Tesco ups shareholder payouts as profit soars
Tesco increases shareholder payouts as half-year profit soars increases 28.7% to £551 million, mainly due to Corona! *
Shareholders will receive a 3.2p dividend, a 21% increase, plus a one-off 51p dividend once Tesco’s sale of Asian arm is finalized.
In March, the global chain sold off its Thai and Malaysian arm, consisting of about 2000 shops, for £8 billion. Following the sale, bosses promised to return £5 billion from the sale to shareholders – around 51p per share.
Meanwhile, Tesco’s headline group sales were up by more than six per cent at £26.7 billion, with sales in its core UK and Ireland market rising 8.6 per cent to £24.3 billion.
Group operating profit before exceptional items and amortization of acquired intangibles decreased 15.8 per cent year-on-year to £1.03 billion.
Tesco’s interim period covers the height of the Covid-19 lockdown when most shops were forced to close for about three months, except for “essential” retailers such as grocers.
It marks the first trading update as chief executive for Ken Murphy, who took over the reins at the UK’s biggest supermarket last week. The former Walgreens Boots Alliance executive says Tesco will continue to invest in providing value for its customers through uncertain times.
“The first half of this year has tested our business in ways we had never imagined, and our colleagues have risen brilliantly to every challenge, acting in the best interests of our customers and local communities throughout,” he brags.
“I would like to thank all our colleagues for their amazing contribution, and I am delighted and proud to be part of such an incredible team. Tesco is a great business with many strategic advantages. I am excited by the range of opportunities we must use those advantages to create further value for our customers and, in doing so, create value for all our other stakeholders,” Murphy concludes.
It should be added that all grocery retailers we have studied in the last six months have made good money on Covid 19.
This applies to Carrefour and Walmart as well as all chains throughout Scandinavia. In fact, we have not seen a grocery chain lose out on Corona.
The reason is simple. Consumers have stopped traveling, going out and going to hotels. At the store level, the big winners in Norway are along the Swedish border, typically in Halden, which is practically a stone's throw from the Swedish border.
The big loser is the restaurant and tourism industry. Grocery suppliers and wholesalers who only supply to catering (there are few) are also among the big losers.
Most suppliers supply both for groceries and catering. Among most of these, the losses in the tourism industry are made up for in groceries. So net result for many in this category is reasonably neutral.
Sources: Tesco, Reuters, Retail Gazette, Bloomberg.
* Tesco has deviating financial years.