Tesco (TSCO.L) is resuming dividend payments as profit at Britain’s largest grocer climbed 27% in its first six months, driven by growth at its core fresh food business.
Group operating profit before exceptional items, management’s preferred profit measure, was 759 million pounds ($1.01 billion) for the 26 weeks ended Aug. 26, compared with 596 million pounds a year earlier, the London-based company said on Wednesday.
Tesco will pay a dividend of 1 pence, making a payment to its shareholders for the first time since the 2014-15 financial year, “reflecting the improved performance in the business” and the board’s confidence in future plans, the company said.
“Today’s announcement that we are resuming our dividend reflects our confidence that we can build on our
strong performance to date and in doing so, create long-term, sustainable value,” said Dave Lewis, the grocer’s chief executive. “We are continuing to make strong progress. Sales are up, profits are up, cash generation continues to strengthen.”
Sales rose 3.3% to 25.17 billion pounds from 24.4 billion pounds a year earlier, a seventh consecutive quarter of revenue growth.
Lewis, who became chief executive in 2014 amid an investigation into accounting errors, has been working to change the company’s fortunes in the face of rising competition from German discount grocers Aldi and Lidl, which have grown their market share. Most recently he needed to navigate rising inflation squeezing shoppers’ spending power. The consumer price index rose to 2.9% in August, matching a four-year high.
In Tesco’s home market of the UK and Ireland, comparable sales rose 2.1%. In the UK core fresh food
business, volumes grew 1.5%, led by strong performance at the meat and produce categories, where the company outperformed rivals in terms of volume, it said.
“The figures are proof that the turnaround plans are working,” David Madden, market analyst at CMC Markets in London, said by e-mail. “The dividend may be only 1p, but the image it projects is far more valuable, it gives off the perception the company has turned a corner.”