Wm Low.

On 2 September 1994, we acquired Wm Low & Company PLC (Wm Low) for a total consideration of 257m, of which 181m was settled by the issue of ordinary shares. Wm Low operated 57 food retail supermarkets - 45 in Scotland and 12 in England (see map).

The purchase has greatly increased our presence in Scotland and almost doubled our share of the Scottish market. There is considerable potential for improving the performance and raising the efficiency of Wm Low stores. Since the acquisition, sales have increased more quickly than originally planned, with the decline in sales in existing stores of 6% immediately prior to acquisition improving to growth of 20% in February 1995. Gross margins have also improved, benefiting from the introduction of the wider Tesco range, particularly higher-margin fresh foods and own-label products.

Wm Low's warehouse in Gateshead ceased operations in March and part of the Dundee headquarters building is now being used as the Tesco Scottish regional office prior to its disposal. All former Wm Low stores are now branded as Tesco and stock the full range of Tesco products. Tesco checkout scanning equipment will have been installed in every store by August 1995. A full refit programme has commenced and will be completed by the end of 1996.

The acquisition has contributed 11m to operating profit. A one-off charge of 39m has been made against this year's operating profit to cover the total cost of integrating the Wm Low business since acquisition and during the following two years. Related capital expenditure will amount to 35m, mainly for new equipment and store refits. 5m of this amount was spent in 1994/95.

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