Note 4-Profit on ordinary activities before taxation
Note 5-Employment costs
Directors' aggregate emoluments, excluding pension contributions but including,
where appropriate, payments under the performance related incentive scheme, fall
within the following scales:
Number of directors
-------------------
1995 1994
-------------------
From £05,001 to £10,000 1 -
From £10,001 to £15,000 2+ 1
From £25,001 to £30,000 2 4
From £30,001 to £35,000 1 -
From £35,001 to £40,000 1 1
From £70,001 to £75,000 1 -
From £75,001 to £80,000 1 -
From £230,001 to £235,000 - 1
From £245,001 to £250,000 1 -
From £290,001 to £295,000 - 1+
From £295,001 to £300,000 - 1+
From £310,001 to £315,000 - 1+
From £335,001 to £340,000 - 1+
From £355,001 to £360,000 - 1+
From £435,001 to £440,000 - 1+
From £450,001 to £455,000 1+ -
From £455,001 to £460,000 - 1+
From £480,001 to £485,000 2+ -
From £565,001 to £570,000 1+ -
From £575,001 to £580,000 1+ -
From £610,001 to £615,000 - 1+
From £775,001 to £780,000 1+ -
From £790,001 to £795,000 - 1+
From £1,010,001 to £1,015,000 1+ -
d) Executive incentive scheme
The executive incentive scheme was introduced in March 1993 and also includes
the directors of the company's principal trading subsidiary, Tesco Stores Limited.
Short term share bonuses are awarded annually based on improvements in earnings
per share and on the achievement of strategic corporate goals. The maximum short
term bonus payable is 25% of salary which is augmented by a further 12½% if the
participants elect for the Trustees of the scheme to retain the fully paid
ordinary shares awarded for a minimum period of two years conditional upon
continuous service with the company.
Long term share bonuses are awarded annually based on improvements in earnings
per share, achievement of strategic corporate goals and comparative performance
against peer companies. The maximum long term bonus is 25% of salary. Shares
awarded have to be held for a period of four years conditional upon continuous
service with the company.
1995 1994
Profit on ordinary activities is stated after charging the following: £m £m
------------
Depreciation and amortisation 247 213
Operating lease costs 96 81
Auditors' remuneration (a) - -
Employment costs (note 5a) 1,001 861
Net loss on disposal of properties (b) 5 93
a) Auditors' remuneration amounted to £0.4m (1994 - £0.4m). The auditors also
received £0.5m (1994 - £0.9m) in respect of non-audit services of which £0.2m
(1994 - £0.4m) related to overseas operations.
b) Net loss on disposal of properties has been arrived at after the offset of
profits of £20m (1994 - £15m).
1995 1994
a) Employment costs during the year £m £m
------------
Wages and salaries 899 770
Social security costs 64 56
Other pension costs (note 24) 38 35
------------
1,001 861
------------
b) Number of persons employed
The average number of employees per week during the year was: UK 108,113
(1994 - 90,926), Europe 3,346 (1994 - 2,413) and the average number of full-time
equivalents was: UK 68,552 (1994 - 60,199), Europe 2,915 (1994 - 2,175).
c) Directors' emoluments
Aggregate emoluments of the directors of the parent company were as follows:
1995 1994
£000 £000
--------------
Directors' emoluments 3,483 3,523
Performance related incentives (d)
- short term bonuses 860 418
- long term bonuses 573 348
Pension contributions
(including - £169,000 in respect of the Chairman (1994 - £151,000)) 788 758
--------------
5,704 5,047
--------------
The emoluments, excluding pension contributions, of the Chairman, who
was also the highest paid director, are analysed as follows:
1995 1994
£000 £000
------------
Emoluments 678 635
Performance related incentives (d)
- short term bonuses 200 87
- long term bonuses 134 72
------------
1,012 794
------------
+Includes performance related incentives under the executive incentive scheme
(see (d) below).
Details of share options granted to directors are given in note 22.
Note 6-Interest
1995 1994
£m £m
------------
Interest receivable and similar income on
money market investments and deposits (c) (d) 64 54
------------
Deduct interest payable on:
Short term bank loans and overdrafts repayable within 5 years (48) (33)
Finance charges payable on finance leases (6) (7)
9% Convertible capital bond 2005 (18) (18)
4% Unsecured deep discount loan stock 2006 (a) (7) (7)
E.C.S.C. loans 1996-1999 (4) (4)
10 3/8% Bonds 2002 (21) (21)
1/8% Deep discount bond 2012 (b) (7) (7)
8 3/4% Bonds 2003 (17) (2)
Interest capitalised 42 52
------------
(86) (47)
------------
(22) 7
------------
a) Interest payable on the 4% unsecured deep discount loan stock 2006 includes £2m
(1994 - £2m) of discount amortisation.
b) Interest payable on the 1/8% deep discount bond 2012 includes £7m (1994 - £7m)
of discount amortisation.
c) Included within interest receivable is an amount of 4m (1994 - 2m) representing
The increase in value during the period of the call option against the Tesco PLC 10K%
bonds 2002 (see note 13).
d) At the year end the company held interest rate swaps with a notional principal
amount off 495m (1994 - 410m).
The substance of these agreements is to swap certain of the group's fixed rate
borrowings into floating rate borrowings.
The floating rates are reset every six months with reference to London Inter-Bank
Offered Rates (LIBOR).
Swap agreements generated net income, included within net interest receivable,
as follows:
1995 1994
£m £m
-------------
Net cash income 8 10
Amortisation of prior year gains (note 14) 5 2
-------------
13 12
-------------
The swap agreements outstanding at the year end will continue to generate net
income (including the amortisation of
prior year gains) provided six month LIBOR is broadly less than 8.3% over the
next three years and 8.6% over the following four years.
Note 7-Taxation
1995 1994
£m £m
-----------
United Kingdom taxation:
--Corporation tax at 33.0% (1994 - 33.0%) 177 127
--Prior year items (10) (8)
--Deferred taxation (1) 15
-----------
166 134
Overseas taxes 4 2
-----------
170 136
Note 8-Dividends
1995 1994 £m £m ----------- Declared interim - 2.70p per share (1994 - 2.45p) 55 48 Proposed final - 5.90p per share (1994 - 5.30p) 122 104 ----------- 177 152 -----------
Note 9-Earnings per share and fully diluted earnings per share
a)-Earnings per share and fully diluted earnings per share excluding integration costs and net loss on disposal of properties have been calculated in addition to the disclosures required by SSAP3 as amended by FRS3 since, in the opinion of the directors, this will allow shareholders to identify the results of the trading operations of the business.
b)-The calculation of earnings per share, including and excluding integration costs and net loss on disposal of properties, is based on the profit on ordinary activities after taxation and after minority interests divided by the weighted average number of ordinary shares in issue during the year of 2,009m (1994 - 1,960m).
c)-The calculation of fully diluted earnings per share, including and excluding integration costs and net loss on disposal of properties, is based on the profit on ordinary activities after taxation and after adding:
i)-the savings of interest net of corporation tax on the 9% convertible bonds assuming that they were converted in full into ordinary shares on the first day of the financial year.
ii)-the interest income net of corporation tax which would have arisen had all the various ordinary share options granted under the company+s various schemes been exercised on the first day of the financial year, or at the date granted if later, and the proceeds invested in 2 1/2% Consolidated Stock on that day.
The amount so derived has been divided by the number of ordinary shares in issue at the beginning of the year together with the weighted average number of ordinary shares assumed to have been issued as indicated above.
Note 10-Tangible fixed assets
Total Plant Total land and equipment buildings fixtures & fittings and vehicles Cost £m £m £m ------------------------------------------ At 26 February 1994 4,170 1,270 5,440 Currency translation 3 2 5 Additions at cost (a) 554 217 771 Purchase of subsidiary undertakings 263 59 322 ------------------------------------------ 4,990 1,548 6,538 Deduct disposals 27 30 57 ------------------------------------------ At 25 February 1995 4,963 1,518 6,481 ------------------------------------------ Depreciation and amortisation At 26 February 1994 282 717 999 Currency translation 1 1 2 Charge for period 99 148 247 Purchase of subsidiary undertakings 18 32 50 ------------------------------------------ 400 898 1,298 Deduct disposals 3 18 21 ------------------------------------------ At 25 February 1995 397 880 1,277 ------------------------------------------ Net book value (b) (d) At 25 February 1995 4,566 638 5,204 At 26 February 1994 3,888 553 4,441 Capital work in progress included above (c) At 25 February 1995 91 21 112 At 26 February 1994 179 21 200 Notes a) Includes 29m (1994 - 35m) in respect of interest capitalised net of tax relief of 13m (1994 - 17m) principally relating to land and building assets. b) Net book value includes capitalised interest, net of tax relief, at 25 February 1995 of 254m (1994 - 236m). Plant, equipment, fixtures and fittings and vehicles subject to finance leases included in net book value is: Cost Depreciation Net book value £m £m £m ------------------------------------------ At 26 February 1994 179 96 83 Movement in the period 19 21 (2) ------------------------------------------ At 25 February 1995 198 117 81 ------------------------------------------ c) Capital work in progress does not include land. d) The net book value of land and buildings comprises: 1995 1994 £m £m --------------------- Freehold 3,852 3,313 Long leasehold - 50 years or more 522 474 Short leasehold - less than 50 years 192 101 --------------------- At 25 February 1995 4,566 3,888 ---------------------
Note 11-Fixed asset investments
Group Company --------------- --------------- 1995 1994 1995 1994 £m £m £m £m --------------- --------------- Subsidiary undertakings - shares at cost, -less amounts written off (a) - - 449 192 Loans to group undertakings - - 3,000 2,750 Associated undertakings - at cost less provisions (b) 5 5 5 5 Other investments 1 - - - --------------- --------------- 6 5 3,454 2,947 --------------- --------------- a) The company's principal operating subsidiary undertakings are: Business Share of Country of equity capital incorporation -------------------------------------------------------------- Tesco Stores Limited Food retail 100% Registered in England Tesco Property Holdings Limited Property investment 100% Registered in England Tesco Insurance Limited Insurance 100% Guernsey Tesco Stores Hong Kong Limited Purchasing 100% Hong Kong Tesco Capital Limited Finance 100%* Jersey Spen Hill Properties Limited Property development 100% Registered in England Ets. Catteau S.A. Food retail 100% France Global T.H. Food retail 57% Hungary Wm Low Supermarkets Limited Food retail 100% Registered in Scotland All subsidiary undertakings operate in their country of incorporation, apart from Tesco Capital Limited which is controlled and managed in the United Kingdom. Subsidiary undertakings marked * are owned directly by Tesco PLC. b) The group has one associated undertaking, Shopping Centres Limited, in which the group owns 50% of the allotted ordinary and preference share capital (1994 - 50%). The main activity of the company is property investment and it operates and is registered in England. The net borrowings of the associated undertaking, as at 25 February 1995, were as follows: 1995 1994 £m £m -------------- Cash and deposits 24 21 Term bank loan - repayable 1999 (48) (48) Debenture stock - repayable 2001 (33) (32) Other loans (£10m from group undertakings) (20) (20) --------------- (77) (79) --------------- There is no recourse to group companies in respect of the borrowings of the associated undertaking, apart from £2m (1994 - £2m) which has been guaranteed by Tesco PLC (note 27).
Note 12-Debtors
Group Company ------------- -------------- 1995 1994 1995 1994 £m £m £m £m ------------- -------------- Amounts owed by group undertakings - - 239 154 Prepayments and accrued income 34 35 245 210 Advance corporation tax recoverable 4 2 4 2 Other debtors 66 56 - - ------------- -------------- 104 93 488 366 ------------- -------------- Debtors falling due after one year included above: 4 2 4 2 ------------- --------------
Note 13-Investments
Group Company ------------- -------------- 1995 1994 1995 1994 £m £m £m £m ------------- -------------- Money market deposits (a) 128 86 98 67 Bonds and certificates of deposit -(market value 3m, 1994 - 13m) 3 13 3 13 ------------- -------------- Money market investments and deposits 131 99 101 80 Own shares (b) 4 - 4 - ------------- -------------- 135 99 105 80 ------------- --------------a) Included within money market deposits is a call option amounting to £60m (1994 - £56m) which was purchased on normal commercial terms and which gives the company the right to acquire £100m of the Tesco PLC 10 3/8% bonds 2002.
It is exercisable at certain dates up to 28 January 2002 at an exercise price that is linked to the net present value of the remaining interest payable on these bonds. Accordingly, the exercise price reduces during the period up to 28 January 2002 resulting in an increase in the value of the call option. This increase in value is reflected in the carrying amount of the asset and is credited to interest receivable in the profit and loss account on an actuarial basis.
b) The company operates an employee share ownership plan whereby an employee trust acquires shares in the company for the benefit of group employees.
Note 14-Creditors - amounts falling due within one year
Group Company -------------- ------------- 1995 1994 1995 1994 £m £m £m £m -------------- ------------- Amounts owed to group undertakings - - 295 345 Bank loans and overdrafts (a) 298 8 878 505 Finance leases (note 19) 29 22 - - Trade creditors 723 593 - - Corporation tax (b) 171 118 36 3 Other taxation and social security 68 57 1 1 Other creditors 255 215 12 29 Accruals and deferred income (c) 115 119 9 4 Proposed final dividend 122 104 122 104 -------------- ------------ 1,781 1,236 1,353 991 -------------- ------------a) Bank deposits at subsidiary undertakings of £614m (1994 - £505m) have been offset against borrowings in the parent company under a legal right of set-off.
b) The corporation tax liability represents the charge for the year after deducting tax relief for capitalised interest and advance corporation tax recoverable.
c) A prior year realised gain of £45m on terminated interest rate swaps is being spread over the life of replacement swaps entered into at the same time for similar periods. Accruals and deferred income include £5m (1994 - £5m) attributable to these realised gains with £33m (1994 - £38m) being included in creditors - amounts falling due after more than one year (note 15).
Note 15-Creditors - amounts falling due after more than one year
Group Company -------------- ------------- 1995 1994 1995 1994 £m £m £m £m -------------- ------------- 4% Unsecured deep discount loan stock 2006 (a) 75 73 75 73 Finance leases (note 19) 76 41 - - 10 3/8% Bonds 2002 (b) 200 200 200 200 1/8 % Deep discount bond 2012 (c) 50 50 70 63 8 3/4% Bonds 2003 (d) 200 200 200 200 E.C.S.C. loans 1996 - 1999 (e) 82 79 8 5 Other loans 5 9 - - -------------- ------------- 688 652 553 541 Amounts owed to group undertakings - - 200 200 Accruals and deferred income (note 14 (c)) 33 38 - - -------------- ------------- 721 690 753 741 Convertible capital bond (note 17) 200 200 - - -------------- ------------- 921 890 753 741 -------------- -------------a) The 4% unsecured deep discount loan stock is redeemable at a par value of £125m in 2006.
b) The 10 3/8% bonds are redeemable at a par value of £200m in 2002.
c) The 1/8% deep discount bond is redeemable at a par value of £429m in 2012. The redemption value as at 25 February 1995 is £70m (1994 - £63m) against which a deposit balance with the same bank of £20m (1994 - £13m) has been offset under a legal right of set-off. To the extent that the outstanding balance on the bond exceeds £50m a subsidiary undertaking has agreed to continue to make these deposits. The bond will therefore never provide more than £50m of funding.
d) The 8 3/4% bonds are redeemable at a par value of £200m in 2003.
e) E.C.S.C. refers to the European Coal and Steel Community.
Note 16-Net borrowings
Group Company -------------- ------------- 1995 1994 1995 1994 £m £m £m £m -------------- ------------- Due within one year Bank and other loans 298 8 878 505 Finance leases 29 22 - - Due within one to two years Bank and other loans 74 - - - Finance leases 17 17 - - Due within two to five years Bank and other loans 8 79 8 5 Finance leases 50 16 - - Due wholly or in part by instalments after five years Finance leases 9 8 - - Due otherwise than by instalments after five years Bank and other loans 530 532 545 536 Convertible capital bond 200 200 - - -------------- ------------- Gross borrowings 1,215 882 1,431 1,046 Deduct: Cash at bank and in hand 44 47 - - Money market investments and deposits 131 99 101 80 -------------- ------------- Net borrowings 1,040 736 1,330 966 -------------- -------------
Note 17-Convertible capital bond
In July 1990 the group issued £200m of 9% convertible capital bonds. The convertible capital bonds are convertible into fully paid 9% exchangeable redeemable preference shares due 2005 in Tesco Capital Limited which are guaranteed on a subordinated basis by, and are exchangeable for fully paid ordinary shares in, Tesco PLC at an exchange price of £2.51 per ordinary share (after adjustment to take account of the 1991 rights issue).
Note 18-Provisions for liabilities and charges
Amount provided Potential amount for deferred tax on all timing differences ----------------- ----------------------- 1995 1994 1995 1994 £m £m £m £m ----------------- ----------------------- Deferred taxation - group Excess capital allowances over depreciation 19 19 233 137 Capital gains deferred by rollover relief - - 12 22 Short term timing differences 74 75 74 75 ----------------- ----------------------- 93 94 319 234 ----------------- -----------------------Deferred taxation balances in Tesco PLC relate to short term timing differences. Where possible taxation on capital gains has been or will be deferred by rollover relief under the provisions of the Taxes Acts.
Note 19-Leasing commitments
a) Finance leases
The future minimum finance lease payments to which the group was committed at 25 February 1995 and which have been guaranteed by Tesco PLC are:
£m ---- Gross rental obligations 138 Deduct finance charges allocated to future periods 33 ---- 105 ---- 1995 1994 £m £m ------------- Net amounts payable are: Within one year 29 22 Between one and five years 67 33 After five years 9 8 ------------- 105 63 ------------- b) Operating leases Group commitments during the year to 24 February 1996 in terms of lease agreements expiring are as follows: 1995 1994 £m £m ------------ Within one year 1 1 Between one and five years 8 6 Beyond five years 91 82 100 89 ------------
Note 20-Called up share capital
Authorised: £135,500,000 (1994 -£135,500,000) Ordinary shares of 5p each ---------------------------- Allotted, issued and fully paid: Number £m ---------------------------- Issued at 26 February 1994 1,964,565,717 98 Acquisition of Wm Low & Company PLC 72,965,971 4 Scrip dividend election 5,203,073 - Share options exercised 15,509,446 1 ---------------------------- Issued at 25 February 1995 2,058,244,207 103 ----------------------------The company issued 72,965,971 ordinary shares at a market value of 247 1/2p on 2 September 1994 in partial consideration for the purchase of Wm Low & Company PLC (note 29).
Between 25 February 1995 and 10 April 1995, options on 219,905 ordinary shares and 690,629 ordinary shares have been exercised under the terms of the savings-related share option scheme (1981) and the executive share option scheme (1984) respectively.
As at 25 February 1995 the directors were authorised to purchase up to a maximum in aggregate of 205,824,420 ordinary shares.
Note 21-Share options
a) Company schemes
The company had three principal share option schemes in operation during the year:
i) The savings-related share option scheme (1981) permits the grant to employees of options in respect of ordinary shares linked to a building society/bank save-as-you-earn contract for a term of five years with contributions from employees of an amount between £10 and Z250 per month. Options are capable of being exercised at the end of the five year period at a subscription price not less than 80% of the middle market quotation of an ordinary share immediately prior to the date of grant.
ii) The executive share option scheme (1984) permitted the grant of options in respect of ordinary shares to selected executives. The scheme expired after ten years on 9 November 1994. Options were generally exercisable between three and ten years from the date of grant at a subscription price determined by the Board but not less than the middle market quotation within the period of 30 days prior to the date of grant. Some options have been granted at a discount of 15% of the standard option price but the option holder may only take advantage of that discount if, in accordance with investor protection ABI guidelines, certain targets related to earnings per share are achieved.
iii) The executive share option scheme (1994) was adopted on 17 October 1994. The principal difference between the new scheme and the previous scheme is that the exercise of options will normally be conditional upon the achievement of a specified performance target related to the annual percentage growth in earnings per share over any three year period. There will be no discounted options granted under the new scheme. To date there have not been any options granted to relevant executives.
The company has granted outstanding options in connection with the two schemes as follows:
Savings-related share option scheme (1981)
Date of grant Number of Shares Subscription executives and under option price employees 25.02.95 (pence) ----------------------------------------------------------------------------------------------- 03.11.89 367 467,375 154.3 01.06.90 4,066 5,092,240 152.3 24.05.91 5,859 4,826,668 220.0 24.10.91 6,756 7,370,995 204.0 29.10.92 9,879 12,897,110 174.0 22.10.93 12,170 13,646,275 161.0 26.10.94 17,685 17,574,005 185.0Executive share option scheme (1984)
Date of grant Number of Shares Subscription executives under option price 25.02.95 (pence) --------------------------------------------------------------------------------------------- 02.08.85 5 18,036 79.2 16.12.85 1 7,729 95.4 21.07.86 2 69,561 122.8 06.07.87 113 1,026,055 177.9 03.06.88 2 47,086 143.6 02.06.89 3 90,392 165.0 01.11.89 1,101 4,903,682 192.1 29.05.90 10 290,163 190.2 22.10.90 4 108,281 214.5 17.05.91 61 2,411,831 274.0 22.10.91 3 30,000 254.0 29.05.92 690 9,925,522 277.0 29.10.92 10 621,705 217.0 27.05.93 20 975,297 217.0 11.10.93 4 190,164 210.0 10.06.94 597 5,885,312 210.0 12.08.94 1 157,124 243.0 29.09.94 1 883,250 232.0The subscription price and number of shares have been adjusted as a result of the rights issue in 1991 and the capitalisation issue in 1987 as appropriate.
Note 22-Directors' interests Executive share options exercised by directors in the financial year
Number of shares at exercise price (pence) Value realised ------------------------------------------ -------------- Price at 1995 1994 exercise 177.9 143.6 165.0 192.1 190.2 TOTAL (pence) £000 £000 ----------------------------------------------------------------------------- ------- ------------- Sir Ian MacLaurin 101,257 153,423 181,859 309,037 63,095 808,671 233.5 474 - Mr V W Benjamin 22,563 55,792 48,495 - - 126,850 227.0 88 - Mr A D Malpas 78,796 167,275 121,239 211,868 52,579 631,757 233.5 388 - Mr T P Leahy 23,468 37,855 38,252 97,744 18,307 215,626 243.5 143 - Mr R S Ager 17,443 10,096 11,753 94,785 43,886 177,963 248.0 111 - Mr D E Reid 38,274 147,751 72,744 145,593 63,095 467,457 248.0 359 - Date of grant 060787 030688 020689 011189 290590The value realised from shares acquired on exercise is the difference between the fair market value at exercise and the exercise price of the options. Each individual director exercised all their options on the same day. None of the other directors exercised share options under the executive scheme during the year or in the previous year although Mr T J R Mason and Mrs L James exercised options in the previous year before they were appointed to the Board.
Share options held by directors and not exercised at 25 February 1995
Executive share option scheme (1984) Number of shares at exercise price (pence) ------------------------------------------------------------------------------------------------------- 177.9 192.1 190.2 214.5 274.0 217.0+ 217.0+ 210.0*+ 243.0*+ 232.0*+ TOTAL ------------------------------------------------------------------------------------------------------- --------- Sir Ian MacLaurin - - - - 307,231 - 27,650 701,040 - - 1,035,921 Mr V W Benjamin - 124,780 42,063 - 108,036 - - - - - 274,879 Mr A D Malpas - - - - 239,622 - 20,277 538,778 - - 798,677 Mr T P Leahy - - - - 50,433 82,949 68,203 139,048 157,124 - 497,757 Mr R S Ager - - - - 61,870 92,165 68,204 100,952 - 142,446 465,637 Mr J Gildersleeve - - 42,064 - 163,532 - 14,747 320,911 - 14,656 555,910 Mrs L James 5,151 - - 6,036 54,722 - 29,340 62,018 - 57,084 214,351 Mr T J R Mason - - - - 115,079 - - 38,619 - 17,333 171,031 Mr D E Reid - - - - 167,891 - 14,746 15,238 - 344,818 542,693 Mr J M Wemms 22,878 78,006 52,579 - 110,479 102,641 36,866 116,191 - - 519,640 Date exercisable 060790 011192 290593 221093 170594 291095 270596 270596 100697 120897 290997Date of expiry 7 years from date exercisable
*Options granted in the year
+One quarter of the options granted at 217p, 210p, 243p and 232p may be exercised at 185p, 179p, 207p and 198p respectively, except in the case of Sir Ian MacLaurin, providing targets related to growth in earnings per share are achieved in accordance with ABI guidelines. If the targets are not met the option holders retain the right to exercise the option at the higher price.
Savings-related share option scheme (1981) Number of shares Value realised
------------------------------------------------------------------------------ --------------
As at Granted Exercised As at Exercise price 1995 1994
26 Feb 94 25 Feb 95 (pence) £000 £000
--------------------------------------------------------------- -------------- --------------
Sir Ian MacLaurin 10,916 3,729 4,666 9,979 174.0 - 185.0 4 -
Mr V W Benjamin 10,675 5,594 6,999 9,270 185.0 - 204.0 6 -
Mr A D Malpas 10,916 3,729 4,666 9,979 174.0 - 185.0 4 -
Mr T P Leahy 10,766 5,594 7,090 9,270 185.0 - 204.0 7 -
Mr R S Ager 10,294 1,864 - 12,158 154.3 - 204.0 - 4
Mr J Gildersleeve 10,916 3,729 4,666 9,979 174.0 - 185.0 4 -
Mrs L James 10,575 3,729 4,757 9,547 161.0 - 204.0 4 2
Mr T J R Mason 11,083 3,729 4,666 10,146 152.3 - 185.0 4 -
Baroness O'Cathain 9,191 - - 9,191 000.0 - 204.0 - -
Mr D E Reid 10,175 1,864 2,333 9,706 174.0 - 204.0 2 -
Mr J M Wemms 10,766 5,594 7,090 9,270 185.0 - 204.0 6 -
The savings-related share option scheme subscription price was
185p and the option matures in February 2000.
Between 25 February 1995 and 10 April 1995 there have been no changes in the number of share options held by the directors.
The disclosable interests of the directors, including family interests, were as follows:
25 February 1995 26 February 1994 -------------------------- -------------------------- Ordinary Options Ordinary Options shares to acquire shares to acquire ordinary ordinary shares shares ---------------------------------------------------------- -------------------------- Beneficial Sir Ian MacLaurin 273,969 1,045,900 188,864 1,154,468 Mr V W Benjamin 130,807 284,149 114,883 412,404 Mr J A Gardiner 17,775 - 17,342 - Mr A D Malpas 192,661 808,656 125,814 902,572 Mr T P Leahy 103,375 507,027 92,024 427,977 Mr R S Ager 63,324 477,795 30,626 410,496 Mr J Gildersleeve 74,641 565,889 29,024 231,259 Mrs L James 30,545 223,898 14,018 105,824 Dr M G Jones 2,097 - 2,023 - Mr T J R Mason 29,669 181,177 12,004 126,162 Baroness O'Cathain 4,197 9,191 4,048 9,191 Mr G F Pimlott 7,776 - 7,500 - Mr D E Reid 144,676 552,399 81,591 660,269 Mr J M Wemms 53,276 28,910 35,074 414,215 Non-beneficial Sir Ian MacLaurin 93,075 - 93,075 -In addition the directors are beneficiaries of the Tesco Employee Trust which held 1,500,000 ordinary shares at 25 February 1995.
Options to acquire ordinary shares shown above comprise options under the executive share option scheme (1984) and the savings-related share option scheme (1981) (note 21).
Between 25 February 1995 and 10 April 1995 there have been no changes in the number of shares held by the directors.
Share bonuses awarded to directors under the executive incentive scheme (note 5(d)) are included in the directors+ interests shown above. The shares on allocation are held in trust and released to directors after two years, in the case of short term share bonuses or four years for long term share bonuses, both conditional on continuous service with the company.
Note 23-Reserves
Group Company ------------ ------------ 1995 1994 1995 1994 ------------ ------------ a) Share premium account £m £m £m £m At 26 February 1994 940 924 940 924 Acquisition of Wm Low & Company PLC 177 - 177 - Premium on issue of shares less costs 24 8 24 8 Scrip dividend election 11 8 11 8 ------------ ------------ At 25 February 1995 1,152 940 1,152 940 ------------ ------------ b) Other reserves At 25 February 1995 and 26 February 1994 40 40 - - ------------ ------------ Other reserves comprise a merger reserve arising on the acquisition of Hillards plc in 1987. Group Company ------------- ------------- 1995 1994 1995 1994 £m £m £m £m ------------- ------------- c) Profit and loss account At 26 February 1994 1,671 1,632 557 513 Goodwill arising on acquisition of subsidiary undertakings (65) (108) - - Gain on foreign currency translation - 1 - - Retained profit for the financial year 203 146 50 44 ------------- ------------- At 25 February 1995 1,809 1,671 607 557 ------------- -------------
In accordance with section 230 of the Companies Act 1985 a profit and loss account for Tesco PLC, whose result for the year is shown above, has not been presented in these accounts.
The cumulative goodwill written off against the reserves of the group as at 25 February 1995 amounted to £367m (1994 - £302m).
Note 24-Pension commitments
The group operates a defined benefit pension scheme for full-time employees, the assets of which are held as a segregated fund, administered by trustees.
The pension cost relating to the scheme is assessed in accordance with the advice of an independent qualified actuary using the projected unit method. The latest actuarial assessment of this scheme was at 5 April 1993. The assumptions which have the most significant effects on the results of the valuation are those relating to the rate of return on investments and the rate of increase in salaries and pensions. It was assumed that the investment return would be 9% per annum with dividend growth of 4 1/2% per annum, that salary increases would average 6 1/2% per annum and that pensions would increase at the rate of 4% per annum.
At the date of the latest actuarial valuation, the market value of the scheme's assets was £480m and the actuarial value of these assets represented 111% of the benefits that had accrued to members, after allowing for expected future increases in earnings.
Benefit improvements to members have been agreed with the trustees which have resulted in an increased company cost. This increasing ongoing cost has been offset by the amortisation of the surplus as a level percentage of pay over nine years.
The pension cost of this scheme to the group was £29m (1994 - £28m).
The group also operates a defined contribution pension scheme for part-time employees which was introduced on 6 April 1988. The assets of the scheme are held separately from those of the group, being invested with an insurance company. The pension cost represents contributions payable by the group to the insurance company and amounted to £8m (1994 - £6m). There were no material amounts outstanding to the insurance company at the year end.
Following the European Court judgement in relation to part-time pension rights, the group is not expected to have any material liability in relation to part-time employees' pensions.
The group also operates defined contribution schemes in France. The contributions payable under these schemes of £1m (1994 - £1m) have been fully expensed against profits in the current year.
Note 25-Post-retirement benefits other than pensions
The company operates a scheme offering post-retirement healthcare benefits. The cost of providing for these benefits has been accounted for on a basis similar to that used for defined benefit pension schemes.
The liability as at 27 February 1993 of £8m, which was determined in accordance with the advice of qualified actuaries, is being spread forward over the service lives of relevant employees. A provision of £2m (1994 - £1m) is being carried in the balance sheet reflecting:
1995 1994 £m £m ------------ At 26 February 1994 1 - Charge to profit and loss account 1 1 Cash payments made - - ------------ 2 1 ------------ It is expected that payments will be tax deductible, at the company's tax rate, when made.
Note 26-Capital commitments
At 25 February 1995:
a) There were commitments for capital expenditure of
approximately £223m (1994 - £395m).
b) Capital expenditure authorised by the Board, but not
contracted for, amounted to £248m (1994 - £328m).
Note 27-Contingent liabilities
Certain bank loans and overdraft facilities of associated undertakings have been guaranteed by Tesco PLC. At 25 February 1995, the amounts outstanding on these facilities were £2m (1994 - £2m).
Note 28-Reconciliation of operating profit to net cash inflow from operating activities
1995 1994 £m £m ------------ Operating profit 578 521 Depreciation and amortisation 247 213 Increase in stock (105) (16) Increase in debtors (3) (11) Increase in trade creditors 111 31 Increase in other creditors 50 80 Miscellaneous items (6) 3 ------------ Net cash inflow from operating activities 872 821 ------------
Note 29-Acquisitions
The company acquired a controlling interest in the Hungarian food retailer Global TH ('Global') on 28 June 1994.
On 2 September 1994 the company also acquired the UK food retailer Wm Low & Company PLC ('Wm Low'). Wm Low results from this date until 25 February 1995 have been consolidated within the group profit and loss account. In the year ended 2 September 1994 the Wm Low group made a profit after taxation of £15m (1993 - £17m).
During the year the group also acquired the remaining ordinary share capital of Ets. Catteau S.A. ('Catteau') for a consideration of £9m, increasing its holding from 95% to 100%.
All of the group's acquisitions have been accounted for using acquisition accounting.
The acquisitions of Global, Wm Low and the remaining share capital of Catteau have been consolidated into the Tesco group balance sheet as follows:
Balance sheet at acquisition ---------------------------- Wm Low Other Fair value Fair value adjustments balance sheet £m £m £m £m --------------------- ----------- ------------ Fixed assets 240 5 27 272 Working capital (13) 1 (2) (14) Taxation (2) - - (2) Net short term borrowings (51) 19 - (32) Minority interest - (8) - (8) -------------------- ------------ ------------ Shareholders' funds 74 17 25 216 -------------------- ------------ Goodwill 65 ------------ Total purchase consideration 281 ------------
The purchase consideration for Wm Low includes £181m that was settled by the issue of ordinary shares in Tesco PLC.
The remaining consideration for Wm Low and other acquisitions was settled by cash of £100m.
The net outflow of cash and cash equivalents for the purchase of subsidiary undertakings comprises:
£m ---- Cash consideration 100 Cash at bank and in hand acquired (26) Bank overdrafts of acquired subsidiary undertakings 58 ---- 132 ---- Fair values at acquisition, total purchase consideration and goodwill are analysed as follows: Fair value Total purchase Goodwill balance sheet consideration £m £m £m ------------- -------------- ----------- Wm Low 199 257 58 Global 14 15 1 Catteau 3 9 6 ------------- -------------- ----------- 216 281 65 ------------- -------------- ----------- Fair value adjustments All fair value adjustments relate to the acquisition of Wm Low. £m ------ Revaluation (a) 27 Accounting policy alignment (1) Other (1) ----- 25 -----
a) The principal adjustment relates to the revaluation of the property portfolio totalling £30m following advice from independent chartered surveyors.
There were no provisions for reorganisation or restructuring made in the accounts of Wm Low in the year ended 2 September 1994.
Note 30-Analysis of changes in financing during the year
Share capital Net other (including borrowings premium) and finance lease obligations £m £m ----------------------------------- At 26 February 1994 1,038 792 Cash inflow from financing 25 72 Shares issued to acquire subsidiary undertaking 181 - Scrip dividend election 11 - ----------------------------------- At 25 February 1995 1,255 864 -----------------------------------
