The directors present their annual report to shareholders
on the affairs of the Group together with the audited consolidated financial
statements of the Group for the 52 weeks ended 27 February 1999. The comparisons
against the previous year are for the 53 weeks to 28 February 1998.
Principal activity and business review
The principal activity of the Group is the operation
of food stores and associated activities in the UK, Republic of Ireland,
France, Czech Republic, Slovakia, Hungary, Poland and Thailand. A review
of the business is contained in the Annual
Review which is published separately and, together with this document,
comprises the full Tesco PLC Annual Report and Accounts.
Group turnover excluding VAT rose by £706m to £17,158m,
representing an increase of 4.3%. Group profit on ordinary activities
before taxation, integration costs, loss on disposals and goodwill amortisation
was £881m compared with £832m for the previous year, an increase of 5.9%.
Including integration costs, loss on disposals and goodwill amortisation,
Group profit on ordinary activities before taxation for the year was £842m.
The amount allocated to the employee profit-sharing scheme this year was
£38m as against £35m last year. After provision for tax of £237m and dividends,
paid and proposed, of £277m, profit retained for the financial year amounted
The directors recommend the payment of a final dividend
of 2.87p per ordinary share to be paid on 1 July 1999 to members on the
Register at the close of business on 23 April 1999. Together with the
interim dividend of 1.25p per ordinary share paid in December 1998, the
total for the year comes to 4.12p compared with 3.87p for the previous
year, an increase of 6.5%.
Tangible fixed assets
Capital expenditure amounted to £1,067m compared with
£841m during the previous year. In the directors' opinion, the properties
of the Group have a market value in excess of the book value of £6,032m
included in these financial statements.
During the year the Group acquired, for a consideration
of £206m, a retailing business in Thailand. Details of acquisitions are
set out in note 32 to the financial statements
Post Balance Sheet event
On 23 March 1999 the Group announced it is to form
a partnership company with Samsung Corporation to develop hypermarkets
in South Korea. The Group will initially invest £80m in cash for 51% of
the business and a further £50m for an additional 30% holding in June
The authorised and issued share capital of the company,
together with details of the shares issued during the period, are shown
in note 23 to the financial statements. A bonus issue was made on 3 July
1998 on the basis of two new shares for every one held on that date.
The company is not aware of any ordinary shareholders
with interests of 3% or more.
Directors and their interests
The names and biographical details of the present directors
are set out in the separately published Annual
Mr T P Leahy, Mr J Gildersleeve, Mr T J R Mason and
Baroness O'Cathain retire from the Board by rotation according to the
company's Articles of Association. Mr P A Clarke, Mr D T Potts, Mr C L
Allen, being appointed during the year and Dr H Einsmann, appointed on
1 April 1999, will also retire. Being eligible, they all offer themselves
The service contracts of Mr T P Leahy, Mr J Gildersleeve,
Mr T J R Mason, Mr P A Clarke and Mr D T Potts are terminable on two years'
notice from the company.
Baroness O'Cathain, Mr C L Allen and Dr H Einsmann
do not have service contracts.
The interests of directors and their immediate families
in the shares of Tesco PLC, along with details of directors' share options,
are set out in the Report of the Directors on Remuneration.
At no time during the year did any of the directors have
a material interest in any significant contract with the company or any
of its subsidiaries.
The Group depends on the skills and commitment of its
employees in order to achieve its objectives. Company staff at every level
are encouraged to make their fullest possible contribution to Tesco success.
A key business priority is to provide First Class
Service to the customer. Ongoing training programmes seek to ensure that
employees understand the company's customer service objectives and strive
to achieve them.
The Group's selection, training, development and promotion
policies ensure equal opportunities for all employees regardless of gender,
marital status, race, age or disability. All decisions are based on merit.
Internal communications are designed to ensure that
employees are well informed about the business of the Group. These include
a staff magazine called 'Tesco TODAY', videos and staff briefing sessions.
Staff attitudes are frequently researched through surveys and store visits,
and management seeks to respond positively to the needs of employees.
Employees are encouraged to become involved in the
financial performance of the Group through a variety of schemes, principally
the Tesco employee profit-sharing scheme, the savings-related share option
scheme and the profit related pay scheme.
Political and charitable donations
Contributions to community projects and to charity
amounted to £1,301,000 (1998 - £1,259,000). There were no political donations.
Supplier payment policy
Tesco PLC is a signatory to the CBI Code of Prompt
Payment. Copies of the Code may be obtained from the CBI, Centre Point,
103 New Oxford Street, London WC1A 1DU. Payment terms and conditions are
agreed with suppliers in advance. Tesco PLC has no trade creditors in
its balance sheet. The Group pays its creditors on a timely basis which
varies according to the type of product and territory in which the suppliers
On 1 July 1998, Price Waterhouse merged with Coopers
& Lybrand. Price Waterhouse have resigned as auditors and the new merged
firm, PricewaterhouseCoopers, have been appointed to fill the casual vacancy.
PricewaterhouseCoopers have expressed their willingness
to continue in office. In accordance with section 384 of the Companies
Act 1985, a resolution proposing the reappointment of PricewaterhouseCoopers
as auditors of the company will be put to the Annual General Meeting.
Annual General Meeting
A separate circular accompanying the Annual Accounts
explains the special business to be considered at the Annual General Meeting
on 4 June 1999.
This report was approved by the Board on 12 April
By Order of the Board
12 April 1999
Registered Number: 445790