Tesco recovery on track as half-year profits leap higher

Tesco hails strong progress as sales rise again

Alastair Lockhart, insight director at shopper marketing agency Savvy, said Tesco's reintroduction of a dividend is the latest in a series of milestones that confirms not only momentum, but pace in the retailer's recovery.

Group revenue rose to £28.3bn, compared with £27.34bn a year earlier, with comparable sales in the United Kingdom and Ireland growing 2.1%.

"However CEO Dave Lewis will no doubt argue that in a world where Sainsbury owns Argos, and Morrisons is flirting with Amazon, he needs to push Tesco on to stay ahead of the game".

Lewis added: "Today's announcement that we are resuming our dividend reflects our confidence that we can build on our strong performance to date and in doing so, create long-term, sustainable value for all of our stakeholders".

A restored interim dividend has been set at 1.0 pence per ordinary share.

Tesco PLC (TSCO.LN) reported Wednesday an eight-fold rise in first-half pretax profit and returned to the dividend list after a three-year hiatus.

It made operating profit before one off items of 759 million pounds ($1 billion) for the six months to August 26 - ahead of analysts' forecasts.

Shares in the group were up two per cent at the open.

The group said its inflation was around 1% lower than across the rest of the supermarket sector as it worked with suppliers to protect customers from inflationary pressures.

The supermarket chain struck a £3.7bn deal to buy food wholesaler Booker in January, which is now being probed by the Competition and Markets Authority.

Regarding its proposed 3.7 billion pounds merger with wholesaler Booker, the company said the merger is now undergoing an in-depth "Phase 2" investigation by the Competition and Markets Authority or CMA.

Credit Suisse, which has an "underperform" rating on Tesco, lowered its price target on the shares from 145p to 140p yesterday, arguing that the group remained most at risk from the continuing rise of discounters Aldi and Lidl.

"The Competition and Markets Authority is due to deliver its findings soon, and the recent plight of Palmer & Harvey, one of Tesco's key suppliers, will serve to underline the potential knock-on effects of the deal".

Tesco agreed to pay a fine of £129m to the Serious Fraud Office earlier this year to avoid prosecution for its 2014 accounting irregularities scandal.