Annual Report and Financial Statements 2012 Tesco at a glance 2011/12 We are one of the world’s largest retailers with operations in 14 countries,* employing almost 520,000 people and serving millions of customers every week. £72.0bn +7.4% £3.8bn +5.3% Group sales Group sales growth Group profit before tax Group profit before tax growth +1.6% +2.1% 14.76p Underlying profit before tax** Underlying diluted earnings Full year dividend per share per share**† UK Asia Europe Revenue± Trading profit Revenue± Trading profit Revenue± £42.8bn £2,480m £10.8bn £737m £9.9bn 66% of Group 66% of Group 17% of Group 20% of Group 15% of Group Revenue growth± Trading profit growth Revenue growth± Trading profit growth Revenue growth± +5.0% (1.0)% +10.5% +21.8% +7.3% Employees Stores Employees Stores Employees 300,373 2,979 117,015 1,719 94,409 Market position 1st Market position 1st or 2nd in all except China Market position 1st o Multiple formats Hypermarkets, superstores, Multiple formats Hypermarkets, supermarkets, Multiple formats Dep include supermarkets, convenience include convenience include supe Loyalty scheme Clubcard – around 16 million Loyalty scheme Clubcard in Malaysia and Thailand, hype active members Family Card in South Korea, Legou Loyalty scheme Club dotcom First grocery home shopping Tesco Membercard in China – over activ service 1997 20 million active members across Asia dotcom Repu dotcom South Korea 2002, planned 2011 launches in at least one major city 2012 in each market in the next few years in ea Fascia brands include: Fascia brands include: Fascia brands include: * In India, we have an exclusive franchise agreement with Trent, the retail arm of the Tata Group. We are supporting the development of their ** See glossary for full accounting definitions. Star Bazaar format. Continuing operations exclude Japan which has been treated as discontinued following our decision to sell the business. † Calculated on a constant tax rate basis. Tesco at a glance 2011/12 US UK Europe Asia* Financial calendar Republic of Ireland South Korea Poland Thailand Hungary China Financial year end 2011/12 25 February 2012 Czech Republic Malaysia Final ex-dividend date 25 April 2012 Slovakia India Record date 27 April 2012 We are one of the world’s largest retailers with operations Turkey Q1 Interim Management Statement 11 June 2012 in 14 countries,* employing almost 520,000 people and Annual General Meeting 29 June 2012 serving millions of customers every week. Final dividend payment date 6 July 2012 Half-year end 2012/13 25 August 2012 Interim Results October 2012 Q3 Interim Management Statement December 2012 Financial year ended 2012/13 23 February 2013 £72.0bn +7.4% £3.8bn +5.3% Please note that dates are provisional and subject to change. Group sales Group sales growth Group profit before tax Group profit before tax growth +1.6% +2 .1% 14.76p Glossary Capital expenditure: the additions to property, plant and equipment, Return on capital employed: profit before interest and tax less tax at Underlying profit before tax** Underlying diluted earnings Full year dividend per share investment property and intangible assets (excluding assets acquired the effective rate of tax divided by the calculated average of opening and per share**† under business combinations). closing net assets plus net debt plus dividend creditor less net assets held for resale. Capex % of sales: capital expenditure as defined above, divided by Group sales including VAT and excluding IFRIC 13. Total shareholder return: the notional return from a share, measured UK Asia Europe US Tesco Bank as the percentage change in the share price, plus the dividends paid with Constant tax rate: using the prior year’s effective tax rate. the gross dividends reinvested in Tesco shares. This is measured over a Revenue± Trading profit Revenue± Trading profit Revenue± Trading profit Revenue± Trading loss Revenue± Trading profit five-year period. EBITDAR: operating profit before depreciation, amortisation, rent and movements in impairments of property, plant and equipment, Underlying diluted earnings per share: underlying profit less tax at investment property and intangible assets. the effective tax rate and minority interest divided by the diluted weighted average number of shares in issue during the year. Fixed charge cover: the ratio of EBITDAR (excluding Tesco Bank £42.8bn £2,480m £10.8bn £737m £9.9bn £529m £0.6bn £(153)m £1.0bn £168m EBITDAR) divided by financing costs (net interest excluding IAS 32 and Underlying profit before tax: underlying profit before tax excludes 39 impacts and pension finance costs) plus operating lease expenses. the impact of non-cash elements of IAS 17, 19, 32 and 39 (principally the 66% of Group 66% of Group 17% of Group 20% of Group 15% of Group 14% of Group 1% of Group (4)% of Group 2% of Group 4% of Group impact of annual uplifts in rents and rent-free periods, pension costs, and Gearing: net debt divided by total equity. the marking to market of financial instruments); the amortisation charge on intangible assets arising on acquisition and acquisition costs, and the Net indebtedness: the ratio of adjusted net debt (net debt plus non-cash impact of IFRIC 13. It also excludes restructuring and other pension deficit and the present value of lease obligations) divided one-off costs. by EBITDAR (excluding Tesco Bank EBITDAR). Revenue growth± Trading profit growth Revenue growth± Trading profit growth Revenue growth± Trading profit growth Revenue growth± Improvement in trading loss Revenue growth± Trading profit growth +5.0% (1.0)% +10.5% +21.8% +7.3% +0.4% +27.3% +17.7% +13.6% (36.4)% Employees Stores Employees Stores Employees Stores Employees Stores Employees Baseline profit growth 300,373 2,979 117,015 1,719 94,409 1,351 5,056 185 2,818 +29.3% Market position 1st Market position 1st or 2nd in all except China Market position 1st or 2nd in all except Turkey Market position A West Coast start-up business Insurance Car, home, pet, travel, life, over 50s, Multiple formats Hypermarkets, superstores, Multiple formats Hypermarkets, supermarkets, Multiple formats Department stores, hypermarkets, Loyalty scheme Friends of Fresh & Easy – two-thirds health, dental, breakdown include supermarkets, convenience include convenience include supermarkets, compact of a million active members Savings Fixed rate, internet, instant access, Loyalty scheme Clubcard – around 16 million Loyalty scheme Clubcard in Malaysia and Thailand, hypermarkets, convenience retail bonds active members Family Card in South Korea, Legou Loyalty scheme Clubcard in all markets – over 7 million Cash Loans, credit cards, ATMs, travel dotcom First grocery home shopping Tesco Membercard in China – over active members across Europe money service 1997 20 million active members across Asia dotcom Republic of Ireland 2000, Prague Future launches Mortgages, current accounts dotcom South Korea 2002, planned 2011, planned launches in Warsaw Loyalty scheme Clubcard launches in at least one major city 2012 and in at least one major city in each market in the next few years in each market in the next few years Fascia brands include: Fascia brands include: Fascia brands include: Fascia brand: Designed and produced by CONRAN DESIGN GROUP This Report is printed on Revive 100 Pure White Silk paper and has been independently certified on behalf of the Forest Stewardship Council® (FSC). The inks used are all vegetable oil based. Printed at Pureprint Group Ltd, ISO14001, FSC certified and CarbonNeutral® * In India, we have an exclusive franchise agreement with Trent, the retail arm of the Tata Group. We are supporting the development of their ** See glossary for full accounting definitions. ± Revenue excludes the accounting impact of IFRIC 13. Star Bazaar format. Continuing operations exclude Japan which has been treated as discontinued following our decision to sell the business. † Calculated on a constant tax rate basis. OVERVIEW FINANCIAL STATEMENTS 1 Chairman’s statement 88 Statement of Directors’ responsibilities STRATEGIC REVIEW 89 Independent auditors’ report 3 Chief Executive’s review* to the members of Tesco PLC 9 Strategy in action* 90 Group income statement 24 Business model* 91 Group statement of comprehensive income PERFORMANCE REVIEW 92 Group balance sheet 29 Key performance indicators* 93 Group statement of changes in equity 33 Financial review* 94 Group cash flow statement GOVERNANCE 94 Reconciliation of net cash flow to movement in net debt note 38 Board of Directors 95 Notes to the Group financial 40 Principal risks and uncertainties* statements 48 General information* 142 Tesco PLC – Parent Company 50 Directors’ report on corporate balance sheet governance 143 Notes to the Parent Company 64 Directors’ remuneration report financial statements 151 Independent auditors’ report to the members of Tesco PLC 152 Five year record IBC Financial calendar IBC Glossary www.tescoplc.com/ar2012 The easy way to get online This year online, you can hear from our leadership team, explore our business through our interactive map and download our financial statements in Excel. Visit www.tescoplc.com/ar2012 or use your smartphone to scan the QR codes in the Report to go straight to the relevant information online. Scan here to visit the 2011/12 Annual Report online homepage * These sections form the Business Review and have been prepared pursuant to the Companies Act 2006. Together with the Board of Directors section and the Directors’ report on corporate governance, these sections form the Report of the Directors.