Tesco 2006 Annual Report Download

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ANNUAL REPORT AND FINANCIAL STATEMENTS 2006

Table of contents

  • Page 1
    A N N U A L R E PO RT A N D F I N A N C I A L STAT E M E N T S 2 0 0 6

  • Page 2
    ...(£m) New underlying diluted earnings per share (p) Diluted earnings per share (p) Dividend per share (p) Group enterprise value (£m) (market capitalisation plus net debt) 20.30 19.92 8.63 30,841 12.7% £m Return on capital employed (ROCE) Non-GAAP measure: new underlying profit Profit before tax...

  • Page 3
    ...foundation of Tesco's success in recent years. Its objectives are: • to grow the core UK business, • to become a successful international retailer, • to be as strong in non-food as in food, and • to develop retailing services - such as Tesco Personal Finance, Telecoms and tesco.com Tesco has...

  • Page 4
    ...challenging year. By investing to improve the shopping experience for customers in our businesses around the world, we have been able to deliver another strong sales performance, meet the demands of higher oilrelated and other external costs and improve returns for shareholders. Year end convergence...

  • Page 5
    ... of the current year. Through good cost control and productivity we have absorbed significant external cost increases during the year, particularly during the second half, arising mainly from higher oil-related costs and increases in local business taxes. Consequently, UK operating profit was 14...

  • Page 6
    ... in seven customers buy from our clothing department each week. We sell three million mugs a year. Operating and financial review continued Net finance costs were £127m (last year £132m), giving interest cover of 18.6 times (last year 15.3 times). Tax has been charged at an effective rate of 29...

  • Page 7
    ... equity and commodities. It offers the prospect, over time, of returns that should make the scheme more cost efficient for the members and the business. In 2005, the scheme's assets appreciated by around 20%. IFRSs require that we value pension scheme liabilities using a high quality corporate bond...

  • Page 8
    ... through our Steering Wheel and others are tracked as a monitor of investor return. 2006* 2005†Sales growth Change in Group sales over the year (including value added tax) UK sales growth International sales growth International sales growth (at constant exchange rates) Profit before tax...

  • Page 9
    ...the Executive Directors, to ensure they are tailored to drive the priorities of each business. Each business operates a Steering Wheel, our balanced scorecard. This year we have rolled-out our Corporate Responsibility management system to our International operations. Each business reports quarterly...

  • Page 10
    ...International businesses delivered a solid performance this year, despite challenging economic and competitive conditions in some markets. With rising customer numbers, good sales growth, growing local scale, increasing store maturity and the benefits of central distribution, performance and returns...

  • Page 11
    ... products to the introduction of a Cherokee clothing range - have also contributed. Customer numbers are up significantly and this is driving large market share gains. • In the Czech Republic, the business has delivered strong sales and profit growth despite very competitive market conditions...

  • Page 12
    ...bring the Tesco offer and lower prices to neighbourhoods. 115 new Express stores opened during the year, bringing the overall total to over 650. A further 130 new Expresses are planned for 2006/07, as we focus on organic expansion. On 6 April, we submitted a response to the Office of Fair Trading on...

  • Page 13
    ... returned to Tesco through two cash dividend payments. This has reduced Tesco's net investment in the joint venture to £141m. TPF now have over 5m customer accounts, of which 1.8m are credit cards and 1.4m are motor insurance policies. Customer numbers are up over 200,000 on last year. Tesco plc...

  • Page 14
    ... In the UK, we offer our staff a market-leading package of pay and benefits. Employee Share Schemes Over 165,000 of our people have a personal stake in Tesco. Our Shares in Success and Save as You Earn schemes resulted in our people receiving benefits of £181m this year. Training and Development We...

  • Page 15
    ... new age of the ready meal. We aim to offer our customers the convenience of either large or small stores. One in ten women in the UK buy Tesco makeup. air from chilled areas is re-used for air conditioning. Our second model energy efficient store has now opened in Swansea. Our investments will...

  • Page 16
    ...USDAW) in the UK and build relationships with trade unions in our International operations. There are clear processes for understanding and responding to employees needs through our People Management Group, staff surveys, regular performance reviews and regular communication of business developments...

  • Page 17
    ... integrity at all times, especially for our own label products. There are strict product safety processes and regular management reports. We work in partnership with suppliers to ensure mutual understanding of the standards required. The business also monitors developments in areas such as health...

  • Page 18
    ...last year 5.4%). Foreign currency risk management Our principal objective is to reduce the effect of exchange rate volatility on short-term profits. Transactional currency exposures that could significantly impact the Income Statement are hedged, typically using forward purchases or sales of foreign...

  • Page 19
    ... On-line Photo Centre last year, available through tesco.com Customers can buy everything under one roof in our Extra stores. We hedge the majority of our investments in our international subsidiaries via foreign exchange transactions in matching currencies. Our objective is to maintain a low cost...

  • Page 20
    ...in the issued share capital of the Company. Directors and their interests The names and biographical details of the present Directors are set out in the separately published Annual Review and Summary Financial Statement 2006. Mr C L Allen, Mr R Brasher, Mr P A Clarke and Mr A T Higginson retire from...

  • Page 21
    ...-related share option scheme (Save-AsYou-Earn) and the partnership share plan (Buy-As-You-Earn). Political and charitable donations Cash donations to charities amounted to £15,047,768 (2005 - £4,576,210). Contributions to community projects including gifts-in-kind, staff time and management costs...

  • Page 22
    ... process. Biographies for the Board Directors can be found on pages 40-41 of the Annual Review and Summary Financial Statement 2006. Board responsibilities The Board meets eight times a year and annually devotes two days to a conference with senior executives on performance and longer-term planning...

  • Page 23
    ...once a year. The Audit Committee's Terms of Reference are reviewed annually and represent current best practice. This year the Committee met four times. To facilitate the members' understanding of the Group's international affairs, a special meeting was held in Asia in 2005. The need for training is...

  • Page 24
    ... overall system and report on its effectiveness. Background The Group has a five-year rolling business plan to support the delivery of the Company's strategy of long-term growth in returns for shareholders. Every business unit and support function derives its objectives from the five-year plan and...

  • Page 25
    ... Directors with relevant financial expertise, Executive Directors and members of senior management. The Committee usually meets twice a year and its role is to review and agree the Finance plan on an annual basis, to review reports of the Treasury function and to review and approve Treasury limits...

  • Page 26
    .... It meets at least four times a year to support, develop and monitor policies on SEE issues, reviewing threats and opportunities for the Group. We have, this year, decided to monitor our corporate responsibility work and KPIs under a specific 'Community' segment on our Steering Wheel. The Board...

  • Page 27
    ... also provided advisory services in respect of share schemes, pensions and taxation to the Group during the year. Members' attendance at Committee meetings is listed in the Directors' Corporate Governance report on page 22. The role of the Committee The Remuneration Committee's key objectives are to...

  • Page 28
    ... car benefits, chauffeurs, life assurance, disability and health insurance, gym/leisure club membership and staff discount); and • pensions. Executive Directors are also eligible to participate in the Company's all-employee savings related share option scheme (SAYE), Shares in Success and Buy...

  • Page 29
    ...account a number of factors including: • the level of ROCE; • the expected ROCE for additional and existing capital investment; • whether capital spend is in line with strategic objectives and balances short-term and long-term investment needs; and • whether this reflects other developments...

  • Page 30
    ... share investment plan for the benefit of employees including Executive Directors. Under this scheme, employees save up to a limit of £110 on a fourweekly basis to buy shares at market value in Tesco PLC. Pensions The retention of key management is critical to the future success of the business...

  • Page 31
    ... resignation or unacceptable performance or conduct) the Company will pay, by way of liquidated damages, a sum calculated on the basis of basic salary and the average annual bonus paid for the last two years. No account will be taken of pension or any other benefit or emolument. Termination payments...

  • Page 32
    ...of car benefits, chauffeurs, disability and health insurance, staff discount and gym/leisure club membership. (b) The long-term performance-related emoluments relate to the additional 12.5% enhancements allocated on long-term awards made in 2001 and short-term awards made in 2003 under the old bonus...

  • Page 33
    ... of the Directors Age at 25 February 2006/ Years of Company service Total accrued pension at 25 February 2006(a) £000 Increase in accrued pension during the year £000 Increase in accrued pension during the year (net of inflation) £000 Transfer value of previous column at 25 February 2006 £000...

  • Page 34
    Directors' remuneration report continued Table 4 Share options held by Directors and not exercised as at 25 February 2006 Executive share option schemes (1984), (1994) and (1996) and Discretionary Share Option Plan (2004) Options as at 26 Feb 2005 Options granted in year....04.2005 Total 32 Tesco plc

  • Page 35
    ... conditions measured over three years as set out on page 27. (c) The market price at exercise is shown in Table 3. Table 5 Share options held by Directors and not exercised at 25 February 2006 Savings-related share option scheme ...2001 08.11.2002 06.11.2003 04.11.2004 02.11.2005 Total Tesco plc 33

  • Page 36
    ...' remuneration report continued Table 5 Share options held by Directors and not exercised at 25 February 2006 continued Savings-related share option scheme (1981) As at 26 Feb 2005 Options granted in year Options exercised in year (c) As at 25 Feb 2006 Exercise price (pence) Value realisable 2006...

  • Page 37
    ... on award was 311.0 pence. The number of shares under option was increased at the time of the interim dividend to reflect dividend equivalents in lieu of the interim dividend, at a market price of 312.5 pence. (b) No options lapsed in the year. (c) No options were exercised in the year. Tesco plc...

  • Page 38
    Directors' remuneration report continued Table 8 Directors' interests in the long-term incentive plan Name Year of release Award date No of shares at 26 Feb 2005 Shares awarded during year Shares released during year No of shares at 25 Feb 2006 Value released £000 Release date Market price on ...

  • Page 39
    ...8 Directors' interests in the long-term incentive plan continued Name Year of release Award date No of shares at 26 Feb 2005 Shares awarded during year Shares released during year No of shares at 25 Feb 2006 Value released £000 Release date Market price on release (pence) Mr T J R Mason 2006 2006...

  • Page 40
    ... Between 25 February 2006 and 24 April 2006, 402 shares were purchased by Executive Directors as part of the BAYE scheme. (b) Options to acquire ordinary shares shown above comprise options under the executive share option schemes, options under the savings-related share option scheme (1981) and nil...

  • Page 41
    ... 1 Accounting policies 2 Segmental reporting 3 Income and expenses 4 Employment costs 5 Finance income and costs 6 Taxation 7 Discontinuing operations and assets classified as held for sale 8 Dividends 9 Earnings per share and diluted earnings per share 10 Goodwill and intangible assets 11 Property...

  • Page 42
    ... statements comply with the Companies Act 1985. The Directors are responsible for the maintenance and integrity of the Annual Review and Summary Financial Statement and Annual Report and Financial Statements published on the Group's corporate website. Legislation in the UK concerning the preparation...

  • Page 43
    ... company financial statements of Tesco PLC for the year ended 25 February 2006 and on the information in the Directors' remuneration report that is described as having been audited. Respective responsibilities of directors and auditors The Directors' responsibilities for preparing the Annual Report...

  • Page 44
    ... Finance income Finance costs Profit before tax Taxation Profit for the period from continuing operations Discontinuing operation Loss for the period from discontinuing operation Profit for the year Attributable to: Equity holders of the parent Minority interests 1,570 6 1,576 Earnings per share...

  • Page 45
    ... of available-for-sale investments Foreign currency translation differences Actuarial losses on defined benefit pension schemes Gains/(losses) on cash flow hedges: - net fair value gains - reclassified and reported in the Income Statement Tax on items taken directly to equity Net expense recognised...

  • Page 46
    ... other liabilities Post-employment benefit obligations Other non-current liabilities Deferred tax liabilities Provisions Net assets Equity Share capital Share premium account Other reserves Retained earnings Equity attributable to equity holders of the parent Minority interests Total equity 25 24/25...

  • Page 47
    ... share capital Repayments of borrowings New finance leases Repayments of obligations under finance leases Dividends paid Own shares purchased Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate...

  • Page 48
    ... an entity whose operating and financing policies are controlled, directly or indirectly, by Tesco PLC. The accounts of the parent Company's subsidiary undertakings are prepared to dates around the Group year end apart from Tesco Taiwan Co. Limited, which for this reporting period have been prepared...

  • Page 49
    ... year Income Statement is to reduce the annual land premia amortisation charge from £21m to nil. Revenue Revenue consists of sales through retail outlets and sales of development properties. Revenue is recorded net of returns, vouchers and value-added taxes, when the significant risks and rewards...

  • Page 50
    ... the profit or loss from the sale is recognised immediately. Following initial recognition, the lease treatment is consistent with those principles described above. Business combinations and goodwill All business combinations are accounted for by applying the purchase method. On acquisition...

  • Page 51
    ... Employees (including Directors) of the Group receive part of their remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The fair value of employee share option plans is calculated...

  • Page 52
    ... in foreign currencies are translated at exchange rates prevailing at the date of the Group Balance Sheet; profits and losses are translated into Pounds Sterling at average exchange rates for the relevant accounting periods. Exchange differences arising, if any, are classified as equity and...

  • Page 53
    ... policy for year ended 25 February 2006 The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. The Group does not hold or issue derivative financial instruments for trading...

  • Page 54
    ...21 'The effect of changes in foreign exchange rates: net investment in a foreign operation', IFRIC 4 'Determining whether an arrangement contains a lease', IFRIC 6 'Liabilities arising from participating in a specific market - waste electrical and electronic equipment', IFRIC 8 'Scope of IFRS 2' and...

  • Page 55
    ... UK £m Rest of Europe £m Asia £m Total £m Discontinuing operation £m Total Group £m Year ended 25 February 2006 Revenue Sales (excluding VAT) to external customers Result Segment operating profit/(loss) Share of post-tax profit from Joint ventures and Associates Net finance costs Profit/(loss...

  • Page 56
    ... operations UK £m Rest of Europe £m Asia £m Total £m Discontinuing operation £m Total Group £m Year ended 26 February 2005 Revenue Sales to external customers Result Segment operating profit/(loss) Share of post-tax profit from Joint ventures and Associates Net finance costs Profit/(loss...

  • Page 57
    ...Group pension scheme. A description of the work of the Audit Committee is set out in the corporate governance report on pages 21 to 23 and includes an explanation of how auditor objectivity and independence is safeguarded when non-audit services are provided by PricewaterhouseCoopers LLP. Tesco plc...

  • Page 58
    ...Note 4 Employment costs, including Directors' remuneration 2006 £m 2005 £m Wages and salaries Social security costs Post-employment benefits Share-based payments expense - equity settled 3,473 271 335 190 4,269 3,033 217 273 173 3,696 The average number of employees during the year was: UK 261...

  • Page 59
    ... in the Income Statement 2006 £m 2005 £m Current tax expense UK corporation tax Foreign tax Adjustments in respect of prior years Deferred tax expense Origination and reversal of temporary differences Benefit of tax losses recognised Benefit of tax losses recognised - adjustments in respect...

  • Page 60
    ... current and prior year: Accelerated tax depreciation £m Retirement benefit obligation £m Share-based payments £m Short-term timing differences £m IAS 32 and IAS 39 £m Tax losses £m Total £m At 28 February 2004 Charge to the Income Statement Charge to equity Foreign exchange differences At...

  • Page 61
    ... financing activities (6) (6) 10 (2) 3 (4) 2 1 Balance Sheet 2006 £m Property, plant and equipment Investment property Investment in Joint venture Inventories Trade and other receivables Cash and cash equivalents Assets of the disposal group Bank loans and overdrafts Trade and other payables...

  • Page 62
    ... members on 5 May 2006. Note 9 Earnings per share and diluted earnings per share Basic earnings per share amounts are calculated by dividing the profit attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share...

  • Page 63
    ... £m Cost At 26 February 2005 Foreign currency translation Additions Acquisitions through business combinations Reclassification across categories Disposals At 25 February 2006 Accumulated amortisation and impairment losses At 26 February 2005 Foreign currency translation Amortisation for the year...

  • Page 64
    ... which are reviewed by the Board. The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected changes in margins. Management estimates discount rates using pre-tax rates that reflect current market assessment of the time value of money and the...

  • Page 65
    ... losses At 26 February 2005 Foreign currency translation Charge for the year Reclassification across categories Classified as held for sale Disposals Impairment losses Reversal of impairment losses At 25 February 2006 Net carrying value (b)(c)(d) At 25 February 2006 At 26 February 2005 Capital work...

  • Page 66
    ... continued Note 11 Property, plant and equipment continued Plant, equipment, fixtures and fittings and motor vehicles £m Land and buildings £m Total £m Cost At 28 February 2004 Foreign currency translation Additions (a) Acquisitions through business combinations Reclassification across...

  • Page 67
    ...the time value of money and the risks specific to the cash-generating units. Changes in selling prices and direct costs are based on past experience and expectations of future changes in the market. The forecasts are extrapolated beyond five years based on estimated long term growth rates (generally...

  • Page 68
    ... statements continued Note 12 Investment property £m Cost At 26 February 2005 Foreign currency translation Additions Transfers Classified as held for sale Disposals At 25 February 2006 Accumulated depreciation and impairment losses At 26 February 2005 Foreign currency translation Charge for the...

  • Page 69
    ... issued ordinary share capital, and voting rights Country of incorporation Tesco Stores Limited* Tesco Distribution Limited* Tesco Property Holdings Limited* Tesco Insurance Limited* Valiant Insurance Company Limited One Stop Stores Limited (formerly T&S Stores Limited) Tesco Ireland Limited* Tesco...

  • Page 70
    ...) Management Limited* The Tesco Property (No. 2) Limited Partnership* Tesco Personal Finance Group Limited Tesco Home Shopping Limited Tesco Mobile Limited* dunnhumby Limited* Nutri Centres Limited* Taiwan Charn Yang Developments Limited* Hymall* Retail Property Company Limited* Tesco Card Services...

  • Page 71
    ... February 2006 was £3m (2005 - £2m). Associates The Group's principal associates are: Share of issued capital, loan capital and debt securities Country of incorporation and principal country of operation Business activity Greenergy Fuels Limited GroceryWorks Holdings Inc Fuel Supplier Internet...

  • Page 72
    ...'s Other investments during the year: £m At 26 February 2005 Restatement as at 27 February 2005 under IAS 39 At 27 February 2005 - restated Additions Revaluation through equity At 25 February 2006 7 (7) - 2 2 4 Note 15 Inventories 2006 £m 2005 £m Goods held for resale Development properties...

  • Page 73
    ...Cash and cash equivalents 2006 £m 2005 £m Cash at bank and in hand Short-term deposits 964 361 1,325 800 346 1,146 The effective rate of interest on short-term deposits is 3.9% and the average maturity term is 2 weeks. Note 18 Trade and other payables Current 2006 £m 2005 £m Trade payables...

  • Page 74
    ... the RPI over the life of the MTN. The maximum indexation of the principal in any one year is 5%, with a minimum of 0%. (e) The other MTNs are of various maturities and include Pounds Sterling and foreign currency denominated notes, swapped into floating rate Pounds Sterling. (f) Various bank loans...

  • Page 75
    ... issued to finance the Group's operations: Short-term borrowings Long-term borrowings Finance leases (Group as lessor - note 31) Finance leases (Group as lessee - note 31) Cash and cash equivalents Derivative financial instruments held to manage the interest rate and currency profile: Interest rate...

  • Page 76
    ... in interest rates and foreign exchange rates. The fair value of swaps used for fair value hedging at the Balance Sheet date was a liability of £100m. Cash flow hedges The Group uses forward foreign exchange contracts and currency options to hedge the cost of future purchases of goods for resale...

  • Page 77
    ... in 2025, was outstanding as at 26 February 2005 and was classified as fixed rate debt. The interest rate payable on this debt was 3.322% and the principal was linked to the Retail Price Index. The maximum indexation of the principal in any one year is 5.0% and the minimum is 0.0%. Tesco plc 75

  • Page 78
    ... Short-term borrowings Long-term borrowings Finance leases (Group as lessee) Short-term deposits Cash at bank and in hand Derivative financial instruments held to manage the interest rate and currency profile: Interest rate swaps and similar instruments Interest rate options Forward foreign currency...

  • Page 79
    ... nominal value forward foreign exchange contracts hedging the cost of foreign currency denominated purchases. On a marking-to-market basis, these contracts showed a loss of £15m. The fair values of interest rate swaps, forward foreign exchange contracts and long-term fixed rate debt were determined...

  • Page 80
    ... schemes The Company had eight share option schemes, all of which are equity-settled 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...

  • Page 81
    ...exercise price (WAEP): For the year ended 25 February 2006 Savings-related share option scheme Options WAEP Irish savings-related share option scheme Options WAEP Approved share option scheme Options WAEP Unapproved share option scheme Options WAEP International executive share option scheme Options...

  • Page 82
    ... percentage of salary and is paid partly in cash and partly in shares. Bonuses are awarded to eligible employees that have completed a required service period and depend on the achievement of corporate targets. The Executive Directors participate in short-term and long-term bonus schemes designed to...

  • Page 83
    ... represented 95% of the benefits that had accrued to members, after allowing for expected increases in earnings and pensions in payment. The T&S Stores PLC Senior Executive Pension Scheme is a funded defined benefit scheme open to senior executives and certain other employees at the invitation of...

  • Page 84
    ... +25 years at age 65: Male Female The assets in the defined pension schemes and the expected rates of return were: 2006 Long term rate of return % Market value £m Long term rate of return % 2005 Market value £m Long term rate of return % 2004 Market value £m Equities Bonds Property Other Total...

  • Page 85
    ... of the amount charged to Operating profit: Current service cost Total charge to Operating profit Analysis of the amount credited/(charged) to Finance income: Expected return on pension schemes' assets Interest on pension schemes' liabilities Net pension finance income (note 5) Total charge to the...

  • Page 86
    ... the annual service and interest cost Effect on defined benefit obligations 0.1 1.0 Expected contributions The Group expects to make contributions of approximately £320m to defined benefit pension schemes in the UK and overseas in the year ending 24 February 2007. Note 24 Called up share capital...

  • Page 87
    ...earnings Minority interests Total At 29 February 2004 Foreign currency translation differences Actuarial losses on defined benefit plans Tax on items taken directly to or transferred from equity Cost of share-based payments Issue of shares Profit for the year Equity dividends authorised in the year...

  • Page 88
    ... undertakings. The employee benefit trusts hold shares in Tesco PLC for the purpose of the various executive share incentive and profit share schemes. At 25 February 2006, the trusts held 48.4 million shares (2005 - 70.9 million), which cost £140m (2005 - £185m) and had a market value of £163m...

  • Page 89
    ...the Group's pension plans are disclosed in note 23. Tesco Stores Limited is a member of one or more partnerships to whom the provisions of the Partnerships and Unlimited Companies (Accounts) Regulations 1993 apply ('Regulations'). The accounts for those partnerships have been consolidated into these...

  • Page 90
    ... in trade payables Increase in other payables Decrease in working capital (a) Cash generated from operations (b) (a) The decrease in working capital includes the impact of translating foreign currency working capital movements at average exchange rates rather than year end exchange rates. (b) The...

  • Page 91
    ... relating to the store development programme. Contingent liabilities The Company has irrevocably guaranteed the liabilities as defined in section 5(c) of the Republic of Ireland (Amendment Act) 1986, of various subsidiary undertakings incorporated in the Republic of Ireland. Tesco Personal Finance...

  • Page 92
    ...- 6 11 17 - - - 6 11 17 - - - The Group entered into finance leasing arrangements with UK staff for certain of its electronic equipment as part of the Computers for Staff scheme. The average term of finance leases entered into is 3 years. The interest rate inherent in the leases is fixed at the...

  • Page 93
    ..., financial performance and cash flows is set out in the following tables and the accompanying notes. Reconciliation of profit For the year ended 26 February 2005 Reported under UK GAAP £m Share-based Business payments combinations IFRS 2 IFRS 3 £m £m Employee benefits IAS 19 £m Presentation...

  • Page 94
    ... payables Short-term borrowings Current tax liabilities Provisions Net current liabilities Non-current liabilities Long-term borrowings Post-employment benefit obligations Other non-current liabilities Deferred tax liabilities Provisions Net assets Equity Share capital Share premium account Other...

  • Page 95
    Investment property IAS 40 £m Intangible assets IAS 38 £m Leasing IAS 17 £m Share-based payments IFRS 2 £m Impairment of fixed assets IAS 36 £m Deferred tax IAS 12 £m ...17 - - - (127) (127) - (127) - - - (79) (79) - (79) - - - 1 1 - 1 384 3,470 40 3,799 7,693 45 7,738 Tesco plc 93

  • Page 96
    ... payables Short-term borrowings Current tax liabilities Provisions Net current liabilities Non-current liabilities Long-term borrowings Post-employment benefit obligations Other non-current liabilities Deferred tax liabilities Provisions Net assets Equity Share capital Share premium account Other...

  • Page 97
    Investment property IAS 40 £m Intangible assets IAS 38 £m Leasing IAS 17 £m Share-based payments IFRS 2 £m Impairment of fixed assets IAS 36 £m Deferred tax IAS 12 £m Other ... - - (135) (135) - (135) - - - (94) (94) - (94) - - - 3 3 - 3 389 3,704 40 4,470 8,603 51 8,654 Tesco plc 95

  • Page 98
    ... February 2005 relating to the share option schemes are £25m and £49m, respectively. b) Share Bonus Schemes Under UK GAAP the Group expensed share bonus schemes by applying the rules of UITF 17. Whereas the UK GAAP Profit and loss account charge was based on the intrinsic value of the award, the...

  • Page 99
    ... on net assets/profit after tax (1) - - (1) (12) 4 3 (5) (13) 4 3 (6) Employee benefits (IAS 19) Post-employment benefits For UK GAAP reporting, we applied the measurement and recognition policies of SSAP 24 'Accounting for pension costs' for pensions and other post-employment benefits, whilst...

  • Page 100
    ...losses will be taken directly to equity. The incremental pre-tax Income Statement charge for 2004/05 from the adoption of IAS 19 is £41m. This is split between the current service cost (increases operating costs by £45m) and the return on plan assets (increases finance income by £4m). The related...

  • Page 101
    ...cash flow information to include these cash equivalents. £m Increase in cash as reported under UK GAAP Movement on short-term deposits (cash equivalents under IFRSs) Increase in cash and cash equivalents (per IFRS definition) Cash and cash equivalents as at 29 February 2004 Effect of exchange rate...

  • Page 102
    ...taken...equipment Investment property Investments in Joint ventures and Associates Other investments Deferred tax assets Current assets Inventories Trade and other receivables Derivative financial instruments Cash and cash equivalents 1,309 769 - 1,146 3,224 Current liabilities Trade and other payables...

  • Page 103
    ... instruments and other liabilities (a) Post-employment benefit obligations Other non-current liabilities Deferred tax liabilities (b) Provisions Net assets Equity Share capital Share premium account Other reserves Retained earnings Equity attributable to equity holders of the parent Minority...

  • Page 104
    ...been restated to remove the Taiwanese business which is held for sale. Results for the year ended 25 February 2006 include 52 weeks for the UK and ROI and 14 months for International. 3 Operating profit includes integration costs and profit/(loss) arising on sale of fixed assets. Operating margin is...

  • Page 105
    ...earning per share8 Dividend per share9 Return on shareholders' funds10 Return on capital employed11 Group statistics Number of stores12 Total sales area - 000 sq ft12/13 Full-time equivalent employees UK retail statistics Number of stores Total sales area - 000 sq ft13 Average store size (sales area...

  • Page 106
    ... less current liabilities Creditors - amounts falling due after more than one year Borrowings Derivative financial instruments Net assets Capital and reserves Called up share capital Share premium account Profit and loss reserve Total equity 13 14 14 9 10 9 10 8 10 6 7 5 7,382 70 4,857 90 5,017...

  • Page 107
    ...are stated at cost less, where appropriate, provisions for impairment. Foreign currencies Assets and liabilities in foreign currencies are translated into Pounds Sterling at the financial year end exchange rates. Share-based payments Employees of the Company receive part of their remuneration in the...

  • Page 108
    ... instrument which does not meet the criteria for an effective hedge is recognised immediately in the Profit and loss account. Derivative instruments qualifying for cash flow hedging are principally forward foreign exchange transactions and currency options. Hedge accounting is discontinued when the...

  • Page 109
    .... Note 3 Employment costs 2006 £m 2005 £m Wages and salaries Social security costs Pension costs Share-based payment expense - equity settled 16 8 2 2 28 13 1 1 2 17 The average number of employees during the year was: 15 (2005 - 15). Note 4 Dividends For details of equity dividends see note...

  • Page 110
    Notes to the Parent company financial statements continued Note 7 Current asset investments and deposits 2006 £m 2005 £m Bonds and certificates of deposit 90 150 Note 8 Other creditors 2006 £m 2005 £m Amounts falling due within one year: Corporation tax Other tax and social security Amounts...

  • Page 111
    ... are disclosed below: 2006 Carrying value £m Fair value £m Primary financial instruments held or issued to finance the Company's operations: Short-term borrowings Long-term borrowings Derivative financial instruments held to manage the interest rate and currency profile: Interest rate swaps and...

  • Page 112
    ... to reward Executive Directors. For further information on these schemes, including the valuation models and assumptions used, see note 22 to the Group financial statements. The number of options and weighted average exercise price (WAEP) of share option schemes relating to Tesco PLC's employees are...

  • Page 113
    ... 2006, the Directors were authorised to purchase up to a maximum in aggregate of 778.7 million ordinary shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the meetings of the Company. Tesco plc 111

  • Page 114
    ...' Deferred tax on changes in accounting policies Profit and loss reserve restated Gain/(loss) on foreign currency net investments Tax effect of exchange adjustment offset in reserves FRS 20 'Share-based payment' Dividend Profit after tax for the financial year At the end of the year 261 410 (60) 24...

  • Page 115
    ...on the Group financial statements of Tesco PLC for the year ended 25 February 2006. Respective responsibilities of directors and auditors The Directors' responsibilities for preparing the Annual Report, the Directors' remuneration report and the parent company financial statements in accordance with...

  • Page 116
    ... 50% Recycled Fibre. The FSC logo identifies products which contain wood from well managed forests certified in accordance with the rules of the Forest Stewardship Council. Cover: Shah Alam hypermarket, Kuala Lumpur, Malaysia Tesco PLC, Tesco House, Delamare Road, Cheshunt, Hertfordshire EN8 9SL