Tesco 2002 Annual Report Download

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TESCO PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2002

Table of contents

  • Page 1
    TESCO PLC ANNUAL REPORT AND FINANCIAL STATEMENTS 2002

  • Page 2
    UNITED KINGDOM REPUBLIC OF IRELAND HUNGARY POLAND CZECH REPUBLIC SLOVAK REPUBLIC THAILAND TESCO OPERATES 979 STORES , EMPLOYS 260,000 SOUTH KOREA PEOPLE , GIVING US ACCESS TO A POPULATION OF TAIWAN 280 MILLION ACROSS OUR 10 MARKETS MALAYSIA

  • Page 3
    ... GROUP SALES G RO U P S A L E S £ m UP UP UP UP 5 7 10 DIRECTORS ' REPORT CORPORATE GOVERNANCE REPORT OF THE DIRECTORS ON REMUNERATION GROUP PROFIT BEFORE TAX †EARNINGS PER SHARE †(adjusted diluted) 1,070 RESPONSIBILITIES INDEPENDENT AUDITORS ' REPORT 16 GROUP PROFIT AND LOSS ACCOUNT...

  • Page 4
    ...to accounting for 2002 £m 2001 £m Change % the net loss on disposal of fixed assets and goodwill amortisation, our underlying tax rate was 30.4% (2001 - 31.1% ‡). SHAREHOLDER RETURNS AND DIVIDENDS Sales (including value added tax) 1,494 29 919 4 62.6 625.0 Operating profit 1 year 3 years...

  • Page 5
    ... from Thailand and South Korea has been partly offset by startup losses in Taiwan. In Malaysia we plan to open our first hypermarket in May 2002. JOINT VENTURES AND ASSOCIATES 98 2 99 00 02 22 38 102 N U M B E R O F I N T E R N AT I O N A L HYPERMARKETS 98 680 99 837 00 1,216 02 UK SALES...

  • Page 6
    ... the year. FUNDING AND LIQUIDITY Our principal objective is to reduce the risk to shor t-term profit of exchange rate volatility. Currency exposures that could significantly impact the profit and loss account are hedged, typically using forward purchases or sales of foreign currencies. However...

  • Page 7
    ...Tesco employee profit-sharing scheme, the savings-related share option scheme (Save-As-You-Earn) and the Partnership Share Plan (Buy-As-You-Earn). The Directors recommend the payment of a final dividend of 3.93p per ordinary share to be paid on 28 June 2002 to members on the Register at the close...

  • Page 8
    ... the year the Group made contributions of £3,200 (2001 - nil) in the form of sponsorship for political conferences. SUPPLIER PAYMENT POLICY Tesco PLC is a signatory to the CBI Code of Prompt Payment. Copies of the Code may be obtained from the CBI, Centre Point, 103 New Oxford Street, London WC1A...

  • Page 9
    ...-making process. The full Board meets ten times a year and annually devotes two days to a conference with senior executives on longer-term planning giving consideration both to the opportunities and risks of future strategy. The Board manages overall control of the Group's affairs by the schedule of...

  • Page 10
    ... Tesco PLC Pension Scheme. The trustee company Board comprises one Executive Director, three senior managers and five members appointed from staff and pensioners. Management of the assets is delegated to a number of independent fund managers. These fund managers have discretion to invest in shares...

  • Page 11
    ...the year ended 23 February 2002 the company has been in compliance with all of the Code Provisions set out in Section 1 of the Combined Code on Corporate Governance, except as with regard to provision B.1.7 on the length of Directors' service agreements, details of which are set out in the report of...

  • Page 12
    ...to base salary earned up to Inland Revenue approved limits. PARTNERSHIP SHARES Executive Directors are included in executive share option schemes (ESOS), and are eligible to join the employees' savings-related share option scheme (SAYE) when they have completed one year's service. Executive options...

  • Page 13
    TESCO PLC 11 PENSIONS NON - EXECUTIVE DIRECTORS Executive Directors are members of the Tesco PLC Pension Scheme which provides a pension of up to two-thirds of base salary on retirement, normally at the age of 60, dependent upon service. The scheme also provides for dependants' pensions and lump...

  • Page 14
    ... the number of options exercised. The market price of the shares at 23 February 2002 was 253.50p. The share price during the 52 weeks to 23 February 2002 ranged from 228.75p to 269.50p. TABLE 3 Pension details of the Directors Increase in accrued Transfer pension during value of increase Years of...

  • Page 15
    TESCO PLC 13 TABLE 4 Share options held by Directors and not exercised at 23 February 2002 Number of shares at exercise price (pence) 70.0 (a) 81.0 (a) 90.3 104.0 98.3 151.7 Sub-total 72.3 (a) 72.3 (a) Executive share options schemes (1984), (1994) and (1996) Sir Terry Leahy Mr D E Reid Mr R S ...

  • Page 16
    ... TESCO PLC report of the directors on remuneration TABLE 5 continued Share options held by Directors and not exercised at 23 February 2002 Number of shares Granted (a) Exercised As at 23 Feb 2002 Exercise price pence 2002 £000 Value realisable 2001 £000 As at 24 Feb 2001 Savings-related share...

  • Page 17
    ... Code specified for our review by the Listing Rules, and we report if it does not. We are not required to consider whether the Board's statements on internal control cover all risks and controls, or to form an opinion on the effectiveness of the company's or Group's corporate governance procedures...

  • Page 18
    16 TESCO PLC group profit and loss account 52 weeks ended 23 February 2002 note 2002 £m Restated ‡ 2001 £m Sales at net selling prices Turnover including share of joint ventures Less: share of joint ventures' turnover Group turnover excluding value added tax Operating expenses - Normal ...

  • Page 19
    ... gains and losses 52 weeks ended 23 February 2002 TESCO PLC 17 Group Restated ‡ 2002 £m 2001 £m 2002 £m Company 2001 £m Profit for the financial year Gain/(loss) on foreign currency net investments Total recognised gains and losses relating to the financial year Prior year adjustment...

  • Page 20
    ...TESCO PLC balance sheets 23 February 2002 Group Restated ‡ note £m 2002 £m £m 2001 £m 2002 £m Company 2001 £m Fixed assets Intangible assets Tangible assets Investments Investments in joint ventures Share of gross assets Less: share of gross liabilities Goodwill Investments in associates...

  • Page 21
    ...cash ï¬,ow statement 52 weeks ended 23 February 2002 TESCO PLC 19 note 2002 £m 2001 £m Net cash inï¬,ow from operating activities Dividends from joint ventures and associates Income received from joint ventures and associates Returns on investments and servicing of finance Interest received...

  • Page 22
    20 TESCO PLC accounting policies BASIS OF PREPARATION OF FINANCIAL STATEMENTS MONEY MARKET DEPOSITS These financial statements have been prepared under the historical cost convention, in accordance with applicable accounting standards and the Companies Act 1985. In November and December 2000, ...

  • Page 23
    ...sheet date. PENSIONS Derivative instruments utilised by the Group are interest rate swaps and caps, forward start interest rate swaps, cross currency swaps, forward rate agreements and forward exchange contracts and options. Termination payments made or received in respect of derivatives are spread...

  • Page 24
    ... analysis of sales, turnover, profit and net assets The Group's operations of retailing and associated activities and property development are carried out in the UK, Republic of Ireland, France, Hungary, Poland, Czech Republic, Slovak Republic, Thailand, South Korea and Taiwan. The results...

  • Page 25
    ... 468 8 177 1 2,047 NOTE 6 Employment costs 2002 £m 2001 £m Employment costs during the year Wages and salaries Social security costs Other pension costs (note 27) 2,103 129 104 2,336 Number of persons employed The average number of employees per week during the year was: UK 187,393 (2001 - 177...

  • Page 26
    24 TESCO PLC notes to the financial statements NOTE 8 continued Net interest payable 2002 £m £m £m 2001 £m Interest receivable and similar income on money market investments and deposits Less interest payable on: Short-term bank loans and overdrafts repayable within five years Finance ...

  • Page 27
    ... which the Group considers to have been earned. The calculation compares the difference between the exercise price of exercisable ordinary share options, weighted for the period over which they were outstanding, with the average daily mid-market closing price over the period. 2002 million 2001...

  • Page 28
    ...xed asset investment additions (note 14). NOTE 13 Tangible fixed assets Plant, equipment, fixtures and Land and fittings and buildings motor vehicles £m £m Total £m Cost At 24 February 2001 Currency translation Additions at cost (a) Acquisitions Disposals At 23 February 2002 Depreciation...

  • Page 29
    ... company's principal operating subsidiary undertakings are: Business Share of equity capital Country of incorporation Tesco Stores Limited Tesco Property Holdings Limited Tesco Insurance Limited Tesco Distribution Limited Spen Hill Properties Limited Tesco Ireland Limited Global T.H. Tesco Polska...

  • Page 30
    ... Fixed asset investments continued (b) The Group's joint ventures are: Business Share of issued share capital, loan capital and debt securities Country of incorporation and principal country of operation Shopping Centres Limited BLT Properties Limited Tesco BL Holdings Limited Tesco British Land...

  • Page 31
    ... within one year Group 2002 £m 2001 £m 2002 £m Company 2001 £m Bank loans and overdrafts (a) (b) Trade creditors Amounts owed to Group undertakings Corporation tax Other taxation and social security Other creditors Accruals and deferred income (c) Finance leases (note 23) Dividends 1,474 1,830...

  • Page 32
    30 TESCO PLC notes to the financial statements NOTE 19 continued Creditors falling due after more than one year Group 2002 £m 2001 £m 2002 £m Company 2001 £m 4% unsecured deep discount loan stock 2006 (a) Finance leases (note 23) 8 3⁄4% bonds 2003 (b) 6% bonds 2006 (c) 71⁄2% bonds 2007...

  • Page 33
    ... Gross debt Less: Cash at bank and in hand Money market investments and deposits Net debt Bank and other loans NOTE 21 Financial instruments An explanation of the objectives and policies for holding and issuing financial instruments is set out in the operating and financial review on pages 2 to...

  • Page 34
    ...fees at market rates and would provide funding at ï¬,oating rates. Currency exposures Within the Group, the principal differences on exchange arising which are taken to the profit and loss account relate to purchases made by Group companies in currencies other than their reporting currencies. After...

  • Page 35
    ... taxation Excess capital allowances over depreciation Short-term timing differences 432 8 440 396 6 402 NOTE 23 Leasing commitments Finance leases £m The future minimum finance lease payments to which the Group was committed at 23 February 2002 and which have been guaranteed by Tesco PLC are...

  • Page 36
    ... under the terms of the savings-related share option scheme (1981) and the executive share option schemes (1984, 1994 and 1996) respectively. As at 23 February 2002 the Directors were authorised to purchase up to a maximum in aggregate of 699 million ordinary shares. NOTE 25 Reserves Group 2002...

  • Page 37
    ...26 Share options Company schemes The company had six principal share option schemes in operation during the year: i The savings-related share option scheme (1981) permits the grant to employees of options in respect of ordinary shares linked to a building society/bank save-as-you-earn contract for...

  • Page 38
    36 TESCO PLC notes to the financial statements NOTE 26 continued Share options continued Number of executives and employees Shares under option 23 Feb 2002 Subscription price (pence) Irish savings-related share option scheme (2000) Date of grant 2 June 2000 26 October 2000 8 November 2001 1,...

  • Page 39
    ... year. These disclosures, to the extent not given in (a), are set out in (b). (a) Pension commitments The Group operates a funded defined benefit pension scheme for employees in the UK, the assets of which are held as a segregated fund and administered by trustees. The total cost of the scheme...

  • Page 40
    38 TESCO PLC notes to the financial statements NOTE 27 continued Pensions continued Long-term rate of expected return Market value £m The assets in the schemes and the expected rates of return at 23 February 2002 were: Equities Bonds Property Other Total market value of assets Present value ...

  • Page 41
    ... BL Holdings Limited,Tesco British Land Property Partnership, Tesco Personal Finance Group Limited, Tesco Home Shopping Limited, iVillage UK Limited, dunnhumby Limited, The Nutri Centre Limited,Taiwan Charn Yang Developments Limited, Retail Property Company Limited and Tesco Card Services Limited...

  • Page 42
    ... sales Turnover excluding VAT UK Rest of Europe Asia Underlying operating profit 2 UK Rest of Europe Asia Operating margin 2 UK Rest of Europe Asia Total Group Share of profit /(loss) from joint ventures and associates Net interest payable Underlying pre-tax profit 3 Ireland integration costs...

  • Page 43
    Designed and produced by Corporate Edge 020 7855 5888 • Cover photography by Arnhel De Serra • Printed by CTD Capita

  • Page 44
    Tesco PLC, Tesco House, Delamare Road, Cheshunt, Hertfordshire EN8 9SL Front cover: Customer Assistant Kim Jong-Min at the Homeplus store in Youngdeungpo, South Korea.