefiting too," he said.

A Tesco supermarket in Glasgow, Scotland.
Jeff J Mitchell I Getty Images
A Tesco supermarket in Glasgow, Scotland.

Like other U.K. supermarkets, Tesco has felt the squeeze from discounters such as Aldi and Lidl but Stewart said the retailer still had just below a 30 percent market share in the U.K. and was looking to build on that.

"From our perspective, we feel that if we're more competitive and we're giving customers a better offer whether that's in terms of quality, range or price then we would see to do better than that," he said.

Tesco made operating profit before one off items of 759 million pounds ($1.01 billion) for the six months to Aug. 26. That compares with 596 million pounds in the same period last year and analyst forecasts of about 700 million pounds.

Tesco, which in January agreed to buy wholesaler Booker for 3.7 billion pounds, said UK like-for-like sales rose 2.1 percent in the second quarter.

Stewart said work had been done to improve the brand's image since 2014 when a accounting irregularities were revealed.

"We were very clear when we set out our plans three years ago that the brand and image of Tesco was something that we had to address and we do that by how we behave with our customer," he said.

"If you look at independent brand measures we've seen a strong improvement since that low point, there's always more we can do, but for us it's about the integrity with which we talk and interact with our customers."