Coronavirus: Tesco takes £533m hit from crisis costs but profits still surge

Tesco has revealed a £533m hit from coronavirus crisis costs but a leap of more than 20% in shareholder rewards thanks to surging sales.

The UK’s largest supermarket chain said the vast COVID-19 cost bill was also offset by business rates relief during the first half of the year.

Tesco reported profit before tax of £551m – a rise of almost 29% on the same period in 2019.

Group sales were up by more than 6% at £26.7bn, with sales in the UK and Ireland rising 8.6% to £24.3bn at a time when the grocery sector adapted to feed customers as economies were placed in hibernation to curb rising infection rates.

Chains were forced to shell out for safety equipment such as PPE and ramp up online delivery services in the face of the public health emergency, with supply chains being severely tested by rampant demand for household essentials.

Handling the crisis proved to be the final act for chief executive Dave Lewis who stepped down last week after driving an overhaul of the business since 2014 – a time when the chain was bleeding customers and mired by a profits scandal.

Investors were handsomely rewarded for their patience on Wednesday.

In a break with the behaviour of many companies during the crisis to date, Tesco said it was to not only maintain an interim dividend but raise it by 21% to 3.2p per share.

A further £5bn is to be returned to shareholders as part of a special dividend related to the £8bn sale of its Asian operations earlier this year.

Shares rose by more than 4% in early trading.

New chief executive Ken Murphy said: “The first half of this year has tested our business in ways we had never
imagined, and our colleagues have risen brilliantly to every challenge, acting in the best interests of our customers and local communities throughout.”

He added: “Tesco is a great business with many strategic advantages. I’m excited by the range of opportunities we have to use those advantages to create further value for our customers and, in doing so, create value for all of our other stakeholders.”

Tesco also confirmed a story by Sky News that it had appointed a new chief financial officer to replace Alan Stewart once he departs next year.

Imran Nawaz will join the company from Tate & Lyle.

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