Tesco stores which have been open for more than a year increased their sales by 4.3%. Of this total, 2.2% was a rise in the volume of goods sold and 2.1% inflation. The sales growth trend is shown in Chart 1. Growth has outperformed the industry average for the past two years and this is reflected in a market share which increased from 10.1% to 11.4% during the year, of which 0.6% was contributed by the Wm Low stores (see Chart 2).

New stores performed well, continuing the trend from last year. All formats - superstores, compact stores, Metro and Express - traded ahead of forecasts. We continued to reduce selling prices, placing further emphasis on value for money and low prices for everyday purchases. To offset this investment, we improved the sales mix and continued to buy and source products more effectively. We are therefore pleased to have achieved for our customers a significantly lower price list on everyday products with gross margins only slightly reduced.

Improvements in retail productivity helped to finance the higher level of service at the checkouts and the introduction of more service-intensive departments such as pharmacies and tobacco counters. We were therefore able to maintain retail wages at the same percentage of sales as last year. In addition to this, central wage costs were reduced as a percentage of sales as a result of headcount reductions at the start of the year. Overall, the UK operating margin (excluding Wm Low) improved by 0.2% to 6.3% - despite the cost of lower prices and higher levels of customer service.

Profit sharing for employees increased to £25m. This represents over 4% of qualifying employees' salaries.

It is worth noting that operating profits are calculated after deducting £40m (1994 - £32m) to amortise the premiums we paid on some of our land. This amortisation policy, introduced last year, recognises the fact that in many cases the price we paid was higher than it would have been had the land not been used for food superstores. We believe this to be a prudent policy in that it matches the full cost of a store site against its revenues and ultimately adds to the quality of earnings.

Property losses in the year were £5m (1994 - £93m). Last year there was a one-off provision of £85m for the loss on disposal of properties surplus to our requirements following the revision of our store development programme.

Net interest payable was £22m (1994 - £7m receivable). The change from receiving to paying interest was expected in view of the cash element of the Wm Low acquisition, the full-year effect of the Catteau purchase and the net cash outflows in the Tesco business resulting from capital expenditure on store development. After substantial cash outflows in recent years, we are planning for cash neutrality in the coming year. Capitalised interest fell from £52m to £42m as a result of lower capital expenditure and lower interest rates paid.

Profit before tax, excluding Wm Low integration costs and net loss on disposal of properties, at £595m showed an increase of 12.7% over last year.