Tesco profits plunge as revival struggles
Troubled supermarket Tesco has announced another big fall in profits as it struggles to turn its business around.
Underlying profits for the first half of its financial year were £354m, 55% down on the same period last year, when it made £779m.
Its pre-tax profit was £74m, compared with a loss of £19m for the same period a year ago.
Like-for-like sales were down 1.1% for the UK, but sales volume rose 1.4%.
The number of transactions were also up by 1.5%.
Chief executive Dave Lewis has put pressure on profits by focusing on price cuts and putting more staff in stores, in an effort to attract customers back to Tesco.
He told the BBC he was "quietly confident" about Tesco's turnaround, admitting the group hit a low point at the end of last year.
"We obviously had some issues to deal with, we dealt with them. It meant that in the second half of last year we made no profit whatsoever in the UK.
"So if I compare to the second half of last year, the first half of this year feels like we've made some progress," Mr Lewis said.
"Our sales are growing compared to where they were either a year ago, or indeed in the second half of last year. And we've generated some profit as we rebuild the profitability of Tesco business. But importantly at the same time, improving what it is we're doing for our customers."
'Hurdles to overcome'
Mike Dennis, of global financial services firm Cantor Fitzgerald Europe, described Tesco's interim results as "disappointing".
"The risk now is that Tesco's recovery needs more time, requires more restructuring and asset sales and, with less cash flow, could require a rights issue to lower the indebtedness," he said.
Charles Hanover, investments partner at Dafydd Davies, said: "Tesco did not have a great set of numbers, but they were marginally better than expected.
"In the medium term, it's still a strong business, but in the short term, they still have hurdles to overcome in terms of competition from cheaper rivals."
Tesco has confirmed it will cost it about £500m to meet the government's proposed National Living Wage rate of £9 an hour by 2020.
Mr Lewis said the group already paid more than the £7.20 minimum which is being brought in under the National Living Wage plans next April.
He added that extra staff benefits already brought its hourly rate closer to £9.
Tesco has completed the sale of its Homeplus stores in South Korea, reducing its debt by £4.2bn.
It has decided to keep its Dunnhumby data business which runs its Clubcard loyalty scheme, after failing to attract enough interest in its sale.
In April, Tesco reported the worst results in its history, with a record statutory pre-tax loss of £6.4bn for the year to the end of February.
The supermarket is still under a criminal investigation by the Serious Fraud Office (SFO) after it admitted overstating its profits by £326m nearly a year ago.
Mr Lewis declined to comment in a BBC interview on reports that the company was close to striking a deal with the SFO.
The results come a week after rival Sainsbury's forecast better-than-expected full-year profits, but the big four supermarkets continue to be under pressure from discount retailers Aldi and Lidl.
Tesco shares closed up 2.5%, or 4.8p, at 197p.