Performance
In the year, group sales grew by 15% to almost £15bn. In the UK, sales were boosted by strong volume growth of 4.5% and a good contribution from our new stores. Group profit before tax was up by 11.1% to £750m.
The financial review, describes our performance in more depth. The remainder of this statement outlines the key development areas in Tesco. There is so much happening to take the business forward and I have summarised a few of these below.
Additional Information
Financial review
Customer Service
Customers are constantly telling us that our people are our best asset. They set out to deliver the best service available in UK retailing and take a real pride in their company and work. In all parts of the company service is key. The enthusiasm of our people in delivering First Class Service is what drives our business forward. During the last year we have added more service counters to our stores and extended opening hours. Some stores have also been open through the night to help customers shop at a more convenient time for them. The 24-hour trial at four stores follows the success of all-night trading in a number of our stores before Christmas.
Our commitment to giving service was best exemplified in the year with the introduction in April 1996 of Customer Assistants: 5,000 new staff dedicated to servicing customers, whenever they need help.
The development of Tesco Direct, and its extension to Home Shopping via the Internet, illustrates how we are providing more service in a more innovative style. Customers at the Osterley store in West London are able to buy their complete shopping trip from home: this trial is now being extended to a further five stores.
Our dedication to listening and responding to customers' needs led to the creation of the new Customer Service Centre in Dundee. Based in the former Wm Low offices, the Centre will allow us to receive over 35,000 calls a week from customers. It is from these customer comments, as well as from the many letters and e-mails we receive, that we can understand what they expect from us, and respond quickly.
Additional Information
Customer service
Financial review
Lord MacLaurin, Chairman, talking with Excel Trainees (from left to right) Andrew Skeet, Gavin Black, Minaxi Patel and Emma Pettitt at the new Ashford store in Kent.
Price
Tesco has always endeavoured to offer customers the very best value for money. Our product range, quality and price are key ingredients to customer satisfaction. This year we invested over £30m in undertaking to guarantee the Unbeatable Value of Tesco by pledging that, on over 600 products, our customers couldn't buy the same quality for less money. Our customers trust us to check prices and quality constantly to ensure they are getting the best deal. The pledge has worked, customers expect and receive Unbeatable Value and tell us they appreciate our commitment to their budgets.
Additional Information
Value for money
Clubcard
As part of that help to customers in budgeting for their shopping, we launched Clubcard Plus in June 1996. The innovative shopping account pays interest on cash balances while offering an overdraft facility at much better rates than standard current accounts. The success of Clubcard Plus, now with nearly 200,000 cards in issue, and the information we gathered while talking to account holders led us to pursue further financial services geared to Tesco customers. By forming a joint venture company with the Royal Bank of Scotland, with its links with Direct Line and Scottish Widows, we will be able to offer our customers personal financial services which suit their needs. This is an exciting venture made possible only through Clubcard.
Launched in February 1995, Clubcard now has over 9.5 million members. And with the information that it provides, it is now possible for us to respond directly to customer needs and to target groups of members who we can help further.
Additional Information
Customer loyalty
Financial Review
Store development
We opened 32 stores this year, including Belfast Metro, our first store in Northern Ireland. In what remains a difficult planning environment, we will continue to seek to maintain an active new store development programme of around 600,000 sq ft per annum. We will also expand our highly successful refit and extension programmes which this year added 120,000 sq ft of selling space. Extending stores gives us very good scope to improve our offer to customers by providing more food and non-food products, as well as more customer facilities. In the year ahead, we plan to open a further 200,000 sq ft of selling space through extensions.
Additional Information
Stores
UK store opening programmes
Financial Review
Europe
During the year, we have continued to expand our operations in Europe. Catteau in France performed well in difficult conditions and profits finished the year ahead of last year's. There is still much to do and our priority in France is to improve our overall return from Catteau.
In Central Europe, our business has grown substantially and we are already one of the leading retailers in the region. We acquired the 13 Kmart stores in the Czech Republic and Slovakia, now all rebranded Tesco, and opened our first new superstore in Budapest, Hungary. This new 60,000 sq ft store opened well and we are encouraged by its performance so far. From this base, we plan to grow and develop in this region by building more large stores. We remain enthusiastic about the prospects for us in this region.
Additional Information
European Opportunities
Financial Review
Notes to the financial Statements - note 1
Notes to the financial Statements - note 31
Directors' report
Dividend
The Board has proposed a final net dividend of 7.1p. The total dividend for the year will therefore be 10.35p, representing an increase of 7.8% over last year.
Additional Information
Financial Review
Directors' report
Notes to the financial Statements - note 9
Five year record
Investors' Information
Ireland
In March 1997, we announced that we had reached an agreement with Associated British Foods plc to purchase most of their retailing assets in the north and south of Ireland, for £630m. This acquisition, which is subject to merger approval from the European Commission, brings to Tesco a further 109 food stores and a leading position in both markets. I believe this acquisition will allow us to grow in a new market for Tesco.
Additional Information
Financial Review
Current trading
Since the year end, our sales have continued to move ahead. In the first four weeks, which excludes Easter, total UK sales rose by 10.3% with sales from existing stores rising 6.0% above last year. Our volume performance continues to be strong, as inflation fell through the second half of the year from 3.5% to 1% in current trading. This is a good start in a competitive environment and we are well placed to meet the many challenges in the year ahead. We continue to develop our existing businesses by remaining close to our customers, by introducing new products and services directly relevant to their needs, and through our new store opening programmes in the UK and Europe.
The Board
In line with our announcement made in November 1995, John Gardiner will become Chairman on my retirement at the Annual General Meeting in June 1997. Terry Leahy was appointed Chief Executive in February 1997. David Reid is the Deputy Chairman as well as Financial, Distribution and European Director. David Malpas, our Managing Director, retired at the year end in February 1997. David played a significant part in the development of Tesco and he has been a key figure in the extraordinary revolution in UK retailing. His professionalism, incisive thinking and vision for the company helped place Tesco where it is today. I am very grateful for his many contributions and wish him a happy retirement.
Terry Leahy, supported by our excellent management team, will continue to develop the business and I have every confidence that their efforts will see the company prosper still further.
Additional Information
Board of Directors
Corporate governance
Directors' report
Conclusion
We have achieved excellent results in a highly competitive marketplace. Full credit must be given to our people for their dedication and initiative in delivering a first class level of customer service. It is the daily contact with our people which I will miss after my retirement. Their enthusiasm has been the inspiration which has been at the heart of Tesco and has made my 38 years with the company so fulfilling. I would also thank our suppliers who continue to work with us in partnership to create exciting products of the highest quality. And finally, I must pay tribute to you as a shareholder for believing in our vision and keeping us on our mettle. Thank you for your support and I know that, with your continued goodwill, Tesco will go from strength to strength.
Lord MacLaurin of Knebworth Chairman