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1996 1995 ------------------------------------- ---------------------------------- Sales Turnover Profit Assets Sales Turnover Profit Assets including excluding including excluding VAT VAT VAT VAT £m £m £m £m £m £m £m £m ------------------------------------- ---------------------------------- Continuing operations Tesco 11,821 10,988 677 10,120 9,410 589 Wm Low 609 570 36 260 245 11 -------------------------- ------------------------- Food retailing – United Kingdom 12,430 11,558 713 4,164 10,380 9,655 600 4,040 Property development 2 2 - 99 – – – ------------------------------------ ----------------------------------- Total U.K. 12,432 11,560 713 4,263 10,380 9,655 600 4,040 Food retailing – Rest of Europe 596 534 11 138 497 446 17 104 ------------------------------------ ----------------------------------- 13,028 12,094 10,877 10,101 ------------------ ------------------ Operating profit (excluding integration costs) 724 617 Wm Low integration costs - (39) ------ ------ Operating profit 724 578 Net loss on disposal of fixed assets (6) (5) Net interest payable (43) (22) ------ ------ Profit on ordinary activities before taxation 675 551 ------ ------ Capital employed 4,401 4,144 Net borrowings (note 19) (813) (1,040) ------------- ---------- Net assets 3,588 3,104 ------------- ----------The analysis of capital employed by geographical area is calculated on net assets excluding net borrowings.
1996 1995
------------------------------- ------
Continuing Acquisitions Total Total
operations
£m £m £m £m
------------------------------- ------
Turnover 12,090 4 12,094 10,101
Cost of sales 11,137 3 11,140 9,298
------------------------------- ------
Gross profit 953 1 954 803
Administration expenses 200 1 201 200
Employee profit sharing 29 – 29 25
-------------------------------- -----
Operating profit 724 – 724 578
-------------------------------- -----
Cost of sales includes warehouse and transportation costs and all store operating costs.
This represents the amount allocated to the trustees of the profit sharing scheme and is based on the United Kingdom profit after interest before net loss on disposal of fixed assets and taxation.
1996 1995 £m £m Profit on ordinary activities is stated after charging the following: -------------------- Depreciation and amortisation 285 247 Operating lease costs 114 96 Auditors’ remuneration (a) – – Employment costs (note 5) 1,184 1,001 Net loss on disposal of fixed assets (b) 6 5a) Auditors’ remuneration amounted to £0.5m (1995 –£0.4m). The auditors also received £0.6m (1995 –£0.5m) in respect of non-audit services of which £0.3m (1995 – £0.2m) related to overseas operations.
1996 1995 £m £m a) Employment costs during the year -------------------- Wages and salaries 1,065 899 Social security costs 73 64 Other pension costs (note 25) 46 38 -------------------- 1,184 1,001 -------------------- b) Number of persons employedThe average number of employees per week during the year was: UK130,308 (1995 –108,113), Europe 4,729 (1995 –3,346) and the average number of full-time equivalents was: UK 80,650 (1995 – 68,552), Europe 4,245 (1995 – 2,915).
Aggregate emoluments of the directors of the parent company were as follows: 1996 1995 £000 £000 -------------------- Directors’ emoluments 4,213 3,483 Performance related incentives – short term bonuses 1,262 860 – long term bonuses 839 573 -------------------- 6,314 4,916 Pension contributions (including – £186,000 in respect of the Chairman (1995 – £169,000)) 932 788 -------------------- 7,246 5,704 --------------------Emoluments of the directors, including the Chairman who was the highest paid director, but excluding pension contributions were as follows:
The table excludes emoluments paid to three former directors, who retired from the Board in May 1994, of £77,000, £75,000 and £6,000, excluding pension contributions.Total ------------ Salary Profit Benefits Incentive scheme 1996 1995 sharing Long term Short term £000 £000 £000 £000 £000 £000 £000 ----------------------------------------------------------------- Sir Ian MacLaurin 737 8 30 167 252 1,194 1,012 Mr V W Benjamin 251 8 15 – – 274 245 Mr J A Gardiner 40 – – – – 40 40 Mr R S Ager 313 8 17 75 113 526 454 Mr J Gildersleeve 404 8 30 96 144 682 567 Mrs L James 198 8 15 50 75 346 15 Dr M G Jones 29 – – – - 29 28 Mr T P Leahy 404 8 19 96 144 671 484 Mr A D Malpas 546 8 20 129 194 897 779 Mr T J R Mason 198 8 17 50 75 348 15 Baroness O’Cathain 25 – 10 – – 35 35 Mr G F Pimlott 25 – – – – 25 25 Mr D E Reid 404 8 28 96 144 680 577 Mr J M Wemms 337 8 21 80 121 567 482 ----------------------------------------------------------------- 3,911 80 222 839 1,262 6,314 4,758 -----------------------------------------------------------------
Executive share options exercised by directors in the financial year
Number of shares at exercise price (pence) Value realised
------------------------------------------ ------------------
Price at 1996 1995
exercise
177.9 192.1 190.2 214.5 274.0 217.0 Total (pence) £000 £000
------------------------------------------------------ ------- -----------
Sir Ian MacLaurin – – – – 307,231 – 307,231 321 144 474
Mr V W Benjamin – 124,780 42,063 – 108,036 – 274,879 293 191 88
Mr R S Ager – – – – 61,870 69,124 130,994 314 91 111
Mr J Gildersleeve – – 42,064 – 163,532 – 205,596 321 132 –
Mrs L James 5,151 – – 6,036 54,722 – 65,909 322 40 –
Mr T P Leahy – – – – 50,433 62,212 112,645 313 79 143
Mr A D Malpas – – – – 239,622 – 239,622 321 113 388
Mr T J R Mason – – – – 115,079 – 115,079 331 66 –
Mr D E Reid – – – – 167,891 – 167,891 321 79 359
Mr J M Wemms 22,878 78,006 52,579 – 110,479 76,981 340,923 315 313 –
Date of grant 06.07.87 01.11.89 29.05.90 22.10.90 17.05.91 29.10.92
The value realised from shares acquired on exercise is the difference between the fair
market value at exercise and the exercise price of the options. Where individual directors
exercised options on different dates the price at exercise shown represents an average of
the prices on these dates weighted to the number of options exercised.
Executive share optiona) The options maybe exercised at 185p providing targets related to growth in earnings pershare are achieved in accordance with ABI guidelines. If the targets are not met the option holders can exercise the options at 217p.
schemes (1984) and (1994) Number of shares at exercise price (pence) -------------------------------------------------------------------------------------- 217.0(a) 217.0(b) 210.0(b) 243.0(b) 232.0(b) 271.0(c) 312.0(c) Total -------------------------------------------------------------------------------------- ------- Sir Ian MacLaurin – 27,650 701,040 – – 89,299 – 817,989 Mr R S Ager 23,041 68,204 100,952 – 142,446 39,852 85,104 459,599 Mr J Gildersleeve – 14,747 320,911 – 14,656 85,608 207,719 643,641 Mrs L James – 29,340 62,018 – 57,084 74,394 100,016 322,852 MrT P Leahy 20,737 68,203 139,048 157,124 – 132,841 82,752 600,705 Mr A D Malpas – 20,277 538,778 - - 67,896 - 626,951 Mr T J R Mason - - 38,619 – 17,333 97,184 145,935 299,071 Mr D E Reid – 14,746 15,238 – 344,818 64,945 185,904 625,651 Mr J M Wemms 25,660 36,866 116,191 – – 42,804 222,201 443,722 Date exercisable (d) 29.10.95 27.05.96 10.06.97 12.08.97 29.09.97 27.04.98 13.10.98
b) One quarter of the options granted at 217p, 210p, 243p and 232p maybe 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.
c) Options granted in the year.
d) Date of expiry seven years from date exercisable.
Savings-related share option scheme (1981)
Number of shares Value realised
--------------------------------------------------------------------------- --------------
As at Granted Exercised As at Exercise price 1996 1995
25 Feb 95 24 Feb 96 (pence) £000 £000
--------------------------------------------------------------------------- --------------
Sir Ian MacLaurin 9,979 – – 9,979 174 – 185 – 4
Mr V W Benjamin 9,270 – – 9,270 185 – 204 – 6
Mr R S Ager 12,158 – 2,333 9,825 161 – 204 3 –
Mr J Gildersleeve 9,979 – – 9,979 174 – 185 – 4
Mrs L James 9,547 – – 9,547 161 – 204 – 4
MrT P Leahy 9,270 – – 9,270 185 – 204 – 7
Mr A D Malpas 9,979 – – 9,979 174 – 185 – 4
MrT J R Mason 10,146 828 1,417 9,557 174 – 250 2 4
Baroness O’Cathain 9,191 – – 9,191 204 – –
Mr D E Reid 9,706 – – 9,706 174 – 204 – 2
Mr J M Wemms 9,270 – – 9,270 185 – 204 – 6
The savings-related share option scheme subscription price was 250p and the option matures
in 2001.
Between 24 February 1996 and 15 April 1996 there have been no changes in the number of share options held by the directors.
For further details on the company share option schemes see note 23.
The disclosable interests of the directors, including family interests, were as follows: 24 February 1996 25 February 1995 ------------------------ --------------------------------- Ordinary Options Ordinary Options shares to acquire shares to acquire ordinary ordinary shares shares -------------------------------------------------------- --------------------------------- Beneficial Sir Ian MacLaurin 412,112 827,968 273,969 1,045,900 Mr V W Benjamin 123,041 9,270 130,807 284,149 Mr J A Gardiner 17,775 – 17,775 – Mr R S Ager 105,395 469,424 63,324 477,795 Mr J Gildersleeve 147,377 653,620 74,641 565,889 Mrs L James 59,921 332,399 30,545 223,898 Dr M G Jones 2,163 – 2,097 – MrT P Leahy 140,054 609,975 103,375 507,027 Mr A D Malpas 299,345 636,930 192,661 808,656 MrT J R Mason 49,784 308,628 29,669 181,177 Baroness O’Cathain 4,329 9,191 4,197 9,191 Mr G F Pimlott 8,020 – 7,776 – Mr D E Reid 222,752 635,357 144,676 552,399 Mr J M Wemms 110,607 452,992 53,276 528,910In addition the directors are beneficiaries of the Tesco Employee Trust which held 4,000,000 ordinary shares at 24 February 1996.Non-beneficial Sir Ian MacLaurin 93,075 – 93,075 –
Mr J W Melbourn was appointed as a director on 15 April 1996 and at that date held 2,190 ordinary shares.
Options to acquire ordinary shares shown above comprise options under the executive share option scheme(1984), the executive share option scheme (1994) and the savings-related share option scheme (1981) (note 23).
Between 24 February 1996 and 15 April 1996 there have been no changes in the number of shares held by the directors.
Share bonuses awarded to directors under the executive incentive scheme (page 29) 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 7 Interest 1996 1995 £m £m ---------------------------------- Interest receivable and similar income on money market investments and deposits (a) (b) (e) 63 64 ---------------------------------- Deduct interest payable on: Short term bank loans and overdrafts repayable within five years (49) (48) Finance charges payable on finance leases (9) (6) 9% convertible capital bonds 2005 (8) (18) 4% unsecured deep discount loan stock 2006 (c) (7) (7) E.C.S.C. loans 1996-1999 (d) (5) (4) 10 3/8% bonds 2002 (21) (21) 1/8% deep discount bonds 2012 (e) (23) (7) 8 3/4% bonds 2003 (17) (17) Interest capitalised 33 42 ---------------------------------- (106) (86) ---------------------------------- (43) (22) ----------------------------------
a) Included within interest receivable is an amount of £2m (1995 – £4m) representing the increase in value and surplus on disposal during the period of the call option against the Tesco PLC 10 3/8% bonds 2002 (note 15).
b) At the year end the company held interest rate swaps with a notional principal amount of £445m (1995 – £495m). 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 interest receivable, as follows:
1996 1995 £m £m ---------------------------------- Net cash income 1 8 Amortisation of prior year gains (note 16) 5 5 ---------------------------------- 6 13 ----------------------------------
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 8.1% over the next two years and 8.3% over the following four years.
c) Interest payable on the 4% unsecured deep discount loan stock 2006 includes £2m (1995 – £2m) of discount amortisation.
d) E.C.S.C. refers to the European Coal and Steel Community.
e) Interest payable on the 1/8% deep discount bonds 2012 includes £3m (1995 – £7m) of discount amortisation. The remaining charge to interest of £20m represents a loss on redemption of the 1/8%deep discount bonds (note 18). Gains on cancellation of the associated deposit and financing arrangement of £26m are included within interest receivable.
Note 8 Taxation 1996 1995 £m £m ---------------------------------- United Kingdom taxation: Corporation tax at 33.0% (1995 – 33.0%) 293 177 Prior year items (14) (10) Deferred taxation (73) (1) ---------------------------------- 206 166 Overseas taxes 3 4 ---------------------------------- 209 170 ----------------------------------Note 10 Earnings per share and fully diluted earnings per share
Note 9 Dividends 1996 1995 £m £m ---------------------------------- Declared interim – 3.05p per share (1995 – 2.70p) 64 55 Proposed final – 6.55p per share (1995 – 5.90p) 142 122 ---------------------------------- 206 177 ----------------------------------
b) The calculation of earnings per share, including and excluding net loss on disposal of fixed assets, 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 2,095m (1995 – 2,009m).
c) The calculation of fully diluted earnings per share, including and excluding net loss on
disposal of fixed assets, is based on the profit on ordinary activities after taxation and
after adding:
Note 11 Tangible fixed assets Total Plant Total land and equipment buildings fixtures & fittings and vehicles £m £m £m ---------------------------------------- Cost At 25 February 1995 4,963 1,518 6,481 Reclassification (a) (68) – (68) Currency translation 5 9 14 Additions at cost (b) 407 242 649 Purchase of subsidiary undertakings 15 2 17 ---------------------------------------- 5,322 1,771 7,093 Deduct disposals 62 32 94 ---------------------------------------- At 24 February 1996 5,260 1,739 6,999 ---------------------------------------- Depreciation and amortisation At 25 February 1995 397 880 1,277 Currency translation 1 7 8 Charge for period 116 169 285 ---------------------------------------- 514 1,056 1,570 Deduct disposals 22 15 37 ---------------------------------------- At 24 February 1996 492 1,041 1,533 ---------------------------------------- Net book value (c) (d) At 24 February 1996 4,768 698 5,466 At 25 February 1995 4,566 638 5,204NotesCapital work in progress included above (e) At 24 February 1996 110 18 128 At 25 February 1995 91 21 112
Cost Depreciation Net book value £m £m £m --------------------------------------------------- At 25 February 1995 198 117 81 Movement in the period 4 21 (17) --------------------------------------------------- At 24 February 1996 202 138 64 ---------------------------------------------------Note 12 Fixed asset investmentsd) The net book value of land and buildings comprises:
1996 1995 £m £m ------------------------------------- Freehold 3,954 3,852 Long leasehold – 50 years or more 541 522 Short leasehold – less than 50 years 273 192 ------------------------------------- At 24 February 1996 4,768 4,566 -------------------------------------
e) Capital work in progress does not include land.
Group Company ----------------------- --------------------- 1996 1995 1996 1995 ----------------------- --------------------- £m £m £m £m Subsidiary undertakings – shares at cost, less amounts written off (a) – – 207 449 Loans to group undertakings – – 3,000 3,000 Associated undertakings – at cost less provisions (b) 5 5 5 5 Own shares (c) 12 4 12 4 Other investments 2 1 – – ----------------------- --------------------- 19 10 3,224 3,458 ----------------------- ---------------------All subsidiary undertakings, none of which are owned directly by Tesco PLC, operate in their country of incorporation.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 Ltd Property investment 100% Registered in England Tesco Insurance Ltd Insurance 100% Guernsey Tesco Stores Hong Kong Ltd Purchasing 100% Hong Kong Spen Hill Properties Ltd Property development 100% Registered in England Ets. Catteau S.A. Food retail 100% France Global T.H. Food retail 74% Hungary Tesco Distribution Ltd Distribution 100% Registered in England Savia S.A. Food retail 96% Poland
b) The group has one associated undertaking, Shopping Centres Limited,
in which the group owns 50% of the allotted ordinary and preference share capital
(1995 – 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 24 February 1996, were as follows: 1996 1995 £m £m --------------------- Cash and deposits 18 24 Term bank loan – repayable 1999 (48) (48) Debenture stock – repayable 2001 (34) (33) Other loans (£10m from group undertakings) (20) (20) --------------------- (84) (77) ---------------------There is no recourse to group companies in respect of the borrowings of the associated undertaking, apart from £2m (1995 – £2m) which has been guaranteed by Tesco PLC (note 28).
c) The company operates an employee share ownership plan whereby an employee trust acquires shares in the company for the benefit of group employees. The shares held bythe trust at 24 February1996 were acquired using funds guaranteed byTesco PLC. Accordingly these shares are included in fixed asset investments and the associated debt included within group borrowings.
Group Company -------------- ---------------- 1996 1995 1996 1995 £m £m £m £m -------------- ---------------- Goods held for resale 461 415 - - Development property 98 - - - -------------- ---------------- 559 415 - - -------------- ----------------At 25 February 1995 tangible fixed assets included £68m in respect of property now identified for development and resale which was transferred to stock (note 11).
Development property includes capitalised interest at 24 February 1996 of £11m.
Group Company -------------- ---------------- 1996 1995 1996 1995 £m £m £m £m -------------- ---------------- Amounts owed by group undertakings - - 830 239 Prepayments and accrued income 34 34 260 245 Advance corporation tax recoverable 3 4 3 4 Other debtors 43 66 - - -------------- ---------------- 80 104 1,093 488 -------------- ---------------- Debtors falling due after one year included above: Advance corporation tax recoverable 3 4 3 4 -------------- ----------------
Group Company -------------- ---------------- 1996 1995 1996 1995 £m £m £m £m -------------- ---------------- Money market deposits (a) 51 128 28 98 Bonds and certificates of deposit (market value £3m, 1995 - £3m) 3 3 3 3 -------------- ---------------- Money market investments and deposits 54 131 31 101 -------------- ----------------(a) Included within money market deposits in 1995 was a call option amounting to £60m which was purchased on normal commercial terms and which gave the company the right to acquire £100m of the Tesco PLC 10 3/8% bonds 2002. During the period this option was disposed for a consideration of £62m and the increase in value and surplus arising on disposal of £2m is included within interest receivable (note 7).
Group Company -------------- ---------------- 1996 1995 1996 1995 £m £m £m £m -------------- ---------------- Bank loans and overdrafts (a) 241 298 776 878 Trade creditors 764 723 - - Amounts owed to group undertakings - - 561 295 Other creditors 288 255 26 12 Corporation tax (b) 259 171 67 36 Other taxation and social security 86 68 1 1 Accruals and deferred income (c) 128 115 8 9 E.C.S.C. loans 1996 74 - - - Finance leases (note 21) 20 29 - - Proposed final dividend 142 122 142 122 -------------- ---------------- 2,002 1,781 1,581 1,353 -------------- ----------------a) Bank deposits at subsidiary undertakings of £675m (1995 - £614m) 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 within one year.
c) A gain of £45m, realised in a prior year, 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(1995 -£5m) attributable to these realised gains with £28m (1995 - £33m) being included in other creditors falling due after more than one year (note 18).
Group Company -------------- ---------------- 1996 1995 1996 1995 £m £m £m £m -------------- ---------------- 4% unsecured deep discount loan stock 2006 (a) 77 75 77 75 Finance leases (note 21) 76 76 - - 10 3/8% bonds 2002 (b) 200 200 200 200 1/8% deep discount bonds 2012 (c) - 50 - 70 8 3/4% bonds 2003 (d) 200 200 200 200 E.C.S.C. loans 1998-1999 8 82 8 8 Other loans 9 5 - - -------------- ---------------- 570 688 485 553 Amounts owed to group undertakings - - - 200 Accruals and deferred income (note 16 (c)) 28 33 - - -------------- ---------------- 598 721 485 753 -------------- ----------------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 bonds were redeemed during the period together with the cancellation of the associated deposit and financing arrangement (note 7).
d) The 8 3/4% bonds are redeemable at a par value of £200m in 2003.
Group Company -------------- ---------------- 1996 1995 1996 1995 £m £m £m £m -------------- ---------------- Due within one year Bank and other loans 315 298 776 878 Finance leases 20 29 - - Due within one to two years Bank and other loans - 74 - - Finance leases 21 17 - - Due within two to five years Bank and other loans 8 8 8 8 Finance leases 44 50 - - Due wholly or in part by instalments after five years Finance leases 11 9 - - Due otherwise than by instalments after five years Bank and other loans 486 530 477 545 Convertible capital bonds - 200 - - -------------- ---------------- Gross borrowings 905 1,215 1,261 1,431 Deduct: Cash at bank and in hand 38 44 - - Money market investments and deposits 54 131 31 101 -------------- ---------------- Net borrowings 813 1,040 1,230 1,330 -------------- ----------------
Amount provided Potential amount for deferred tax on all timing differences ----------------------- ----------------------- 1996 1995 1996 1995 £m £m £m £m ----------------------- ----------------------- Deferred taxation - group Excess capital allowances over depreciation 10 19 259 233 Capital gains deferred by rollover relief - - 3 12 Short term timing differences 12 74 12 74 ----------------------- ----------------------- 22 93 274 319 ----------------------- -----------------------The amount provided for deferred taxation on short term timing differences has decreased as a result of a change in the tax legislation in respect of interest on corporate debt.
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.
£m -------- Gross rental obligations 126 Deduct finance charges allocated to future periods 30 -------- 96 -------- 1996 1995 £m £m Net amounts payable are: ------------------------ Within one year 20 29 Between one and five years 65 67 After five years 11 9 ------------------------ 96 105 ------------------------b) Operating leases
1996 1995 £m £m ------------------------ Within one year 4 1 Between one and five years 10 8 After five years 104 91 ------------------------ 118 100 ------------------------
Authorised: £135,500,000 (1995 - £135,500,000) Ordinary shares of 5p each -------------------------------- Allotted, issued and fully paid: Number £m -------------------------------- Issued at 25 February 1995 2,058,244,207 103 Conversion of capital bonds (note 17) 79,676,401 4 Scrip dividend election 5,078,565 - Share options exercised 11,507,026 1 -------------------------------- Issued at 24 February 1996 2,154,506,199 108 --------------------------------Between 24 February1996 and 15 April 1996, options on 27,529 ordinary shares and 151,837 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 24 February 1996 the directors were authorised to purchase up to a maximum in aggregate of 215,450,619 ordinary shares.
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.
Date of grant Number of Shares Subscription executives and under option price employees 24 Feb 96 (pence) --------------------------------------------------------------------------------------------- 24.05.91 5,366 4,395,163 220.0 24.10.91 6,128 6,721,803 204.0 29.10.92 8,877 11,696,807 174.0 22.10.93 10,494 11,830,961 161.0 26.10.94 15,572 15,148,110 185.0 27.10.95 21,911 15,694,735 250.0Executive share option scheme (1984)
Date of grant Number of Shares Subscription executives under option price 24 Feb 96 (pence) --------------------------------------------------------------------------------------------- 21.07.86 1 30,916 122.8 06.07.87 34 306,020 177.9 03.06.88 1 21,410 143.6 02.06.89 1 36,220 165.0 01.11.89 462 2,106,428 192.1 29.05.90 4 81,779 190.2 22.10.90 2 92,586 214.5 17.05.91 36 437,658 274.0 22.10.91 1 5,000 254.0 29.05.92 562 8,015,522 277.0 29.10.92 4 228,096 217.0 27.05.93 18 811,976 217.0 11.10.93 4 190,164 210.0 10.06.94 552 5,635,057 210.0 12.08.94 1 157,124 243.0 29.09.94 30 861,599 232.0Executive share option scheme (1994)
Date of grant Number of Shares Subscription executives under option price 24 Feb 96 (pence) --------------------------------------------------------------------------------------------- 27.04.95 25 1,531,117 271.0 13.10.95 1,019 10,333,613 312.0The subscription price and number of shares have been adjusted as a result of the rights issue in 1991and the capitalisation issue in 1987 as appropriate.
Group Company ----------------------- -------------------- 1996 1995 1996 1995 £m £m £m £m a) Share premium account At 25 February 1995 1,152 940 1,152 940 Acquisition of Wm Low & Company PLC - 177 - 177 Conversion of capital bonds 196 - 196 - Premium on issue of shares less costs 21 24 21 24 Scrip dividend election 14 11 14 11 ----------------------- -------------------- At 24 February 1996 1,383 1,152 1,383 1,152 ----------------------- -------------------- b) Other reserves At 24 February 1996 and 25 February 1995 40 40 - - ----------------------- -------------------- c) Profit and loss account At 25 February 1995 1,809 1,671 607 557 Goodwill arising on acquisition of subsidiary undertakings (11) (65) - - Loss on foreign currency translation (1) - - - Retained profit for the financial year 260 203 101 50 ----------------------- -------------------- At 24 February 1996 2,057 1,809 708 607 -----------------------------------------------Other reserves comprise a merger reserve arising on the acquisition of Hillards plc in 1987.
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 24 February 1996 amounted to £378m (1995 - £367m).
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 all owing 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 £34m (1995 - £29m).
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 fromthose 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 £10m (1995 - £8m). There were no material amounts outstanding to the insurance company at the year end.
The group also operates defined contribution schemes in France. The contributions payable under these schemes of £2m (1995 - £1m) have been fully expensed against profits in the current year.
The liability as at 24 February 1996 of £10m, which was determined in accordance with the advice of qualified actuaries, is being spread forward over the service lives of relevant employees and £1m(1995 - £1m) has been charged to the profit and loss account. Aprovision of £3m (1995 - £2m) is being carried in the balance sheet. It is expected that payments will be tax deductible, at the company’s tax rate, when made.
1996 1995 £m £m ---------------------------- Operating profit 724 578 Depreciation and amortisation 285 247 Increase in goods held for resale (44) (105) Increase in development property (24) - Decrease/(increase) in debtors 25 (3) Increase in trade creditors 41 111 Increase in other creditors 40 50 Miscellaneous items (1) (6) ---------------------------- Net cash inflow from operating activities 1,046 872 ----------------------------
All of the group’s acquisitions have been accounted for using acquisition accounting.
There were no significant fair value adjustments and the acquisitions have been consolidated into the Tesco group balance sheet as follows:
Fair value balance sheet £m ------------- Fixed assets 17 Working capital (1) Net short term borrowings - Minority equity interests 3 ------------- Shareholders’ funds 19 Goodwill 11 ------------- Total purchase consideration 30 -------------The net out flow of cash and cash equivalents for the purchase of subsidiary undertakings is equal to the total purchase consideration of £30m.
Share capital Net other (including borrowings premium) and finance lease obligations £m £m ----------------------------------- At 25 February 1995 1,255 864 Cash inflow/(outflow) from financing 22 (11) Conversion of capital bonds 200 (200) Scrip dividend election 14 - ----------------------------------- At 24 February 1996 1,491 653 -----------------------------------
1996 1995 £m £m ---------------------------------- Cash at bank and in hand 38 44 Money market investments and deposits 54 131 Bank loans and overdrafts (241) (298) ---------------------------------- (149) (123) ---------------------------------- Less: Deposits exceeding three months to maturity when acquired (11) (53) (160) (176) ----------------------------------
1996 1995 £m £m ---------------------------------- At 25 February 1995 (176) 56 Net cash inflow/(outflow) 16 (232) ---------------------------------- At 24 February 1996 (note 32) (160) (176) ----------------------------------