Tesco 1998 Annual Report Download - page 5

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Tesco Personal Finance
Our new financial services business was launched in July 1997.
It provides a good opportunity to improve service, choice and
value for customers. It now includes Clubcard Plus, Tesco Visa
Card, the Instant Access Savings Account and we are rolling out
Loans and Home Insurance. We are at an early stage in the
development of this business but already we are seeing a real
demand for these products and services from customers. By the
year end, Tesco Personal Finance had over 550,000 accounts with
deposits of nearly £600m. We are currently incurring significant
start-up costs to build the business.This year, our share of the
operating loss was £15m and we expect to incur similar costs in
the year ahead.
Profit sharing
P rofit sharing increased by 9.4% to £35m (1997 – £32m). In
addition staff have also benefited this year from profit related pay.
Interest and taxation
Net interest payable was £65m (1997 – £24m) with the increase
on last year primarily due to the financing costs of our
acquisition in Northern Ireland and the Republic of Ireland.
Corporation tax has been charged at an effective rate of 30.7%
– the same as last year. Prior to accounting for the net loss on
disposal of fixed assets and discontinued operations and the
acquisition provisions, our underlying tax rate was 29%.
Store development and capital expenditure
In the UK we opened 23 stores with a total sales area of 561,500
square feet.This comprised eight superstores, 12 compact stores
and three Metro stores.There were five closures. As part of our
programme to improve our stores and introduce non-food
products, we have added 118,000 square feet through extensions.
In the year ahead, we will add at least a further 200,000 square
feet through extensions, much of which will be utilised to grow
our non-food business.
Our newest trading format, Tesco Extra at Pitsea in Essex,
developed from our extension programme. The initial success
of this store has encouraged us to look at other stores which we
can extend and convert to the Extra format, as well as to open
new ones.
In 1998/99, we plan to open around 650,000 square feet of
new space, comprising 26 stores: two new Extra stores at Cardiff
and Peterborough, three superstores, 17 compact stores, one
Metro store and three Express stores.
Following our acquisition in Ireland, we opened one 30,000
square-foot new store at Athlone. We are currently looking at a
number of potential sites for new and replacement stores in both
Northern Ireland and the Republic of Ireland, in addition to the
store refit programme.
In Central Euro p e , we opened one hypermarket of 86,100 square
feet in Budapest, Hungary. In the year ahead, we plan to open
six hypermarkets: another three in Hungary, two in the Czech
Republic and one in Poland. In total, we will add around
600,000 square feet of new space – almost as much as we will
open in the UK.
G roup capital expenditure was £841m (1997 – £758m) with
£737m in the UK, £63m in Northern Ireland and the Republic
of Ireland, and £41m in the rest of Europe. In the current year,
supported by our strong cashflows, capital expenditure will rise
to around £950m.The increase relates mainly to our
development plans in Northern Ireland and the Republic of
Ireland and more substantially in Central Europe.
95 96 97 98 99
UK new stores sales are a
opened and planned
including Express (000 sq ft)
* fo re c a s t
*
95 96 97 98 99 G roup capital ex p e n d i t u re £m
* fo re c a s t
*
U K
Rest of Euro p e