'Drastic' Dave Lewis taking Tesco down aisle to recovery

Work done to simplify product ranges and improve customer service seems to be paying off. Group sales, excluding fuel, rose 1.3 per cent at constant exchange rates during the first half, with like-for-like sales growth reported across all regions. On an underlying basis, sales rose 1 per cent at the group level, while sustained volume growth across the UK and Ireland handed that region its first positive underlying sales result since 2010-11. Online grocery sales growth has slowed, but bosses say that was expected following actions to improve the margin, including adding a delivery charge for smaller orders. Finally, international sales grew 3.2 per cent at constant exchange rates, driven by new store openings in Asia.

Moving down the accounts, operating profits before exceptional items rose 60 per cent to £596m. Those one-off costs included £95m relating to restructuring and redundancies, an additional £45m added to Tesco Bank's customer redress provisions - payment protection insurance claims to you and me - and a £59m gain on property transactions. But taking these into account, operating profits still rose 38 per cent year on year. Crucially, margins are on the up, rising 23 basis points in the UK.

Cash generated from continuing operations improved to £955m from £791m this time last year, while net debt - although still high - fell by 49 per cent. Lower bond yields increased the pension fund's accounting deficit from £3.2bn to £5.9bn, but a new recovery plan is not due to be reported until 2018, based on March 2017 numbers.

Analysts at Shore Capital expect pre-tax profits of £682m for the year ending February 2017, giving EPS of 6.2p (from £435m and 5.2p in FY2016).