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Tesco sees new fall in profits Tesco sees new fall in profits
(35 minutes later)
Troubled supermarket Tesco has seen a further big fall in profits as it struggles to turn its business around.Troubled supermarket Tesco has seen a further big fall in profits as it struggles to turn its business around.
Underlying profits for the first half of its financial year were £354m, 55% down on the same period last year, when it made £779m.Underlying profits for the first half of its financial year were £354m, 55% down on the same period last year, when it made £779m.
Its pre-tax profit was £74m, compared with a loss of £19m for the same period a year ago.Its pre-tax profit was £74m, compared with a loss of £19m for the same period a year ago.
UK like-for-like sales were down 1.1% in the second quarter, an improvement from the first quarter's fall of 1.5%. UK like-for-like sales were down 1.1% in the second quarter an improvement from the first quarter's fall of 1.5%.
International sales were up 1%. International sales were up 1%, but the group warned price deflation was still having a detrimental effect.
In February, Tesco reported the worst results in its history, with a record statutory pre-tax loss of £6.4bn for the year to the end of February. Chief executive Dave Lewis said in a BBC interview he was "quietly confident" about Tesco's turnaround, admitting the group hit a low point at the end of last year.
Chief executive Dave Lewis said: "In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment. "We obviously had some issues to deal with, we dealt with them. It meant that in the second half of last year we made no profit whatsoever in the UK.
"Our transformation programme in Europe has accelerated growth and reduced operating expenses, and in Asia, we have gained market share in challenging economic conditions." "So if I compare to the second half of last year, the first half of this year feels like we've made some progress.
Debt reduced "Our sales are growing compared to where they were either a year ago, or indeed in the second half of last year. And we've generated some profit as we rebuild the profitability of Tesco business. But importantly at the same time, as improving what it is we're doing for our customers." Mr Lewis added.
Mr Lewis has been focusing on cutting prices and putting more staff in stores in an effort to attract customers back to Tesco. 'Disappointing' results
Mr Lewis has put pressure on profits by focusing on cutting prices and putting more staff in stores, in an effort to attract customers back to Tesco.
But Mike Dennis, of global financial services firm Cantor Fitzgerald Europe, described Tesco's interim results as "disappointing".
"The risk now is that Tesco's recovery needs more time, requires more restructuring and asset sales and, with less cash flow, could require a rights issue to lower the indebtedness." Mr Dennis added.
Tesco has confirmed it will cost it about £500m to meet the government's proposed National Living Wage rate of £9 an hour by 2020.
Mr Lewis said the group already paid more than the £7.20 minimum which is being brought in under the National Living Wage plans next April.
He added that extra staff benefits already brought its hourly rate closer to £9.
Tesco has completed the sale of its Homeplus stores in South Korea, reducing its debt by £4.2bn, but it has decided to keep its Dunnhumby data business.Tesco has completed the sale of its Homeplus stores in South Korea, reducing its debt by £4.2bn, but it has decided to keep its Dunnhumby data business.
In April, Tesco reported the worst results in its history, with a record statutory pre-tax loss of £6.4bn for the year to the end of February.
The supermarket is still under a criminal investigation by the Serious Fraud Office (SFO) after it admitted overstating its profits by £263m nearly a year ago.The supermarket is still under a criminal investigation by the Serious Fraud Office (SFO) after it admitted overstating its profits by £263m nearly a year ago.
In a BBC interview, Mr Lewis declined to comment on reports that the company was close to striking a deal with the SFO. Mr Lewis declined to comment in a BBC interview on reports that the company was close to striking a deal with the SFO.
The results come a week after rival Sainsbury's forecast better-than-expected full-year profits, but the big four supermarkets continue to be under pressure from discount retailers Aldi and Lidl.The results come a week after rival Sainsbury's forecast better-than-expected full-year profits, but the big four supermarkets continue to be under pressure from discount retailers Aldi and Lidl.
Tesco shares were down 0.88% in early morning trading.