Tesco 2009 Annual Report Download - page 25

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23
REPORT OF THE DIRECTORS
Tesco PLC Annual Report and Financial Statements 2009
 Capital and Liquidity. TPF’s core Tier 1 capital ratio is 12%. Looking
forward, TPF has strong earnings retention to support planned
business growth and the funding and liquidity position of the business
has also improved as a result of the successful re-launch of TPF as a
savings brand. This is demonstrated by the near-doubling of balances
from £2.5 billion in mid-October to in excess of £4.5 billion by the
year-end. Combined with securing long-term wholesale funding,
this has transformed TPF’s liquidity position – providing high quality
liquid assets and net short-term wholesale cash over £2 billion as
at year-end.
 Commercial. Average lending balances grew slightly in the year,
even after tightening lending criteria to reflect the deteriorating
economic conditions. Good growth has been maintained in the
customer base with total accounts and policies increasing by 8%.
The ATM network continues to grow with over 2,700 now located
across the Tesco store portfolio, which account for 12% of total
market volumes. The insurance business continues to be a significant
contributor to the overall profits, accounting for over 65% of the
underlying profit. New asset quality has remained stable over 2008
and portfolio performance remains favourable to the industry.
TPF continues to monitor closely portfolio and new business quality.
However, the challenging economic conditions throughout the year
have resulted in some increase in bad debt levels and fraud. The
reduction in bank rates in recent months has, however, helped
lending margins, a trend which has continued into 2009/10.
TPF uses a range of techniques to ensure that risk and reward is
balanced and remains committed to responsible lending.
tesco.com delivered another excellent performance, with our online
businesses achieving a 20% increase in sales to £1.9bn, with profits
after initial start-up losses on Tesco Direct, rising to £109m. We are
continuing to see robust growth in customer and order numbers and
operationally the business made further progress, with improved
product availability, and strong productivity. Growth in the international
businesses – in South Korea and Ireland – was very strong.
Telecoms had a good year, with particularly robust growth in Tesco
Mobile. Mobile saw double-digit growth in customer numbers in a flat
pre-pay phone market and an encouraging early performance from our
new pay-monthly tariffs, which were launched during the year. Tesco
Mobile retained its status as the best service in the market for overall
customer satisfaction.
1.8m
Tesco Mobile customers.
To find out more go to
www.tesco.com/annualreport09