Tesco 2008 Annual Report Download - page 15

Tesco PLC Annual Report and
Financial Statements 2008 13
Tesco Personal Finance (TPF) TPF is ten years old this year and 2007/8
was a successful one for our joint venture with Royal Bank of Scotland –
with 1.7m new customers being attracted by a substantial increase in its
range to 26 products, spanning credit cards to pet insurance and bureaux
de change. New products were launched in health insurance, dental
insurance and internet savings accounts. Most products are available
online, where over 50% of new sales are now made, after a 20% rise in
internet business in the year. The Tesco Compare website, which allows
customers to compare price and non-price product features across a wide
range of providers, has been very successful.
Whilst profits were flat in the year, this was after absorbing £31m of
additional home insurance claims linked to last summer’s severe floods
in Yorkshire and the Thames and Severn valleys.
Tesco.com had another excellent year, with our online businesses achieving
a 31% increase in sales to £1.6bn and a 49% increase in profit to £124m
(before initial operating losses on Tesco Direct), helped by improved order
picking productivity. Customer numbers once again saw strong growth –
we saw 20% growth in new customers during the year leaving more
than one million active customers by the year end. Product availability
has improved again, with more customers receiving everything they
order, and this has been helped by the strong growth in bag-less delivery
to customers, which was launched only in the first half but which now
represents 40% of all orders. We have also seen an improvement in delivery
slot availability of more than 10% and our Croydon dotcom-only store is
now profitable and handling orders with a value of over £1m per week.
Tesco Telecoms Our telecoms business made very good progress, with
promising growth in sales across our mobile, home phone and branded
phone operations. Tesco Mobile, our joint venture with O2, moved from
a small loss in 2006/7 to an encouraging level of profitability – in its fifth
year of operation. Sales were up 39% mainly as a result of strong growth
in its customer base, which grew by a quarter of a million during the year;
the second highest net subscriber increase in its market. Mobile also
remained the best service for overall customer satisfaction throughout
2007. Hardware sales, including handsets, grew well in the year, driving
over 35% growth in our branded telecoms hardware business.
Resources and relationships
Customers Our customers have told us what they want from an ‘Every
little helps’ shopping trip and this year 300,000 shared their ideas on
how to improve the shopping trip for all customers, including those
who attended our in-store Customer Question Time sessions. Clubcard
also helps us to understand what our customers want, whilst allowing us
to thank them for shopping with us – this year we gave away over £380m
in Clubcard vouchers. In the next year we plan to launch versions of
Clubcard in Thailand, Hungary, Turkey, Slovakia and the Czech Republic.
We don’t always get it right but we try to make our customers’ shopping
trip as easy as possible, reduce prices where we can to help them spend
less and give them the convenience of shopping when and where they
want – in small stores, large stores or online.
Employees With over 440,000 staff in 13 countries, we play an important
role in creating employment, fostering skills and generating economic
development. Our people are our most important asset. Looking after
our staff so that they can look after our customers is one of the core values
of the business. We are committed to providing market-leading working
conditions for our staff and we encourage our suppliers to do the same.
In the UK, we offer our staff a market-leading package of pay and benefits:
Employee share schemes Through share ownership and share incentive
schemes, over 170,000 of our people have a personal stake in Tesco. Staff
were awarded shares worth a record £85m last May under our Shares in
Success scheme. 52,000 staff were able to benefit when Save As You Earn
schemes matured in February, giving them access to shares worth £175m.
Training and development We are committed to developing our people
to bring out the best in everyone and do what we can to enable all our
people to reach their potential. All our staff have access to training
programmes and personal development planning to ensure that they
have the right skills to do their job.
Diversity and inclusivity We strive to provide an inclusive environment
where all difference is valued, people are able to be themselves, enjoy
coming to work and realise their full potential, regardless of their gender,
marital status, race, age, sexual preference and orientation, colour, creed,
ethnic origin, religion or belief, or disability.
Suppliers To be a successful, sustainable business we have to ensure
that our drive to bring cheaper prices is achieved without compromising
our standards, reducing quality, damaging the environment or harming
the suppliers and workers who produce the goods we sell. So we take a
partnership approach to working with suppliers – sharing our knowledge
and listening to suppliers’ feedback. This includes providing technical
expertise, advice and insight into customer trends and making regular
payments, on time.
We are one of four signatories to the UK Government’s statutory
Supermarkets Code of Practice. Since the Code’s introduction we have
run tailored training for all Tesco buyers to promote understanding and
compliance. If problems do arise in supplier relationships we aim to air and
resolve them through constructive discussion. To aid this process, three years
ago we appointed a Code Compliance Officer to hear formal complaints,
confidentially if requested, and we hope that our annual Supplier Viewpoint
Survey encourages suppliers to give us more feedback on our relationships.
Our target is for feedback to show that at least 90% of our UK suppliers
view Tesco as being trustworthy, reliable, consistent, clear, helpful and fair.
We carry out ethical audits and target ourselves to cover 100% of our high
risk own brand suppliers and ensure all commercial teams have received
training on supply chain labour standards. This year we carried out
significantly more audits than the previous year – 455 compared to 221.
However the number of sites to be audited also increased significantly to
623 and were disproportionately allocated a high risk rating as the business
continues to expand into non-food areas. The introduction of the Sedex
risk assessment tool in September 2007 also had an impact as a proportion
of medium risk suppliers were reclassified as high risk. As these changes
did not occur until late in the financial year and resources had already been
allocated to improving our auditing programme, we failed to meet our
target. To help us meet our target in future years, we have increased the
resource in our ethical trading team to cope with the higher number of
suppliers as our business grows.
Community, environment and corporate responsibility
People tell us they want us to use our size and reach to be a force for good
in society. To help us meet this challenge we decided in 2006 to introduce
a new Community Plan. This is part of our Steering Wheel, setting out
objectives that the business will deliver. It will ensure we provide the right
resources, energy and focus to meet the expectations of our customers and
other stakeholders in this area.