Tesco : Annual Report and Financial Statements 2023/24

Serving our customers, communities and planet a little better every day.

Tesco PLC Annual Report and Financial Statements 2024

Hello.

Welcome to our Annual Report 2024

Tesco was built to be a champion for customers, serving them every day with affordable, healthy and sustainable food. Our commitment to our customers extends beyond our stores, and into every community we serve

• in the UK, Republic of Ireland (ROI), Slovakia, the Czech Republic and Hungary. We invest in communities to help them thrive, through supporting schools and children's groups, food banks and other good causes.

In challenging times, our purpose has guided every part of the Group.

Serving our customers, communities and planet a little

better every day is what we do.

Strategic report
	Governance		Financial statements

	01.
Additional information

Strategic report

Performance highlights

Group salesΔ(a)

£61.5bn

7.4%

(2023: £57.2bn)

Adjusted operating profitΔ(b)

£2,829m

12.8%

(2023: £2,509m)

Dividend per share

12.10p

11.0%

(2023: 10.90p)

UK market share (sales value)(d)

27.6%

28bps

(2023: 27.3%)

Statutory measuresΔ

Statutory revenue

£68.2bn

4.4%

(2023: £65.3bn)

Statutory profit before tax

£2,289m

159.5%

(2023: £882m)

Adjusted diluted EPSΔ(b)

23.41p

14.0%

(2023: 20.53p)

Retail free cash flowΔ(c)

£2,063m

(3.3)%

(2023: £2,133m)

Net debtΔ(c)

£(9,764)m

6.9%

(2023: £(10,493)m)

Group net promoter score(e)

19pts

+4pts

(2023: 15pts)

Operating profit

£2,821m

100.1%

(2023: £1,410m)

Statutory diluted EPS

24.53p

178.4%

(2023: 8.81p)

Performance highlights	01
Tesco at a glance	02
Supporting our customers
with value they can rely on	04
Chair's statement	06
Our purpose framework	08
Group Chief Executive's review	09
Our market context	12
Our strategic priorities	14
Key performance indicators	16
Our business model	17
Planet	18
Planet plan in action	20
Financial review	22
Principal risks and uncertainties	30
Nature	38
Task Force on Climate-related
Financial disclosures	39
Longer term viability statement	46
Corporate governance
Governance at a glance	48
Governance introduction	50
Board of Directors	52
Executive Committee	57
Nominations and Governance Committee	74
Sustainability Committee	78
Audit Committee	82
Directors' remuneration report	90
Directors' report	115
Financial statements
Independent auditor's report	117
Group income statement	129
Group statement of comprehensive
income/(loss)	130
Group balance sheet	131
Group statement of changes in equity	132
Group cash flow statement	133
Notes to the Group financial statements	134
Tesco PLC - Parent Company balance sheet	204
Tesco PLC - Parent Company statement
of changes in equity	205
Notes to the Parent Company
financial statements	206
Related undertakings of the Tesco Group	212

Comparatives have been restated for the adoption of IFRS 17 'Insurance contracts'.

In February 2024 we announced the sale of our banking operation, which has been consequently classified as discontinued. Discontinued operations are excluded from our headline performance metrics.

Δ Alternative performance measures (APMs)

All measures apart from Net debt are shown on a continuing operations basis unless otherwise stated, with growth stated at actual exchange rates. The Group has defined and outlined the purpose of its APMs in the Glossary starting on page 220.

1. Group sales exclude VAT and fuel.
2. Adjusted operating profit and Adjusted diluted EPS exclude the impact of adjusting items.
3. Net debt and Retail free cash flow exclude the impact of Tesco Bank.
4. UK market share based on Kantar Grocers Total Till Roll on a 12-week basis ending 18 February 2024.
5. Basis - Tesco Global Brand tracker on a three-month rolling basis.

Additional information
Supplementary information	217
Glossary - Alternative
performance measures	220
Five-year record	227
Additional Directors' report disclosures	228
NFSIS	232
Additional information for shareholders	233

Tesco PLC Annual Report and Financial Statements 2024

02. Strategic report

Tesco at a glance

Who we are.

We are Tesco, a major grocery retailer operating across multiple markets.

We serve millions of customers every week, in stores and online and provide additional services across the Tesco family.

We are Tesco.

	Our	purp
	ose
		Our
	businesses
	Tesco Mobile has	Tesco is a leading
	multinational
	grown into an
	grocery retailer,
	award-winning
	available in five
	network
	markets
The Bank helps	Our customers	dunnhumby is
more than
five million	a global leader
customers	are always at the core	in customer
manage their	data science
money every day
		Booker is the UK's
	One Stop is a	leading food and
	retail convenience	drink wholesaler,
	business with more	serving thousands of
	than 1,000 shops	retail and catering
		customers
	Our purpose

Serving our customers, communities and planet a little better every day.

Tesco PLC Annual Report and Financial Statements 2024

Strategic report							03.
	Governance		Financial statements		Additional information

The value our businesses bring to customers and the Group

Tesco is a leading multinational grocery retailer, which aims to serve customers affordable, healthy and sustainable food. This year, we have again focused on delivering great value and quality for our customers across large stores, convenience and online.

www.tesco.com

Booker is the UK's leading food and drink wholesaler, serving caterers, independent retailers and other businesses. Booker also owns symbol brands including Budgens, Londis and Premier. This year, Booker has ensured it once again delivered the best choice, price and service to all customers.

www.booker.co.uk

dunnhumby is a global leader in customer data science. It works with brands, grocery retail, retail pharmacy and retail financial services to provide technology, software and consultancy services. Its insights help retailers and brands to truly put the customer first, through engaging experiences which enhance loyalty and growth.

www.dunnhumby.com

One Stop is a retail convenience business with more than 1,000 shops across the country, including more than 300 franchise stores. Our focus this year has been to continue to provide customers in local communities with quality products and services at great prices.

www.onestop.co.uk

Tesco Bank offers a range of personal banking and insurance products with the aim of making financial products easier and better value for its customers. It helps more than five million customers manage their money every day. We have been better connected to our customers than ever before by listening to their needs, combined with using data and technology to drive better insight. This year, that helped us to keep delivering what our customers tell us matters most, with Clubcard Prices on everyday banking products and differentiated motor insurance.

www.tescobank.com

Tesco Mobile is a mobile operator serving more than five million UK customers. Established in 2003 as a joint venture between Tesco and O2, Tesco Mobile has grown into an award- winning network with more than 500 phone shops. This year, as the helpful network,

our focus has been on unlocking the power of Clubcard to deliver unique value and service for our customers.

www.tescomobile.com

Where we operate

4,506

Stores globally

3,786

Stores in the United Kingdom

170

Stores in the Republic of Ireland

184

Stores in the Czech Republic

169

Stores in Slovakia

197

Stores in Hungary

Tesco PLC Annual Report and Financial Statements 2024

04. Strategic report

Supporting our customers with value they can rely on

Value our customers can rely on.

We know things have been tough for many over the past year and we have worked tirelessly to make sure the weekly shop is one less thing to worry about.

Using the powerful combination of Aldi Price Match, Clubcard Prices and Low Everyday Prices, we have given our customers the power to bring down the cost of their weekly shop - and we are proud to have cemented our place as the UK's cheapest full-line grocer.

Across our Group - from banking and mobile to groceries and wholesale - we have been working around the clock to give our customers the best possible value.

And we have done that while continuing to support our colleagues, suppliers and shareholders - as well as our communities and planet.

Our value proposition

UK & ROI:

*

The power to lower prices

Clubcard

* Logo used in UK only from May 2024

Central Europe:

And customers are really responding to our Value offer…

Prices

Clubcard Prices saves customers up to

£360

off the annual cost of their groceries

Tesco app users	CE Clubcard sales
across the Group	penetration
16.2m	87%
ROI Clubcard sales	UK Clubcard sales
penetration	penetration
85%	82%

Tesco PLC Annual Report and Financial Statements 2024

more than

Strategic report

Governance

Financial statements

Additional information

05.

Supporting customers right across the Group

However customers choose to shop with Tesco, we are giving them great value - from thousands of price cuts across our stores to free roaming with Tesco Mobile.

UK	More than 4,000	Central	Low Price Guarantee	ROI	More than 800
prices cut	relaunched on more than	prices cut
	across the year by an	Europe 500 Own		on essential products,
	average of 12%		Brand lines		by an average of 12%

Largest ever Booker catering price lock over Christmas, with a second price lock through to May 2024. Together, prices have been locked on

1,500 products

Free roaming in EU

and other popular holiday destinations extended until 2025

Clubcard Prices

expanded to personal loans

Price Drop campaign

cut the price of everyday essentials

Relentless focus on value throughout the year

April 2023 Price lock on 1,000 everyday products

June 2023		July 2023		August 2023
VAT covered		Kids Eat Free		Reduced in
on our		in our cafés		Price areas
suncare range		during summer		now in 300
		holiday		stores

August 2023		September 2023		October 2023		January 2024		February 2024
Swapped >50		Half price		Kids dental		Double		Kids Eat Free
Express		pre-Christmas		care prices		Clubcard		February half
products with		toy sale		cut by 20%		points offer		term
a cheaper
alternative

April 2023	June 2023	June 2023	August 2023
Price cuts	Price cuts on	500 price cuts	Covered
on milk	pasta, oil, bread	on key products	20% VAT on
	and butter		period pants

This is an illustrative list and does not reflect all activity on value in the year.

August 2023		September 2023
Prices cut on		Another price
baby		lock on 1,000
products		products

October 2023 Kids Eat Free in October half term

January 2024 Price cuts for

150 popular

products

Months of consecutive switching gains in UK

12

88bpsValue perception up

Communities - more than

450,000

free children's meals through Kids Eat Free

Tesco PLC Annual Report and Financial Statements 2024

06. Strategic report

Chair's statement

Working hard for customers.

Gerry Murphy,

Chair

I am delighted to be making my first annual statement to you following my appointment as Chair of Tesco in September 2023.

I am excited to join a company that I have long admired for its leadership in the grocery sector and its commitment to serving its customers and communities. Having been closely involved in the food sector throughout my career, it's a privilege to be able to contribute to the next phase of development of the leading grocer in the UK.

I would like to thank John Allan for the significant contribution he made to the business during his eight-year tenure as Chair. As I said when I was appointed, John has left Tesco with its business, management and Board in great shape and fit for the future.

I am already enjoying working with the Board and our exceptional executive team to deliver on Tesco's purpose and am very excited about the strategic opportunities for growth across the Group.

Doing the right thing by our stakeholders

I joined Tesco in a year that has again been shaped by cost-of-living pressures, when supporting our customers, colleagues, communities and suppliers has never been more important. You will see on pages 4 and 5 a snapshot of the steps we have taken to look after our customers this year and support them through these challenges.

As the external environment has continued to evolve, we've been committed to doing the right thing by our stakeholders. Our customers are at the heart of what we do, and we've continued to invest in delivering great value. This relentless commitment to value has helped to make Tesco

consistently the cheapest full-line grocer for well over a year in the UK. And I am pleased that customers are recognising this, with our customer recommend scores gaining in all markets and market share growth on a volume and value basis in both the UK and ROI.

We have continued to invest in our colleagues, building on the largest single investment made by Tesco in hourly pay in 2023, with a new UK hourly pay deal of £12.02, a 9.1% increase in base pay. This recognises the essential role that our colleagues play in supporting our customers and communities, and helping the business succeed.

Supporting our communities remains central to our business, and to our purpose. This year we launched Stronger Starts in the UK and ROI - a new grant programme to support young people to access healthy food and exercise.

Since joining Tesco, the dedication and hard work of our colleagues in supporting customers and their local communities has really stood out to me and I'd like to thank the whole Tesco team for their commitment in this regard.

Strong financial performance

Our focus on doing the right thing by our customers has delivered a strong financial performance for us across the year.

Group adjusted operating profit rose 12.8% on a continuing operations basis, which reflects strong trading across the Group combined with continued cost savings.

Tesco Bank update

We took the decision this year to review our banking services and announced a long-term strategic partnership with Barclays under which our existing banking operations in credit cards,

Did you know:

We are growing market share, winning customers and our customer recommend score has increased to 19 points for the Group.

Tesco PLC Annual Report and Financial Statements 2024

Strategic report							07.
	Governance		Financial statements		Additional information

Since joining Tesco, the dedication and hard work of our colleagues in supporting customers and their local communities has really stood out to me and I'd like to thank the whole Tesco team for their commitment.

loans and savings will be sold. Tesco will keep all the other existing activities of Tesco Bank, including insurance, ATMs, travel money and gift cards. These are capital-light businesses, with a strong connection to our core retail offer.

As well as removing significant capital from the Tesco balance sheet, this will reduce our exposure to the regulatory complexity and capital requirements associated with offering credit cards and loans. It will help us to unlock more cash, which we can use to keep investing in our business and our customers and colleagues.

Taking into account the £250m special dividend paid by Tesco Bank in August 2023, in total we expect to receive around £1bn, in addition to regular payments for our ongoing strategic partnership. The majority of this cash will be returned to shareholders in the form of an incremental share buyback.

I would like to thank our Tesco Bank colleagues for their hard work over the years and I look forward to the next chapter for Tesco Bank and our financial services offering in partnership with Barclays.

Board changes

In June, we said goodbye to Lindsey Pownall who stepped down from the Board after seven years. Lindsey made extremely valuable and insightful contributions to the Board and, in particular,

I would like to thank her for her careful stewardship of the Sustainability Committee. She has been succeeded by Stewart Gilliland as Chair of that committee.

In September, we welcomed Carolyn Fairbairn to the Board as an independent Non-executive Director. Carolyn brings a wealth of experience to the Board with her deep understanding of the macroeconomic, regulatory and political environment and significant experience across the media, government and finance sectors. She has also taken up positions on the Remuneration Committee and Sustainability Committee.

I would like to thank Byron Grote for his careful stewardship of the Board earlier this year as interim Chair. Byron will retire from the Board at the forthcoming Annual General Meeting (AGM). Carolyn Fairbairn will succeed Byron as Senior Independent Director and Karen Whitworth will take on the role of Audit Committee Chair. I would like to thank Byron for his hard work and dedication to the Board.

Looking ahead

Tesco is well positioned to continue building on the successes of the past year as we head into 2024/25. While we expect cost-of-living pressures to remain a significant factor throughout the year,

we will continue to focus our efforts on how we can best support all our stakeholders. Even as a relative newcomer to Tesco, I know that I have joined a business that has the agility and flexibility to respond to any potential challenges, while continuing to listen to our customers and support our colleagues. Tesco is fortunate to have outstanding colleagues helping it deliver and I know that our teams everywhere will continue to go above and beyond to support our customers and deliver on our strategy.

Gerry Murphy

Chair

9 April 2024

Tesco PLC Annual Report and Financial Statements 2024

08. Strategic report

Our purpose framework

What we stand for.

Our core purpose is:

Serving our customers, communities and planet a little better every day.

This means we always keep customers at the heart of what we do, while also reflecting our responsibilities to the communities we serve and to society more broadly.

Customers	Everything we do begins and ends with our customers. By understanding our customers, we can
	anticipate and respond to their needs and expectations. As a Group we serve a wide range of different
	customers, in different settings, from retail customers through to banking, mobile, Booker's wholesale
	customers, and dunnhumby's retail and supplier customers.
Communities	The role we play in the thousands of communities we serve is vital - whether it's creating good jobs,
	supporting local suppliers and producers, or helping local causes through our community programmes.
Planet	Our commitment to sustainability is core to our business. It drives our work across our own operations
	and our supply chain to reduce our environmental impact and support a healthier way of living.

Our values put our purpose into practice:

Our three values underpin our purpose, setting out how we work together as a team and guiding the decisions and choices we make across the Group.

1.

No one tries harder for customers

2.	3.
We treat people	Every little
how they want	help makes a
to be treated	big difference

Understanding people - customers, colleagues, communities - and what matters to them, and then trying to make those things better, is at the heart of Tesco. It's about listening to people and talking to them and then acting using all the tools at our disposal by changing and innovating to meet their needs.

We know that looking after our colleagues in a culture of trust and respect is essential to the success of Tesco. Where colleagues feel recognised and rewarded for the work they do together, where they have the opportunity to get on and where they are supported in their development as they move through their careers in the business - they in turn try their hardest for customers.

Every little help makes a big difference

• it is the value we live by to ensure we serve our customers, colleagues and their communities a little better every day. It really captures how, when we add up all the small things we do, Tesco can make a big difference to the issues customers, colleagues, communities and wider society care about.

Since we first introduced our Tesco Values more than a decade ago, they have become a vital part of our culture - and an essential underpinning of our growth and success. They ensure that every person at Tesco understands what is important - about how we work together as a team and how customers are at the centre of what we do. They are universal values, which have helped guide our people as Tesco has grown.

It covers the little things we do every day as well as linking these things together to contribute to the bigger global initiatives in which we are involved. It helps us take the right actions to restore trust and transparency in our business.

Tesco PLC Annual Report and Financial Statements 2024