(Alliance News) - Tesco PLC on Wednesday reported a slump in annual profit but held its dividend steady, as it added Kingfisher PLC's boss to the board.
Shares in grocer Tesco were down 4.0% at 222.75 pence in London early Wednesday.
Revenue for the financial year ended February 27 fell 0.4% to GBP57.89 billion from GBP58.09 billion the year before, with pretax profit tumbling 20% to GBP825 million from GBP1.03 billion. Group like-for-like sales growth was 6.3%.
Revenue excluding VAT and fuel on a comparable 52-week basis was GBP53.45 billion, up 7.1% on GBP49.95 billion the year before but missing the company-compiled consensus forecast of GBP58.41 billion, while pretax profit missed the estimate of GBP891 million.
Tesco said that total retail operating profit before exceptional items and amortisation of acquired intangibles fell 15% to GBP1.99 billion, noting that it took GBP892 million in UK Covid-19 costs and decided to forgo GBP535 million in business rates relief.
"In the current year, whilst we anticipate that the majority of these costs will fall away, a certain proportion are likely to be required due to any ongoing absence and whilst we operate within national lockdown restrictions. Our current estimate - based on the latest UK Government roadmap for easing restrictions - is for around a quarter of the 2020/21 costs to be repeated. We will continue to forgo any business rates relief available," the company said.
Despite the profit slump, the grocer proposed a final dividend of 5.95 pence per share, bringing the total payout for the year to 9.15p, in line with the year before.
Chief Executive Ken Murphy said: "Our decision to protect and hold the dividend flat for this financial year demonstrates our commitment to shareholders. We believe we can create significant further value for them and every stakeholder in our business by continuing to focus on value, loyalty and convenience for customers, underpinned by strong capital discipline."
In February, Tesco returned GBP5.0 billion to shareholders via a special dividend following the sale of its businesses in Thailand and Malaysia.
Looking ahead, Tesco said it is well placed for the current year with strong improvement in profitability expected. It also anticipates a return to profit for Tesco Bank in financial 2022 from a GBP175 million operating loss in financial 2021.
"While the pandemic is not yet over, we're well-placed to build on the momentum in our business," said Murphy. "We have strengthened our brand, increased customer satisfaction and improved value perception. We have doubled the size of our online business and through Clubcard, we're building a digital customer platform."
In addition, Tesco confirmed a Sky News report that it has hired Kingfisher Chief Executive Thierry Garnier as a non-executive director. Tesco also appointed Bertrand Bodson, the chief digital officer of Swiss pharmaceutical firm Novartis AG, as a non-executive director. Bodson was previously chief digital & marketing officer at the Argos division of Tesco peer J Sainsbury PLC.
Garnier has been chief executive officer of B&Q owner Kingfisher since 2019 and previously spent over 20 years at Carrefour SA, the French multi-national retailer. He will join the Tesco board at the end of the month, while Bodson joins at the start of June.
By Lucy Heming; lucyheming@alliancenews.com
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