TIDMTSCO
RNS Number : 3720V
Tesco PLC
14 April 2021
Notes to the Group financial statements
Note 10 Goodwill and other intangible assets continued
Customer Intangible
Goodwill Software(a) relationships(c) assets Total
GBPm GBPm GBPm GBPm GBPm
Cost
At 23 February 2019 (restated(b)
) 5,509 1,840 715 447 8,511
Foreign currency translation (5) (2) - (1) (8)
Additions - 188 - 19 207
Reclassification - 40 - (5) 35
Disposals (27) (198) - (2) (227)
At 29 February 2020 (restated(b)
) 5,477 1,868 715 458 8,518
Accumulated amortisation and
impairment losses
At 23 February 2019 641 1,254 72 321 2,288
Foreign currency translation (4) (1) - - (5)
Charge for the year(e) - 281 76 10 367
Impairment losses(f) - 15 - 12 27
Reversal of impairment losses(f) - (31) - (7) (38)
Reclassification - 2 - (3) (1)
Disposals - (196) - (2) (198)
At 29 February 2020 637 1,324 148 331 2,440
(a)-(e) Refer to previous table
for footnotes.
Customer Intangible
Goodwill Software relationships assets Total
GBPm GBPm GBPm GBPm GBPm
Cost
At 24 February 2018 (restated(b)
) 2,417 3,166 - 392 5,975
Foreign currency translation (6) 1 - (1) (6)
Additions - 167 - 24 191
Acquired through business combinations 3,098 - 715 48 3,861
Reclassification - (140) - 2 (138)
Disposals - (308) - (15) (323)
Fully-amortised assets - (1,046) - (3) (1,049)
At 23 February 2019 (restated(b)
) 5,509 1,840 715 447 8,511
Accumulated amortisation and
impairment losses
At 24 February 2018 662 2,378 - 315 3,355
Foreign currency translation (21) - - (2) (23)
Charge for the year - 210 72 13 295
Impairment losses - 15 - 27 42
Reversal of impairment losses - (2) - (24) (26)
Disposals - (301) - (5) (306)
Fully-amortised assets - (1,046) - (3) (1,049)
23 February 2019 641 1,254 72 321 2,288
(b) Refer to Note 1 for further details regarding prior year
restatement.
Notes to the Group financial statements
Note 11 Property, plant and equipment
Land and
buildings Other(a) Total
GBPm GBPm GBPm
Cost
At 29 February 2020 24,868 6,925 31,793
Foreign currency translation (38) (15) (53)
Additions (b) 927 623 1,550
Acquired through business combinations 8 4 12
Transfers (to)/from assets classified as held
for sale 29 - 29
Transfer to disposal group classified as held
for sale (3,642) (1,415) (5,057)
Disposals (128) (379) (507)
At 27 February 2021 22,024 5,743 27,767
Accumulated depreciation and impairment losses
At 29 February 2020 7,841 4,718 12,559
Foreign currency translation (15) (10) (25)
Charge for the year 432 489 921
Impairment losses (c) 353 107 460
Reversal of impairment losses (c) (515) (43) (558)
Transfers (to)/from assets classified as held
for sale 15 - 15
Transfer to disposal group classified as held
for sale (1,386) (987) (2,373)
Disposals (72) (371) (443)
At 27 February 2021 6,653 3,903 10,556
Net carrying value
At 27 February 2021 (d) 15,371 1,840 17,211
At 29 February 2020 17,027 2,207 19,234
Construction in progress included above (e)
At 27 February 2021 77 210 287
At 29 February 2020 88 114 202
(a) Other assets consist of fixtures and fittings with a net
carrying value of GBP1,345m (2020: GBP1,712m), office equipment
with a net carrying value of GBP213m (2020: GBP245m) and motor
vehicles
with a net carrying value of GBP282m (2020: GBP250m)
(b) Includes GBP476m of land and buildings related to obtaining
control of The Tesco Property (No. 2) Limited Partnership, which
was impaired by GBP(32)m on acquisition (2020: GBP914m of land and
buildings related to obtaining control of The Tesco Atrato Limited
Partnership, which was impaired by GBP(287)m on acquisition). The
GBP476m additions comprised GBP492m cost of acquisition offset by
GBP16m of historical deferred profit. Refer to the breakdown of
assets and liabilities acquired within Note 33.
(c) Refer to Note 15.
(d) Includes GBP2,099m (2020: GBP1,406m) of assets pledged as
security for secured bonds (refer to Note 23 and GBP826m (2020:
GBP478m) of property held as security in favour of the Tesco PLC
Pension Scheme (refer to Note 29.
(e) Construction in progress does not include land.
Land and
buildings Other(a) Total
GBPm GBPm GBPm
Cost
At 23 February 2019 24,484 6,993 31,477
Foreign currency translation (69) (15) (84)
Additions(b) 1,285 621 1,906
Reclassification (24) (28) (52)
Classified as held for sale (589) (36) (625)
Disposals (219) (610) (829)
At 29 February 2020 24,868 6,925 31,793
Accumulated depreciation and impairment losses
(restated)
At 23 February 2019 7,523 4,768 12,291
Foreign currency translation (23) (11) (34)
Charge for the year 525 613 1,138
Impairment losses(c) 611 111 722
Reversal of impairment losses(c) (391) (104) (495)
Reclassification 41 (23) 18
Classified as held for sale (298) (34) (332)
Disposals (147) (602) (749)
At 29 February 2020 7,841 4,718 12,559
Net carrying value (d) 17,027 2,207 19,234
(a)-(d) Refer to previous table for footnotes
Notes to the Group financial statements
Note 12 Leases
Group as lessee
Lease liabilities represent rentals payable by the Group for
certain retail, distribution and office properties and other assets
such as motor vehicles. The leases have varying terms, purchase
options, escalation clauses and renewal rights. Purchase options
and renewal rights, where they occur, are at market value.
Escalation clauses are in line with market practices and include
inflation-linked, fixed rates, resets to market rents and hybrids
of these.
In prior years, the Group entered into several joint ventures,
and sold and leased back properties to and from these joint
ventures over 20 to 30-year terms. On certain transactions, the
Group has an option to buy back either the leased asset or the
equity of the other party, at market value and at a specified date,
typically at year 10. On some of these transactions the Group also
has a lease-break option, which is exercisable if the buyback
option is exercised and the associated debt in the joint venture is
repaid. The lease liability in respect of these leases assumes that
the lease-break option is not exercised.
On 18 September 2020, the Group obtained control of The Tesco
Property (No. 2) Limited Partnership, previously accounted for as a
joint venture, through the acquisition of the other partner's 50%
interest, at which point the associated property leases from the
joint venture became intercompany leases and are eliminated on
consolidation. Refer to Note 33 for further details.
Right of use assets
Land and
buildings Other Total
GBPm GBPm GBPm
Net carrying value at 29 February 2020 6,734 140 6,874
Additions (including through business combinations) 308 42 350
Depreciation charge for the year (517) (49) (566)
Impairment losses (a) (225) - (225)
Reversal of impairment losses (a) 230 - 230
Derecognition on acquisition of property joint
venture (Note 33) (130) - (130)
Transfer to disposal group classified as held
for sale (724) (20) (744)
Other movements (b) 190 (28) 162
Net carrying value at 27 February 2021 5,866 85 5,951
(a) Refer to Note 15.
(b) Other movements include lease terminations, modifications
and reassessments, foreign exchange, reclassifications between
asset classes and entering into finance subleases.
Land and
buildings Other Total
GBPm GBPm GBPm
Net carrying value at 23 February 2019 7,561 152 7,713
Additions (including through business
combinations) 146 58 204
Depreciation charge for the year (584) (67) (651)
Impairment losses (a) (267) - (267)
Reversal of impairment losses (a) 182 - 182
Derecognition on acquisition of property
joint venture (335) - (335)
Other movements (b) 31 (3) 28
Net carrying value at 29 February 2020 6,734 140 6,874
(a)-(b) Refer to footnotes in table above.
Lease liabilities
The following tables show the discounted lease liabilities
included in the Group balance sheet and a maturity analysis of the
contractual undiscounted lease payments:
2021 2020
GBPm GBPm
Current 575 598
Non-current 7,827 8,968
Total lease liabilities 8,402 9,566
Maturity analysis - contractual undiscounted lease 2021 2020
payments GBPm GBPm
Within one year 969 1,081
Greater than one year but less than two years 939 1,018
Greater than two years but less than three years 912 996
Greater than three years but less than four years 867 993
Greater than four years but less than five years 841 951
Greater than five years but less than ten years 3,597 4,178
Greater than ten years but less than fifteen years 2,443 2,810
After fifteen years 1,959 2,596
Total undiscounted lease payments 12,527 14,623
A reconciliation of the Group's opening to closing lease
liabilities balance is presented in Note 32.
Notes to the Group financial statements
Note 12 Leases continued
Amounts recognised in the Group income statement
52 weeks 53 weeks
2021 2020*
Continuing operations GBPm GBPm
Interest on lease liabilities 446 486
Variable payment expenses not included in lease liabilities 1 1
Expenses relating to short-term leases 17 14
Expenses relating to leases of low value assets (excluding
amounts already included in short-term leases above) 1 -
* Comparatives have been restated to present Thailand, Malaysia
and Poland as discontinued operations. Refer to Note 7 for further
details.
Amounts recognised in the Group cash flow statement
52 weeks 53 weeks
2021 2020
GBPm GBPm
Total cash outflow for leases* 1,109 1,175
* Includes GBP5m (2020: GBP5m) related to Tesco Bank.
Future possible cash outflows not included in the lease
liability
Some leases contain break clauses or extension options to
provide operational flexibility. Potential future undiscounted
lease payments not included in the reasonably certain lease term,
and hence not included in lease liabilities, total GBP10.8bn (2020:
GBP11.8bn).
Future increases or decreases in rentals linked to an index or
rate are not included in the lease liability until the change in
cash flows takes effect. Approximately 75% (2020: 72%) of the
Group's lease liabilities are subject to inflation-linked rentals
and a further 15% (2020: 12%) are subject to rent reviews. Rental
changes linked to inflation or rent reviews typically occur on an
annual or five-yearly basis.
The Group is committed to payments totalling GBP36m (2020:
GBP93m) in relation to leases that have been signed but have not
yet commenced.
Group as lessor
The Group leases out owned properties and sublets leased
properties under operating and finance leases. Such properties
include malls, mall units, stores, units within stores,
distribution centres and residential properties.
Amounts recognised in the Group income statement
52 weeks 53 weeks
2021 2020 (a)
Continuing operations GBPm GBPm
Finance lease - interest income (b) 5 4
Operating lease - rental income (c) 85 98
(a) Comparatives have been restated to present Thailand,
Malaysia and Poland as discontinued operations. Refer to Note 7 for
further details.
(b) Includes GBP5m (2020: GBP4m) of sublease interest income.
(c) Includes GBP22m (2020: GBP26m) of sublease rental income.
Finance lease payments receivable
The finance lease receivable (net investment in the lease)
included in the Group balance sheet is GBP86m (2020: GBP48m).
Operating lease payments receivable maturity analysis
2021 2020
GBPm GBPm
Within one year 74 220
Greater than one year but less than two years 52 128
Greater than two years but less than three years 41 71
Greater than three years but less than four years 32 38
Greater than four years but less than five years 24 27
Greater than five years but less than ten years 70 83
Greater than ten years but less than fifteen years 38 44
After fifteen years 65 82
Total undiscounted operating lease payments receivable 396 693
Notes to the Group financial statements
Note 13 Investment property
2021 2020
GBPm GBPm
Cost
At the beginning of the year 100 118
Foreign currency translation 1 (1)
Reclassification (4) (11)
Classified as held for sale 1 -
Disposals (5) (6)
At the end of the year 93 100
Accumulated depreciation and impairment losses
At the beginning of the year 74 82
Foreign currency translation 1 (1)
Charge for the year 1 1
Impairment losses for the year* 2 5
Reversal of impairment losses for the year* (2) (4)
Reclassification (2) (4)
Classified as held for sale 1 -
Disposals (1) (5)
At the end of the year 74 74
Net carrying value at the end of the year 19 26
Rental income earned from investment properties under
operating leases 7 11
Direct operating expenses incurred on rental-earning
investment properties - (3)
* Refer to Note 15.
The estimated fair value of the Group's investment property is
GBP0.1bn (2020: GBP0.2bn). This fair value has been determined by
applying an appropriate rental yield to the rentals earned by the
investment property. A valuation has not been performed by an
independent valuer.
Note 14 Group entities
The Group consists of the ultimate Parent Company, Tesco PLC,
and a number of subsidiaries, joint ventures and associates held
directly or indirectly by Tesco PLC. See pages 117 to 121 for a
complete list of Group entities.
Subsidiaries
The accounting year ends of the subsidiaries consolidated in
these financial statements are on or around 27 February 2021.
Consolidated structured entities
The Group has a number of securitisation structured entities
established in connection with Tesco Bank's credit card
securitisation transactions. Although none of the equity of these
entities is owned by the Group, the Group has rights to variable
returns from its involvement with these entities and has the
ability to affect those returns through its power over them under
contractual agreements. As such, these entities are effectively
controlled by the Group, and are therefore accounted for as
subsidiaries of the Group.
These entities have financial year ends of 31 December. The
management accounts of these entities are used to consolidate the
results to 27 February 2021 within these financial statements.
Unconsolidated structured entities
In prior years, the Group sponsored a number of structured
entities. The Group led the formation of the entities and its name
appears in the name of the entities and/or on the debt issued by
the entities. The structured entities were set up to finance
property purchases by some of the UK property joint ventures in
which the Group typically holds a 50% equity interest. The
structured entities obtain debt financing from third-party
investors and lend the funds to these joint ventures, who use the
funds to purchase the properties.
The liabilities of the UK property joint ventures include the
loans due to these structured entities. The Group's exposure to the
structured entities is limited to the extent of the Group's
interests in the joint ventures. The liabilities of the structured
entities are non-recourse to the Group.
The Group concluded that it does not control, and therefore
should not consolidate, these structured entities since it does not
have power over the relevant activities of the structured entities,
or exposure to variable returns from these entities.
Notes to the Group financial statements
Note 14 Group entities continued
Interests in joint ventures and associates
Principal joint ventures and associates
The Group's principal joint ventures and associates are:
Share of
issued
share capital,
Nature loan capital Principal
of and debt Country area
relationship Business activity securities of incorporation of operation
Included in 'UK property
joint ventures':
The Tesco Coral Limited
Partnership Joint venture Property investment 50% England United Kingdom
The Tesco Blue Limited
Partnership Joint venture Property investment 50% England United Kingdom
The Tesco Passaic Limited
Partnership Joint venture Property investment 50% England United Kingdom
The Tesco Navona Limited
Partnership Joint venture Property investment 50% England United Kingdom
The Tesco Sarum Limited
Partnership Joint venture Property investment 50% England United Kingdom
The Tesco Dorney Limited
Partnership Joint venture Property investment 50% England United Kingdom
The Tesco Arena Unit Trust Joint venture Property investment 50% Jersey United Kingdom
Included in 'Other joint
ventures and associates':
Tesco Mobile Limited Joint venture Telecommunications 50% England United Kingdom
Tesco Underwriting Limited Joint venture Insurance 49.9% England United Kingdom
Booker India Private Limited Joint Venture Retail 49% India India
Trent Hypermarket Private
Limited Joint venture Retail 50% India India
The accounting period end dates of the joint ventures and
associates consolidated in these financial statements range from 31
December 2020 to 27 February 2021. The accounting period end dates
of joint ventures differ from those of the Group for commercial
reasons and depend upon the requirements of the joint venture
partner as well as those of the Group. The accounting period end
dates of the associates are different from those of the Group as
they depend upon the requirements of the parent companies of those
entities.
There are no significant restrictions on the ability of joint
ventures and associates to transfer funds to the parents, other
than those imposed by the Companies Act 2006 or equivalent local
regulations, and for Tesco Underwriting Limited, regulatory capital
requirements.
Prior to the Group's sale of its 20% share in Gain Land Limited
(Gain Land) on 28 February 2020, management applied judgement in
determining that Gain Land was an associate of the Group. The Group
had significant influence by virtue of holding 20% equity interest
which presumed significant influence per IAS 28, together with
having a contractual right to appoint two out of 10 directors,
while taking into account that the remaining 80% interest was held
by one other party.
The UK property joint ventures involve the Group partnering with
third parties in carrying out some property investments in order to
enhance returns from property and access funding, while reducing
risks associated with sole ownership. These property investments
generally cover shopping centres and standalone stores. The Group
enters into leases for some or all of the properties held in the
joint ventures. These leases provide the Group with some rights
over alterations and adjacent land developments. Some leases also
provide the Group with options to purchase the other joint
venturers' equity stakes at a future point in time. In some cases
the Group has the ability to substitute properties in the joint
ventures with alternative properties of similar value, subject to
strict eligibility criteria. In other cases, the Group carries out
property management activities for third-party rentals of shopping
centre units.
The property investment activities are carried out in separate
entities, usually partnerships or limited liability companies. The
Group has assessed its ability to direct the relevant activities of
these entities and any impact on Group returns and concluded that
the entities qualify as joint ventures since decisions regarding
them require the unanimous consent of both equity holders. This
assessment included not only rights within the joint venture
agreements, but also any rights within other contractual
arrangements between the Group and the entities.
The Group made a number of judgements in arriving at this
determination, the key ones being:
- since the provisions of the joint venture agreements require
the relevant decisions impacting investor returns to be either
unanimously agreed by both joint venturers at the same time, or in
some cases to be agreed sequentially by each venturer at different
stages, there is joint decision-making within the joint
venture;
- since the Group's leases are priced at fair value, and any
rights embedded in the leases are consistent with market practice,
they do not provide the Group with additional control over the
joint ventures nor do they infer an obligation by the Group to fund
the settlement of liabilities of the joint ventures;
- any options to purchase the other joint venturers' equity
stakes are priced at market value, and only exercisable at future
dates, hence they do not provide control to the Group at the
current time;
- where the Group has a right to substitute properties in the
joint ventures, the rights are strictly limited and are at fair
value, hence do not provide control to the Group; and
- where the Group carries out property management activities for
third-party rentals in shopping centres, these additional
activities are controlled through joint venture agreements or lease
agreements, and do not provide the Group with additional powers
over the joint venture.
Notes to the Group financial statements
Note 14 Group entities continued
Summarised financial information for joint ventures and
associates
The summarised financial information below reflects the amounts
presented in the financial statements of the relevant joint
ventures and associates, and not the Group's share of those
amounts. These amounts have been adjusted to conform to the Group's
accounting policies where required. The summarised financial
information for UK property joint ventures has been aggregated in
order to provide useful information to users without excessive
detail, since these entities have similar characteristics and risk
profiles largely based on their nature of activities and geographic
market.
UK property joint Gain Land Limited
ventures (d)
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
Summarised balance sheet
Non-current assets (a) 2,916 3,242 - -
Current assets (excluding cash and cash
equivalents) 50 101 - -
Cash and cash equivalents 27 28 - -
Current liabilities (b) (420) (487) - -
Non-current liabilities (b) (3,229) (3,621) - -
Net assets/(liabilities) (656) (737) - -
Summarised income statement
Revenue 250 258 - 8,551
Profit/(loss) after tax - - - (95)
Reconciliation to carrying amounts:
Opening balance - - - 263
Foreign currency translation - - - (4)
Share of profits/(losses) (c) 14 12 - (19)
Dividends received from joint ventures
and associates (14) (12) - -
Disposals(d) - - - (240)
Closing balance - - - -
Group's share in ownership 50% 50% - -
Group's share of net assets/(liabilities) (328) (369) - -
Goodwill - - - -
Deferred property profits offset against
carrying amounts (60) (61) - -
Cumulative unrecognised losses (c) 205 205 - -
Cumulative unrecognised hedge reserves
(c) 183 225 - -
Carrying amount - - - -
(a) The non-current asset balances of UK property joint ventures
are reflected at historical depreciated cost to conform to the
Group's accounting policies. The aggregate fair values in the
financial statements of the UK property joint ventures are
GBP3,939m (2020: GBP4,338m).
(b) The current and non-current liabilities of UK property joint
ventures largely comprise loan balances of GBP3,235m (2020:
GBP3,616m) and derivative swap balances of GBP363m (2020: GBP452m)
entered into to hedge the cash flow variability exposures of the
joint ventures.
(c) The share of profit for the year for UK property joint
ventures related to GBP14m dividends received from joint ventures
with GBPnil carrying amounts. GBP 2m of profit and GBP12m of
decrease i n the fair values of derivatives arising from these
entities have been included in cumulative unrecognised losses and
cumulative unrecognised hedge reserves respectively.
(d) The Group completed the sale of its 20% investment in Gain
Land Limited on 28 February 2020 for a consideration of
GBP277m.
As at 27 February 2021, the Group has GBP101m (2020: GBP106m)
loans to UK property joint ventures.
Other joint ventures and associates
The Group also has interests in a number of individually
immaterial joint ventures and associates excluding UK property
joint ventures.
Joint ventures Associates
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
Aggregate carrying amount of individually
immaterial joint ventures and associates 168 230 10 77
Group's share of profits/(losses) for
the year* 1 2 11 (3)
* Comparatives have been restated to present Thailand, Malaysia
and Poland as discontinued operations. Refer to Note 7 for further
details.
Note 15 Impairment of non-current assets
Impairment losses and reversals
An impairment of GBP295m was recognised on the goodwill
associated with Tesco Bank (2020: GBPnil). This impairment arises
due to an increase in the cost of equity used to discount cash
flows and a reduction in cash flows arising from the economic
impact of the pandemic. No other goodwill impairment losses were
recognised by the Group (2020: GBPnil).
The table below summarises the Group's pre-tax impairment losses
and reversals on other non-current assets and investments in joint
ventures and associates, with the former aggregated by segment due
to the large number of individually immaterial store
cash-generating units. This includes any losses recognised
immediately prior to classifying an asset or disposal group as held
for sale but excludes all impairments post classification as held
for sale. Impairment losses and reversals comparatives have been
re-presented in order to show the Group's Poland, Thailand and
Malaysia businesses as discontinued operations. There were no
impairment losses or reversals in the year (2020: GBPnil) with
respect to other non-current assets and investments in joint
ventures and associates in Tesco Bank.
Notes to the Group financial statements
Note 15 Impairment of non-current assets continued
Total continuing Discontinued
UK & ROI Central Europe operations operations Total(a)
Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment
52 weeks ended loss reversal loss reversal loss reversal loss reversal loss reversal
27 February 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Group balance
sheet
Other intangible
assets (32) 9 (2) 7 (34) 16 - - (34) 16
Property, plant
and equipment (371) 497 (23) 38 (394) 535 (66) 23 (460) 558
Right of use
assets (209) 229 (16) 1 (225) 230 - - (225) 230
Investment
property (2) 2 - - (2) 2 - - (2) 2
Other
non-current
assets (614) 737 (41) 46 (655) 783 (66) 23 (721) 806
Investments in
joint ventures
and associates - - - - - - - - - -
Total impairment
(loss)/reversal (614) 737 (41) 46 (655) 783 (66) 23 (721) 806
Group income
statement
Cost of sales -
underlying (2) - - - (2) - - - (2) -
Cost of sales -
exceptional (564) 683 (41) 46 (605) 729 - - (605) 729
Administrative
expenses -
underlying (48) 54 - - (48) 54 - - (48) 54
Administrative
expenses -
exceptional - - - - - - - - - -
Total impairment
(loss)/
reversal
from continuing
operations (614) 737 (41) 46 (655) 783 - - (655) 783
Discontinued
operations
- underlying - - - - - - - - - -
Discontinued
operations
- exceptional - - - - - - (66) 23 (66) 23
Total impairment
(loss)/reversal (614) 737 (41) 46 (655) 783 (66) 23 (721) 806
(a) Of the GBP85m other non-current assets net impairment
reversal for the Group (2020: GBP302m loss), a net reversal of
GBP81m (2020: GBP302m loss) has been classified within exceptional
items, of which a net reversal of GBP119m (2020: GBP251m loss)
related to the UK & ROI, a net reversal of GBP5m (2020: GBP28m
reversal) related to Central Europe and a net loss of GBP43m (2020:
GBP79m loss) related to discontinued operations.
Total continuing Discontinued
UK & ROI Central Europe operations operations Total(a)(b)
Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment Impairment
53 weeks ended loss reversal loss reversal loss reversal loss reversal loss reversal
29 February 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Group balance
sheet
Other intangible
assets (27) 36 - - (27) 36 - 2 (27) 38
Property, plant
and equipment (428) 272 (54) 67 (482) 339 (240) 156 (722) 495
Right of use
assets (242) 142 (2) 18 (244) 160 (23) 22 (267) 182
Investment
property (5) - - 2 (5) 2 - 2 (5) 4
Other
non-current
assets (702) 450 (56) 87 (758) 537 (263) 182 (1,021) 719
Investments in
joint ventures
and associates (47) - - - (47) - - - (47) -
Total impairment
(loss)/reversal (749) 450 (56) 87 (805) 537 (263) 182 (1,068) 719
Group income
statement
Cost of sales -
underlying - - (5) 8 (5) 8 - - (5) 8
Cost of sales -
exceptional (658) 407 (51) 75 (709) 482 - - (709) 482
Administrative
expenses -
underlying (44) 43 - - (44) 43 - - (44) 43
Administrative
expenses -
exceptional (47) - - 4 (47) 4 - - (47) 4
Total impairment
(loss)/
reversal
from continuing
operations (749) 450 (56) 87 (805) 537 - - (805) 537
Discontinued
operations
- underlying - - - - - - (2) - (2) -
Discontinued
operations
- exceptional - - - - - - (261) 182 (261) 182
Total impairment
(loss)/reversal (749) 450 (56) 87 (805) 537 (263) 182 (1,068) 719
(a) Refer to previous table for footnote.
(b) Comparatives have been re-presented to present Thailand,
Malaysia and Poland as discontinued operations. Refer to Note 7 for
further details.
Notes to the Group financial statements
Note 15 Impairment of non-current assets continued
The net impairment reversal in UK & ROI includes an
impairment loss of GBP32m in the UK in respect of the Group
obtaining control of The Tesco Property (No. 2) Limited Partnership
(2020: GBP287m impairment loss in the UK & ROI in respect of
the Group obtaining control of The Tesco Atrato Limited
Partnership). Refer to Note 33 for further details.
Immediately preceding their recognition as held for sale in H1
2020/21, an impairment review was carried out on the Group's
Poland, Malaysia and Thailand operations. There were no significant
changes in relation to the Malaysia and Thailand operations between
the 2020 year end and reclassification as held for sale, and
expected proceeds exceeded the carrying value so no impairment was
required. The Poland disposal involves both a corporate sale and
the separate sale of the remaining property assets. Expected
proceeds for the corporate sale exceeded the carrying value so no
impairment was required. The recoverable amount of the remaining
property assets is based on fair value less costs of disposal on an
asset by asset basis, such that some assets are impaired while
others have an impairment reversal. This results in a net
impairment charge of GBP43m, recognised in discontinued operations
- exceptional. See Note 7 for further details.
The remaining Other non-current assets impairment losses and
reversals for the Group largely reflect normal fluctuations
expected from store-level performance, property fair values and
changes in discount rates, as well as any specific store
closures.
Net carrying value of non-current assets
The net carrying values of Other non-current assets and
recoverable amounts of impaired Other non-current assets for which
an impairment loss has been recognised or reversed have been
aggregated by segment due to the large number of individually
immaterial store cash-generating units. The amounts below exclude
assets or disposal groups classified as held for sale.
UK & Central Tesco
ROI Europe Bank Total
At 27 February 2021 GBPm GBPm GBPm GBPm
Net carrying value
Other intangible assets 959 32 131 1,122
Property, plant and equipment 15,379 1,767 65 17,211
Right of use assets 5,571 368 12 5,951
Investment property 18 1 - 19
Other non-current assets 21,927 2,168 208 24,303
Goodwill (a) 3,791 - 480 4,271
Investments in joint ventures and associates
(b) 84 1 93 178
Net carrying value of non-current assets 25,802 2,169 781 28,752
Recoverable amount of impaired Other non-current
assets
for which an impairment loss has been recognised
or reversed,
supported by:
Value in use 2,555 152 - 2,707
Fair value less costs of disposal (c) 1,400 122 - 1,522
3,955 274 - 4,229
(a) Goodwill of GBP4,271m (2020: GBP4,840m) consists of UK
GBP3,789m (2020: GBP3,793m), ROI GBP2m (2020: GBP3m) and Tesco Bank
GBP480m (2020: GBP775m) included within continuing operations and
GBPnil (2020: Thailand GBP193m and Malaysia GBP76m) in discontinued
operations.
(b) The carrying value of the Group's investments include: Trent
Hypermarket Private Limited GBP53m (2020: GBP59m) and Tesco
Underwriting Limited GBP93m (2020: GBP87m).
(c) Due to the individual nature of each property, fair values
are classified as Level 3 within the fair value hierarchy.
Total
Central Tesco continuing Discontinued
At 29 February 2020 (restated UK & ROI Europe Bank operations operations Total
(d) ) GBPm GBPm GBPm GBPm GBPm GBPm
Net carrying value
Other intangible assets 1,055 25 139 1,219 19 1,238
Property, plant and equipment 14,612 1,824 61 16,497 2,737 19,234
Right of use assets 5,719 392 14 6,125 749 6,874
Investment property 23 2 - 25 1 26
Other non-current assets 21,409 2,243 214 23,866 3,506 27,372
Goodwill (a) 3,796 - 775 4,571 269 4,840
Investments in joint ventures
and associates (b) 70 1 87 158 149 307
Net carrying value of non-current
assets 25,275 2,244 1,076 28,595 3,924 32,519
Recoverable amount of impaired
Other non-current assets for
which an impairment loss has
been recognised or reversed,
supported by:
Value in use 3,448 178 - 3,626 239 3,865
Fair value less costs of disposal
(c) 2,105 126 - 2,231 352 2,583
5,553 304 - 5,857 591 6,448
(a)-(c) Refer to previous table for footnotes.
(d) Refer to Note 1 for further details regarding the prior year
restatement.
Notes to the Group financial statements
Note 15 Impairment of non-current assets continued
Impairment methodology
Cash-generating units
The Group treats each store as a separate cash-generating unit
for impairment testing of other intangible assets, property, plant
and equipment, right of use assets and investment property. Refer
to Note 1 for further details. The Group allocates goodwill to
groups of cash-generating units, where each country represents a
group of cash-generating units for the Group's retail operations,
as this represents the lowest level at which goodwill is monitored
by management. Tesco Bank represents a separate cash-generating
unit.
The recoverable amount of each store cash-generating unit is the
higher of its value in use and its fair value less costs of
disposal. The recoverable amount of a group of cash-generating
units to which goodwill has been allocated is determined based on
value in use calculations.
Head office and central assets such as distribution centres and
associated costs are allocated to store cash-generating units based
on level of use, estimated with reference to sales. Urban
fulfilment centres and associated costs that are part of a store
are included in the store cash- generating unit. Standalone
customer fulfilment centres and associated costs are each treated
as a separate cash-generating unit from the current financial year
due to the evolution of the online channel that these centres
support, rather than being allocated to the stores in their
vicinity.
Value in use
Retail
Estimates for value in use calculations include discount rates,
long-term growth rates, expected changes to future cash flows,
including volumes and prices, and the probabilities assigned to
cash flow scenarios. Estimates are based on past experience and
expectations of future changes in the market, including the
prevailing economic climate and global economy, competitor
activity, market dynamics, changing customer behaviours, structural
challenges facing retail and the resilience afforded by the Group's
operational scale.
Cash flow projections are based on the Group's three-year
internal forecasts, the results of which are reviewed by the Board.
The forecasts are extrapolated to five years based on management's
expectations, and beyond five years based on estimated long-term
average growth rates. Long-term growth rates for the Retail
business are based on inflation forecasts by recognised bodies.
In the current year, the Group applies an expected cash flow
approach by probability-weighting different cash flow scenarios.
The greatest probability weighting is applied to the cash flows
derived from the three-year internal forecasts. Additional
scenarios take account of the risks presented by Brexit, COVID-19,
a macro-economic downturn and climate change consistent with the
viability statement scenarios (see 'Longer-term viability
statement' in the Strategic Report) as well as an upside
scenario.
Management estimates discount rates using pre-tax rates that
reflect the market assessment as at the balance sheet date of the
time value of money and the risks specific to the cash-generating
units. The pre-tax discount rates are derived from the Group's
post-tax weighted average cost of capital, as adjusted for the
specific risks relating to each geographical region. Risk-free
rates are based on government bond rates in each geographical
region and equity risk premia are based on forecasts by recognised
bodies. In the current year the risks associated with Brexit and
COVID-19 are reflected in the probability-weighted cash flow
scenarios, and hence the discount rate is no longer adjusted for
these risks.
Tesco Bank goodwill
Tesco Bank value in use is calculated by discounting equity cash
flows, defined as the excess above the regulatory requirement.
Tesco Bank applies an expected cash flow approach, using the
internal three-year forecasts, approved by the Board, as well as
stressed scenarios in line with those used to measure expected
credit losses (refer to Note 25) to form a probability-weighted
cash flow. The long-term growth rate is based on inflation and GDP
growth forecasts by recognised bodies. The discount rate is the
cost of equity of Tesco Bank. Risk-free rates and equity risk
premia are derived from recognised bodies.
Fair value less costs of disposal
Fair values of owned properties are determined with regard to
the market rent for the stores or for alternative uses with
investment yields appropriate to reflect the physical
characteristics of the property, location, infrastructure,
redevelopment potential and other factors. In some cases, fair
values include residual valuations where stores may be viable for
redevelopment. Fair values of leased properties are determined with
regard to the discounted market rent for the property over the
remaining period of the lease, reflecting the condition and
location of the property and the local rental market, adjusted for
a suitable void period. Fair values of the Group's properties were
determined with the assistance of independent professional valuers
where appropriate. Costs of disposal are estimated based on past
experience in each geographical region.
Investments in joint ventures and associates
The recoverable values of investments in joint ventures and
associates are estimated taking into account forecast cash flows,
equity valuations of comparable entities and/or recent transactions
for comparable businesses.
Notes to the Group financial statements
Note 15 Impairment of non-current assets continued
Key assumptions and sensitivity
Key assumptions
For value in use calculations, the key assumptions to which the
recoverable amounts are most sensitive are discount rates,
long-term growth rates, the impact on cash generated from
operations from year one sales growth (incorporating sales and
costs, as well as volumes and prices) and probabilities assigned to
cash flow scenarios. For fair value less costs of disposal
calculations, the key assumption is property fair values.
The discount rates and long-term growth rates for each group of
cash-generating units to which goodwill has been allocated are:
UK ROI Tesco Bank
2021 2020 2021 2020 2021 2020
% % % % % %
Pre-tax discount rates 5.9 8.0 5.4 8.1 12.8 9.7
Post-tax discount rates 4.8 6.6 4.7 7.1 10.4 7.2
Long-term growth rates 1.9 2.0 1.9 1.9 1.6 1.8
The discount rates and long-term growth rates for the Group's
portfolio of store cash-generating units, aggregated by segment due
to the large number of individually immaterial store
cash-generating units, are:
UK & ROI Central Europe
2021 2020 2021 2020
% % % %
5.4 - 8.0 - 5.5 - 7.0 -
Pre-tax discount rates 5.9 8.1 8.3 9.3
4.7 - 6.6 - 4.4 - 5.5 -
Post-tax discount rates 4.8 7.1 7.6 8.3
1.9 - 2.0 - 2.0 -
Long-term growth rates 1.9 2.0 3.0 3.0
Sensitivity
The Group has carried out sensitivity analyses on the reasonably
possible changes in key assumptions in the impairment tests for (a)
each group of cash-generating units to which goodwill has been
allocated and (b) for its portfolio of store cash-generating
units.
(a) With the exception of Tesco Bank, which has been impaired in
the current year, neither a reasonably possible one percentage
point increase in discount rates, a one percentage point decrease
in year one sales growth nor a one percentage point decrease in
long-term growth rates would indicate impairment (or further
impairment), in any group of cash-generating units to which
goodwill has been allocated.
The table below summarises the reasonably possible changes in
key assumptions to which Tesco Bank goodwill is most sensitive and
their impact on impairment in the current year:
Reasonably possible Impact on 2021
Key assumption change impairment GBPm
Cost of equity Increase of 1.0%pt Increase (203)
Annual equity cash flows Decrease of 5.0% Increase (107)
Long-term growth rates Decrease of 0.5%pt Increase (27)
(b) While there is not a significant risk of an adjustment to
the carrying amount of any one store cash-generating unit that
would be material to the Group as a whole in the next financial
year, the table below summarises the reasonably possible changes in
each key assumption and its impact on the impairment of the Group's
entire portfolio of store cash-generating units, presented in
aggregate due to the large number of individually immaterial store
cash-generating units:
Impact on 2021 2020
Key assumption Reasonably possible change impairment GBPm GBPm
Post-tax discount Increase of 1.0%pt for each
rates geographic region Increase (438) (482)
Decrease of 1.0%pt for each
geographic region Decrease 397 485
Increase of 1.0%pt for each
Year one sales growth geographic region Decrease 55 61
Decrease of 1.0%pt for each
geographic region Increase (56) (61)
Long-term growth Increase of 1.0%pt for each
rates geographic region Decrease 304 445
Decrease of 1.0%pt for each
geographic region Increase (308) (410)
Increase of 5.0% for each
Property fair values geographic region Decrease 81 105
Decrease of 5.0% for each
geographic region Increase (80) (105)
The probability applied to each cash flow scenario in the
current year differs by country, depending on the expected
likelihood of each scenario occurring in each country. The base
case represents the cash flows derived from the three-year internal
forecasts and is assigned a weighted average probability of 60%.
The impairment is not highly sensitive to the upside and climate
change scenarios, assigned 5% and 4% weighted average probabilities
respectively. The table below sets out the weighted average
probability assigned to each of the remaining scenarios, to which
the impairment is most sensitive, and shows the impact on
impairment of a reasonably possible change in probability for each
scenario, where the corresponding opposite change in probability is
applied to the base case.
Weighted average Impact on 2021
Scenario probability Reasonably possible change impairment GBPm
Increase of 5.0%pt for
Brexit 11% each geographic region Increase (59)
Decrease of 5.0%pt for
each geographic region Decrease 60
Increase of 5.0%pt for
COVID-19 10% each geographic region Increase (28)
Decrease of 5.0%pt for
each geographic region Decrease 29
Macro-economic Increase of 5.0%pt for
downturn 10% each geographic region Increase (80)
Decrease of 5.0%pt for
each geographic region Decrease 81
Notes to the Group financial statements
Note 16 Investments in debt and equity instruments
Financial assets at fair value through other comprehensive
income
2021 2020
GBPm GBPm
Investments in debt instruments (a) - 1,058
Investments in equity instruments 14 10
Total financial assets at fair value through other comprehensive
income 14 1,068
Of which:
Current 3 202
Non-current 11 866
14 1,068
Investment securities at amortised cost
2021 2020
GBPm GBPm
Investment securities at amortised cost (a) 928 -
Expected credit loss allowance (b) (1) -
927 -
Of which:
Current 175 -
Non-current 752 -
927 -
(a) Refer to Note 1 for more information regarding the change in business model.
(b) Refer to Note 25 for allowance for expected credit losses disclosures.
On 1 March 2020, following a change in business model, the
Group's GBP1,058m portfolio of debt investments measured at fair
value through other comprehensive income was reclassified to
investment securities at amortised cost (see Note 1) and the GBP3m
cumulative loss relating to these assets, previously recognised in
other comprehensive income, was adjusted against the carrying value
of the assets. See Note 24 for the fair value of these assets as at
27 February 2021. A fair value gain of GBP8m would have been
recognised in other comprehensive income in the current year had
the financial assets not been reclassified.
Note 17 Inventories
2021 2020
GBPm GBPm
Goods held for resale 2,066 2,429
Development properties 3 4
2,069 2,433
Goods held for resale are net of commercial income. Refer to
Note 22.
Cost of inventories from continuing operations recognised as an
expense for the 52 weeks ended 27 February 2021 was GBP42,482m (53
weeks ended 29 February 2020: GBP42,782m). Inventory losses and
provisions recognised as an expense for the 52 weeks ended 27
February 2021 were GBP1,052m
(53 weeks ended 29 February 2020: GBP1,121m).
Note 18 Trade and other receivables
2021 2020
GBPm GBPm
Trade receivables 424 495
Prepayments 207 192
Accrued income (a) 210 262
Other receivables 430 439
Amounts owed by joint ventures and associates (Note
31) (b) 162 174
Total trade and other receivables 1,433 1,562
Of which:
Current 1,263 1,396
Non-current 170 166
1,433 1,562
(a) Accrued income includes contract assets of GBP52m (2020:
GBP60m) primarily related to insurance renewal income. The expected
credit loss was immaterial as at 27 February 2021 (2020:
immaterial).
(b) Expected credit losses on amounts owed by joint ventures and
associates are not material.
Trade receivables include commercial income. Refer to Note 22.
Trade receivables are generally non-interest-bearing. Credit terms
vary by country and the nature of the debt, ranging from seven to
60 days.
Notes to the Group financial statements
Note 18 Trade and other receivables continued
The tables below present the ageing of receivables and related
allowances for expected credit losses:
Greater
Up to Six to than
Not past six months 12 months 12 months
due past due past due past due Total
At 27 February 2021 GBPm GBPm GBPm GBPm GBPm
Trade receivables 403 54 3 11 471
Other receivables 413 15 5 19 452
Trade and other receivables 816 69 8 30 923
Allowance for expected credit losses:
At the beginning of the year (7) (9) (8) (30) (54)
Transfer to disposal group held
for sale - 1 1 4 6
Foreign currency translation (1) - - - (1)
Increase in allowance, net of recoveries,
charged to the Group income statement (14) (4) - (6) (24)
Amounts written off - 1 1 2 4
At the end of the year (22) (11) (6) (30) (69)
Greater
Up to Six to than
Not past six months 12 months 12 months
due past due past due past due Total
At 29 February 2020 GBPm GBPm GBPm GBPm GBPm
Trade receivables 438 70 6 15 529
Other receivables 431 7 4 17 459
Trade and other receivables 869 77 10 32 988
Allowance for expected credit losses:
At the beginning of the year (5) (11) (14) (29) (59)
Foreign currency translation - 1 - - 1
Increase in allowance, net of recoveries,
charged to the Group income statement (2) - 4 (3) (1)
Amounts written off - 1 2 2 5
At the end of the year (7) (9) (8) (30) (54)
Note 19 Loans and advances to customers and banks
Tesco Bank has loans and advances to customers and banks, as
follows:
2021 2020
GBPm GBPm
Loans and advances to customers 6,402 8,451
Loans and advances to banks - -
6,402 8,451
Of which:
Current 3,093 4,280
Non-current 3,309 4,171
6,402 8,451
The maturity of these loans and advances is as follows:
2021 2020
GBPm GBPm
Repayable on demand or at short notice 3 4
Within three months 3,354 4,543
Greater than three months but less than one year 94 86
Greater than one year but less than five years 2,922 3,322
After five years 654 984
7,027 8,939
Expected credit loss allowance for loans and advances
to customers and banks (625) (488)
6,402 8,451
At 27 February 2021, GBP3.0bn (2020: GBP3.5bn) of the credit
card portfolio had its beneficial interest assigned to a
securitisation structured entity, Delamare Cards Receivables
Trustee Limited, for use as collateral in securitisation
transactions. The total encumbered portion of this portfolio is
GBPnil (2020: GBP0.8bn).
At 27 February 2021, Delamare Cards MTN Issuer PLC had GBP1.8bn
(2020: GBP2.0bn) notes in issue in relation to securitisation
transactions, of which GBPnil (2020: GBP0.6bn) was externally
issued. The Group owned GBP1.5bn (2020: GBP1.4bn) class A credit
card-backed notes and GBP0.3bn (2020: GBP0.2bn) class D credit
card-backed notes.
All of the GBP1.5bn (2020: GBP1.2bn) class A retained Credit
Card backed notes are held within a single collateral pool.
Fair value hedge adjustments
Fair value hedge adjustments amounting to GBP6.7m (2020:
GBP9.7m) are in respect of fixed rate loans. These adjustments are
largely offset by derivatives, which are used to manage interest
rate risk and are designated as fair value hedges within loans and
advances to customers.
Refer to Note 25 for allowance for expected credit losses
disclosures.
Notes to the Group financial statements
Note 20 Cash and cash equivalents and short-term investments
Cash and cash equivalents
2021 2020*
GBPm GBPm
Cash at bank and in hand 2,495 3,980
Short-term deposits 15 157
Cash and cash equivalents in the Group balance sheet 2,510 4,137
Bank overdrafts (532) (1,106)
Cash and cash equivalents in the Group cash flow statement 1,978 3,031
* Refer to Note 1 for further details regarding the prior year
restatement in relation to notional cash pooling arrangements.
Short-term investments
2021 2020
GBPm GBPm
Money market funds 1,011 1,076
Cash and cash equivalents includes GBP101m (2020: GBP35m) of
restricted amounts mainly relating to the Group's pension schemes
and employee
benefit trusts.
Note 21 Trade and other payables
2021 2020
GBPm GBPm
Trade payables 5,131 5,579
Other taxation and social security 369 477
Other payables 1,653 1,793
Amounts payable to joint ventures and associates (Note
31) 23 26
Accruals 956 841
Contract liabilities 376 376
Total trade and other payables 8,508 9,092
Of which:
Current 8,399 8,922
Non-current 109 170
8,508 9,092
Trade and other payables are net of commercial income. Refer to
Note 22.
Contract liabilities represent consideration received for
performance obligations not yet satisfied, predominantly in
relation to Clubcard points.
The majority of the revenue deferred at the current financial
year end will be recognised in the following financial year.
Trade payables include GBP572m (2020: GBP393m) that suppliers
have chosen to early-fund under supplier financing arrangements.
Refer to Note 1. Amounts in trade payables that are overdue for
payment to the provider are immaterial.
Note 22 Commercial income
Below are the commercial income balances included within
inventories and trade and other receivables, or netted against
trade and
other payables. Amounts received in advance of income being
earned are included in accruals.
2021 2020
GBPm GBPm
Current assets
Inventories (24) (55)
Trade and other receivables
Trade/other receivables 90 138
Accrued income 125 157
Current liabilities
Trade and other payables
Trade payables 170 292
Accruals (2) (3)
Notes to the Group financial statements
Note 23 Borrowings
Borrowings are classified as current and non-current based on
their scheduled redemption date, and not their maturity date.
Repayments of principal amounts are classified as current if the
repayment is scheduled to be made within one year of the balance
sheet date.
2021 2020 (k)
Par value Maturity GBPm GBPm
Bank loans and overdrafts (a) - - 559 1,142
2.125% MTN EUR296m Nov 2020 - 255
1m USD LIBOR + 0.70% Tesco Bank
Bond $350m Nov 2020 - 273
5% Tesco Bank Retail Bond GBP200m Nov 2020 - 202
6.125% MTN GBP417m Feb 2022 417 416
LIBOR + 0.53% Tesco Bank Bond GBP300m Oct 2022 - 299
5% MTN (b) GBP71m Mar 2023 79 103
1.375% MTN EUR750m Oct 2023 662 660
2.5% MTN (b) EUR473m Jul 2024 415 653
2.5% MTN GBP400m May 2025 417 418
3.5% Tesco Bank Senior MREL Notes
(h) GBP250m Jul 2025 251 250
3.322% LPI MTN (i) GBP354m Nov 2025 364 358
0.875% MTN EUR750m May 2026 649 640
5.5457% Secured Bond (c)(d) GBP289m Feb 2029 275 303
6.067% Secured Bond (c) GBP200m Feb 2029 193 192
LIBOR + 1.2% Secured Bond (c) GBP50m Feb 2029 48 36
0.375% MTN EUR750m Jul 2029 625 -
6% MTN (b) GBP38m Dec 2029 45 58
2.75% MTN GBP450m Apr 2030 441 -
LIBOR + 1.17% Secured Bond (f)(l) GBP187m Jan 2032 184 -
LIBOR + 1.17% Secured Bond (f) GBP108m Jan 2032 100 -
5.5% MTN (b) GBP67m Jan 2033 80 133
1.982% RPI MTN (j) GBP294m Mar 2036 302 297
6.15% USD Bond (b) $355m Nov 2037 333 555
6.0517% Secured Bond (e)(g) GBP458m Oct 2039 592 616
4.875% MTN (b) GBP14m Mar 2042 14 20
5.125% MTN (b) EUR235m Apr 2047 209 316
5.2% MTN (b) GBP14m Mar 2057 14 29
7,268 8,224
Of which:
Current 1,080 2,219
Non-current 6,188 6,005
7,268 8,224
(a) Bank loans and overdrafts includes GBP532m (2020: GBP1,106m)
of bank overdrafts. GBP525m (2020: GBP979m) is held under a
notional pooling arrangement which does not meet the criteria to be
presented net of cash on the balance sheet. Refer to Note 20.
(b) During the year, the Group undertook a tender for
outstanding bonds and as a result the following notional amounts
were repaid early, 5% MTN Mar 2023 GBP22m, 2.5% MTN Jul 2024
EUR277m, 6% MTN Dec 2029 GBP10m, 5.5% MTN Jan 2033 GBP42m, 6.15%
USD Bond Nov 2037 $170m, 4.875% MTN Mar 2042 GBP6m, 5.125% MTN Apr
2047 EUR121m and 5.2% MTN Mar 2057 GBP16m.
(c) The bonds are secured by a charge over the property, plant
and equipment held within The Tesco Property Limited Partnership, a
100% owned subsidiary of Tesco PLC. The carrying amounts of assets
pledged as security for secured bonds is GBP817m (29 February 2020:
GBP794m).
(d) This is an amortising bond which matures in Feb 2029. GBP26m
(29 February 2020: GBP22m) is the principal repayment due within
the next 12 months. The remainder is payable in quarterly
instalments until maturity in Feb 2029.
(e) These bonds is secured by a charge over the property, plant
and equipment held within The Tesco Atrato Limited Partnership, a
100% owned subsidiary of Tesco PLC. The carrying amounts of assets
pledged as security for secured bonds is GBP837m (29 February 2020
GBP612m).
(f) These bonds are secured by a charge over the property, plant
and equipment held within The Tesco Property No. 2 Limited
Partnership, a 100% owned subsidiary of Tesco PLC. The carrying
amounts of assets pledged as security for secured bonds is
GBP445m.
(g) This is an amortising bond which matures in October 2039.
GBP14m is the principal repayment due within the next 12 months.
The remainder is payable in quarterly instalments until maturity in
Oct 2039.
(h) These notes are Tesco Bank MREL compliant senior debt and
were issued on 25 July 2019. The scheduled redemption date is July
2024.
(i) The 3.322% Limited Price Inflation (LPI) MTN is redeemable
at par, indexed for increases in the RPI over the life of the MTN.
The maximum indexation of the principal in any one year is 5%, with
a minimum of 0%.
(j) The 1.982% RPI MTN is redeemable at par, indexed for
increases in the RPI over the life of the MTN.
(k) Refer to Note 1 for further details regarding the prior year restatement.
(l) This is an amortising bond which matures in January 2032
GBP9m is the principal repayment due within the next 12 months. The
remainder is payable in quarterly instalments until maturity in Jan
2032.
Notes to the Group financial statements
Note 24 Financial instruments
The Group recognises the following financial instruments on its
balance sheet. The Group's exposure to the risks associated with
its financial assets and liabilities is discussed in Note 25.
At fair
value At fair
through value through
At amortised profit other comprehensive
cost or loss income Total
At 27 February 2021 Notes GBPm GBPm GBPm GBPm
Financial assets
Cash and cash equivalents 20 2,496 14 - 2,510
Short-term investments 20 1,011 - - 1,011
Trade receivables 18 424 - - 424
Other receivables 18 430 - - 430
Joint ventures and associates loan
receivables 31 122 - - 122
Loans and advances to customers
- Tesco Bank 19 6,402 - - 6,402
Investment securities at amortised
cost 16 927 - - 927
Financial assets at fair value
through other comprehensive income 16 - - 14 14
Derivative financial instruments:
Interest rate swaps - 42 - 42
Cross-currency swaps - 298 - 298
Index-linked swaps - 1,080 - 1,080
Forward contracts - 42 - 42
11,812 1,476 14 13,302
Financial liabilities
Trade payables 21 (5,131) - - (5,131)
Other payables 21 (1,653) - - (1,653)
Borrowings 23 (7,268) - - (7,268)
Customer deposits - Tesco Bank 26 (5,738) - - (5,738)
Deposits from banks - Tesco Bank 26 (600) - - (600)
Lease liabilities 12 (8,402) - - (8,402)
Derivative financial instruments:
Interest rate swaps - (162) - (162)
Cross-currency swaps - (38) - (38)
Index-linked swaps - (729) - (729)
Forward contracts - (78) - (78)
(28,792) (1,007) - (29,799)
At fair
value At fair
through value through
At amortised profit other comprehensive
costs or loss income Total
At 29 February 2020 (restated)* Notes GBPm GBPm GBPm GBPm
Financial assets
Cash and cash equivalents 20 4,111 26 - 4,137
Short-term investments 20 1,076 - - 1,076
Trade receivables 18 495 - - 495
Other receivables 18 439 - - 439
Joint ventures and associates loan
receivables 31 127 - - 127
Loans and advances to customers
- Tesco Bank 19 8,451 - - 8,451
Investment securities at amortised
cost 16 - - - -
Financial assets at fair value
through other comprehensive income 16 - - 1,068 1,068
Derivative financial instruments:
Interest rate swaps - 47 - 47
Cross-currency swaps - 497 - 497
Index-linked swaps - 541 - 541
Forward contracts - 61 - 61
14,699 1,172 1,068 16,939
Financial liabilities
Trade payables 21 (5,579) - - (5,579)
Other payables 21 (1,793) - - (1,793)
Borrowings 23 (8,224) - - (8,224)
Customer deposits - Tesco Bank 26 (7,707) - - (7,707)
Deposits from banks - Tesco Bank 26 (500) - - (500)
Lease liabilities 12 (9,566) - - (9,566)
Derivative financial instruments:
Interest rate swaps - (70) - (70)
Cross-currency swaps - - - -
Index-linked swaps - (816) - (816)
Forward contracts - (62) - (62)
(33,369) (948) - (34,317)
* Refer to Note 1 for further details regarding the prior year
restatement.
Notes to the Group financial statements
Note 24 Financial instruments continued
The fair values are determined by reference to prices available
from the markets on which the instruments are traded, where they
are available. Where market prices are not available, the fair
value is calculated by discounting expected future cash flows at
prevailing interest rates. The fair value of assets measured at
amortised cost is shown below.
The expected maturity of financial assets and liabilities is not
considered to be materially different to their current and
non-current classification.
Fair value of financial assets and liabilities measured at
amortised cost
The fair value of financial assets and liabilities measured at
amortised cost is shown below. The table excludes cash and cash
equivalents, short-term investments, trade receivables/payables,
and other receivables/payables where the carrying values
approximate fair value.
2020 (restated(a)
2021 )
Carrying Fair Carrying Fair
value value value value
GBPm GBPm GBPm GBPm
Financial assets measured at amortised
cost
Loans and advances to customers - Tesco
Bank (Level 3) 6,402 6,618 8,451 8,672
Investment securities at amortised cost
(Level 1 and 2) 927 932 - -
Joint ventures and associates loan receivables(b)
(Level 2) 122 153 127 193
Financial liabilities measured at amortised
cost
Borrowings
Amortised cost (Level 1 and 2) (4,711) (5,761) (5,793) (6,371)
Bonds in fair value hedge relationships
(Level 1) (2,557) (2,658) (2,431) (2,432)
Customer deposits - Tesco Bank (Level
3) (5,738) (5,744) (7,707) (7,711)
Deposits from banks - Tesco Bank (Level
2) (600) (600) (500) (500)
(a) Refer to Note 1 for further details regarding the prior year restatement.
(b) Joint ventures and associates loan receivables carrying
amounts of GBP122m (2020: GBP127m) are presented in the Group
balance sheet net of deferred profits of GBP38m (2020: GBP54m)
historically arising from the sale of property assets to joint
ventures.
Fair value measurement by level of fair value hierarchy
The following table presents the Group's financial assets and
liabilities that are measured at fair value, by level of fair value
hierarchy:
- quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1);
- inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2); and
- inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
Level
Level 1 Level 2 3 Total
At 27 February 2021 GBPm GBPm GBPm GBPm
Assets
Financial assets at fair value through
other comprehensive income - 3 11 14
Cash and cash equivalents at fair value
through profit or loss - 14 - 14
Derivative financial instruments:
Interest rate swaps - 42 - 42
Cross-currency swaps - 298 - 298
Index-linked swaps - 1,080 - 1,080
Forward contracts - 42 - 42
Total assets - 1,479 11 1,490
Liabilities
Derivative financial instruments:
Interest rate swaps - (162) - (162)
Cross-currency swaps - (38) - (38)
Index-linked swaps - (729) - (729)
Forward contracts - (78) - (78)
Total liabilities - (1,007) - (1,007)
Net assets/(liabilities) - 472 11 483
Notes to the Group financial statements
Note 24 Financial instruments continued
Level
Level 1 Level 2 3 Total
At 29 February 2020 GBPm GBPm GBPm GBPm
Assets
Financial assets at fair value through
other comprehensive income 1,058 - 10 1,068
Cash and cash equivalents at fair value
through profit or loss - 26 - 26
Derivative financial instruments:
Interest rate swaps - 47 - 47
Cross-currency swaps - 497 - 497
Index-linked swaps - 541 - 541
Forward contracts - 61 - 61
Total assets 1,058 1,172 10 2,240
Liabilities
Derivative financial instruments:
Interest rate swaps - (70) - (70)
Index-linked swaps - (816) - (816)
Forward contracts - (62) - (62)
Total liabilities - (948) - (948)
Net assets/(liabilities) 1,058 224 10 1,292
The following table presents the changes in Level 3
instruments:
2021 2020
GBPm GBPm
At the beginning of the year 10 (1)
Gains/(losses) recognised in the Group statement of
comprehensive income/(loss) 3 1
Disposal of financial instrument at fair value through
profit or loss (4) 6
Addition of financial asset at fair value through other
comprehensive income 2 4
At the end of the year 11 10
During the financial year, there were no transfers (2020: no
transfers) between Level 1 and Level 2 fair value measurements, and
no transfers into and out of Level 3 fair value measurements (2020:
no transfers).
Offsetting of financial assets and liabilities
The following tables show those financial assets and liabilities
subject to offsetting, enforceable master netting arrangements and
similar agreements.
Related
amounts
not offset
in the
Group balance
sheet
Gross
amounts
of
financial
Gross assets/
amounts (liabilities) Net amounts
of offset presented
recognised in the in the
financial Group Group
assets/ balance balance Financial
(liabilities) sheet sheet instruments Collateral Net amount
At 27 February 2021 GBPm GBPm GBPm GBPm GBPm GBPm
Financial assets
Derivative financial
instruments 1,462 - 1,462 (234) - 1,228
Trade receivables 520 (96) 424 - - 424
Total assets 1,982 (96) 1,886 (234) - 1,652
Financial liabilities
Derivative financial
instruments (1,007) - (1,007) 234 42 (731)
Trade payables (5,227) 96 (5,131) - - (5,131)
Total liabilities (6,234) 96 (6,138) 234 42 (5,862)
Notes to the Group financial statements
Note 24 Financial instruments continued
Related
amounts
not offset
in the
Group balance
sheet
Gross
amounts
of
financial
Gross assets/
amounts (liabilities) Net amounts
of offset presented
recognised in the in the
financial Group Group
At 29 February 2020 assets/ balance balance Financial
(restated(a) (liabilities) sheet sheet instruments Collateral Net amount
) GBPm GBPm GBPm GBPm GBPm GBPm
Financial assets
Derivative financial
instruments 1,146 - 1,146 (168) - 978
Trade receivables 735 (240) 495 - - 495
Total assets 1,881 (240) 1,641 (168) - 1,473
Financial liabilities
Derivative financial
instruments (948) - (948) 168 45 (735)
Trade payables (5,819) 240 (5,579) - - (5,579)
Total liabilities (6,767) 240 (6,527) 168 45 (6,314)
(a) Refer to Note 1 for further details regarding the prior year
restatement.
For the financial assets and liabilities subject to enforceable
master netting arrangements above, each agreement between the Group
and the counterparty allows for net settlement of the relevant
financial assets and liabilities when both elect to settle on a net
basis. In the absence of such an election, financial assets and
liabilities will be settled on a gross basis. However, each party
to the master netting agreement or similar agreement will have the
option to settle all such amounts on a net basis in the event of
default of the other party.
Note 25 Financial risk management
The Group's financial risk management is carried out under
policies approved and authority delegated by the Board of
Directors, including parameters for risk management across the
Group. The financial risk management in relation to Retail is
carried out by a central treasury department. Tesco Bank has a
separate formal structure for reporting, monitoring and managing
its financial risks appropriate to the nature of its business as a
regulated financial institution.
The main financial risks faced by the Group, including Retail
and Tesco Bank, and the management of these risks are set out below
and include market risk (foreign exchange, interest rate, inflation
and commodity prices), credit risk, liquidity risk, capital risk
and insurance risk. Additional information on the management of the
financial risks relating to Tesco Bank is also set out below.
(a) Market risk
The Group is exposed to various elements of market risk, which
include foreign exchange risk, interest rate risk, commodity price
risk and inflation risk.
Foreign exchange risk
The Group is exposed to foreign exchange risk principally
via:
- transactional exposure that arises from the cost of future
purchases of goods, where those purchases are denominated in a
currency other than the functional currency of the purchasing
company;
- net investment exposure that arises from changes in the value
of net investments denominated in currencies other than Pounds
Sterling;
- loans to and from subsidiaries in currencies other than in the
entity's functional currency; and
- debt issued in a currency other than Pound Sterling.
The foreign exchange risk for each of the above is managed
via:
Transactional exposure
- forward foreign currency contracts or purchased currency
options, which are designated as cash flow hedges. The Group's
policy is to hedge currency exposure that could significantly
impact the Group income statement with a minimum (20%) and maximum
(80%) hedge level of forecast uncommitted exposure within at least
the next 12 months.
Net Investment exposure
- foreign currency derivatives and borrowings in matching
currencies, which are formally designated as net investment hedges.
The Group's policy is to hedge a part of its investments in
international subsidiaries.
Intercompany loan hedging
- the use of foreign currency derivatives and borrowings in
matching currencies. The Group's policy is that 100% of the foreign
exchange risk is hedged. These are not formally designated as
accounting hedges as gains and losses will naturally offset in the
income statement.
Foreign currency debt
- cross-currency swaps which swap the non-sterling debt back
into a net sterling exposure. The Group's policy is to swap foreign
currency debt back to Pound Sterling, unless there are appropriate
matching foreign currency assets.
Notes to the Group financial statements
Note 25 Financial risk management continued
Interest rate risk
The Group is exposed to interest rate risk principally via:
- debt issued at variable interest rates, as well as cash
deposits and short-term investments, giving rise to cash flow risk;
and debt issued at fixed interest rates, giving rise to fair value
risk.
The interest rate risk for each of the above is managed via:
- The issuance of debt at variable and floating interest rates
as well as forward rate agreements, interest rate swaps, and caps
and floors, which may be used to achieve the desired mix of fixed
and floating rate debt. Hedging relationships are formally
designated as either fair value or cash flow hedges. The Group's
policy is to target fixing a minimum of 50% of interest costs for
senior unsecured debt excluding Tesco Bank. At 27 February 2021,
the percentage of interest-bearing debt at fixed rates was 67%
(2020: 68%). The weighted average rate of interest paid on senior
unsecured debt this financial year, excluding joint ventures and
associates, was 3.07% (2020: 3.30%).
The Group has RPI-linked debt where the principal is indexed to
increases in the RPI. RPI debt is treated as floating rate debt.
The Group also has LPI-linked debt, where the principal is indexed
to RPI, with an annual maximum increase of 5% and a minimum of 0%.
LPI debt is treated as fixed-rate debt. RPI-linked debt and
LPI-linked debt are hedged for the effects of inflation until
maturity.
During 2021 and 2020, Group net debt was managed using
derivative instruments to hedge interest rate risk.
2021 2020 (restated*)
Fixed Floating Total Fixed Floating Total
GBPm GBPm GBPm GBPm GBPm GBPm
Cash and cash equivalents - 2,510 2,510 - 4,137 4,137
Loans and advances to customers
- Tesco Bank 6,402 - 6,402 4,370 4,081 8,451
Investment securities at
amortised cost 502 425 927 - - -
Short-term investments - 1,011 1,011 - 1,076 1,076
Financial assets at fair
value through other comprehensive
income 14 - 14 659 409 1,068
Joint ventures and associates
loan receivables 101 21 122 106 21 127
Lease liabilities (8,402) - (8,402) (9,566) - (9,566)
Bank and other borrowings (6,102) (1,166) (7,268) (6,260) (1,964) (8,224)
Customer deposits - Tesco
Bank (5,738) - (5,738) (3,164) (4,543) (7,707)
Deposits from banks - Tesco
Bank - (600) (600) (500) - (500)
Derivative effect:
Interest rate swaps (1,206) 1,206 - (1,092) 1,092 -
Cross-currency swaps (905) 905 - 410 (410) -
Index-linked swaps (299) 299 - (294) 294 -
Total (15,633) 4,611 (11,022) (15,331) 4,193 (11,138)
* Refer to Note 1 for further details regarding the prior year
restatement.
Commodity price risk
The Group is exposed to commodity price risk via:
- changes in commodity prices largely relating to diesel for own
use.
The commodity price risk is managed via:
- forward derivative contracts which are designated as cash flow
hedges. These are used to hedge future purchases of diesel for own
use which are forecast to occur within a 12-month period. The Group
Policy is to hedge a minimum of 50% of the forecast uncommitted
exposure within the next 12 months.
Inflation risk
The Group is exposed to inflation risk in relation to its
financial assets and liabilities via:
- Indexed linked debt, were the principal is indexed to increase
/ decrease in line with the RPI or LPI.
- Lease liabilities where rent payments are indexed to increases
/ decreases in inflation indexes such as RPI.
The inflation risk is managed via:
- Indexed-linked debt
- Indexed-linked swaps, which are used to hedge RPI-linked and
LPI-linked debt for the effect of inflation until maturity.
- Indexed linked lease liabilities
- Indexed linked swaps, which are used to hedge inflation linked
rent payments for the effect of inflation until maturity of the
lease.
Hedge accounting of market risks
Derivatives are used to hedge exposure to market risks, some of
which are economic hedges and others are formally designated
hedging instruments with hedge accounting applied. The main sources
of hedge ineffectiveness are the effect of the counterparties' and
the Group's own credit risk on the fair value of derivatives.
Notes to the Group financial statements
Note 25 Financial risk management continued
Fair value hedges
The Group maintains interest rate and cross-currency swap
contracts as fair value hedges of the interest rate and currency
risk on fixed-rate debt issued by the Group and investment
securities held by the Group.
Derivative contracts hedging fixed rate debt issued by the Group
receive a fixed-rate of interest and pay a variable interest
rate.
Derivative contracts held by the Group receive a floating rate
of interest and pay a fixed interest rate to hedge investment
securities where the Group receives a fixed rate of interest.
There is an economic relationship between the hedged item and
the hedging instrument as the terms of the swap contracts match the
terms of the fixed-rate borrowings, including notional amount,
maturity, payment and rate set dates. The Group has established a
hedge ratio of 1:1 for the hedging relationship as the underlying
risk of the swap contract is identical to the hedged item.
Cash flow hedges
The Group is exposed to foreign currency risk arising from
purchases of goods for resale in currencies other than the
functional currency of the purchasing entity. Foreign currency
forwards are utilised to hedge this risk and are formally
designated as cash flow hedges.
Under the Group's hedging policy, the critical terms of the
forward contracts must align with the hedged items. The foreign
currency forwards are denominated in the same currency as the
highly probable future sales and purchases, which are expected to
occur within a maximum 24-month period, and the hedging
relationship is determined to be 1:1.
The Group also uses forward contracts to hedge the price of
certain commodities, these mainly relate to forward contracts to
hedge future purchases of diesel for own use, which are forecast to
occur within a 12-month period. These are denominated in the same
currency and volume as the forecast purchases and the hedging
relationship is determined to be 1:1.
The Group also uses index-linked swaps to hedge cash flows on
index-linked debt and interest rate swaps to hedge interest cash
flows on debt.
Net investment hedging
The Group uses Euro-denominated borrowings to hedge the exposure
of a portion of its net investments in overseas operations which
have a Euro functional currency, against changes in value due to
changes in foreign exchange rates. The hedged risk in the net
investment hedge is the risk of a weakening Euro against Pound
Sterling that will result in a reduction in the carrying amount of
the Group's Euro net investments.
To assess hedge effectiveness, the Group determines the economic
relationship between the hedging instrument and the hedged item by
comparing changes in the carrying amount of the debt that is
attributable to a change in the spot rate with changes in the
investment in foreign operations due to movements in the spot rate.
The Group has established a hedge ratio of 1:1, as the underlying
risk of the hedging instrument is identical to the hedged risk
component.
The details of the hedging instruments and movements in
cumulative losses on net investment hedges in other comprehensive
income are set out below:
Nominal
amount Movement Movement
Nominal amount of the on on
of the hedged hedging continuing discontinued
Gains/(losses) on net investment item instrument hedges hedges
hedges GBPm GBPm GBPm GBPm
At 23 February 2019 1,281 1,281 (42) (976)
Change in value for calculating
ineffectiveness 9 9 48 (89)
At 29 February 2020 1,290 1,290 6 (1,065)
Change in value for calculating
ineffectiveness 10 10 (10) -
Recycled to Group income statement - - - 57
At 27 February 2021 1,300 1,300 (4) (1,008)
Net investment hedge ineffectiveness was GBPnil (2020: GBPnil)
during the year.
During the current financial year, the Group disposed of its
Asian business resulting in a recycle to the income statement from
the translation reserve of GBP57m (2020: GBPnil) relating to net
investment hedging.
During the current financial year, currency movements decreased
the net value, after the effects of hedging, of the Group's
overseas assets by GBP68m (2020: decrease by GBP68m). The Group
also ensures that each subsidiary is appropriately hedged in
respect of its non-functional currency assets.
Financial instruments not qualifying for hedge accounting
The Group's policy does not permit use of derivatives for
trading purposes. However, some derivatives do not qualify for
hedge accounting, or are specifically not designated as a hedge
where gains and losses on the hedging instrument and the hedged
item naturally offset in the Group income statement. These
instruments include index-linked swaps, interest rate swaps,
cross-currency swaps and forward foreign currency contracts.
Notes to the Group financial statements
Note 25 Financial risk management continued
IBOR reform
In the prior year, the Group early adopted the 'Interest Rate
Benchmark Reform Phase 1' amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16. This allowed the Group to continue hedge
accounting for its benchmark interest rate exposures during the
period of uncertainty from interest rate benchmark reforms.
In the current year, the Group has early adopted the 'Interest
Rate Benchmark Reform Phase 2' amendments to IFRS 9, IAS 39, IFRS
7, IFRS 4 and IFRS 16 and has applied this to hedging relationships
where no uncertainty remains as IBOR based benchmarks have been
replaced by risk-free benchmarks for a number of hedging
relationships.
Both Phase 1 and Phase 2 are relevant to the Group because it
applies hedge accounting to its interest rate benchmark exposures
and modifications in response to the reform have been made to some
but not all of the Group's derivative and non-derivative financial
instruments.
Where new hedging arrangements have been entered into during the
year these have been set up utilising risk-free rates.
During the year the Group transitioned some of its exposures
from IBOR based to risk free rate indices. These included interest
rate swaps and floating Inter-Company lending which were
transitioned to Sterling Overnight Index Average (SONIA) based
indices.
None of the Group's current IBOR linked contracts include
adequate and robust fall-back provisions for cessation of the
referenced
benchmark interest rate.
The Group continues to monitor the market and the output from
various industry groups managing the transition to new benchmark
interest rates, and will look to implement fall-back language for
different instruments and IBORs when appropriate.
For the Group's derivatives, the International Swaps and
Derivatives Association (ISDA) fall-back clauses were made
available at the end of
2019 and the Group has entered discussions with its banks and
other counterparties with the aim to implement this language into
its ISDAs and other relevant agreements.
The Group's transition to alternative benchmark rates is managed
by cross functional teams, led by the Treasury teams in the Retail
business and Tesco Bank, with the aim to complete this transition
during the financial year ending 26 February 2022. There are a
number of potential risks arising from the transition, however the
Group does not envisage that these will materialise, as significant
progress on the transition has been made with its banks and other
counterparties.
The following table sets out the hedging relationships as at 27
February 2021, which include IBOR benchmarks and are yet to be
transitioned to
Risk-free rate benchmarks.
Carrying value
Notional Asset Liability Interest
Hedging instrument GBPm GBPm GBPm rate benchmark Hedged item Hedge relationship
Interest Fair value
rate swaps 650 14 - EURIBOR MTN hedge
Interest Fair value
rate swaps 465 22 - LIBOR MTN hedge
Interest Cash flow
rate swaps 346 - (108) LIBOR Borrowing hedge
Cross-currency
interest Not in formal
rate swaps 256 137 (3) LIBOR MTN hedge relationship
Investment
in subordinated Not in formal
loans 21 21 - LIBOR - hedge relationship
Derivatives and hedging exposures
The fair value and notional amounts of derivatives analysed by
hedge type are as follows:
2021 2020
Asset Liability Asset Liability
Fair
Fair value Notional Fair value Notional Fair value Notional value Notional
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Fair value hedges
Interest rate swaps 42 2,018 (54) 2,774 47 1,710 (51) 2,404
Cross-currency swaps - - (35) 650 232 409 - -
Cash flow hedges
Interest rate swaps - - (108) 346 - - (19) 50
Cross-currency swaps - - - - 265 1,477 - -
Index-linked swaps 203 660 - - 186 649 - -
Forward contracts 37 1,118 (59) 1,468 38 1,133 (29) 954
Derivatives not
in a formal hedge
relationship
Interest rate swaps - 13 - 101 - 35 - 13
Cross-currency swaps 298 782 (3) 86 - - - -
Index-linked swaps 877 3,209 (729) 4,982 355 3,025 (816) 5,130
Forward contracts 5 479 (19) 1,043 23 1,139 (33) 1,416
Total 1,462 8,279 (1,007) 11,450 1,146 9,577 (948) 9,967
Notes to the Group financial statements
Note 25 Financial risk management continued
The following tables set out the maturity profile and average
interest rates and foreign currency exchange rates of the hedging
instruments used in the Group's non-dynamic hedging strategies.
2021 2020
One to One to More than
Up to five More than Up to five five
Maturity profile one year years five years one year years years
Fair value hedges
Interest rate risk
Interest rate swaps - GBP
- Notional amount (GBPm) 1,384 2,156 602 953 1,910 607
- Average net interest rate
(pay)/receive 0.32% 1.29% 0.59% 1.08% 0.84% 1.39%
Interest rate swaps - EUR
- Notional amount (GBPm) - 650 - - 645 -
- Average net interest rate
(pay)/receive - 0.66% - - 0.63% -
Interest rate/Foreign currency
risk
Cross-currency swaps (GBP:EUR)
- Notional amount (GBPm) - - 650 - - -
- Average exchange rate - - 1.13 - - -
- Average net interest rate
(pay)/receive - - (0.77%) - - -
Cross-currency swaps (GBP:USD)
- Notional amount (GBPm) - - - - - 409
- Average exchange rate - - - - - 1.50
- Average net interest rate
(pay)/receive - - - - - 3.15%
Cash flow hedges
Interest rate risk
Index-linked swaps
- Notional amount (GBPm) - 360 300 - - 649
Average net interest rate
(pay)/receive - (4.23%) (4.21%) - - (4.22%)
Interest rate swaps
- Notional amount (GBPm) - - 346 - - 50
- Average net interest rate
(pay)/receive - - (4.97%) - - (4.23%)
Interest rate/Foreign currency
risk
Cross-currency swaps (GBP:USD)
floating
- Notional amount (GBPm) - - - 272 - -
- Average exchange rate - - - 1.29 - -
- Average net interest rate
(pay)/receive - - - 0.84% - -
Cross-currency swaps (GBP:EUR)
fixed
- Notional amount (GBPm) - - - 254 645 306
- Average exchange rate - - - 1.19 1.25 1.47
- Average net interest rate
(pay)/receive - - - (0.87%) (1.46%) (0.32%)
At 27 February 2021, forward foreign currency contracts,
designated as cash flow hedges, equivalent to GBP2.5bn were
outstanding (2020: GBP2.1bn). These forward contracts are largely
in relation to purchases of Euros (notional EUR1.0bn) (2020:
notional GBP0.8bn) and US Dollars (notional $1.3bn) (2020: notional
$0.9bn) with varying maturities up to August 2022.
For the above currencies the rates ranged from Euro/GBP 1.08 to
1.156 and US$/GBP from 1.222 to 1.416.
Forward commodity contracts hedging diesel purchases for own use
as at 27 February 2021 had a GBP notional of GBP54m (2020: GBP69m)
at a rate of GBP277 to GBP457 per tonne.
The notional and fair values of these contracts is shown on page
82.
The following table sets out the details of the hedged exposures
covered by the Group's fair value hedges.
Accumulated amounts
of fair value
adjustments on
Carrying amount hedged item
Changes
in fair
value for
calculating Residual
hedge hedge
Assets Liabilities Assets Liabilities ineffectiveness adjustments(a)
At 27 February 2021 GBPm GBPm GBPm GBPm GBPm GBPm
Fair value hedges
Interest rate risk
Fixed-rate loans (b) 3,653 - 7 - (3) (3)
Fixed-rate savings (c) - (1,866) - - - -
Fixed-rate investment securities
(b) 500 - 10 - 8 -
Fixed-rate bonds (d) - (2,926) - (95) (59) (97)
(a) Accumulated amount of fair value hedge adjustments remaining
in the Group balance sheet for
any hedged items that have ceased to be adjusted for hedging gains and losses.
(b) Classified as Loans and advances to customers and banks.
(c) Classified as Customer deposits and Deposits from Banks.
(d) Classified as Borrowings.
Notes to the Group financial statements
Note 25 Financial risk management continued
Accumulated amounts
of fair value
adjustments on
Carrying amount hedged item
Changes in
fair
value for Residual
calculating hedge
hedge adjustments
Assets Liabilities Assets Liabilities ineffectiveness (a)
At 29 February 2020 GBPm GBPm GBPm GBPm GBPm GBPm
Fair value hedges
Interest rate risk
Fixed-rate loans and
mortgages (b) 4,416 - 10 - 12 6
Fixed-rate savings
(c) - (3,003) - (1) (1) (1)
Fixed-rate investment
securities (b) 650 - 2 - 7 -
Fixed-rate bonds (d) - (2,348) - (216) 140 (34)
(a)-(d) Refer to previous
table for footnotes.
The following tables set out information regarding the change in
value of the hedged item used in calculating hedge ineffectiveness
as well as the impacts on the cash flow hedge reserve and cost of
hedging reserve.
Cumulative impact
on hedging reserve
and cost of hedging
reserve*
Change in
value of Change in
hedging value of
instrument hedged item
for for
calculating calculating
hedge hedge Continuing Discontinued
ineffectiveness ineffectiveness hedges hedges
At 27 February 2021 Hedging instrument GBPm GBPm GBPm GBPm
Interest rate risk
Index-linked
Index-linked bonds bonds 1 (1) 71 -
Interest rate
Borrowings swaps 30 (30) 18 -
Foreign currency risk
Trade payables Forward contracts (44) 44 (24) -
Interest rate/Foreign currency
risk
Cross -- currency
MTNs swaps 6 (6) - 43
* Excludes deferred tax.
Cumulative impact
on hedging reserve
and cost of hedging
reserve*
Change in
value of Change in
hedging value of
instrument hedged item
for for
calculating calculating
hedge hedge Continuing Discontinued
ineffectiveness ineffectiveness hedges hedges
At 29 February 2020 Hedging instrument GBPm GBPm GBPm GBPm
Interest rate risk
Index-linked
Index-linked bonds bonds 22 (22) 69 -
Interest rate
Borrowings swaps (2) 2 (4) -
Foreign currency risk
Trade payables Forward contracts 55 (55) 8 -
Interest rate/Foreign currency
risk
Cross -- currency
MTNs swaps 28 (28) 137 (44)
* Excludes deferred tax.
The following table sets out information regarding the
effectiveness of hedging relationships designated by the Group, as
well as the impacts on profit or loss and other comprehensive
income:
2021 2020
Line item in Hedge ineffectiveness Hedge ineffectiveness
Group income recognised recognised
statement that in profit in profit
includes hedge or loss or loss
ineffectiveness GBPm GBPm
Cash flow hedges Finance income/costs - -
Net investment hedges Finance income/costs - -
Fair value hedges - interest rate risk
- Borrowings Finance income/costs (18) (6)
- Derivatives Finance income/costs - -
Notes to the Group financial statements
Note 25 Financial risk management continued
The following table presents a reconciliation by risk category
of the Cash flow hedge and Cost of hedging reserves and an analysis
of other comprehensive income in relation to hedge accounting:
2021 2020
Cost of Cost of
Hedging hedging Hedging hedging
reserve reserve reserve reserve
GBPm GBPm Line item GBPm GBPm Line item
Opening balance 154 (15) 118 (5)
Interest rate risk
Index-linked swaps
- Net fair value gains/(losses) 16 - 1 -
- Amount reclassified Finance Finance
to Group income statement (15) - income/costs (2) - income/costs
Interest rate swaps
- Net fair value gains/(losses) 30 - (2) -
- Amount reclassified Finance Finance
to Group income statement (6) - income/costs (1) - income/costs
Interest rate/Foreign
currency risk
Cross-currency swaps
- Net fair value gains/(losses) (4) 17 70 (12)
- Amount reclassified Finance Finance
to Group income statement (65) - income/costs (4) - income/costs
Foreign currency risk
Forward contracts
- Net fair value gains/(losses) (3) - 49 -
- Amount reclassified
to Inventories (28) - Inventories (64) - Inventories
Tax 11 (2) (11) 2
Closing balance 90 - 154 (15)
Sensitivity analysis
The impact on the financial statements of the Group, including
Retail and Tesco Bank, from foreign currency, inflation and
interest rate volatility is discussed below.
The analysis excludes the impact of movements in market
variables on the carrying value of pension and other
post-employment benefit obligations and on the retranslation of
overseas net assets. However, it does include the foreign exchange
sensitivity resulting from local entity non-functional currency
financial instruments.
The sensitivity analysis has been prepared on the basis that the
amount of net debt, the ratio of fixed to floating interest rates
of the debt and derivatives portfolio, and the proportion of
financial instruments in foreign currencies are all constant and on
the basis of the hedge designations in place at 27 February 2021.
It should be noted that the sensitivity analysis reflects the
impact on income and equity due to financial instruments held at
the balance sheet date. It does not reflect any change in sales or
costs that may result from changing interest or exchange rates.
The following assumptions were made in calculating the
sensitivity analysis:
- the sensitivity of interest payable to movements in interest
rates is calculated on net floating rate exposures on debt,
deposits and derivative instruments with no sensitivity assumed for
RPI-linked borrowings, which have been swapped to fixed rates;
- changes in the carrying value of derivative financial
instruments designated as fair value hedges from movements in
interest rates or foreign exchange rates have an immaterial effect
on the Group income statement
and equity due to compensating adjustments in the carrying value of debt;
- changes in the carrying value of financial instruments
designated as net investment hedges from movements in foreign
exchange rates are recorded directly in the Group statement of
comprehensive income/(loss);
- all other changes in the carrying value of derivative
financial instruments designated as hedging instruments are fully
effective with no impact on the Group income statement; and
- the floating leg of any swap or any floating rate debt is
treated as not having any interest rate already set, therefore a
change in interest rates affects a full 12-month period for the
interest payable portion of the sensitivity calculations.
Using the above assumptions, the following table shows the
quantitative effect on the Group income statement and Group
statement of changes in equity that would result, at the balance
sheet date, from changes in interest rates, inflation rates and
currency exchange rates that are reasonably possible for major
currencies where there have recently been significant
movements:
2021 2020
Income Equity Income Equity
gain/(loss) gain/(loss) gain/(loss) gain/(loss)
GBPm GBPm GBPm GBPm
1% increase in interest rates (2020:
1%) (31) 31 39 (42)
10% appreciation of the Euro (2020: 10%) (5) (96) 1 (117)
10% appreciation of the US Dollar (2020:
10%) 3 97 5 78
25 basis points parallel upward shift
in the forward inflation curve (2020:
25 basis points) 116 - 86 -
Notes to the Group financial statements
Note 25 Financial risk management continued
A decrease in interest rates, depreciation of foreign currencies
and downward shift in the forward inflation curve would have the
opposite effect to the impact in the table above.
The impact on the Group income statement resulting from changes
in foreign exchange rates against GBP in relation to financial
instruments (excluding those arising on consolidation) are minimal
as Group policy dictates that all material income statement foreign
exchange exposures are hedged.
During the current and prior financial year, the Group entered
into a number of derivative index-linked contracts with external
counterparties, to economically hedge a proportion of the Group's
exposure to index-linked lease liabilities with its joint ventures.
These are specifically not designated as accounting hedges but are
economic hedges. However, the gains and losses on the hedging
instrument and hedged item do not naturally offset in the Group
income statement. This mismatch arises due to different accounting
outcomes of IFRS 9 and IFRS 16 which results in a timing
difference.
The impact on the Group statement of comprehensive income/(loss)
from changing exchange rates results from the revaluation of
financial liabilities used as net investment hedges. The impact on
the Group statement of comprehensive income/(loss) will largely be
offset by the revaluation in equity of the hedged assets in the
Group statement of changes in equity.
(b) Credit risk
Credit risk represents the risk that a counterparty will not
meet its obligations leading to a financial loss for the Group.
Credit risk arises from Cash and cash equivalents, Short-term
investments, Trade receivables, Other receivables, Joint ventures
and associates loan receivables, Loans and advances to customers -
Tesco Bank, Loans and advances to banks - Tesco Bank, Investment
securities at amortised cost, Financial assets at fair value
through other comprehensive income, and Derivative financial
instruments.
For financial assets other than Trade receivables, Other
receivables, Joint ventures and associates loan receivables, and
Loans and advances to customers - Tesco Bank, the Group holds
positions with an approved list of investment-grade rated
counterparties and monitors the exposure, credit rating, outlook
and credit default swap levels of these counterparties on a regular
basis. Counterparty credit limits are reviewed on an annual basis
and may be updated throughout the financial year. The limits are
set to minimise the concentration of risk and are set taking into
account the type and value of the specific financial asset.
For Trade receivables, Other receivables, Joint ventures and
associates loan receivables, and Loans and advances to customers -
Tesco Bank, the Group's credit risk is managed with various
mitigating controls including credit checks, credit insurance and
master netting agreements. Due to the nature of the Retail and
Tesco Bank businesses, there is little concentration of risk due to
the large number of customers which are spread across wide
geographical areas.
Maximum exposure to credit risk
The maximum exposure to credit risk at the end of the reporting
period reflects the carrying amount of each class of financial
assets, including loan commitments which are not recognised on the
balance sheet. Joint ventures and associates loan receivables in
the table below are gross of deferred profits historically arising
from the sale of property assets to joint ventures (see Note 31).
The Group's maximum exposure to credit risk is GBP26.0bn (2020:
GBP28.9bn).
The net counterparty exposure under derivative contracts is
GBP1.2bn (2020: GBP1.0bn).
The Group's maximum gross exposure to credit risk is analysed
below by class of financial instrument, including for financial
instruments that are not subject to ECL i.e. derivative financial
instruments and cash balances with central banks:
2021 2020(a)
GBPm GBPm
Cash and cash equivalents (b) 2,510 4,137
Short-term investments 1,011 1,076
Trade receivables 424 495
Other receivables 430 439
Joint venture and associate loan receivables 160 181
Loans and advances to customers - Tesco Bank 6,402 8,451
Investment securities at amortised cost 927 -
Financial assets at fair value through other comprehensive
income 14 1,068
Derivative financial instruments:
Interest rate swaps 42 47
Cross-currency swaps 298 497
Index-linked swaps 1,080 541
Forward contracts 42 61
Off balance sheet:
Loan commitments 12,668 11,872
Maximum exposure to credit risk 26,008 28,865
(a) Refer to Note 1 for further details regarding the prior year restatement.
(b) Cash balances with central banks of GBP1.6bn (2020:
GBP2.6bn) are included within Cash and cash equivalents.
Notes to the Group financial statements
Note 25 Financial risk management continued
Counterparty credit rating
The table below provides detail of financial assets by long term
credit rating of investment-grade rated counterparties:
2021 2020
Rating AAA AA A BBB Total AAA AA A BBB Total
Money market funds 955 - 56 - 1,011 1,076 - - - 1,076
Investment securities
at amortised cost 560 65 302 - 927 - - - - -
Investment securities
at fair value through
other comprehensive
income - 5 - - 5 525 248 274 14 1,061
Derivatives financial
assets
Interest rate swaps - 9 27 6 42 - 8 39 - 47
Cross currency swaps - - 211 87 298 - - 287 210 497
Index Linked swaps - - 613 467 1,080 - - 95 446 541
Forward contracts - 1 27 14 42 - 9 35 17 61
The low credit risk exemption has been applied to cash and cash
equivalents, short-term investments, financial assets at fair value
through OCI, financial assets at amortised cost and investment
securities as these are held with counterparties with
investment-grade ratings (BBB or above) or are short term in
nature. The expected credit loss is immaterial.
Expected credit losses
For trade receivables, contract assets and lease receivables the
Group applies the simplified approach with lifetime ECLs recognised
from initial recognition of the receivables. For loans and advances
to customers, short-term investments, investment securities at
amortised cost, debt instruments at fair value through other
comprehensive income and loan receivables from joint venture and
associates, the three-stage model for impairment has been applied.
The expected lifetime of a financial asset is generally the
contractual term.
The Group's financial assets are written off when the balance is
known not to be recoverable or the Group is time barred from
recovering a balance under local legislation.
The expected credit losses for Retail are immaterial. For
details on the expected credit losses relating to Tesco Bank see
below.
Gross loans to related parties of GBP160m (2020: GBP181m) are
presented net of loss allowances of GBPnil (2020: GBP2m) and
deferred profits of GBP38m (2020: GBP54m) on the Group balance
sheet. The ECL is determined by multiplying together the
probability of default (PD), exposure at default (EAD) and the loss
given default (LGD) for the relevant time period and for each
specific loan and by discounting back to the balance sheet
date.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities.
The Group finances its liquidity position and its operations by
a combination of retained profits, disposals of assets, debt
capital market issuance, commercial paper, bank borrowings and
leases. The policy is to maintain a prudent level of cash together
with sufficient committed bank facilities to meet liquidity needs
as they arise, to maintain a smooth debt profile and maturing
senior unsecured debt will not exceed GBP1.5bn in any 12-month
period.
The Group retains access to capital markets so that maturing
debt may be refinanced as it falls due and the Group is investment
grade rating with all three major credit rating agencies.
2021 2020
Short Long Short Long
term term term term
rating rating Outlook rating rating Outlook
Rating agency
Fitch F3 BBB- Stable F3 BBB- Stable
Moody's P-3 Baa3 Stable P-3 Baa3 Stable
Standard & Poor's A-3 BBB- Stable A-3 BBB- Stable
The Group has a GBP15.0bn Euro Medium Term Note programme, of
which GBP4bn was in issue at 27 February 2021 (2020: GBP4.0bn),
plus GBP0.3bn equivalent of USD-denominated notes issued under 144A
documentation (2020: GBP0.4bn).
Liquidity risk is continuously monitored by short-term and
long-term cash flow forecasts.
During the year, the Group accessed the capital markets twice
issuing GBP450m (maturing in 2030) and EUR750m (maturing in 2029).
The EUR750m issuance was the Group's first sustainability linked
bond. The bond includes a coupon step up of 25 bps for the final
three coupon payments, if science-based carbon reduction targets of
60% are not achieved compared to a 2015/16 baseline.
Borrowing facilities
The Group has the following undrawn committed facilities
available at 27 February 2021, in respect of which all conditions
precedent had been met as at that date:
2021 2020
GBPm GBPm
Expiring in less than one year 38 38
Expiring between one and two years - 3,000
Expiring in more than two years 2,500 -
2,538 3,038
During the year, a new three-year multicurrency GBP2.5bn
revolving facility was established, replacing the existing GBP3bn
committed facilities. The new facility is linked to three ESG
targets and includes the use of risk-free rates rather than
LIBOR.
The undrawn committed facilities include GBPnil (2020: GBP0.4bn)
of bilateral facilities and a GBP2.5bn (2020: GBP2.6bn) syndicated
revolving credit facility. All facilities incur commitment fees at
market rates and would provide funding at floating rates. There
were no withdraws from the facilities during the year.
Notes to the Group financial statements
Note 25 Financial risk management continued
For liquidity risk relating to Tesco Bank, refer to the separate
section on Tesco Bank financial risk factors on page 89.
The following is an analysis of the undiscounted contractual
cash flows payable under financial liabilities and derivative
liabilities taking into account contractual terms that provide the
counterparty a choice of when (the earliest date) an amount is
repaid by the Group. The potential cash outflow is considered
acceptable as it is offset by financial assets.
The undiscounted cash flows will differ from both the carrying
values and fair values. Floating-rate interest and inflation is
estimated using the prevailing rate at the balance sheet date. Cash
flows in foreign currencies are translated using spot rates at the
balance sheet date.
Due between Due between Due between Due between
Due within 1 and 2 and 3 and 4 and Due beyond
1 year 2 years 3 years 4 years 5 years 5 years
At 27 February 2021 GBPm GBPm GBPm GBPm GBPm GBPm
Non-derivative financial liabilities
Bank and other borrowings (1,002) (53) (779) (724) (888) (3,844)
Interest payments on borrowings (199) (172) (170) (151) (134) (905)
Customer deposits - Tesco Bank (4,924) (488) (253) (114) (24) -
Deposits from banks - Tesco Bank (500) - (100) - - -
Lease liabilities (969) (939) (912) (867) (841) (7,999)
Trade payables (5,131) - - - - -
Other payables (1,543) (23) (3) (1) - (83)
Derivative financial liabilities
Net settled derivative contracts
- receipts 69 51 32 26 4 19
Net settled derivative contracts
- payments (88) (533) (217) (186) (23) (78)
Gross settled derivative contracts
- receipts 2 2 2 1 1 2
Gross settled derivative contracts
- payments (7) (8) (10) (11) (12) (61)
Total on balance sheet (14,292) (2,163) (2,410) (2,027) (1,917) (12,949)
Off balance sheet
Contractual lending commitments (12,668) - - - - -
Total (26,960) (2,163) (2,410) (2,027) (1,917) (12,949)
Due between Due between Due between Due between Due
Due within 1 and 2 and 3 and 4 and beyond
1 year 2 years 3 years 4 years 5 years 5 years
At 29 February 2020 (restated)* GBPm GBPm GBPm GBPm GBPm GBPm
Non-derivative financial
liabilities
Bank and other borrowings (2,120) (467) (53) (795) (956) (3,776)
Interest payments on borrowings (227) (208) (181) (179) (159) (1,237)
Customer deposits - Tesco
Bank (6,426) (797) (233) (187) (115) -
Deposits from banks - Tesco
Bank (3) (1) (501) - - -
Lease liabilities (1,081) (1,018) (996) (993) (951) (9,584)
Trade payables (5,409) - - - - -
Other payables (1,623) (22) (18) (2) (1) (127)
Derivative financial liabilities
Net settled derivative contracts
- receipts 10 11 467 116 - 25
Net settled derivative contracts
- payments (717) (42) (470) (148) (160) (18)
Gross settled derivative
contracts - receipts 2,534 - - - - -
Gross settled derivative
contracts - payments (2,585) - - - - -
Total on balance sheet (17,647) (2,544) (1,985) (2,188) (2,342) (14,717)
Off balance sheet
Contractual lending commitments (11,872) - - - - -
Total (29,519) (2,544) (1,985) (2,188) (2,342) (14,717)
* Refer to Note 1 for further details regarding the prior year
restatement.
The Group is not subject to covenants in relation to its
facilities and borrowings. There is an element of seasonality in
the Group's operations, however the overall impact on liquidity is
not considered significant.
The Group cash flow statement includes net (investment in) /
proceeds from sale of financial assets at fair value through other
comprehensive income and amortised cost of GBP116m inflow (2020:
GBP6m outflow) within cash flows generated from/(used in) investing
activities. The gross cash flows are GBP201m inflow (2020: GBP774m
inflow) and GBP85m outflow (2020: GBP780m outflow).
The Group cash flow statement includes net cash flows from
derivative financial instruments of GBP580m outflow (2020: GBP17m
outflow) within cash flows generated from/(used in) financing
activities. The gross cash flows are GBP2,276m outflow (2020:
GBP346m outflow) and GBP1,696m inflow (2020: GBP329m inflow).
Notes to the Group financial statements
Note 25 Financial risk management continued
(d) Capital risk
The Group's objectives when managing capital (defined as net
debt plus equity) are to safeguard the Group's ability to continue
as a going concern in order to provide returns to shareholders and
benefits for other stakeholders, while protecting and strengthening
the Group balance sheet through the appropriate balance of debt and
equity funding. The Group manages its capital structure and makes
adjustments to it, in light of changes to economic conditions and
the strategic objectives of the Group.
To maintain or adjust the capital structure, the Group may
adjust the dividend payment to shareholders, buy back shares and
cancel them, or issue new shares.
The Group raises finance in the public debt markets and borrows
centrally and locally from financial institutions, using a variety
of capital market instruments and borrowing facilities to meet the
requirements of each local business.
In line with the Group's objectives, during the current
financial year, the Group issued a GBP450m bond maturing in 2030
and undertook a liability management exercise by combining an
issuance of EUR750m bond maturing in 2029 with a debt buyback, the
latter resulting in notionals of GBP0.6bn
bought back across eight bonds.
Refer to Note 32 for the value of the Group's net debt
(GBP12.0bn; 2020: GBP12.3bn), and the Group statement of changes in
equity for the value of the Group's equity (GBP12.3bn; 2020:
GBP13.4bn).
(e) Insurance risk
The Group is exposed to the risk of being inadequately protected
from liabilities arising from unforeseen events. The Group
purchased assets, earnings and combined liability protection from
the open insurance market for higher value losses only.
The risk not transferred to the insurance market is retained
within the Group with some cover being provided by the Group's
captive insurance company, ELH Insurance Limited in Guernsey, which
covers assets, earnings and combined liability.
Tesco Bank
Information on the management of the financial risks relating to
Tesco Bank, which is additional to the information provided for the
Group overall, is set out below.
Interest rate risk
Interest rate risk arises mainly where assets and liabilities in
Tesco Bank's banking activities have different repricing dates and
from unexpected changes to the yield curve. Tesco Bank is exposed
to interest rate risk through dealings with retail customers as
well as through lending to and borrowing from the wholesale market.
Tesco Bank has established limits for risk appetite and stress
tests are performed using sensitivity to fluctuations in underlying
interest rates in order to monitor this risk. Tesco Bank also use
the Capital at Risk (CaR) approach which assesses the sensitivity
(value change) of a reduction in the Bank's capital to movements in
interest rates.
The scenarios considered include both parallel and non-parallel
movements of the yield curve and have been designed to assess
impacts across a suitable range of severe but plausible movements
in interest rates. Interest rate risk is primarily managed using
interest rate swaps as the main hedging instrument.
Liquidity risk
Liquidity risk is the risk that Tesco Bank has insufficient
liquidity resources to meet its obligations as they fall due.
Funding risk is the risk that Tesco Bank does not have sufficiently
stable and diverse sources of funding.
Tesco Bank operates within a Liquidity Risk Management Policy
Framework (LRMP) to ensure that sufficient funds are available at
all times to meet demands from depositors, to fund agreed advances,
to meet other commitments as and when they fall due, and to ensure
risk appetite is met.
Liquidity and funding risks are assessed through the Individual
Liquidity Adequacy Assessment Process (ILAAP) on at least an annual
basis. Formal limits are set within the LRMP to maintain liquidity
risk exposures within the Liquidity Risk Appetite set by Tesco
Bank's Board of Directors and key liquidity measures are monitored
on a regular basis. Tesco Bank maintains a conservative liquidity
and funding profile to confirm that it is able to meet its
financial obligations under normal, and stressed, market
conditions.
Credit risk
Credit risk is the risk that a retail customer or counterparty
to a wholesale transaction will fail to meet its obligations in
accordance with contractually agreed terms and Tesco Bank will
incur losses as a result. Credit risk principally arises from the
Bank's retail lending activities but also from the placement of
surplus funds with other banks and money market funds, investments
in transferable securities and interest rate and foreign exchange
derivatives. In addition, credit risk arises from contractual
arrangements with third parties where payments and commissions are
due to the Bank for short periods of time. To minimise the
potential exposure to bad debts that are outside risk appetite,
processes, systems and limits have been established that cover the
end-to-end retail credit risk customer life cycle. These include
credit scoring, affordability, credit policies and guides, and
monitoring and reporting. The Bank is also exposed to wholesale
credit risk primarily through its treasury activities. Controls and
risk mitigants include daily monitoring of exposures, investing in
counterparties with investment grade ratings, restricting the
amount that can be invested with one counterparty and credit-rating
mitigation techniques. Assessment of the expected credit loss (ECL)
on loans and advances to customers has taken into account a range
of macroeconomic scenarios.
Notes to the Group financial statements
Note 25 Financial risk management continued
Maximum exposure to credit risk
The table below presents Tesco Bank's maximum exposure to credit
risk i.e. total gross exposure, by stages and by class of financial
instruments. For financial assets, the balances are based on gross
carrying amounts. For loan commitments, the amounts represent the
amounts for which Tesco Bank is contractually committed:
Stage
1 Stage 2 Stage 3 Total
<30 days >30 days
Not past past past
due due due Total
27 February 2021 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Loans and advances
to customers 5,749 981 25 25 1,031 242 7,022
Investment securities
at FVOCI(a) 5 - - - - - 5
Investment securities
at amortised cost 928 - - - - - 928
Loan commitments
- Loans and advances
to customers (b) 12,379 283 2 - 285 4 12,668
Total gross exposure 19,061 1,264 27 25 1,316 246 20,623
Loss allowance
Loans and advances
to customers (b) 131 314 11 16 341 153 625
Investment securities
at FVOCI - - - - - - -
Investment securities
at amortised cost 1 - - - - - 1
Total loss allowance 132 314 11 16 341 153 626
Net Exposure
Loans and advances
to customers 5,618 667 14 9 690 89 6,397
Investment securities
at FVOCI 5 - - - - - 5
Investment securities
at amortised cost 927 - - - - - 927
Total net exposure 6,550 667 14 9 690 89 7,329
Coverage
Loans and advances
to customers 2% 32% 44% 64% 33% 63% 9%
(a) On 1 March 2020 the Group's portfolio of debt investment
securities measured at FVOCI was reclassified to amortised cost
following a change in business model.
(b) The loss allowance in respect of loan commitments is
included within the total loss allowance for loans and advance to
customers as above to the extent that it is below the gross
carrying amount of loans and advances to customers. Where the loss
allowance exceeds the gross carrying amount, any excess is included
within the provisions.
Stage
1 Stage 2 Stage 3 Total
<30 days >30 days
Not past past past
due due due Total
29 February 2020 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Loans and advances
to customers 7,688 869 52 32 953 289 8,930
Investment securities
at FVOCI(a) 1,061 - - - - - 1,061
Investment securities
at amortised cost - - - - - - -
Loan commitments
- Loans and advances
to customers (b) 11,755 116 - - 116 1 11,872
Total gross exposure 20,504 985 52 32 1,069 290 21,863
Loss allowance
Loans and advances
to customers (b) 83 178 21 20 219 186 488
Investment securities
at FVOCI - - - - - - -
Investment securities
at amortised cost - - - - - - -
Total loss allowance 83 178 21 20 219 186 488
Net Exposure
Loans and advances
to customers 7,605 691 31 12 734 103 8,442
Investment securities
at FVOCI 1,061 - - - - - 1,061
Investment securities
at amortised cost - - - - - - -
Total net exposure 8,666 691 31 12 734 103 9,503
Coverage
Loans and advances
to customers 1% 20% 40% 63% 23% 64% 5%
(a)-(b) Refer to previous table for footnotes.
Expected credit losses (ECL)
The ECL is determined by multiplying together the probability of
default (PD), exposure at default (EAD) and loss given default
(LGD) for the relevant time period and for each asset category and
by discounting back to the balance sheet date. The ECL calculation
and the measurement of significant deterioration in credit risk
both incorporate forward-looking information using a range of
macroeconomic scenarios, with key variables being the Bank of
England base rate, unemployment rate, house price index and gross
domestic product. The key economic variables are based on
historical patterns observed over a range of economic cycles.
Notes to the Group financial statements
Note 25 Financial risk management continued
The tables below present the reconciliations of ECL allowances
on loans and advances to customers.
2021
Stage
1 Stage 2 Stage 3 Total
27 February 2021 GBPm GBPm GBPm GBPm
Gross exposure 5,749 1,031 242 7,022
Loan commitments 12,379 285 4 12,668
Total exposure 18,128 1,316 246 19,690
Allowance for expected credit losses
At 29 February 2020 (83) (219) (186) (488)
Transfers:
Transfers from stage 1 to stage 2 20 (20) - -
Transfers from stage 2 to stage 1 (9) 9 - -
Transfers to stage 3 2 42 (44) -
Transfers from stage 3 (2) (2) 4 -
Movements recognised in the Group income
statement:
Net remeasurement following transfer
of stage 6 (36) (72) (102)
New financial assets originated (25) (5) (2) (32)
Financial assets derecognised during
the current financial year 8 9 3 20
Changes in risk parameters and other
movements (56) (134) (83) (273)
Other movements:
Write-offs and asset disposals - 3 227 230
Transfers to provisions for liabilities
and charges 8 12 - 20
Reclassification of mortgage book balances
to fair value through profit or loss - - - -
At 27 February 2021 (131) (341) (153) (625)
Reconciliation to Group balance sheet
Gross exposure 5,749 1,031 242 7,022
Allowance for expected credit losses (131) (341) (153) (625)
5,618 690 89 6,397
Fair value adjustment 5
Carrying value at 27 February 2021 6,402
2020
Stage
1 Stage 2 Stage 3 Total
29 February 2020 GBPm GBPm GBPm GBPm
Gross exposure 7,688 953 289 8,930
Loan commitments 11,755 116 1 11,872
Total exposure 19,443 1,069 290 20,802
Allowance for expected credit losses
At 23 February 2019 (84) (229) (172) (485)
Transfers:
Transfers from stage 1 to stage 2 11 (11) - -
Transfers from stage 2 to stage 1 (64) 64 - -
Transfers to stage 3 3 50 (53) -
Transfers from stage 3 (2) (2) 4 -
Movements recognised in the Group income
statement:
Net remeasurement following transfer
of stage 38 (23) (93) (78)
New financial assets originated (27) (21) (10) (58)
Financial assets derecognised during
the current financial year 9 12 3 24
Changes in risk parameters and other
movements 32 (63) (60) (91)
Other movements:
Write-offs and asset disposals - 3 195 198
Transfers to provisions for liabilities
and charges - - - -
Reclassification of mortgage book balances
to fair value through profit or loss 1 1 - 2
At 29 February 2020 (83) (219) (186) (488)
Reconciliation to Group balance sheet
Gross exposure 7,688 953 289 8,930
Allowance for expected credit losses (83) (219) (186) (488)
7,605 734 103 8,442
Fair value adjustment 9
Carrying value at 29 February 2020 8,451
The Bank defines four classifications of credit quality for all
credit exposures: high, satisfactory, low and below standard.
Credit exposures are segmented according to the probability of
default (PD), with credit impaired reflecting a PD of 100%.
Notes to the Group financial statements
Note 25 Financial risk management continued
Stage Stage
12-month PD 1 2 Stage 3 Total
At 27 February 2021 % GBPm GBPm GBPm GBPm
Loans and advances to customers:
High quality <=3.02 5,314 445 - 5,759
Satisfactory quality >3.03 - 11.10 392 389 - 781
Low quality and below standard >=11.11 43 197 - 240
Credit impaired 100 - - 242 242
5,749 1,031 242 7,022
12-month PD Stage 1 Stage 2 Stage 3 Total
At 29 February 2020 % GBPm GBPm GBPm GBPm
Loans and advances to
customers:
High quality <=3.02 6,609 37 - 6,646
Satisfactory quality >3.03 - 11.10 1,037 485 - 1,522
Low quality and below
standard >=11.11 42 431 - 473
Credit impaired 100 - - 289 289
7,688 953 289 8,930
Default
An account is deemed to have defaulted when the Tesco Bank
considers that a customer is in significant financial difficulty
and that the customer meets certain quantitative and qualitative
criteria regarding their ability to make contractual payments when
due. This includes instances where:
- the customer makes a declaration of significant financial
difficulty;
- the customer or third-party agency communicates that it is
probable that the customer will enter bankruptcy or another form of
financial restructure such as insolvency or repossession;
- the account has been transferred to recoveries and the
relationship is terminated;
- an account's contractual payments are more than 90 days past
due; or
- where the customer is deceased.
A loan deemed uncollectable is written off against the related
provision after all of the necessary procedures have been completed
and the amount of the loss has been determined. Tesco Bank may
write off loans that are still subject to enforcement activity. The
outstanding contractual amount of such assets written off were
GBP154m (2020: GBP140m).
Significant increase in credit risk
At each reporting date, the change in credit risk of the
financial asset is observed using a set of quantitative and
qualitative criteria, together with a backstop based on arrears
status. For each financial asset, Tesco Bank compares the lifetime
PD at the reporting date with the lifetime PD that was expected at
the reporting date at initial recognition (PD threshold). Tesco
Bank has established PD thresholds for each type of product which
vary depending on initial term and term remaining. A number of
qualitative criteria are in place such as: forbearance offered to
customers in financial difficulty; risk-based pricing
post-origination; credit indebtedness; credit limit decrease; and
pre-delinquency information. As a backstop, Tesco Bank considers
that if an account's contractual payment are more than 30 days past
due then a significant increase in credit risk has taken place.
Tesco Bank has used the low credit risk exemption in respect of its
portfolio of investment securities in both the current and prior
year.
Tesco Bank has commissioned four scenarios from its third --
party provider, all of which were based on an economic outlook that
sought to take account of the potential ramifications of the
current COVID -- 19 pandemic. These scenarios include a Base
scenario, an Upside scenario and two different Downside scenarios.
As the economic outlook remains uncertain, the scenarios are based
on the success of the COVID -- 19 vaccine roll out against emerging
strains of the virus and, as the restrictions are lifted, the speed
at which consumer and business confidence will support the recovery
in GDP and the labour market. The Base scenario anticipates a
delayed economic recovery, with consumer confidence remaining weak
in the near term and unemployment peaking in Q3 2021. The Upside
scenario involves a sharper economic recovery while Downside 1
scenario assumes a longer delay until the economy recovers.
Downside 2 is a prolonged and sustained recession with a slow
economic recovery thereafter. These scenarios are also reviewed to
ensure an unbiased estimate of ECL by ensuring the credit loss
distribution under a larger number of scenarios is adequately
captured using these four scenarios and their respective
weightings. The Base, Upside, Downside 1 and Downside 2 scenarios
have been assigned weighting of 40%, 30%, 25% and 5%
respectively.
The economic scenarios used include the following ranges of key
indicators:
Base Downside Downside
Upside 1 2 COVID-19
As at 27 February 2021 (5 year 40%
average) 30% 25% 5% n/a
Bank of England base rate (a) 0.1% 0.2% 0.1 % 0.1% n/a
Gross domestic product (b) 2.6% 3.5% 2.2 % 1.8% n/a
Unemployment rate 5.5% 4.7% 6.7 % 8.6% n/a
Unemployment rate peak in year 5.8% 4.9% 7.4 % 9.3% n/a
Base Downside Downside
Upside 1 2 Covid-19
As at 29 February 2020 (5 year 40%
average) 20% 30% 5% 5%
Bank of England base rate (a) 0.6% 0.2% 1.4 % 2.3% 2.3%
Gross domestic product (b) 1.6% 2.0% 1.0 % 0.7% 0.7%
Unemployment rate 3.9% 3.9% 5.3 % 6.1% 6.1%
Unemployment rate peak in year 3.9% 3.9% 5.5 % 6.3% 6.3%
(a) Simple average
(b) Annual growth rates
Notes to the Group financial statements
Note 25 Financial risk management continued
Key assumptions and sensitivity
The key assumptions to which the Tesco Bank ECL is most
sensitive are macroeconomic factors, probability of default (PD),
loss given default (LGD), PD threshold (staging), and expected
lifetime (revolving credit facilities). The table below sets out
the changes in the ECL allowance that would arise from reasonably
possible changes in these assumptions from those used in Tesco
Bank's calculations as at 27 February 2021.
Impact on the loss
allowance
2021 2020
Key assumption Reasonably possible change GBPm GBPm
Closing ECL allowance 625 488
Macroeconomic factors (100%
weighted) Upside scenario (66) (41)
Base scenario (1) (28)
Downside scenario 1 57 40
Downside scenario 2 117 103
Probability of default Increase of 2.5% 8 11
Decrease of 2.5% (8) (11)
Loss given default Increase of 2.5% 10 12
Decrease of 2.5% (10) (12)
Probability of threshold
(staging) Increase of 20% (7) (17)
Decrease of 20% 11 21
Expected lifetime (revolving
credit facility) Increase of 1 year 9 2
Decrease of 1 year (9) (2)
COVID -- 19 has had a significant impact on the global economy
and there remains a large degree of uncertainty around the scale
and stress of the peak of the economic downturn and the speed and
shape of any subsequent recovery. The extension of government
support measures such as furlough has been unprecedented and this,
coupled with the granting of payment holidays by Tesco Bank, have
broken traditional modelled relationships between unemployment and
default. Although projected levels of unemployment remain high,
Tesco Bank is yet to see significant defaults emerge in its lending
portfolio and, as such, COVID -- 19 specific adjustments to the
modelled ECL provision to capture the estimated impact of the
stress within the ECL provision have been recognised for an overall
post-model adjustment of GBP214m which includes three management
overlays. A first GBP129m adjustment is in respect of the
beneficial modelling impact of lower consumer spending through the
pandemic. An increase or decrease of 10% on the adjustment for
lower drawn balances would not result in a material increase or
decrease of this management overlay. A second GBP64m adjustment is
to recognise the expected emergence of defaults once support
measures such as furlough and the various temporary customer
support measures Tesco Bank has put in place are removed and a
third GBP21m adjustment is to recognise an increase in credit risk
in respect of customers who sought an extension to their initial
payment holiday.
Forbearance
Tesco Bank could be exposed to unacceptable levels of bad debt
and also suffer reputational damage if it did not provide adequate
support to customers who are experiencing financial difficulties.
Forbearance is relief granted by a lender to assist customers in
financial difficulty, through arrangements which temporarily allow
the customer to pay an amount other than the contractual amounts
due. These temporary arrangements may be initiated by the customer
or Tesco Bank where financial distress would prevent repayment
within the original terms and conditions of the contract. The main
aim of forbearance is to support customers in returning to a
position where they are able to meet their contractual
obligations.
Tesco Bank has adopted the definition of forbearance in the
European Banking Authority's (EBA) final draft Implementing
Technical Standards (ITS) of July 2014 and reports all accounts
meeting this definition, providing for them appropriately.
Tesco Bank has well defined forbearance policies and processes.
A number of forbearance options are made available to customers.
These routinely, but not exclusively, include the following:
- arrangements to repay arrears over a period of time, by making
payments above the contractual amount, that ensure the loan is
repaid within the original repayment term;
- short-term concessions, where the borrower is allowed to make
reduced repayments (or in exceptional circumstances, no repayments)
on a temporary basis to assist with short-term financial hardship;
and
- for secured products, it may also be acceptable to allow the
customer to clear the arrears over an extended period of time,
provided the payments remain affordable.
Forbearance programmes Proportion of
Gross loans and as a proportion forbearance programmes
advances subject of total loans covered by allowance
to forbearance and advances for expected
programmes by category credit losses
2021 2020 2021 2020 2021 2020
GBPm GBPm % % % %
Credit cards - UK 119 108 4 3 50 50
Credit cards - Commercial - - 5 5 96 94
Loans 48 49 1 1 56 41
Insurance risk
Tesco Bank is indirectly exposed to insurance risks through its
ownership of 49.9% of Tesco Underwriting Limited (TU), an
authorised insurance company. Insurance risk is defined as the risk
accepted through the provision of insurance products in return for
a premium. The timing and quantum of the risks are uncertain and
determined by events outside the control of Tesco Bank. The key
insurance risks within TU relate to underwriting risk and reserving
risk. TU operates a separate framework to ensure that the TU
insurance portfolio operates within agreed risk appetite. Tesco
Bank closely monitors performance of the portfolio against specific
thresholds and limits.
Notes to the Group financial statements
Note 26 Customer deposits and deposits from banks
2021 2020
GBPm GBPm
Customer deposits 5,738 7,707
Deposits from banks 600 500
6,338 8,207
Of which:
Current 5,321 6,377
Non-current 1,017 1,830
6,338 8,207
Deposits from banks include balances of GBP500m (2020: GBP500m)
drawn under the Bank of England's Term Funding Scheme (TFS) and
GBP100m
(2020: GBPnil) drawn under the Bank of England's term Funding
Scheme with additional incentives for Small and Medium Sized
Entities (TFSME).
Note 27 Provisions
Property Restructuring Other
provisions provisions provisions Total
GBPm GBPm GBPm GBPm
At 29 February 2020 156 64 72 292
Foreign currency translation - 3 (6) (3)
Acquired through business combinations 5 - - 5
Reclassifications - (3) 38 35
Amount released in the year (24) (29) - (53)
Amount provided in the year 49 31 105 185
Amount utilised in the year (4) (60) (25) (89)
Transfer to disposal group classified as
held for sale (51) (6) (11) (68)
Unwinding of discount 1 - - 1
At 27 February 2021 132 - 173 305
The balances are analysed as follows:
2021 2020
GBPm GBPm
Current 186 155
Non-current 119 137
305 292
Property provisions
Property provisions comprise onerous property provisions,
including non-lease contracts related to unprofitable stores and
vacant properties, remediation works, dilapidations provisions and
asset retirement obligation provisions. Property provisions related
to leased properties are expected to be utilised prior to the end
of the leases. Refer to Note 12 for a maturity analysis of the
Group's contractual undiscounted lease payments.
Restructuring provisions
Of the GBP2m net charge (GBP31m charge, GBP(29)m release)
recognised in the year, GBP2m (2020: GBP43m) has been classified as
an exceptional item within discontinued operations, and GBPnil
(2020: GBP108m charge) has been classified within exceptional items
as 'Net restructuring and redundancy costs' within continuing
operations, of which GBPnil (2020: GBP95m) related to UK & ROI
and GBPnil (2020: GBP13m) related to Tesco Bank. Refer to Notes 4
and 7 for further details. The restructuring provisions were fully
utilised in the financial year to 27 February 2021.
Other provisions
Other provisions include a GBP88m (2020: GBPnil) provision
relating to claims from Homeplus (Korea) purchasers. Refer to Note
7 for further details. Additional provisions included in other
provisions are individually immaterial. The majority of provisions
are expected to be utilised in the next financial year.
Notes to the Group financial statements
Note 28 Share-based payments
The Group income statement charge for the financial year
recognised in respect of share-based payments is GBP69m (2020:
GBP129m), which is made up of share option schemes and share bonus
payments. Of this amount, GBP60m (2020: GBP113m) will be settled in
equity and GBP9m (2020:
GBP16m) in cash representing National Insurance
contributions.
Share option schemes
The Company had nine share option schemes in operation during
the financial year, all of which are equity-settled schemes:
i. The Savings-related Share Option Scheme (1981) permits the
grant to colleagues of options in respect of ordinary shares linked
to a building society/bank save-as-you-earn contract for a term of
three or five years with contributions from colleagues of an amount
between GBP5 and GBP500 per four-weekly period. Options are capable
of being exercised at the end of the three or five-year period at a
subscription price of not less than 80% of the average of the
middle-market quotations of an ordinary share over the three
dealing days immediately preceding the offer date.
ii. The Irish Savings-related Share Option Scheme (2000) permits
the grant to ROI colleagues of options in respect of ordinary
shares linked to a building society/bank save-as-you-earn contract
for a term of three or five years with contributions from
colleagues of an amount between EUR12 and EUR500 per four-weekly
period. Options are capable of being exercised at the end of the
three or five-year period at a subscription price of not less than
80% of the average of the middle-market quotations of an ordinary
share over the three dealing days immediately preceding the offer
date.
iii. The Executive Incentive Plan (2004) permitted the grant of
options in respect of Ordinary shares to selected senior
executives. Options are normally exercisable between three and 10
years from the date of grant for nil consideration. No further
options will be granted under this scheme.
iv. The Executive Incentive Plan (2014) permits the grant of
options in respect of Ordinary shares to selected senior executives
as a proportion of annual bonus following the completion of a
required service period and is dependent on the achievement of
corporate performance and individual targets. Options are normally
exercisable between three and 10 years from the date of grant for
nil consideration. Full details of this plan can be found in the
Directors' remuneration report.
v. The Performance Share Plan (2011) permits the grant of
options in respect of Ordinary shares to selected executives.
Options are normally exercisable between the vesting date(s) set at
grant and 10 years from the date of grant for nil consideration.
The vesting of options will normally be conditional upon the
achievement of specified performance targets over a three-year
period and/or continuous employment.
vi. The Group Bonus Plan permits the grant of options in respect
of Ordinary shares to selected senior executives as a proportion of
annual bonus following the completion of a required service period
and is dependent on the achievement of corporate performance and
individual targets. Options are normally exercisable between three
and 10 years from the date of grant for nil consideration. No
further options will be granted under this scheme.
vii. The Long Term Incentive Plan (2015) permits the grant of
options in respect of Ordinary shares to selected executives.
Options are normally exercisable between the vesting date(s) set at
grant and 10 years from the date of grant for nil consideration.
The vesting of options will normally be conditional upon the
achievement of specified performance targets over a three-year
period and/or continuous employment.
viii. The Booker Group PLC Savings Related Share Option Plan
(2008) (Booker SAYE) permitted the grant to Booker colleagues of
options in respect of ordinary shares in Booker Group PLC (Booker
Shares) linked to a building society/bank save-as-you-earn contract
for a term of three years with contributions from Booker colleagues
of an amount between GBP5 and GBP500 per four-weekly period.
Following completion of the acquisition of Booker Group PLC by
Tesco PLC, Booker colleagues elected to roll over their existing
options over Booker Shares under the Booker SAYE into equivalent
options over ordinary shares in Tesco PLC (Tesco Shares). The
options over Tesco Shares are capable of being exercised at the end
of the three-year period at a subscription price equivalent to not
less than 80% of the average of the middle-market quotations of a
Booker Share over the
three dealing days immediately preceding the offer date.
ix. The Booker Group PLC Performance Share Plan (2008) (Booker
PSP) permitted the grant of options in respect of Booker Shares to
selected Booker senior colleagues (Booker PSP Options). Under the
Booker PSP, tax approved Company Share Option Plan options (Booker
CSOP Options) were also granted to selected Booker senior
colleagues. Following completion of the acquisition of Booker Group
PLC by Tesco PLC, Booker senior colleagues elected to roll over
their existing Booker PSP and Booker CSOP Options over Booker
Shares into equivalent options over Tesco Shares. Booker PSP
Options are normally exercisable between the third anniversary of
the original date of grant and 10 years from the date of grant for
nil consideration. The vesting of options is normally conditional
upon the achievement of specified performance targets over a three
year period and continuous employment. Conditional on the vesting
of the relevant Booker PSP Options, Booker CSOP Options are
normally exercisable between the third anniversary of the original
date of grant and 10 years from the date of grant at a
subscription price equivalent to the market value of the Booker Shares at the time of grant.
Notes to the Group financial statements
Note 28 Share-based payments
The following tables reconcile the number of share options
outstanding and the weighted average exercise price (WAEP):
For the 52 weeks ended 27 February 2021
Booker Group
PLC Booker Group
Savings-related Irish Savings-related Nil cost Savings Related PLC Performance
Share Option Share Option Share Option Share Option Share
Scheme Scheme Scheme(a) Plan Plan Scheme Other Schemes
Options WAEP Options WAEP Options WAEP Options WAEP Options WAEP Options WAEP
Outstanding
at 29
February
2020 215,812,094 175.06 6,855,613 185.35 18,455,841 - 5,100,149 151.21 4,976,236 - - -
Granted 60,005,859 198.00 2,800,186 198.00 516,622 - - - - - - -
Forfeited (18,268,028) 197.73 (808,107) 194.80 (3,675,500) - (271,569) 149.39 (2,257,156) - - -
Exercised (91,142,849) 151.29 (1,261,423) 153.20 (8,079,580) - (4,141,825) 151.10 (1,858,323) - - -
Outstanding
at 27
February
2021 166,407,076 193.86 7,586,269 194.35 7,217,383 - 686,755 152.58 860,757 - - -
Exercise 150.00 150.00 137.45
price range to to to
(pence) 219.00 219.00 - 152.78 - -
Weighted
average
remaining
contractual
life
(years)(b) 2.86 2.78 5.18 0.42 - -
Exercisable
at 27
February
2021 4,780,919 151.11 108,223 151.00 7,217,383 686,755 152.58 860,757 - - -
Exercise 150.00 150.00 137.45 - -
price range to to to
(pence) 219.00 219.00 152.78
Weighted
average
remaining
contractual
life
(years)(b) 0.42 0.42 5.18 0.42 - -
(a) The special dividend and associated share consolidation had
a neutral impact to the number of options.
(b) Contractual life represents the period from award to the
scheme end date. Certain schemes may be exercised later than
vesting date at the discretion of the individual.
Share options were exercised on a regular basis throughout the
financial year. The average share price during the 52 weeks ended
27 February 2021 was 227.07p (2020: 237.69p).
For the 53 weeks ended 29 February 2020
Booker
Irish Booker Group Group PLC
Savings-related Nil cost PLC Savings Performance
Savings-related Share Option Share Option Related Share Share Plan Other Schemes
Share Option Scheme Scheme Scheme Option Plan Scheme *
Options WAEP Options WAEP Options WAEP Options WAEP Options WAEP Options WAEP
Outstanding
at 23
February
2019 215,591,248 168.04 6,470,978 175.06 25,377,129 - 9,827,705 145.36 11,222,347 - 12,379,637 -
Granted 44,387,158 219,00 1,977,339 219.00 537,271 - - - - - -
Forfeited (23,512,462) 200.62 (1,062,090) 187.69 (5,502,793) - (766,057) 147.40 (2,870,980) - (12,379,637) -
Exercised (20,653,850) 167.18 (530,614) 180.60 (1,955,766) - (3,961,499) 137.46 (3,375,131) - - -
Outstanding
at 29
February
2020 215,812,094 175.06 6,855,613 185.35 18,455,841 - 5,100,149 151.21 4,976,236 - - -
Exercise 150.00 150.00 - 137.13 - -
price range to to to
(pence) 322.00 219.00 152.78
Weighted
average
remaining
contractual
life
(years) 2.09 2.55 6.39 1.32 0.51 -
Exercisable
at 29
February
2020 2,948,571 189.92 243,886 190.00 9,359,089 - 523,817 137.45 977,437 - - -
Exercise 150.00
price range to
(pence) 322.00 190.00 - 137.45 - -
Weighted
average
remaining
contractual
life
(years) 0.41 0.42 5.60 0.42 - -
* Other Schemes includes Approved Share Option Scheme
(Approved), Unapproved Share Option Scheme (Unapproved), and
International Executive Share Option Scheme (International). The
WAEP for all other
schemes at 29 February 2020 was 338.40p and all options were forfeited during the year.
Notes to the Group financial statements
Note 28 Share-based payments continued
The fair value of savings related share options schemes are
estimated at the date of grant using the Black-Scholes option
pricing model. The following table gives the assumptions applied to
the options granted in the respective periods shown. No assumption
has been made to incorporate the effects of expected early
exercise.
2021 2020
SAYE SAYE
Expected dividend yield (%) 4.90-5.05% 3.70-4.28%
Expected volatility (%) 23.00-25.60% 22.60-28.09%
Risk-free interest rate (%) 0.15-0.26% 0.81-0.84%
Expected life of option (years) 3 or 5 3 or 5
Weighted average fair value of options granted
(pence) 27.13 38.56
Probability of forfeiture (%) 6-10% 7-10%
Share price (pence) 219.60 243.00
Weighted average exercise price (pence) 198.00 219.00
Volatility is a measure of the amount by which a price is
expected to fluctuate during a period. The measure of volatility
used in the Group's option pricing models is the annualised
standard deviation of the continuously compounded rates of return
on the share over a period of time. In estimating the future
volatility of the Company's share price, the Board considers the
historical volatility of the share price over the most recent
period that is generally commensurate with the expected term of the
option, taking into account the remaining contractual life of the
option.
Share bonus and incentive schemes
Selected executives participate in the Group Bonus Plan, a
performance-related bonus scheme. The amount paid to colleagues is
based on a percentage of salary and is paid partly in cash and
partly in shares. Bonuses are awarded to selected executives who
have completed a required service period and depend on the
achievement of corporate and individual performance targets.
Selected executives participate in the Performance Share Plan
(2011) and the Long Term Incentive Plan (2015). Awards made under
these plans will normally vest on the vesting date(s) set on the
date of the award for nil consideration. Vesting will normally be
conditional on the achievement of specified performance targets
over a three-year performance period and/or continuous
employment.
The Executive Directors participate in short-term bonus and
long-term incentive schemes designed to align their interests with
those of shareholders. Full details of these schemes can be found
in the Directors' remuneration report.
The fair value of shares awarded under these schemes is their
market value on the date of award. Expected dividends are not
incorporated into the fair value.
The number and weighted average fair value (WAFV) of share
bonuses and share incentives awarded were:
2021 Number 2020
WAFV Number WAFV
of shares pence of shares pence
11,496,310 237.80
39,136,637 233.77
Group Bonus Plan 15,502,105 246.70
Performance Share Plan 25,024,909 221.72
Note 29 Post-employment benefits
Pensions
The Group operates a variety of post-employment benefit
arrangements, covering both funded and unfunded defined benefit
schemes and defined contribution schemes.
Defined contribution
Defined contribution schemes are open to all Tesco employees in
the UK.
Under the Group's defined contribution pension schemes,
employees of the Group pay contributions to an independently
administered fund, into which the Group also pays contributions
based upon a fixed percentage of the employee's contributions. The
Group has no further payment obligations once its contributions
have been paid. Contributions paid for defined contribution schemes
in continuing operations of GBP347m (2020: GBP329m) have been
recognised in the Group income statement. This includes GBP132m
(2020: GBP116m) of salaries paid as pension contributions.
Defined benefit schemes
The Group has a defined benefit pension deficit of GBP1,222m
(2020: GBP3,085m), comprising a number of schemes. The most
significant of these are for the Group's employees in the UK, which
are closed to future accrual, and ROI. The defined benefit pension
deficit in the UK represents 86% of the Group deficit (2020:
92%).
Guaranteed minimum pension
During the year, a further high court judgement was handed down
regarding the Lloyd's Banking Group's defined benefit pension
schemes, which affects many schemes in the UK, including the
Group's UK schemes. This ruling requires pension schemes to also
consider the impact of guaranteed minimum pensions (GMPs)
equalisation on individual transfer payments made since May 1990.
In consultation with independent actuaries, the Group recognised
the financial effect of this as a one-off GBP7m exceptional past
service cost in the current year. This is presented as an
exceptional item in the income statement (Note 4).
Notes to the Group financial statements
Note 29 Post-employment benefits continued
United Kingdom
The principal plan within the Group is the Tesco PLC Pension
Scheme (the Scheme), the assets of which are held as a segregated
fund and administered by the Trustee.
The Scheme is established under trust law and has a corporate
trustee (the Trustee) that is required to run the Scheme in
accordance with the Scheme's Trust Deed and Rules and to comply
with all relevant legislation. Responsibility for governance of the
Scheme lies with the Trustee. The Trustee is a company whose
directors comprise:
1. representatives of the Group; and
2. representatives of the Scheme participants, in accordance
with its articles of association and UK pension law.
Scheme funding
The Group considers two measures of the pension deficit. The
accounting position is shown on the Group balance sheet. The
funding position, calculated at the triennial actuarial assessment,
is used to agree contributions made to the schemes. The two
measures will vary because they are for different purposes, and are
calculated at different dates and in different ways. The key
calculation difference is that the funding position considers the
expected returns of scheme assets when calculating the liability,
whereas the accounting position calculated under
IAS 19 discounts liabilities based on corporate bond yields.
The most recent completed triennial actuarial assessment of the
Scheme was performed as at 31 December 2019 using the projected
unit credit method. After the GBP2.5bn contribution in relation to
the Group's sale of its operations in Thailand and Malaysia, the
funding position was a surplus of GBP570m. The market value of the
Scheme's assets was GBP18,492m and these assets represented 103% of
the benefits that had accrued to members, after allowing for
expected increases in pensions in payment.
Subsequent to this triennial actuarial assessment it was agreed
that no further pension deficit contributions would be required,
with contributions being assessed at the next triennial review. The
GBP2.5bn contribution has significantly reduced the prospect of
having to make further pension deficit contributions in the future.
The Group will continue to pay GBP25m per annum to meet expenses of
the Scheme, including the Pension Protection Fund levy.
Additionally, as part of the triennial review it was agreed that
the market value of assets held as security in favour of the Scheme
would increase to at least GBP775m (2020: GBP575m).
The most recent Booker Pension Scheme triennial valuation showed
a funding deficit of GBP103m at 31 March 2019, with agreed
contributions of
GBP15m per annum until the end of 2028. No contributions were
required for the Budgens or Londis schemes.
IFRIC 14
The Group is not required to recognise any additional
liabilities in relation to funding plans, or limit the recognition
of any surpluses, as any future economic benefits will be available
to the Group by way of future refunds or reductions to future
contributions.
Maturity profile of obligations
The estimated duration of the Scheme obligations is an indicator
of the weighted average term of benefit payments after discounting.
For the Scheme this is 23 years.
Around 40% of the undiscounted benefits are due to be paid
beyond 30 years' time, with the last payments expected to be over
80 years from now.
The liabilities held by the Scheme are broken down as
follows:
%
Deferred members 78
Current pensioners 22
Notes to the Group financial statements
Note 29 Post-employment benefits continued
Risks
The Group bears a number of risks in relation to the Scheme,
which are described below:
Risk Description of risk Mitigation
Investment The Scheme's accounting liabilities The Trustee and the Group
are calculated using a discount regularly monitor the funding
rate set with reference to position and operate a diversified
corporate bond yields. If investment strategy.
the return on the Scheme's
assets underperform this rate, The Trustee and Group take
the accounting deficit will a balanced approach to investment
increase. risk and have a long-term
plan to significantly reduce
If the Scheme's assets underperform the investment risk within
the expected return for the the Scheme.
funding valuation, this may
require additional contributions
to be made by the Group.
Inflation The Scheme's benefit obligations As part of the investment
are linked to inflation. A strategy, the Trustee aims
higher rate of expected long-term to mitigate this risk through
inflation will therefore lead investment in a liability-driven
to higher liabilities, both investment (LDI) portfolio.
for the IAS 19 and funding
liability. The portfolio invests in
assets which increase in
If the Scheme's funding liability value as inflation expectations
increases, this may require increase. This mitigates
additional contributions to the impact of any adverse
be made by the Group. movement in long-term inflation
expectations.
The Scheme's holdings are
designed to hedge against
inflation risk up to the
value of the funded liabilities.
Additionally, changes to
future benefits were introduced
in June 2012 to reduce the
Scheme's exposure to inflation
risk by changing the basis
for calculating the rate
of increase in pensions to
CPI (previously RPI).
Interest rate A decrease in corporate bond As part of the investment
yields will increase the accounting strategy, the Trustee aims
deficit under IAS 19. Similarly, to mitigate this risk through
a decrease in gilt yields investment in a LDI portfolio.
will have an adverse impact
on the funding position of The portfolio invests in
the Scheme. This may lead assets which increase in
to additional contributions value as interest rates decrease.
to be made by the Group. The Scheme's holdings are
designed to hedge against
interest rate risk up to
the value of the funded liabilities.
Because the aim of the portfolio
is to mitigate risk for the
funding position, ineffectiveness
in hedging for the accounting
deficit under IAS 19 can
arise where corporate bond
and gilt yields diverge.
This is partially offset
by Scheme holdings in corporate
bonds.
Life expectancy The Scheme's obligations are To reduce this risk, changes
to provide benefits for the to future benefits were introduced
life of the member and so in June 2012 to increase
increases in life expectancy the age at which members
will lead to higher liabilities. can take their full pension
by two years.
The Trustee and Group regularly
monitor the impact of changes
in longevity on scheme obligations.
The operations and audit pensions committee was established to
further strengthen the Group's Trustee governance and provide
greater oversight and stronger internal control over the Group's
risks. The Group pensions committee was also set up to provide an
additional layer of governance and risk management. Further
mitigation of the risks is provided by external advisors and the
Trustee who consider the funding position, fund performance and
impacts of any regulatory changes.
Notes to the Group financial statements
Note 29 Post-employment benefits continued
Scheme principal assumptions
Financial assumptions
The principal assumptions, on a weighted average basis, used by
the actuaries to value the defined benefit obligation of the Scheme
were as follows:
2021 2020
% %
Discount rate 2.0 1.9
Price inflation 2.9 2.8
Rate of increase in deferred pensions* 2.5 2.0
Rate of increase in pensions in payment*
Benefits accrued before 1 June 2012 2.8 2.7
Benefits accrued after 1 June 2012 2.5 2.1
* In excess of any guaranteed minimum pension (GMP) element.
Discount Rate
The discount rate for the Scheme is determined by reference to
market yields of high-quality corporate bonds of suitable currency
and term to the Scheme cash flows and extrapolated based on the
trend observable in corporate bond yields to produce a single
equivalent discount rate.
Inflation
The inflation assumption is used to determine increases in
pensions linked to RPI and CPI inflation within sections of the
Scheme, subject to relevant maximum and minimum increases.
RPI inflation is derived by reference to the difference between
fixed-interest and index-linked long-term government bonds. To
account for the premium that investors are willing to pay to
mitigate the risk that inflation is higher than expected, the
inflation assumption incorporates an inflation risk premium. CPI
inflation is set by reference to RPI.
The government announced RPI reforms in 2019 and subsequently
responded to a consultation in November 2020, with changes to align
RPI with CPIH expected from 2030 onwards. The Group uses a
bifurcated approach to pre- and post-2030 assumptions, reflecting
the impact of the RPI reforms from 2030 onwards. In consultation
with external actuaries, the inflation risk premium has been set at
0.42% (2020: 0.25%), representing the weighted average of 0.3% p.a.
pre-2030 and 0.5% p.a. post-2030. The CPI differential has been set
as 0.43% lower than RPI (2020: 0.80%), representing the weighted
average of 1.0% p.a. pre-2030 and 0.1% p.a. post-2030.
Mortality assumptions
The Group, in consultation with an independent actuary,
conducted a mortality analysis of the Scheme as part of the
triennial actuarial valuation process. Subsequent to this analysis,
the Group adopted the best estimate assumptions for the calculation
of the IAS 19 pension liability for the main UK scheme.
The mortality assumptions used are based on tables that have
been projected to 2017 with CMI 2018 improvements. In addition, the
allowance for future mortality improvements from 2017 have been
updated to be in line with CMI 2019, with a long-term improvement
rate of 1.25% per annum.
The base tables used in calculating the mortality assumptions
are different for various categories of members, as shown
below:
Pensioner Non-Pensioner
90% of SAPS S3 Normal 97% of SAPS S3 Normal
Male Staff Heavy Heavy
95% of SAPS S3 Normal 104% of SAPS S3 Normal
Senior Manager Light Light
110% of SAPS S3 Normal 114% of SAPS S3 Normal
Female Staff Heavy Heavy
95% of SAPS S3 All 100% of SAPS S3 All
Senior Manager Middle Middle
The following table illustrates the expectation of life of an
average member retiring at age 65 at the balance sheet date and a
member reaching age 65 at the balance sheet date +25 years. A
comparison between the two retiree dates illustrates the expected
improvements in mortality over the next 25 years.
2021 2020
Years Years
Retiring at the balance sheet
date at age 65: Male 20.7 22.0
Female 22.2 23.8
Retiring at the balance sheet
date +25 years at age 65: Male 22.0 23.4
Female 23.9 25.8
Sensitivity analysis of significant actuarial assumptions
The sensitivity of significant assumptions upon the Scheme
defined benefit obligation are detailed below:
2021 2020
Financial Discount Inflation Discount Inflation
assumptions - rate ' rate rate rate
Increase/(decrease) GBPm GBPm GBPm GBPm
in UK Defined
Benefit Obligation
Impact of 0.1%
increase of the
assumption (460) 400 (460) 383
Impact of 0.1%
decrease of the
assumption 480 (380) 479 (383)
Impact of 1.0%
increase of the
assumption (4,038) 4,318 (4,002) 4,289
Impact of 1.0%
decrease of the
assumption 5,577 (3,418) 5,572 (3,313)
Mortality assumptions - Increase/(decrease) in UK Defined 2021 2020
Benefit Obligation GBPm GBPm
Impact of 1 year increase in longevity 900 881
Impact of 1 year decrease in longevity (920) (881)
Notes to the Group financial statements
Note 29 Post-employment benefits continued
Sensitivities are calculated by changing the relevant assumption
while holding all other assumptions constant. The sensitivities
reflect the range of recent assumption movements and illustrate
that the financial assumption sensitivities do not move in a linear
fashion. Movements in the defined benefit obligation from discount
rate and inflation rate changes may be partially offset by
movements in assets.
Overseas
The Group operates defined benefit schemes in ROI. An
independent actuary, using the projected unit credit method,
carried out the latest actuarial assessment of the ROI schemes as
at 27 February 2021. At the financial year end, the IAS 19 deficit
relating to ROI was GBP169m (2020:
GBP206m).
Post-employment benefits other than pensions
The Group operates a scheme offering post-retirement healthcare
benefits. The cost of providing these benefits has been accounted
for on a similar basis to that used for defined benefit pension
schemes.
The liability as at 27 February 2021 of GBP7m (2020: GBP8m) was
determined in accordance with the advice of independent actuaries.
During the current financial year, GBPnil (2020: GBPnil) has been
charged to the Group income statement and GBPnil (2020: GBPnil) of
benefits were paid.
Plan assets
The Group's pension schemes hold assets that both provide
returns and mitigate risk, including the volatility of future
pension payments.
The table below shows a breakdown of the combined investments
held by the Group's schemes:
2021 2020
Quoted Total Quoted Total
Unquoted GBPm % Unquoted GBPm %
GBPm GBPm GBPm GBPm
Equities
UK 89 - 89 1 255 - 255 2
Europe 889 - 889 4 746 - 746 4
Rest of the
world 4,502 - 4,502 22 4,347 - 4,347 25
5,480 - 5,480 27 5,348 - 5,348 31
Bonds
Government 1,377 - 1,377 6 750 - 750 4
Corporates -
investment
grade 3,334 - 3,334 17 1,362 - 1,362 8
Corporates -
non-investment
grade 197 - 197 1 2 - 2 -
4,908 - 4,908 24 2,114 - 2,114 12
Property
UK 78 1,041 1,119 6 44 1,036 1,080 6
Rest of the
world 6 440 446 2 7 475 482 3
84 1,481 1,565 8 51 1,511 1,562 9
Alternative
assets
Hedge funds 1 312 313 2 2 304 306 2
Private equity - 1,020 1,020 5 - 881 881 5
Other 210 1,288 1,498 7 225 1,043 1,268 7
211 2,620 2,831 14 227 2,228 2,455 14
LDI portfolio 3,241 (493) 2,748 14 4,580 444 5,024 29
Cash 2,550 - 2,550 13 922 - 922 5
Total fair
value of
plan assets 16,474 3,608 20,082 100 13,242 4,183 17,425 100
Quoted assets are those with a quoted price in an active market.
Unquoted assets are valued in accordance with IFRS13, using the
most appropriate level within the fair value hierarchy based on the
specifics of the asset class, and in line with industry standard
guidelines, including the RICS methodology for property and the
IPEV guidelines for Private Equity.
The LDI portfolio consists of assets, including gilts and
index-linked gilts, of the value of GBP8,425m (2020: GBP8,115m) and
associated repurchase agreements and swaps of GBP(5,677)m (2020:
GBP(3,091)m). Other alternative assets include infrastructure and
private credit investments. Other derivatives are included in the
asset category to which they relate, reflecting the underlying
nature and exposure of the derivative.
The plan assets include GBP222m (2020: GBP209m) relating to
property used by the Group. Group property with net carrying value
of GBP826m
(2020:GBP478m) (Note 11) and a value to the Scheme of at least
GBP775m (2020: GBP575m) is held as security in favour of the
Scheme.
Notes to the Group financial statements
Note 29 Post-employment benefits continued
Movement in the Group pension deficit during the financial
year
Including all movements of discontinued operations up to
classification as held for sale(a)
Fair value of Defined benefit Net defined
plan assets obligation benefit surplus/(deficit)
2021 2020 2021 2020 2021 2020 (b)
GBPm GBPm GBPm GBPm GBPm GBPm
Opening balance 17,425 15,054 (20,510) (17,862) (3,085) (2,808))
Current service cost - - (41) (40) (41) (40))
Past service cost - - (7) (5) (7) (5))
Finance income/(cost) 341 409 (384) (480) (43) (71))
Included in the Group income
statement 341 409 (432) (525) (91) (116))
Remeasurement gain/(loss):
Financial assumptions gain/(loss) - - (1,193) (2,867) (1,193) (2,867))
Demographic assumptions gain/(loss) - - 18 182 18 182
Experience gain/(loss) - - 354 61 354 61
Return on plan assets excluding
finance income (136) 2,158 - - (136) 2,158
Foreign currency translation 1 (3) (4) 5 (3) 2
Included in the Group statement
of comprehensive income/(loss) (135) 2,155 (825) (2,619) (960) (464))
Member contributions 2 2 (2) (2) - -
Employer contributions 34 36 - - 34 36
Additional employer contributions 2,836 262 - - 2,836 262
Benefits paid (421) (493) 436 498 15 5
Classified as held for sale - - 29 - 29 -
Other movements 2,451 (193) 463 496 2,914 303
Closing balance 20,082 17,425 (21,304) (20,510) (1,222) (3,085)
Deferred tax asset 218 512
Deficit in schemes at the
end of the year, net of deferred
tax (1,004) (2,573)
(a) Movements in the year include GBPnil relating to
discontinued operations up to classification as held for sale.
After classification as held for sale post-employment benefit
obligations movements within discontinued operations included
GBP(1)m within the Group income statement, GBP(6)m remeasurement
loss in the Group statement of comprehensive income/(loss) and
GBP2m in other movements.
(b) Movements in the prior year in relation to discontinued
operations included GBP(8)m within the Group income statement,
GBP(3)m in the Group statement of comprehensive income/(loss)
and
GBP1m in other movements
Note 30 Called-up share capital
2021 2020
Number
Number of of
Ordinary Ordinary
shares GBPm shares GBPm
Allotted, called-up and fully paid:
At the beginning of the year 9,793,496,561 490 9,793,496,561 490
Share consolidation (including shares
issued (a) ) (2,061,788,741) - -
At the end of the year 7,731,707,820 490 9,793,496,561 490
(a) To affect the share consolidation, 11 additional Ordinary
shares were issued so that the total Ordinary shares is exactly
divisible by 19.
On 26 February 2021, the Group paid a special dividend of
GBP4.9bn to shareholders in relation to the sale of its businesses
in Thailand and Malaysia. In order to maintain the comparability of
the Company's share price before and after the special dividend, a
share consolidation was approved at the General Meeting held on 11
February 2021. Shareholders received 15 new Ordinary shares of 6
1/3 pence each for every existing 19 Ordinary shares of 5 pence
each.
No shares were issued during the current financial year in
relation to share options.
The Group has a share forfeiture programme following the
completion of a tracing and notification exercise to any
shareholders who have not had contact with the Company over the
past 12 years, in accordance with the provisions set out in the
Company's Articles of Association. Under the share forfeiture
programme the shares and dividends associated with shares of
untraced members are forfeited, with the resulting proceeds
transferred to the Group to use for good causes in line with the
Group's corporate responsibility strategy. For more information on
how these proceeds have been spent, please see our Little Helps
Plan Report (available at www.tescoplc.com/littlehelpsplan). Du
ring the current financial year, the Group received GBPnil (2020:
GBPnil) proceeds from sale of untraced shares and GBPnil (2020:
GBPnil) write-back of unclaimed dividends, which are reflected in
share premium and retained earnings respectively.
As at 27 February 2021, the Directors were authorised to
purchase up to a maximum in aggregate of 773.2 million (2020: 979.3
million) Ordinary shares before the AGM 2021 on 25 June 2021.
The holders of Ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at general meetings of the Company.
Own shares purchased
Own shares represent the shares of Tesco PLC that are held in
Treasury or by the Employee Benefit Trust. Own shares are recorded
at cost and are deducted from equity.
The own shares held represents the cost of shares in Tesco PLC
purchased from the market and held by the Tesco International
Employee Benefit Trust to satisfy share awards under the Group's
share scheme plans (refer to Note 28). The number of Ordinary
shares held by the Tesco International Employee Benefit Trust at 27
February 2021 was 58.4 million (2020: 87.6 million). This
represents 0.76% of called-up share capital at the end of the year
(2020: 0.89%).
No own shares held of Tesco PLC were cancelled during the
financial years presented.
Notes to the Group financial statements
Note 31 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its
joint ventures and associates are disclosed below:
Transactions
Joint venture Associate
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
Sales to related parties 479 491 - -
Purchases from related parties 87 100 10 12
Dividends received 18 29 8 13
Injection of equity funding 14 - - 12
Sales to related parties consist of service/management fees and
loan interest.
Transactions between the Group and the Group's pension plans are
disclosed in Note 29.
Balances
Joint ventures Associates
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
Amounts owed to related parties 23 26 - -
Amounts owed by related parties 40 47 - -
Lease liabilities payable to related parties 2,718 3,206 144 146
Loans to related parties (net of deferred
profits)* 122 127 - -
* Loans to related parties of GBP122m (2020: GBP127m) are
presented net of deferred profits of GBP38m (2020: GBP54m),
historically arising from the sale of property assets to joint
ventures. Refer to Note 14 for further details. For loans to
related parties, a 12-month expected credit loss (ECL) allowance is
recorded on initial recognition. In the current and prior financial
years, the ECL allowance was immaterial.
A number of the Group's subsidiaries are members of one or more
partnerships to whom the provisions of the Partnerships (Accounts)
Regulations 2008 (Regulations) apply. The financial statements for
those partnerships have been consolidated into these financial
statements pursuant to Regulation 7 of the Regulations.
Transactions with key management personnel
Members of the Board of Directors and Executive Committee of
Tesco PLC are deemed to be key management personnel.
Cost of key management personnel compensation for the financial
year was as follows:
2021 2020
GBPm GBPm
Salaries and short-term benefits 20 20
Pensions and cash in lieu of pensions 2 2
Share-based payments 20 16
Joining costs and loss of office costs - 1
42 39
Attributable to:
The Board of Directors (including Non-executive Directors) 14 10
Executive Committee (members not on the Board of Directors) 28 29
42 39
During the year 6,403,309 (2020: 8,470,986) Performance Shares
and 2,615,921 (2020: 1,539,924) bonus shares were granted to key
management personnel under the Performance Share Plan and Deferred
Bonus Plan 2019 respectively. Vesting will be conditional on the
achievement of specified performance targets over a three-year
performance period and/or continuous employment. The cost of these
awards will be spread over the vesting period.
Of the key management personnel who had transactions with Tesco
Bank during the financial year, the following are the balances at
the financial year end:
Credit card,
mortgage and
personal loan Current and saving
balances deposit accounts
Number Number
of key of key
management management
personnel GBPm personnel GBPm
At 27 February 2021 4 - 7 -
At 29 February 2020 6 - 13 1
Notes to the Group financial statements
Note 32 Analysis of changes in net debt
Non-cash movements
Cash
flows
arising Fair
At 29 from Other value Interest Acquisitions At 27
February financing cash gains/ Foreign income/ and Discontinued February
2020 activities flows (losses) exchange (charge) disposals Other operations 2021
GBPm GBPm GBPm GBPm GBPm GBPm (a) GBPm GBPm GBPm GBPm
Total Group
Bank and other
borrowings,
excluding
overdrafts (7,118) 716 223 (41) (2) (226) (288) - - (6,736)
Lease
liabilities (9,566) 621 488 - - (488) 977 (568) 134 (8,402)
Net derivative
financial
instruments 198 580 18 (203) - (20) (118) - - 455
Arising from
financing
activities (16,486) 1,917 729 (244) (2) (734) 571 (568) 134 (14,683)
Cash and cash
equivalents
in the Group
balance sheet 4,137 - (1,607) - 8 - - - (28) 2,510
Overdrafts(b) (1,106) - 539 - - - - - 35 (532)
Cash and cash
equivalents
(including
overdrafts)
in the Group
cash flow
statement 3,031 - (1,068) - 8 - - - 7 1,978
Short-term
investments 1,076 - (62) - (3) - - - - 1,011
Joint venture
loans 127 - 2 - - 2 (9) - - 122
Interest and
other
receivables 1 - (12) - - 11 - - - -
Net debt of
the disposal
group - - - - - - - - (141) (141)
Total Group (12,251) 1,917 (411) (244) 3 (721) 562 (568) - (11,713)
Tesco Bank
Bank and other
borrowings,
excluding
overdrafts (1,260) 774 4 (1) - (4) - - - (487)
Lease
liabilities (33) 3 2 - - (2) - - - (30)
Net derivative
financial
instruments (45) - - 3 - - - - - (42)
Arising from
financing (1,338) 777 6 2 - (6) - - - (559)
activities
Cash and cash
equivalents
in the Group
balance sheet 1,364 - (584) - - - - - - 780
Overdrafts(b) - - - - - - - - - -
Cash and cash
equivalents
(including
overdrafts)
in the Group
cash flow
statement 1,364 - (584) - - - - - - 780
Joint ventures
loans 21 - - - - - - - - 21
Tesco Bank 47 777 (578) 2 - (6) - - - 242
Retail
Bank and other
borrowings,
excluding
overdrafts (5,858) (58) 219 (40) (2) (222) (288) - - (6,249)
Lease
liabilities (9,533) 618 486 - - (486) 977 (568) 134 (8,372)
Net derivative
financial
instruments 243 580 18 (206) - (20) (118) - - 497
Arising from
financing (15,148) 1,140 723 (246) (2) (728) 571 (568) 134 (14,124)
activities
Cash and cash
equivalents
in the Group
balance sheet 2,773 - (1,023) - 8 - - - (28) 1,730
Overdrafts(b) (1,106) - 539 - - - - - 35 (532)
Cash and cash
equivalents
(including
overdrafts)
in the Group
cash flow
statement 1,667 - (484) - 8 - - - 7 1,198
Short-term
investments 1,076 - (62) - (3) - - - - 1,011
Joint ventures
loans 106 - 2 - - 2 (9) - - 101
Interest and
other
receivables 1 - (12) - - 11 - - - -
Net debt of
the disposal
group - - - - - - - - (141) (141)
Net debt (12,298) 1,140 167 (246) 3 (715) 562 (568) - (11,955)
(a) Movements in Group net debt arising from the disposal of the
Group's Thailand and Malaysia operations, the acquisition of The
Tesco Property (No. 2) Limited Partnership and the acquisition of
the trade and assets of Best Food Logistics. Refer to Notes 7 and
33 for further details.
(b) Overdraft balances are included within Bank and other
borrowings in the Group balance sheet, and within Cash and cash
equivalents in the Group cash flow statement. Refer to Note 20.
Net debt excludes the net debt of Tesco Bank but includes that
of discontinued operations. Balances and movements in respect of
the total Group and Tesco Bank are presented to allow
reconciliation between the Group balance sheet and the Group cash
flow statement.
Notes to the Group financial statements
Note 32 Analysis of changes in net debt continued
Non-cash movements
Cash
flows
At arising Fair At
23 from Other value Interest Acquisition 29
February financing cash gains/ Foreign income/ of joint February
2019 activities flows (losses) exchange (charge) venture(a) Other 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Total Group
Bank and other
borrowings,
excluding overdrafts (6,794) 484 255 (192) 2 (251) (622) - (7,118)
Lease liabilities (10,505) 634 541 - 1 (541) 455 (151) (9,566)
Net derivative
financial instruments 591 17 7 (208) - 14 (223) - 198
Arising from
financing (16,708) 1,135 803 (400) 3 (778) (390) (151) (16,486)
activities
Cash and cash
equivalents
in the Group
balance sheet 4,227 - (48) - (42) - - - 4,137
Overdrafts(b) (1,660) - 554 - - - - - (1,106)
Cash and cash
equivalents
(including overdrafts)
in the Group
cash flow statement 2,567 - 506 - (42) - - - 3,031
Short-term investments 390 - 687 - (1) - - - 1,076
Joint venture
loans 133 - (8) - - 2 - - 127
Interest and
other receivables 1 - (18) - (1) 19 - - 1
Total Group (13,617) 1,135 1,970 (400) (41) (757) (390) (151) (12,251)
Tesco Bank
Bank and other
borrowings,
excluding overdrafts (1,421) 160 5 1 - (5) - - (1,260)
Lease liabilities (35) 2 3 - - (3) - - (33)
Net derivative
financial instruments (29) - - (16) - - - - (45)
Arising from
financing (1,485) 162 8 (15) - (8) - - (1,338)
activities
Cash and cash
equivalents
in the Group
balance sheet 1,043 - 321 - - - - - 1,364
Overdrafts(b) - - - - - - - - -
Cash and cash
equivalents
(including overdrafts)
in the Group
cash flow statement 1,043 - 321 - - - - - 1,364
Joint ventures
loans 29 - (8) - - - - - 21
Tesco Bank (413) 162 321 (15) - (8) - - 47
Retail
Bank and other
borrowings,
excluding overdrafts (5,373) 324 250 (193) 2 (246) (622) - (5,858)
Lease liabilities (10,470) 632 538 - 1 (538) 455 (151) (9,533)
Net derivative
financial instruments 620 17 7 (192) - 14 (223) - 243
Arising from
financing (15,223) 973 795 (385) 3 (770) (390) (151) (15,148)
activities
Cash and cash
equivalents
in the Group
balance sheet 3,184 - (369) - (42) - - - 2,773
Overdrafts(b) (1,660) - 554 - - - - - (1,106)
Cash and cash
equivalents
(including overdrafts)
in the Group
cash flow statement 1,524 - 185 - (42) - - - 1,667
Short-term investments 390 - 687 - (1) - - - 1,076
Joint ventures
loans 104 - - - - 2 - - 106
Interest and
other receivables 1 - (18) - (1) 19 - - 1
Net debt (13,204) 973 1,649 (385) (41) (749) (390) (151) (12,298)
(a) Movements in Group net debt arising from the acquisition of
The Tesco Atrato Limited Partnership.
(b) Overdraft balances are included within Bank and other
borrowings in the Group balance sheet, and within Cash and cash
equivalents in the Group cash flow statement. Refer to Note 20.
Notes to the Group financial statements
Note 32 Analysis of changes in net debt continued
Reconciliation of net cash flow to movement in Net debt
2021 2020
GBPm GBPm
Net increase/(decrease) in cash and cash equivalents
including overdrafts (1,068) 506
Elimination of Tesco Bank movement in cash and cash
equivalents including overdrafts 584 (321))
Retail cash movement in other Net debt items:
Net increase/(decrease) in short-term investments (62) 687
Net increase/(decrease) in joint venture loans 2 -
Net (increase)/decrease in borrowings and lease liabilities 560 956
Net cash flows from derivative financial instruments 580 17
Net interest paid on components of Net debt 711 777
Change in Net debt resulting from cash flow 1,307 2,622
Retail net interest charge on components of Net debt (715) (749)
Retail fair value and foreign exchange movements (243) (426)
Retail other non-cash movements (568) (151)
Acquisition of property joint venture (Note 33) (161) (390)
Acquisition of Best Food Logistics (Note 33) (42) -
Disposal of the Asia business (Note 7) 765 -
Increase)/ decrease in Net debt 343 906
Opening Net debt (12,298) (13,204)
Closing Net debt* (11,955) (12,298)
* Refer to page 130 for a reconciliation from Net debt (Retail
net debt) shown above to the Group's 52-week alternative
performance measure.
Note 33 Acquisitions
Acquisition of Best Food Logistics
On 7 March 2020, the Group acquired the trade and assets of Best
Food Logistics (trading name of BFS Group Ltd), which has been
accounted for as an acquisition of a business in accordance with
IFRS 3 'Business Combinations'. Best Food Logistics provides a food
supply chain and logistics services to national fast food and
casual dining clients. The acquisition builds on the Group's
expertise in wholesale operations in the UK market and will further
enhance its foodservice offer to customers within procurement,
warehousing and distribution solutions. The purchase consideration
received by the Group of GBP15m was fully satisfied by cash. There
is no deferred or
contingent consideration.
The fair value of the assets and liabilities recognised as a
result of the acquisition of Best Food Logistics are as
follows:
GBPm
Acquired intangible assets 4
Property, plant and equipment 12
Right of use assets 41
Inventories 27
Trade and other receivables 77
Trade and other payables (128)
Lease liabilities (42)
Deferred tax liabilities (2)
Provisions (5)
Total assets and liabilities acquired (16)
Goodwill 1
Purchase consideration received (15)
The goodwill is primarily attributable to synergies. None of the
goodwill is expected to be deductible for tax purposes.
Acquired intangible assets comprise software of GBP1m and
customer relationships of GBP3m, which are amortised over 3 years.
The amortisation charge on the acquired intangibles is excluded
from the Group's operating profit before exceptional items and
amortisation of acquired intangibles.
The fair value of acquired trade and other receivables is
GBP77m. The gross contractual amount for trade receivables due was
GBP78m, of which GBP1m is expected to be uncollectable.
Best Food Logistics contributed revenues of GBP715m and net loss
after tax of GBP14m to the Group from 7 March 2020 to 27 February
2021. The GBP14m loss includes GBP1m of amortisation expense on
acquired intangible assets. If the acquisition had occurred on 1
March 2020, Group revenue and net loss after tax for the 52 weeks
ended 27 February 2021 would not be materially different.
Transaction costs of GBPnil have been included in Administrative
expenses for the 52 weeks ended 27 February 2021 (53 weeks ended 29
February 2020: GBP2m).
Acquisition of property joint venture - The Tesco Property (No.
2) Limited Partnership
On 18 September 2020, the Group obtained control of The Tesco
Property (No. 2) Limited Partnership (the partnership), previously
accounted for as a joint venture, through the acquisition of the
other partner's 50% interest for GBP54m. The partnership had bond
and derivative liabilities, and owns 12 stores and two distribution
centres, which the partnership previously leased to the Group. The
acquisition, which has been treated as an asset acquisition,
increased the Group's owned property portfolio and borrowings,
replacing the Group's associated right of use assets and lease
liabilities, which are eliminated on consolidation.
Notes to the Group financial statements
The table below sets out the values to the Group in respect of
obtaining control of the partnership:
Notes GBPm
Property, plant and equipment 11 492
Cash and cash equivalents 2
Borrowings 32 (288)
Derivative liabilities 32 (118)
Joint venture partnership loans payable
to the parent (49)
Deferred tax asset 19
Total assets and liabilities acquired 58
Consideration paid in cash and cash equivalents 54
Joint venture loan receivable from the other former joint
venture partner (25)
Net consideration paid 29
Revaluation of the Group's original 50% investment 29
Total cost 58
The Group recognised the following gains and losses as an
exceptional item within cost of sales on the Group income
statement. The related tax charge of GBP23m has also been
classified as an exceptional item. Refer to Note 4 for further
details.
Notes GBPm
Revaluation of the Group's original 50% investment 29
Impairment of property, plant and equipment acquired 15 (32)
Derecognition of the Group's lease liabilities with
the partnership 32 254
Derecognition of the Group's right of use assets
with the partnership 12 (130)
Derecognition of dilapidation provisions and other
consolidation adjustments on acquisition 13
Total exceptional gain within cost of sales 134
Taxation - exceptional 4 (23)
Total exceptional gain after taxation 111
Note 34 Commitments and contingencies
Capital commitments
At 27 February 2021, there were commitments for capital
expenditure contracted for, but not incurred, of GBP203m (2020:
GBP140m), principally relating to store development.
Contingent liabilities
There are a number of contingent liabilities that arise in the
normal course of business, which if realised, are not expected to
result in a material liability to the Group. The Group recognises
provisions for liabilities when it is more likely than not that a
settlement will be required and the value of such a payment can be
reliably estimated.
In July and August 2020, the Group settled claims brought by two
claimant groups against Tesco PLC for matters arising out of or in
connection with the overstatement of profit announced in 2014. As a
result of the settlement and associated legal costs, Tesco has
taken a one-off charge in the amount of GBP93 million. Two claimant
law firms issued proceedings against the Group in September 2020 in
respect of the same matters. The Group will vigorously defend any
further proceedings. The merit, likely outcome and potential impact
on the Group of any further litigation that might potentially be
brought against the Group is subject to a number of significant
uncertainties and, therefore, the Group cannot make any assessment
of the likely outcome or quantum of any such litigation as at 27
February 2021. There are substantial legal and factual defences to
these claims and the Group will vigorously defend any further
proceedings.
Prior to the disposal of its Korean operations (Homeplus), Tesco
PLC provided guarantees in respect of 13 Homeplus lease agreements
in Korea in the event of termination of the relevant lease
agreement by the landlord due to Homeplus' default. Entities
controlled by MBK Partners and Canada Pension Plan Investment Board
as the purchasers of Homeplus, undertook to procure Tesco PLC's
release from these guarantees following the disposal of Homeplus.
At 27 February 2021, four guarantees remained outstanding. This
liability decreases over time with all relevant leases expiring in
the period between 2027 and 2031. The maximum potential liability
under these outstanding guarantees is between KRW 110bn (GBP70m)
and KRW 189bn (GBP121m). In the event that the guarantees are
called, the potential economic outflow is estimated at KRW 73bn
(GBP46m), with funds of KRW 32bn (GBP20m) placed in escrow to
provide the payment mechanism for these guarantees. The net
potential outflow to Tesco is therefore estimated at KRW 41bn
(GBP26m). Additionally, Tesco PLC has the benefit of an indemnity
from the purchasers of Homeplus for any claims made over and above
the amounts in escrow.
Following the sale of Homeplus for GBP4.2bn in 2015, Tesco PLC
has received claims from the purchasers relating to the sale of the
business. In July 2015, an arbitral tribunal tribunal dismissed the
majority of the claims. It made findings of liability in relation
to the remaining claims but reserved its position in relation to
quantum. The parties are in the process of making submissions on
the damages that should be awarded in relation to the remaining
claims. A provision in the amount of GBP88m has been recognised in
the accounts.
Notes to the Group financial statements
As previously reported, Tesco Stores Limited has received claims
from current and former Tesco store colleagues alleging that their
work is of equal value to that of colleagues working in Tesco's
distribution centres and that differences in terms and conditions
relating to pay are not objectively justifiable. The claimants are
seeking the differential between the pay terms looking back, and
equivalence of pay terms moving forward. At present, the likely
number of claims that may be received and the merit, likely outcome
and potential impact on the Group of any such litigation is subject
to a number of significant uncertainties and therefore, the Group
cannot make any assessment of the likely outcome or quantum of any
such litigation as at the date of this disclosure. There are
substantial factual and legal defences to these claims and the
Group intends to vigorously defend them.
Subsidiary audit exemptions
The following UK subsidiary undertakings are exempt from the
requirements of the Companies Act 2006 (the Act) relating to the
audit of individual accounts by virtue of section 479A of the
Act.
Company Company Company
Name number Name Number Name Number
Buttoncable Limited 5294246 T & S Stores Limited 1228935 Tesco PENL Limited 6479938
Tesco Red (3LP)
Buttoncase Limited 5298861 Tapesilver Limited 5205362 Limited 10127765
Day and Nite Stores Tesco Aqua (GP)
Limited 1746058 Limited 5721654 Tesco Red (GP) Limited 5721630
Dillons Newsagents Tesco Brislington Tesco TLB Properties
Limited 140624 Limited 10701640 Limited 3159425
Dunnhumby Holding Tesco Family Dining The Tesco Aqua Limited
Limited 8071909 Limited 8514605 Partnership LP011520
Tesco Food Sourcing The Tesco Red Limited
Launchgrain Limited 5260856 Limited 7502096 Partnership LP011522
Oakwood Distribution Tesco Freetime
Limited 5721635 Limited 4345023
Spen Hill Development Tesco Gateshead
Limited 4827219 Property Limited 8312532
Spen Hill Management
Limited 2460426 Tesco Mobile Communications 4780729
Spen Hill Properties Tesco Mobile Services
(Holdings) PLC 2412674 Limited 04780734
Spen Hill Regeneration
Limited 6418300 Tesco PEG Limited 6480309
Tesco PLC will guarantee all outstanding liabilities that these
subsidiaries are subject to as at the financial year ended 27
February 2021 in accordance with section 479C of the Act, as
amended by the Companies and Limited Liability Partnerships
(Accounts and Audit Exemptions and Change of Accounting Framework)
Regulations 2012. In addition, Tesco PLC will guarantee any
contingent and prospective liabilities that these subsidiaries are
subject to.
Subject to and with effect from an amendment to the Companies
Act of Ireland 2014 coming into force which permits Irish
incorporated subsidiaries of an English incorporated company to
avail of section 537, Tesco PLC has irrevocably guaranteed the
liabilities and commitments of the following Irish subsidiary
undertakings: Chirac Limited; Cirrus Finance (2009) Limited;
Clondalkin Properties Limited; Commercial Investments Limited;
Edson Investments Limited; Edson Properties Limited; Monread
Developments Limited; Nabola Development Limited; Orpingford;
Pharaway Properties Limited; R.J.D. Holdings; Tesco Ireland
Holdings Limited; Tesco Ireland Limited; Tesco Ireland Pension
Trustees Limited; Tesco Mobile Ireland Limited; Tesco Trustee
Company of Ireland Limited; Thundridge; Wanze Properties (Dundalk)
Limited; WSC Properties Limited.
Tesco Bank
At 27 February 2021, Tesco Bank had contractual lending
commitments totalling GBP12.7bn (2020: GBP11.9bn). The contractual
amounts represent the amounts that would be at risk should the
available facilities be fully drawn upon and not the amounts at
risk at the reporting date.
Note 35 Tesco Bank capital resources
The following tables analyse the regulatory capital resources of
Tesco Personal Finance PLC (TPF), being the regulated entity at the
balance sheet date:
2021 2020
GBPm GBPm
Common equity tier 1 capital:
Shareholders' funds and non-controlling interests, net
of tier 1 regulatory adjustments 1,443 1,567
Tier 2 capital:
Qualifying subordinated debt 235 235
Other interests - -
Total tier 2 regulatory adjustments (21) (21)
Total regulatory capital 1,657 1,781
On 27 June 2013, the final Capital Requirements Directive IV
(CRD IV) rules were published in the Official Journal of the
European Union. Following the publication of the CRD IV rules, the
Prudential Regulation Authority (PRA) issued a policy statement on
19 December 2013 detailing how the rules will be enacted within the
UK with corresponding timeframes for implementation. The CRD IV
rules are currently being phased in.
It is the Group's policy to maintain a strong capital base, to
expand it as appropriate and to utilise it efficiently throughout
its activities to optimise the return to shareholders while
maintaining a prudent relationship between the capital base and the
underlying risks of the business. In carrying out this policy, the
Group has regard to the supervisory requirements of the PRA.
Note 36 Events after the reporting period
During the year, the Board approved plans to dispose of the
Group's operations in Poland. The disposal of the Group's corporate
business in Poland completed after the balance sheet date on 16
March 2021. Refer to Notes 1 and 7 for details of the Group's
operations in Poland classified as held for sale at the balance
sheet date.
Tesco PLC - Parent Company balance sheet
27 February 29 February
2021 2020
Notes GBPm GBPm
Non-current assets
Investments 6 16,963 17,829
Receivables 7 259 1,043
Derivative financial instruments 10 1,536 1,167
18,758 20,039
Current assets
Receivables 7 1,514 547
Cash in hand 96 249
1,610 796
Current liabilities
Borrowings 9 (463) (43)
Payables 8 (810) (238)
(1,273) (281)
Net current assets/(liabilities) 337 515
Non-current liabilities
Borrowings 9 (1,415) (2,285)
Payables 8 (1,293) (82)
Derivative financial instruments 10 (630) (735)
(3,338) (3,102)
Net assets 15,757 17,452
Equity
Share capital 13 490 490
Share premium 5,165 5,165
All other reserves 2,972 2,950
Retained earnings (including profit/(loss)
for the financial year of GBP4,250m (2020:
GBP(21)m) 7,130 8,847
Total equity 15,757 17,452
The notes on pages 111 to 116 form part of these financial
statements.
Ken Murphy Alan Stewart Directors
The Parent Company financial statements on pages 109 to 116 were
approved and authorised for issue by the Directors on 13 April
2021.
Tesco PLC
Registered number 00445790
Tesco PLC - Parent Company statement of changes in equity
All other reserves
Capital Cost of Own
Share Share Redemption hedging Hedging shares Merger Retained Total
capital premium reserve reserve reserve held reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 29 February
2020 490 5,165 16 (19) 153 (250) 3,050 8,847 17,452
Profit/(loss)
for
the year - - - - - - - 4,250 4,250
Other
comprehensive
income/(loss)
Gains/(losses)
on cash flow
hedges - - - 20 (18) - - - 2
Reclassified and
reported in the
Company income
statement - - - - (47) - - - (47)
Tax relating to
components of
other
comprehensive
income - - - (1) 6 - - - 5
Total other
comprehensive
income/(loss) - - - 19 (59) - - - (40)
Total
comprehensive
income/(loss) - - - 19 (59) - - 4,250 4,210
Transactions
with
owners
Purchase of own
shares - - - - - (246) - - (246)
Share-based
payments - - - - - 308 - (75) 233
Dividends - - - - - - - (5,892) (5,892)
Total
transactions
with owners - - - - - 62 - (5,967) (5,905)
At 27 February
2021 490 5,165 16 - 94 (188) 3,050 7,130 15,757
All other reserves
Capital Cost of Own
Share Share Redemption hedging Hedging shares Merger Retained Total
capital premium reserve reserve reserve held reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 23 February
2019 490 5,165 16 (13) 95 (179) 3,050 9,468 18,092
Profit/(loss)
for
the year - - - - - - - (21) (21)
Other
comprehensive
income/(loss)
Gains/(losses)
on cash flow
hedges - - - (7) 92 - - - 85
Reclassified and
reported in the
Company income
statement - - - - (23) - - - (23)
Tax relating to
components of
other
comprehensive
income - - - 1 (11) - - - (10)
Total other
comprehensive
income/(loss) - - - (6) 58 - - - 52
Total
comprehensive
income/(loss) - - - (6) 58 - - (21) 31
Transactions
with
owners
Purchase of own
shares - - - - - (221) - - (221)
Share-based
payments - - - - - 150 - 56 206
Dividends - - - - - - - (656) (656)
Total
transactions
with owners - - - - - (71) - (600) (671)
At 29 February
2020 490 5,165 16 (19) 153 (250) 3,050 8,847 17,452
The Company has considered the profits available for
distribution to shareholders. At 27 February 2021, the Company had
retained earnings of GBP7.1bn, of which the unrealised profit
elements are GBP1.6bn of share-based payment reserves and GBP0.7bn
of dividends received from subsidiary undertakings not yet settled
by qualifying consideration. After deducting the cost of its own
shares held in trust of GBP0.2bn, the Company had profits available
for distribution of GBP4.6bn.
The notes on pages 111 to 116 form part of these financial
statements.
Notes to the Parent Company financial statements
Note 1 Authorisation of financial statements and statement of
compliance with FRS 101
The Parent Company financial statements for the 52 weeks ended
27 February 2021 were approved by the Board of Directors on 13
April 2021 and the Company balance sheet was signed on the Board's
behalf by Ken Murphy and Alan Stewart.
These financial statements were prepared in accordance with
Financial Reporting Standard 101, 'Reduced Disclosure Framework'
(FRS 101). The Company meets the definition of a qualifying entity
under FRS 100, 'Application of Financial Reporting Requirements' as
issued by the Financial Reporting Council.
The Company's financial statements are presented in Pounds
Sterling, its functional currency, generally rounded to the nearest
million.
The principal accounting policies adopted by the Company are set
out in Note 2. The financial statements have been prepared under
the historical cost convention, except for certain financial
instruments and share-based payments that have been measured at
fair value.
Note 2 Accounting policies
Basis of preparation of financial statements
The Parent Company financial statements have been prepared in
accordance with FRS 101 and the Companies Act 2006 (the Act).
FRS 101 sets out a reduced disclosure framework for a
'qualifying entity' as defined in the standard which addresses the
financial reporting requirements and disclosure exemptions in the
individual financial statements of qualifying entities that
otherwise apply the recognition, measurement and disclosure
requirements of adopted IFRS.
The financial year represents the 52 weeks to 27 February 2021
(prior financial year 53 weeks to 29 February 2020).
As permitted by FRS 101, the Company has taken advantage of the
disclosure exemptions available under that standard in relation to
business combinations, financial instruments, capital management,
presentation of comparative information in respect of certain
assets, presentation of a cash flow statement, impairment of
assets, share-based payments and related party transactions. Where
required, equivalent disclosures are given in the consolidated
financial statements of Tesco PLC.
The Parent Company financial statements are prepared on a going
concern basis as set out in Note 1 of the consolidated financial
statements of Tesco PLC.
The Directors have taken advantage of the exemption available
under section 408 of the Companies Act 2006 and not presented an
income statement or a statement of comprehensive income for the
Company alone.
A summary of the Company's significant accounting policies is
set out below.
Investments in subsidiaries and joint ventures
Investments in subsidiaries and joint ventures are stated at
cost less, where appropriate, provisions for impairment. The
Company tests the investment balances for impairment annually or
when there are indicators of impairment.
Foreign currencies
Transactions in foreign currencies are translated to the
functional currency at the exchange rate on the date of the
transaction. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated to the functional currency at the rates prevailing on
the balance sheet date.
Share-based payments
The fair value of employee share option plans is calculated at
the grant date using the Black-Scholes or Monte Carlo model. The
resulting cost is charged to the Company income statement over the
vesting period. The value of the charge is adjusted to reflect
expected and actual levels of vesting. Where the Company awards
shares or options to employees of subsidiary entities, this is
treated as a capital contribution.
Own shares held
Own shares represent the shares of Tesco PLC that are held in
Treasury or by the Employee Benefit Trust. The Company adopts a
'look-through' approach which, in substance, accounts for the trust
as an extension of the Company. Own shares are recorded at cost and
are deducted from equity.
Financial instruments
Financial assets and financial liabilities are recognised in the
Company balance sheet when the Company becomes party to the
contractual provisions of the instrument.
Receivables
Receivables are recognised initially at fair value, and
subsequently at amortised cost using the effective interest rate
method, less any expected credit losses.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that gives a residual
interest in the assets of the Company after deducting all of its
liabilities. Equity instruments issued by the Company are recorded
as the proceeds received, net of direct issue costs.
Interest-bearing borrowings
Interest-bearing bank loans and overdrafts are initially
recognised at fair value and net of attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are
stated at amortised cost with any differences between proceeds and
redemption value being recognised in the Company income statement
over the period of the borrowings on an effective interest
basis.
Payables
Payables are recognised initially at fair value, and
subsequently at amortised cost using the effective interest rate
method.
Notes to the Parent Company financial statements continued
Note 2 Accounting policies continued
Derivative financial instruments and hedge accounting
The Company uses derivative financial instruments to hedge its
exposure to foreign exchange and interest rate risks arising from
operating, financing and investing activities. The Company does not
hold or issue derivative financial instruments for trading
purposes.
Derivative financial instruments are recognised and stated at
fair value. Where derivatives do not qualify for hedge accounting,
any gains or losses on remeasurement are immediately recognised in
the Company income statement. Where derivatives qualify for hedge
accounting, recognition of any resultant gain or loss depends on
the nature of the hedge relationship and the item being hedged. In
order to qualify for hedge accounting, the Company is required to
document from inception, the relationship between the item being
hedged and the hedging instrument.
The Company is also required to document and demonstrate an
assessment of the relationship between the hedged item and the
hedging instrument, which shows that the hedge will be highly
effective on an ongoing basis. This effectiveness testing is
performed at each reporting date to ensure that the hedge remains
highly effective.
Derivative financial instruments with maturity dates of more
than one year from the reporting date are disclosed as
non-current.
Fair value hedging
Derivative financial instruments are classified as fair value
hedges when they hedge the Company's exposure to changes in the
fair value of a recognised asset or liability. Changes in the fair
value of derivatives that are designated and qualify as fair value
hedges are recorded in the Company income statement, together with
any changes in the fair value of the hedged item that is
attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting,
the adjustment to the carrying amount of a hedged item is amortised
to the Company income statement over the remaining period to
maturity.
Cash flow hedging
Derivative financial instruments are classified as cash flow
hedges when they hedge the Company's exposure to variability in
cash flows that are either attributable to a particular risk
associated with a recognised asset or liability, or a highly
probable forecasted transaction. The effective element of any gain
or loss from remeasuring the derivative designated as the hedging
instrument is recognised directly in the Company statement of
comprehensive income and accumulated in the hedging reserve. Any
cost of hedging, such as the change in fair value related to
forward points and currency basis adjustment is separately
accumulated in the cost of hedging reserve. The ineffective element
is recognised immediately in the Company income statement.
The associated cumulative gain or loss is reclassified from
other comprehensive income and recognised in the Company income
statement in the same period or periods during which the hedged
transaction affects the Company income statement. The
classification of the effective portion when recognised in the
Company income statement is the same as the classification of the
hedged transaction. Any element of the remeasurement criteria of
the derivative instrument which does not meet the criteria for an
effective hedge is recognised immediately in the Company income
statement within finance income or costs.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting. At that point in time, any cumulative gain or
loss on the hedging instrument recognised in equity is retained in
the Company statement of changes in equity until the forecasted
transaction occurs or the original hedged item affects the Company
income statement. If a forecast hedged transaction is no longer
expected to occur, the net cumulative gain or loss recognised in
the Company statement of changes in equity is reclassified to the
Company income statement.
Pensions
The Company participates in defined benefit pension schemes. The
Company cannot identify its share of the underlying assets and
liabilities of the schemes. Accordingly, as permitted by IAS 19
'Employee benefits', the Company has accounted for the schemes as
defined contribution schemes, with the schemes recognised in
another Group company, Tesco Stores Limited, as per Group
policy.
The Company also participates in a defined contribution scheme
open to all UK employees. Payments to this scheme are recognised as
an expense as they fall due.
Taxation
The tax expense included in the Company income statement
consists of current and deferred tax.
Current tax is the expected tax payable on the taxable income
for the financial year, using tax rates enacted or substantively
enacted by the balance sheet date. Tax expense is recognised in the
Company income statement except to the extent that it relates to
items recognised in the Company statement of comprehensive income
or directly in the Company statement of changes in equity, in which
case it is recognised in the Company statement of comprehensive
income or directly in the Company statement of changes in equity,
respectively.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset
realised based on the tax rates that have been enacted or
substantively enacted by the balance sheet date. Deferred tax is
charged or credited in the Company income statement, except when it
relates to items charged or credited directly to equity or other
comprehensive income/(loss), in which case the deferred tax is also
recognised in equity, or other comprehensive income/(loss),
respectively.
Notes to the Parent Company financial statements continued
Note 2 Accounting policies continued
Judgements and sources of estimation uncertainty
The preparation of the Company financial statements requires
management to make judgements, estimates and assumptions in
applying the Company's accounting policies to determine the
reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances. Actual results may differ from
these estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis, with revisions to accounting
estimates applied prospectively.
The preparation of the Company financial statements for the
financial year did not require the exercise of any critical
accounting judgements apart from those involving estimates
discussed below.
Key sources of estimation uncertainty
The key assumptions about the future, and other key sources of
estimation uncertainty at the reporting period end that may have a
significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial year
are:
Impairment of investment in Tesco Bank
The key source of estimation uncertainty is in relation to the
Company's investment in Tesco Personal Finance Group PLC (Tesco
Bank). The Company considers impairment of its investments in
subsidiaries based on the value in use of the subsidiary. Value in
use is calculated from cash flow projections based on the Group's
three-year internal forecasts. The forecasts are extrapolated to
five years based on management's expectations, and beyond five
years based on estimated long-term growth rates. See Note 6.
New standards and amendments effective for the current financial
year
- 'Definition of a business' amendment to IFRS 3, 'Business
combinations' guidance has been applied when evaluating whether
acquisitions in the period are asset acquisitions or business
combinations.
- 'Interest rate benchmark reform' phase 2 amendments, which
have been adopted early. Refer to Note 25 to the Group financial
statements for the impact of IBOR Reform amendments on the
Company.
- FRS 101 amendments 'UK exit from the European Union' have been early adopted.
Other standards and amendments
Refer to Note 1 to the Group financial statements.
Note 3 Auditor remuneration
Fees payable to the Company's auditor for the audit of the
Company and Group financial statements are disclosed in Note 3 to
the Group financial statements.
Note 4 Dividends
For details of dividends see Note 8 to the Group financial
statements.
Note 5 Employment costs, including Directors' remuneration
2021 2020
Notes GBPm GBPm
Wages and salaries 17 16
Social security costs 2 2
Pension costs 12 1 2
Share-based payment expense 11 4 7
Total 24 27
The amounts above include recharges from other Group companies
for Tesco PLC-related activities.
The average number of employees (all Directors of the Company)
during the financial year was 13 (2020: 13).
Note 6 Investments
2021
GBPm
Cost
At 29 February 2020 20,686
Capital contributions 61
Return of capital contributions (684)
At 27 February 2021 20,063
Accumulated impairment losses
At 29 February 2020 (2,857)
Impairment (243)
At 27 February 2021 (3,100)
Net carrying value
At 27 February 2021 16,963
At 29 February 2020 17,829
The impairment losses of GBP243m includes the GBP234m impairment
of its subsidiary holding company Cheshunt Holdings Guernsey
Limited to a recoverable amount of GBP7m based on remaining net
assets subsequent to a dividend payment, and GBP9m relating to
immaterial impairments in various small holding companies.
Notes to the Parent Company financial statements continued
Note 6 Investments continued
The key source of estimation uncertainty is in relation to the
Company's investment in Tesco Personal Finance PLC (Tesco Bank),
for which no impairment was required. The impairment review for the
Company's investments was performed using the same projections used
in the impairment review performed in relation to the Group's
goodwill. Details, including sensitivity analyses showing the
impact of the reasonably possible changes in key assumptions upon
the value in use of Tesco Bank, are disclosed in Note 15 in the
Group financial statements.
The list of the Company's subsidiary undertakings and joint
ventures is shown on pages 117 to 121.
Note 7 Receivables
2021 2020
GBPm GBPm
Amounts owed by Group undertakings* 1,737 1,530
Amounts owed by joint ventures and associates - 24
Other receivables 36 36
Total receivables 1,773 1,590
Of which:
Current 1,514 547
Non-current 259 1,043
1,773 1,590
* Amounts owed by Group undertakings are either interest-bearing
or non interest-bearing depending on the type and duration of the
receivable relationship, with interest rates ranging from 0.7% to
8.3%, with maturities up to and including January 2032.
The expected credit loss on receivables is immaterial (2020:
immaterial).
Note 8 Payables
2021 2020
GBPm GBPm
Amounts owed to Group undertakings* 2,017 278
Other payables 60 11
Taxation and social security 4 4
Deferred tax liability 22 27
Total payables 2,103 320
Of which:
Current 810 238
Non-current 1,293 82
2,103 320
* Amounts owed to Group undertakings are either interest-bearing
or non interest-bearing depending on the type and duration of the
creditor relationship, with interest rates ranging from 0.6% to
1.1%, with maturities up to and including February 2051.
The deferred tax liability recognised by the Company, and the
movements thereon, during the current financial year are as
follows:
Other
Financial timing
instruments differences Total
GBPm GBPm GBPm
At 29 February 2020 (27) - (27)
Movement in other comprehensive income for the
year 5 - 5
At 27 February 2021 (22) - (22)
Note 9 Borrowings
2021 2020
Par value Maturity GBPm GBPm
Bank loans and overdrafts 21 43
6.125% MTN GBP417m Feb 2022 417 416
5% MTN (a) GBP93m Mar 2023 79 103
3.322% LPI MTN (b) GBP354m Nov 2025 364 358
6% MTN (a) GBP48m Dec 2029 45 58
5.5% MTN (a) GBP109m Jan 2033 80 133
1.982% RPI MTN (c) GBP294m Mar 2036 302 297
6.15% USD Bond (a) $525m Nov 2037 333 555
4.875% MTN (a) GBP20m Mar 2042 14 20
5.125% MTN (a) EUR356m Apr 2047 209 316
5.2% MTN (a) GBP30m Mar 2057 14 29
1,878 2,328
Of which:
Current 463 43
Non-Current 1,415 2,285
1,878 2,328
(a) During the year, the Group undertook a tender for
outstanding bonds and as a result the following notional amounts
were repaid early, 5% MTN Mar 2023 GBP22m, 6% MTN Dec 2029 GBP10m,
5.5% MTN Jan 2033 GBP42m, 6.15% USD Bond Nov 2037 $170m, 4.875% MTN
Mar 2042 GBP6m, 5.125% MTN Apr
2047 EUR121m and 5.2% MTN Mar 2057 GBP16m.
(b) The 3.322% LPI MTN is redeemable at par, indexed for
increases in the RPI over the life of the MTN. The maximum
indexation of the principal in any one year is 5%, with a minimum
of 0%.
(c) The 1.982% RPI MTN is redeemable at par, indexed for
increases in the RPI over the life of the MTN.
Notes to the Parent Company financial statements continued
Note 10 Derivative financial instruments
2021 2020
Asset Liability Asset Liability
Fair value Notional Fair value Notional Fair value Notional Fair value Notional
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Fair value hedges
Interest rate swaps
and similar instruments 9 65 - - 10 65 - -
Cross-currency swaps - - - - 228 409 - -
Cash flow hedges
Cross-currency swaps - - - - 208 306 - -
Index-linked swaps 199 660 - - 185 649 - -
Derivatives not
in a formal hedge
relationship
Cross-Currency Swaps 266 372 (3) 86 - - - -
Index-linked swaps 1,062 4,006 (627) 3,964 536 3,339 (735) 4,461
Total 1,536 5,103 (630) 4,050 1,167 4,768 (735) 4,461
Note 11 Share-based payments
The Company's equity-settled share-based payment schemes
comprise various share schemes designed to reward Executive
Directors.
For further information on these schemes, including the
valuation models and assumptions used, refer to Note 28 to the
Group financial statements.
Share option schemes
The number of options and weighted average exercise price (WAEP)
of share option schemes relating to the Company employees are:
For the 52 weeks ended 27 February 2021
Savings-related
Share Option Nil cost
Scheme share options
Options WAEP Options WAEP
Outstanding at 29 February 2020 19,148 188.00 10,633,867 -
Granted(a) - - 318,623 -
Forfeited (9,574) - (1,587,596) -
Exercised - - (6,224,090) -
Outstanding at 27 February 2021 9,574 188.00 3,140,804 -
Exercise price range (pence) - 188.00 - -
Weighted average remaining contractual life
(years) - 1.01 - 5.05
Exercisable at 27 February 2021 - - 3,140,804 -
Exercise price range (pence) - - - -
Weighted average remaining contractual life
(years) - - - 5.05
(a) The special dividend and associated share consolidation had
a neutral impact to the number of options.
For the 53 weeks ended 29 February 2020
Savings-related
Share Option Nil cost
Scheme share options
Options WAEP Options WAEP
Outstanding at 23 February 2019 19,148 188.00 12,743,733 -
Granted - - 295,554 -
Forfeited - - (2,405,420) -
Exercised - - - -
Outstanding at 29 February 2020 19,148 188.00 10,633,867 -
188.00 - -
Exercise price range (pence)
Weighted average remaining contractual life -
(years) - 2.01 - 6.15
Exercisable at 29 February 2020 - - 6,454,736 -
-
Exercise price range (pence)
Weighted average remaining contractual life -
(years) - 5.46
Share bonus and incentive schemes
Executive Directors participate in the Group Bonus Plan, a
performance-related bonus scheme . The amount paid is based on a
percentage of salary and is paid partly in cash and partly in
shares. Bonuses are awarded to Executive Directors who have
completed a required service period and depend on the achievement
of the corporate and individual performance targets. For further
information on these schemes, including the valuation models and
assumptions used, refer to Note 28 to the Group financial
statements.
The number and weighted average fair value (WAFV) of share
bonuses awarded during the financial year were:
2021 2020
Number WAFV Number WAFV
of shares pence of shares pence
Group Bonus Plan 777,044 246.7 506,768 244.1
Performance Share Plan 990,404 221.6 2,388,395 230.3
Notes to the Parent Company financial statements continued
Note 12 Pensions
The total cost of participation in the Tesco Retirement Savings
Plan (a defined contribution scheme) to the Company was GBP1m
(2020: GBP2m). Further disclosure relating to all schemes can be
found in Note 29 to the Group financial statements.
Note 13 Called up share capital
Refer to Note 30 to the Group financial statements.
Note 14 Contingent liabilities
In addition to the contingent liabilities shown in Note 34 to
the Group financial statements, the Company has entered into
financial guarantee contracts to guarantee the indebtedness of
Group undertakings amounting to GBP3,200m (2020: GBP2,589m). It has
also guaranteed derivative agreements of Group undertakings with a
gross liability of GBP790m (2020: GBP168m) at the reporting date.
These guarantees are treated as contingent liabilities until it
becomes probable they will be called upon.
In addition, the Company has guaranteed the rental payments of
certain Group undertakings relating to a portfolio of retail
stores, distribution centres and mixed-use retail developments.
The likelihood of the above items being called upon is
considered remote.
Note 15 Events after the reporting period
During the year, the Board approved plans to dispose of the
Group's operations in Poland. The disposal of the Group's corporate
business in Poland completed after the balance sheet date on 16
March 2021. Refer to note 36 of the Group financial statements for
further details.
Related undertakings of the Tesco Group
In accordance with section 409 of the Companies Act 2006 and
Schedule 4 of The Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, a full list of related
undertakings, registered office address and the percentage of share
class owned as at 27 February 2021 are disclosed below. Changes to
the list of related undertakings since the year-end date are
detailed in the footnotes below. All undertakings are indirectly
owned by Tesco PLC unless otherwise stated.
Subsidiary undertakings incorporated in the United Kingdom
% held % held
Name of Registered Class of by Name of Registered Class of by
undertaking address share held Group undertaking address share held Group
Acklam Management Limited GBP1.00
Company Limited 1 by Guarantee - Linnco Limited 8 Ordinary 100
Alfred Preedy & GBP1.00 Londis (Holdings) GBP50.00
Sons Limited 2 Deferred 100 Limited 8 Ordinary 100
Londis Pension
GBP1.00 Trustees GBP1.00
Ordinary 100 Limited 8 Ordinary 100
Armitage Finance GBP0.90 Makro Holding GBP1.00
Unlimited 1 Ordinary 100 Limited 8 Ordinary 100
Bath Upper
Bristol
Road Management Limited Makro Properties GBP1.00
Company Limited 1 by Guarantee - Limited 8 Ordinary 100
Makro Self
Berry Lane Service GBP1.00
Management Limited Wholesalers Ordinary
Company Limited 1 by Guarantee - Limited 8 A 100
GBP1.00
GBP1.00 Ordinary
BF Limited 8 Ordinary 100 B 100
Bishop's Group GBP0.01 Maldon Finance GBP1.00
Limited 8 Ordinary 100 Limited 1 Ordinary 100
Booker Cash &
Carry GBP1.00 US$1.00
Limited 8 Ordinary 100 A Preference 100
Booker Direct GBP0.01 US$0.50
Limited 8 Ordinary 100 B Preference 100
Booker Group GBP0.00000000055625 US$0.25
Limited 8 Ordinary 100 C Preference 100
Munster Road
GBP1.00 Management Limited
Booker Limited 8 Ordinary 100 Company Limited 1 by Guarantee -
Booker Retail
Partners GBP1.00 Murdoch Norton GBP0.05
(GB) Limited 8 Ordinary 100 Limited 8 Ordinary 100
Oakwood
Booker Retail GBP0.10 Distribution GBP1.00
Limited 8 Ordinary 100 Limited 1 Ordinary 100
Booker Pension One Stop
Trustees Limited Community GBP0.00001200004
Limited 8 by Guarantee 100 Stores Limited 2 Ordinary 100
GBP0.01 One Stop
Booker Wholesale Ordinary Convenience GBP1.00
Holdings Limited 8 A1 100 Stores Limited 2 Ordinary 100
Booker Unapproved
Scheme Trustees Limited One Stop Stores GBP1.00
Ltd 8 by Guarantee - Limited (a) 2 Ordinary 100
Bourne End
Residential
Management One Stop Stores
Company Limited Trustee Services GBP1.00
Limited 1 by Guarantee - Limited 2 Ordinary 100
Broughton Retail Orpington
Park Nominee 1 GBP1.00 (Station GBP1.00
Limited 1 Ordinary 100 Road) Limited 1 Ordinary 100
Oxford Fox and
Hounds
Broughton Retail Management
Park Nominee 2 GBP1.00 Company Limited
Limited 1 Ordinary 100 Limited 1 by Guarantee -
Broughton Retail
Park Nominee 3 GBP1.00 Paper Chain (East GBP1.00
Limited 1 Ordinary 100 Anglia) Limited 2 Deferred 100
Broughton Retail
Park Nominee 4 GBP1.00 US$0.001
Limited 1 Ordinary 100 Ordinary 100
Budgen Holdings GBP1.00 GBP1.00
Limited 8 Ordinary 100 PTLL Limited 1 Ordinary 100
Budgens Pension
Trustees No.2 GBP1.00 Ritter-Courivaud GBP0.10
Limited 8 Ordinary 100 Limited 8 Ordinary 100
Budgens Property Seacroft Green
Investments GBP1.00 Nominee GBP1.00
Limited 8 Ordinary 100 1 Limited 1 Ordinary 100
Seacroft Green
Budgens Stores GBP1.00 Nominee GBP1.00
Limited 8 Ordinary 100 2 Limited 1 Ordinary 100
Spen Hill
Buttoncable GBP1.00 Developments GBP1.00
Limited 1 Ordinary 100 Limited 1 Ordinary 100
GBP1.00
Cumulative Spen Hill
Buttoncase Redeemable Management GBP1.00
Limited 1 Preference 100 Limited (b) 1 Ordinary 100
Spen Hill
GBP1.00 Properties GBP1.00
Ordinary 100 (Holdings) plc 1 Ordinary 100
Canterbury Road Spen Hill
Management Limited Regeneration GBP1.00
Limited 1 by Guarantee - Limited 1 Ordinary 100
Cardiff Cathays
Terrace Spen Hill
Management Limited Residential GBP1.00
Company Limited 1 by Guarantee - No 1 Limited 1 Ordinary 100
Spen Hill
GBP1.00 Residential GBP1.00
Comar Limited 1 Ordinary 100 No 2 Limited 1 Ordinary 100
GBP1.00
Cumulative
Convertible Station House
Day And Nite Participating Welling
Stores Preferred Management Limited
Limited 2 Ordinary 100 Limited 1 by Guarantee -
GBP1.00
Cumulative
Redeemable Statusfloat GBP1.00
Preference 100 Limited 1 Ordinary 100
GBP1.00 T & S Stores GBP0.05
Ordinary 100 Limited 2 Ordinary 100
Dillons GBP0.25
Newsagents Non-Voting Tapesilver GBP1.00
Limited* 2 Ordinary 100 Limited 1 Ordinary 100
dunnhumby
International GBP1.00 Teesport (GP) GBP1.00
Limited 4 Ordinary 100 Limited 1 Ordinary 100
GBP3.59 Tesco (Overseas) GBP1.00
dunnhumby Limited 4 Ordinary 100 Limited 1 Ordinary 100
dunnhumby
Overseas GBP1.00 Tesco Aqua (3LP) GBP1.00
Limited 4 Ordinary 100 Limited 1 Ordinary 100
dunnhumby Tesco Aqua
Trustees GBP1.00 (FinCo2) GBP1.00
Limited 4 Ordinary 100 Limited 1 Ordinary 100
Giant Bidco GBP1.00 Tesco Aqua (GP) GBP1.00
Limited 8 Ordinary 100 Limited 1 A Ordinary 100
Giant Booker GBP0.25 GBP1.00
Limited 8 Ordinary 100 B Ordinary 100
Tesco Aqua
Giant Midco GBP1.00 (Nominee GBP1.00
Limited 8 Ordinary 100 1) Limited 1 Ordinary 100
Highams Green Tesco Aqua
Management Limited (Nominee GBP1.00
Company Limited 1 by Guarantee - 2) Limited 1 Ordinary 100
Tesco Aqua
GBP1.00 (Nominee GBP1.00
IRTH (15) Limited 8 Ordinary 100 Holdco) Limited 1 Ordinary 100
Tesco Atrato
US$0.000000052383172 (1LP) GBP1.00
IRTH (19) Limited 8 Ordinary 100 Limited 1 Ordinary 100
GBP1.00
A Ordinary
Launchgrain GBP1.00 Tesco Atrato (GP) GBP1.00
Limited 1 Ordinary 100 Limited 1 B Ordinary 100
Tesco Atrato
(Nominee GBP1.00
1) Limited 1 Ordinary 100
Tesco Atrato
(Nominee GBP1.00
2) Limited 1 Ordinary 100
Tesco Atrato
(Nominee GBP1.00
Holdco) Limited 1 Ordinary 100
Related undertakings of the Tesco Group continued
Subsidiary undertakings incorporated in the United Kingdom
continued
% held % held
Registered Class of by Registered Class of by
Name of undertaking address share held Group Name of undertaking address share held Group
Tesco Atrato Depot GBP1.00 Tesco Property Finance GBP1.00
Propco Limited 1 Ordinary 100 1 PLC 1 Ordinary 100
Tesco Blue (3LP) GBP1.00 GBP0.25
Limited 1 Ordinary 100 Ordinary 100
Tesco Blue (GP) GBP1.00 Tesco Property Holdings GBP1.00
Limited 1 A Ordinary 100 (No.2) Limited 1 Ordinary 100
GBP1.00 Tesco Property Holdings GBP1.00
B Ordinary 100 Limited 1 Ordinary 100
Tesco Blue (Nominee GBP1.00 Tesco Property Nominees GBP1.00
1) Limited 1 Ordinary 100 (No.5) Limited 1 Ordinary 100
Tesco Blue (Nominee GBP1.00 Tesco Property Nominees GBP1.00
2) Limited 1 Ordinary 100 (No.6) Limited 1 Ordinary 100
Tesco Blue (Nominee GBP1.00 Tesco Property Partner GBP1.00
Holdco) Limited 1 Ordinary 100 (GP) Limited 1 A Ordinary 100
Tesco Brislington GBP1.00 GBP1.00
Limited 1 Ordinary 100 1 B Ordinary 100
Tesco Corporate
Treasury Services GBP1.00 Tesco Property Partner GBP1.00
PLC 1 Ordinary 100 (GP No.2) Limited A Ordinary 100
Tesco Depot Propco GBP1.00 GBP1.00
Limited 1 Ordinary 100 B Ordinary 100
Tesco Distribution GBP1.00 Tesco Property Partner GBP1.00
Holdings Limited 1 Ordinary 100 (No.1) Limited 1 Ordinary 100
Tesco Distribution GBP1.00 Tesco Property Partner GBP1.00
Limited 1 Ordinary 100 (No.2) Limited 1 Ordinary 100
Tesco Dorney (1LP) GBP1.00 Tesco Red (3LP) GBP1.00
Limited 1 Ordinary 100 Limited 1 Ordinary 100
Tesco Employees' GBP1.00
Share Scheme Trustees GBP1.00 Ordinary
Limited (c) 1 Ordinary 100 Tesco Red (GP) Limited 1 A 100
GBP1.00
Tesco Family Dining GBP1.00 Ordinary
Limited 1 Ordinary 100 B 100
Tesco Food Sourcing GBP1.00 Tesco Red (Nominee GBP1.00
Limited 1 Ordinary 100 1) Limited 1 Ordinary 100
GBP1.00 Tesco Red (Nominee GBP1.00
Tesco Freetime Limited 1 Ordinary 100 2) Limited 1 Ordinary 100
Tesco Fuchsia (3LP) GBP1.00 Tesco Red (Nominee GBP1.00
Limited 1 Ordinary 100 Holdco) Limited 1 Ordinary 100
Tesco Gateshead GBP1.00 Tesco Sarum (1LP) GBP1.00
Property Limited 1 Ordinary 100 Limited 1 Ordinary 100
GBP0.10 GBP1.00
Tesco Holdings Limited 1 Ordinary 100 Tesco Seacroft Limited 1 Ordinary 100
GBP1.00 Tesco Secretaries GBP1.00
Preference 100 Limited 1 Ordinary 100
Tesco International GBP1.00 GBP1.00
Services Limited 1 Ordinary 100 Tesco Services Limited 1 Ordinary 100
Tesco Lagoon GP GBP1.00 GBP1.00
Limited 5 Ordinary 100 Tesco Stores Limited 1 A Preference 100
Tesco Maintenance GBP1.00 GBP1.00
Limited 1 Ordinary 100 B Preference 100
Tesco Mobile
Communications GBP1.00 GBP1.00
Limited 1 Ordinary 100 Ordinary 100
Tesco Mobile Services GBP1.00 Tesco TLB Finance GBP1.00
Limited 1 Ordinary 100 Limited 1 Ordinary 100
Tesco Navona (1LP) GBP1.00 Tesco TLB Properties GBP1.00
Limited 1 Ordinary 100 Limited 1 A Ordinary 100
GBP1.00
Tesco Navona (GP) Ordinary GBP1.00
Limited 1 A 100 B Ordinary 100
GBP1.00
Ordinary The Big Food Group GBP0.10
B 100 Limited 8 Ordinary 100
Tesco Navona (Nominee GBP1.00 The Teesport Limited Limited
1) Limited 1 Ordinary 100 Partnership 1 Partnership 100
Tesco Navona (Nominee GBP1.00 The Tesco Aqua Limited Limited
2) Limited 1 Ordinary 100 Partnership 1 Partnership 100
Tesco Navona (Nominee GBP1.00 The Tesco Atrato Limited
Holdco) Limited 1 Ordinary 100 Limited Partnership 1 Partnership 100
Tesco Navona PL GBP1.00 The Tesco Blue Limited Limited
Propco Limited 1 Ordinary 100 Partnership 1 Partnership 100
Tesco Overseas
Investments GBP1.00 The Tesco Navona Limited
Limited 1 Ordinary 100 Limited Partnership 1 Partnership 100
Tesco Passaic (1LP) GBP1.00 The Tesco Passaic Limited
Limited 1 Ordinary 100 Limited Partnership 1 Partnership 100
GBP1.00
Tesco Passaic (GP) Ordinary The Tesco Property Limited
Limited 1 A 100 Limited Partnership 1 Partnership 100
GBP1.00 The Tesco Property
Ordinary (No.2) Limited Limited
B 100 Partnership 17 Partnership 100
Tesco Passaic (Nominee GBP1.00 The Tesco Red Limited Limited
1) Limited 1 Ordinary 100 Partnership 1 Partnership 100
Tesco Passaic (Nominee GBP1.00 TPI Fund Managers GBP1.00
2) Limited 1 Ordinary 100 Limited 1 Ordinary 100
Tesco Passaic (Nominee GBP1.00 TPT Holdco No.1 GBP1.00
Holdco) Limited 1 Ordinary 100 Limited 1 Ordinary 100
Tesco Passaic PL GBP1.00 Weymouth Avenue GBP1.00
Propco Limited 1 Ordinary 100 (Dorchester) Limited 1 Ordinary 100
GBP0.01
Tesco PEG Limited 1 Ordinary 100
GBP1.00
Tesco PENL Limited 1 Ordinary 100
Tesco Pension
Investment GBP1.00
Limited(d) 1 Ordinary 100
Tesco Pension Trustees GBP1.00
Limited 1 Ordinary 100
Tesco Personal Finance GBP0.10
Group PLC 6 A Ordinary 100
GBP0.10
B Ordinary 100
GBP0.10
C Ordinary 100
Tesco Personal Finance GBP0.10
PLC 6 Ordinary 100
Tesco Property
(Nominees) GBP1.00
(No.1) Limited 11 Ordinary 100
Tesco Property
(Nominees) GBP1.00
(No.2) Limited 11 Ordinary 100
Tesco Property
(Nominees) GBP1.00
Limited 11 Ordinary 100
Tesco Property Finance GBP1.00
1 Holdco Limited 1 Ordinary 100
Related undertakings of the Tesco Group continued
International subsidiary undertakings
% held % held
Registered Class of by Registered Class of by
Name of undertaking address share held Group Name of undertaking address share held Group
Agate Jewel sp. PLN 50 Let any Development CZK 100,000
z.o.o.(e) 75 Ordinary 100 land 2 s.r.o. 16 Ordinary 100
Arena (Jersey)
Management GBP1.00 Monread Developments EUR0.001
Limited 33 Ordinary 100 Limited 24 Ordinary 100
Amethyst Jewel sp. PLN 50 Nabola Development EUR1.25
z o.o. 75 Ordinary 100 Limited 24 A Ordinary 100
Cheshunt Holdings GBP1.00 GBP1.25
Guernsey Limited 27 Ordinary 100 B Ordinary 100
EUR1.25 PLN 50
Chirac Limited 24 Ordinary 100 Onyx Jewel sp. Z.o.o.(e) 75 Ordinary 100
Cirrus Finance
(2009) GBP1,000 PLN 50
Limited 24 A Ordinary 100 Opal Jewel sp. Z.o.o. 75 Ordinary 100
EUR1.00 Orpingford Unlimited EUR1.00
Ordinary 100 Company 24 Ordinary 100
Clondalkin
Properties EUR1.25 GBP1.00
Limited 24 Ordinary 100 Parijude Limited 45 Ordinary 100
Commercial
Investments EUR1.25 Pharaway Properties EUR1.00
Limited 24 Ordinary 100 Limited 24 Ordinary 100
Coral Jewel sp. PLN 50 Pearl Jewel sp. PLN 50
z.o.o.(e) 75 Ordinary 100 z o.o. 75 Ordinary 100
CZK
100,000 R.J.D. Holdings EUR1.269738
Crest Ostrava a.s 16 Ordinary 100 Unlimited Company 24 Ordinary 100
Diamond Jewel sp. PLN 50 PLN 50
z o.o. 75 Ordinary 100 Ruby Jewel sp. z.o.o.(e) 24 Ordinary 100
dunnhumby (Korea) KRW 5,000 Sapphire Jewel sp. PLN 50
Limited 66 Ordinary 100 z.o.o.(e) 75 Ordinary 100
dunnhumby
(Malaysia) RM 1.00 Shopping Mall Chrudim CZK 100,000
Sdn Bhd 84 Ordinary 100 s.r.o.(i) 7 Ordinary 100
dunnhumby THB
(Thailand) 1,000,000 Shopping Mall Eden CZK 100,000
Limited 73 Ordinary 100 s.r.o.(i) 7 Ordinary 100
dunnhumby
Advertising EUR130,000
(Shanghai) Co., Registered Shopping Mall Karlovy CZK 100,000
Ltd 23 Capital 100 Vary s.r.o(i) 7 Ordinary 100
dunnhumby Australia AUD 100 Shopping Mall Opava CZK 100,000
PTY Limited 65 Ordinary 100 s.r.o.(i) 7 Ordinary 100
dunnhumby Brasil BRL$1.00 Shopping Mall Ostrava CZK 100,000
Consultora Ltda 77 Ordinary 100 s.r.o. (i) 7 Ordinary 100
Sociomantic Labs
dunnhumby Canada CA$1.00 Internet Hizmetleri TRY 25.00
Limited 59 Ordinary 100 Limited ireketi 51 Ordinary 100
CLP
dunnhumby Chile 500,000 Tesco (Polska) Sp. PLN 500.00
SpA 48 Ordinary 100 z o.o.(g) 42 Ordinary 100
Tesco Akadémia
Képzési
és Fejlesztési
Korátolt Felel HUF 1.00
dunnhumby Colombia COP 2,000 sségű Business
S.A.S. 74 Type A 100 Társaság 32 Share 100
COP 41.00 Tesco Bengaluru INR 10.00
Type B 100 Private Limited 41 Ordinary 100
COP 1.00 Tesco Capital No. GBP0.50
Type C 100 1 Limited 28 A Ordinary 100
dunnhumby Computer
Information
Technology
and Consultancy TL 25.00 GBP0.50
Services LLC 18 Ordinary 100 B Ordinary 100
dunnhumby
Consulting
Services India
Private INR 10.00 GBP0.01
Limited 60 Ordinary 100 Preference -
Guaranteed
CZK Cumulative
dunnhumby Czech 200,000 Fixed Rate
s.r.o. 16 Ordinary 100 Preference 100
GBP0.01
dunnhumby Denmark DKK 1.00 Preferred
lvS 57 Ordinary 100 Ordinary 100
100
dunnhumby Finland Kovellinum GBP1.00
Oy 30 Oy 100 Ordinary 100
dunnhumby France EUR2.00 Tesco Chile Sourcing CLP 1.00
SAS 61 Ordinary 100 Limitada 22 Ordinary 100
dunnhumby Germany EUR1.00 US$1.00
GmbH 14 Ordinary 100 Ordinary 100
Registered
capital
dunnhumby Hungary HUF Tesco Digital Ventures SGD 1.00
Kft 32 3,000,000 100 Pte Ltd 49 Ordinary 100
No par Tesco Dystrybucja PLN 50.00
dunnhumby Inc. 35 value - Sp. z o.o.(g) 42 Ordinary 100
dunnhumby
Information
Technology
Consulting Registered CZK
(Shanghai) Company capital Tesco Franchise 2,000,000
Limited 62 US$140,000 100 Stores ČR s.r.o. 16 Ordinary 100
dunnhumby Ireland EUR1.00 Tesco Franchise EUR1.00
Limited 67 Ordinary 100 Stores SR s.r.o. 68 Ordinary 100
dunnhumby IT
Services Tesco-Global Stores
India Private INR 10.00 Privately Held Company HUF 10.00
Limited 36 Ordinary 100 Limited 32 Common 100
dunnhumby Italia EUR1.00 EUR1.00
Srl. 37 Ordinary 100 Tesco Holdings B.V. 40 Ordinary 100
dunnhumby Japan JPY 10,000 Tesco International EUR1.00
K.K 38 Ordinary 100 Clothing Brand s.r.o. 58 Ordinary 100
MXN 2,970
dunnhumby Mexico Ordinary Tesco International EUR1.00
S. de R.L. de C.V. 69 A 100 Franchising s.r.o. 58 Ordinary 100
MXN 30.00
Ordinary Tesco International HKD 10.00
. B 100 Sourcing Limited 20 Ordinary 100
dunnhumby
Netherlands EUR1.00 Tesco Ireland Holdings EUR1.25
B.V. 70 Ordinary 100 Limited 24 Ordinary 100
dunnhumby New NZD 100.00 EUR1.25
Zealand 64 Ordinary 100 Tesco Ireland Limited 24 Ordinary 100
dunnhumby Poland PLN 50,000 Tesco Ireland Pension EUR1.25
Sp. z o.o. 42 Ordinary 100 Trustees Limited 24 Ordinary 100
Tesco Joint Buying
dunnhumby Russia RUB 1.00 Service (Shanghai) US$1.00
LLC 79 Ordinary 100 Co., Limited 76 Ordinary 100
dunnhumby Singapore SGD 1.00 Tesco Mobile Ireland EUR1.00
Pte Ltd 19 Ordinary 100 Limited 24 Ordinary 100
EUR100.00 Tesco Property (No. GBP1.00
dunnhumby SARL 61 Ordinary 100 1) Limited 28 Ordinary 100
dunnhumby
Serviços
de
Promoção R$1.00 Tesco Sourcing India INR 10.00
Digital Ltda 77 Ordinary 100 Private Limited 80 Ordinary 100
dunnhumby Slovakia No shares Tesco Stores ČR CZK 250
s.r.o. 58 in issue - a.s. 16 Ordinary 100
dunnhumby Sp. z PLN 50.00 Tesco Stores SR, EUR33,193.92
o.o. 47 Ordinary 100 a.s. 58 Ordinary 100
Tesco Technology
dunnhumby Spain EUR1.00 and Services Europe PLN 50
S.L 50 Ordinary 100 SP . Z.O.O. 75 Ordinary 100
No par
dunnhumby South value Tesco Trustee Company EUR1.25
Africa (Pty) Ltd 43 Ordinary 100 of Ireland Limited 24 Ordinary 100
TESCO Üzleti
és Technológiai
Szolgáltatások
Zârtköruen
dunnhumby Ventures Múködó
LLC 44 - - Részvénytársaság 25 HUF 1,000.00 100
Edson Investments EUR2.00 EUR1.00
Limited 24 Ordinary 100 Thundridge Unlimited 24 Ordinary 100
Edson Properties EUR1.00 Topaz Jewel sp. PLN 50
Limited 24 Ordinary 100 z o.o. 75 Ordinary 100
ELH Insurance GBP1.00 Victoria BB Sp. PLN 800.00
Limited 71 Ordinary 100 z o.o. 42 Ordinary 100
Emerald Jewel sp. PLN 50 Wanze Properties EUR1.00
z o.o. 75 Ordinary 100 (Dundalk) Limited 24 Ordinary 100
GBP1.00 EUR0.0000005
Epicier Limited 46 Ordinary 100 WSC Properties Limited 24 Ordinary 100
Genesis sp. z PLN 500.00
o.o.(g) 42 Ordinary 100
Jasper Sp. z PLN 100.00
o.o.(g) 42 Ordinary 100
Related undertakings of the Tesco Group continued
Subsidiary undertakings in liquidation
The following subsidiary undertakings were incorporated in
the
United Kingdom
% held
Name of Registered Class of by Name of Registered Class of % held
undertaking address share held Group undertaking address share held by Group
Tesco Dorney
Adminstore GBP0.01 (Nominee GBP1.00
Limited 9 A Ordinary 100 Holdco) Limited 1 Ordinary 100
GBP0.01 Tesco Jade (GP) GBP1.00
B Ordinary 100 Limited 29 A Ordinary 30
GBP0.01 GBP1.00
C Ordinary 100 B Ordinary 30
Cheshunt Finance GBP0.000000001 Tesco Mobile GBP0.10
Unlimited 9 Ordinary 100 Limited* 1 A Ordinary 100
Limited
Cheshunt Overseas Liability GBP0.90
LLP 3 Partnership 100 B Ordinary 100
Tesco Property
dunnhumby (Sparta
Advertising GBP0.001 Nominees) GBP1.00
Limited 9 Ordinary 100 Limited 1 Ordinary 100
Tesco Property
dunnhumby Holding GBP1.00 (Nominees) GBP1.00
Limited 4 Ordinary 100 (No.3) Limited 1 Ordinary 100
Tesco Property
Europa Foods GBP0.000000176 (Nominees) GBP1.00
Limited 9 Ordinary 100 (No.4) Limited 1 Ordinary 100
Tesco Property
Partner
Fresh Food GBP1.00 (GP No.2) GBP1.00
Trader Limited 9 Ordinary 50 Limited 1 A Ordinary 100
GBP1.00 Tesco Sarum (GP) GBP1.00
Preference 100 Limited* 1 A Ordinary 10
J.Smylie & Tesco Sarum
Sons (IOM) GBP1.00 (Nominee GBP1.00
Limited 72 Ordinary 100 1) Limited 1 Ordinary 100
Tesco Sarum
KSS Retail (Nominee GBP1.00
Limited 9 GBP0.000000851 100 2) Limited 1 Ordinary 100
Tesco Sarum
(Nominee GBP1.00
M & W Limited 9 GBP0.0000000582261 100 Holdco) Limited 1 Ordinary 100
Tesco
Motorcause GBP1.00 Underwriting GBP1.00
Limited 9 Ordinary 100 Limited 31 Ordinary 49.9
Reefknot The Tesco Coral
Technology GBP1.00 Limited Limited
Limited 9 Ordinary 100 Partnership 1 Partnership 50
Stewarts The Tesco Dorney
Supermarkets GBP1.00 Limited Limited
Limited 9 Ordinary 100 Partnership 1 Partnership 50
The Tesco
Property
Tesco Aqua GBP1.00 (No.2) Limited Limited
(FinCo1) Limited 9 Ordinary 100 Partnership 17 Partnership 50
The Tesco Sarum
Tesco Blue GBP1.00 Limited Limited
(FinCo2) Limited 9 Ordinary 100 Partnership 1 Partnership 50
GBP0.01
Tesco FFC Limited 9 Ordinary 100
Tesco
International
Internet
Retailing
Limited 9 GBP0.0000013543 100
The following associated undertakings
Tesco Overseas GBP0.00000025 were incorporated outside of
ULC 9 A Ordinary 100 the United Kingdom
GBP0.00000025
B Ordinary 100
GBP0.00000025
C Ordinary 100
GBP0.00000025 100 Name of Registered Class of % held
D Ordinary undertaking address share held by Group
GBP0.00000025
E Ordinary 100 Arena Unit Trust 33 - 50
GBP0.00000025 Booker India INR 1.00
F Ordinary 100 Limited 54 Ordinary 49
Booker Satnam
GBP0.00000025 Wholesale INR 1.00
G Ordinary 100 Limited 54 Ordinary 49
China Wisdom
GBP0.00000025 dunnhumby RMB 264,000
H Ordinary 100 Limited 53 Ordinary 50
China Wisdom
dunnhumby RMB 264,000,000
GBP0.00000025 (Shanghai) Registered
J Ordinary 100 Limited 63 Capital 50
dunnhumby Mitsui
Bussan
Customer Science
GBP0.00000025 Co., JPY 1,000
K Ordinary 100 Ltd 55 Ordinary 50
GBP0.00000025 dunnhumby Norge NOK 1,000
L Ordinary 100 A.S. 56 Ordinary 50
Merrion Shopping
GBP0.00000025 Centre EUR0.012697
M Ordinary 100 Limited 24 Ordinary 51.9
Tesco Mobile
GBP0.00000025 ČR CZK 100,000
N Ordinary 100 s.r.o. 16 Ordinary 50
Tesco Mobile
GBP0.00000025 Slovakia EUR1.00
O Ordinary 100 s.r.o. 81 Ordinary 50
Trent
GBP0.00000025 Hypermarket INR 10.00
P Ordinary 100 Private Limited 26 Equity 50
The following subsidiary undertakings
were incorporated outside of
the United Kingdom
Consolidated structured entities
% held Name of Registered Nature of business
Name of Registered Class of by undertaking address
undertaking address share held Group
Delamare Cards
Avantil Services GBP1.00 Holdco Securitisation
Company Limited 39 Ordinary 100 Limited 47 entity
Delamare Cards
Booker Cyprus EUR1.00 MTN Securitisation
Limited 21 Ordinary 100 Issuer plc 47 entity
China Property Delamare Cards
Holdings (HK) HKD 1.00 Receivables Securitisation
Limited 20 Ordinary 100 Trustee Limited 47 entity
Delamare Cards
EUR1.00 Funding Securitisation
Saneyia Limited 21 Ordinary 100 1 Limited 47 entity
Sociomantic Delamare Cards
Labs Private INR 10.00 Funding Securitisation
Limited 78 Ordinary 100 2 Limited 47 entity
Tesco Global
Employment THB 100.00 Delamare Finance Securitisation
Company Limited 34 Ordinary 100 PLC 11 entity
GBP0.01
Floating
Rate Redeemable
Preference 100 Delamare Group
Tesco Capital GBP1.00 Holdings Securitisation
No.2 Limited 9 Ordinary 100 Limited 11 entity
Tesco Vin Plus EUR1.60
S.A. 52 Ordinary 100
Associated undertakings * Undertaking where other share classes
The following associated undertakings are held by a third party
were incorporated in the United Interest held directly by Tesco PLC
Kingdom (a) 95% held by Tesco PLC
(b) 66.6% held by Tesco PLC
(c) 50% held by Tesco PLC
(d) Shares held by Tesco Pension Trustees
Limited (TPTL), the corporate trustee
of the
Tesco PLC Pension Scheme (the Scheme).
On behalf of the Scheme, TPTL holds
a 50%
shareholding in three property joint
ventures with Tesco, and is the sole
shareholder
of Tesco Pension (Jade) Limited and
Tesco Pension Investment Limited
(e) Placed into liquidation on 01/03/2021
(f) Interest sold on 02/03/2021
(g) Sold on 16/03/2021
(h) Dissolved on 21/03/2021
(i) Incorporated on 06/04/2021
% held
Name of Registered Class of by
undertaking address share held Group
Broadfields
Management GBP0.10
Limited 12 Ordinary 35.3
Clarepharm GBP0.10
Limited(f) 13 Ordinary 26.5
Shire Park GBP1.00
Limited 15 Ordinary 48.57
Tesco Coral GBP1.00
(GP) Limited* 1 A Ordinary 100
Tesco Coral GBP1.00
(Nominee) Limited 1 Ordinary 100
Tesco Dorney GBP1.00
(GP) Limited* 1 A Ordinary 100
Tesco Dorney
(Nominee 1) GBP1.00
Limited 1 Ordinary 100
Tesco Dorney
(Nominee 2) GBP1.00
Limited 1 Ordinary 100
Registered office addresses
1. Tesco House, Shire Park, Kestrel Way, Welwyn Garden City, AL7 1GA, United Kingdom
2. Apex Road, Brownhills, Walsall, West Midlands, WS8 7HU, United Kingdom
3. KPMG LLP, 15 Canada Square, London, E14 5GL, United Kingdom
4. 184 Shepherds Bush Road, London, W6 7NL, United Kingdom
5. C/O Morton Fraser LLP, 5th Floor, Quartermile Two, 2 Lister
Square, Edinburgh, Scotland, EH3 9GL, United Kingdom
6. 2 South Gyle Crescent, Edinburgh, EH12 9FQ, United Kingdom
7. Vršovická 1527/68b, Vršovice, 100 00 Prague 10, Czech Republic
8. Equity House, Irthlingborough Road, Wellingborough,
Northamptonshire, NN8 1LT, United Kingdom
9. Ernst & Young LLP, 1 More London Place, London, SE1 2AF, United Kingdom
10. Suite 13.03, 13th Floor, Menara Tan & Tan, 207 Jalan Tun
Razak, 50400 Kuala Lumpur, Malaysia
11. 1 Bartholomew Lane, London, England, EC2N 2AX
12. 2 Paris Parklands, Railton Road, Guildford, Surrey, GU2 9JX
13. Thompson Jenner, 28 Alexandra Terrace, Exmouth, Devon, EX8 1BD
14. Ritterstraße 6, 10969 Berlin, Germany
15. Riverside House, 3 Place Farm, Wheathampstead, St. Albans, England, AL4 8SB
16. 1527/68b, Vrsovicka, Praha 10, City of Prague, 100 00, Czech Republic
17. PO Box 87 22 Grenville Street, St Helier, Jersey
18. Yeni Havaalani Caddesi, No. 40 Cigli, Izmir, 35610 Turkey
19. 50 Raffles Place, #19-00 Singapore Land Tower, Singapore 048623
20. 31st Floor AIA Kowloon Tower Landmark East, 100 How Ming Street, Kowloon, Hong Kong
21. 5 Esperidon Street, 4th floor, 2001 Strovolos, Nicosia, Cyprus
22. Avenida Santa María 5888, Piso 2 Zona A, Oficina 4,
Vitacura, Santiago, 7660268, Chile
23. Eco City Centro, 901-12 office, 9 / F 1788 West Nanjing
Road, Jingan District, Shanghai, China
24. Gresham House, Marine Road, Dun Laoghaire, Co. Dublin, Ireland
25. ll38, Budapest, Váci út, 187, Hungary
26. Taj Building, 2nd Floor, 210, Dr D.N. Road, Fort, Mumbai, 400001, India
27. PO Box 25, Regency Court, Glategny Esplanade, St. Peter Port, Guernsey, GY1 3AP
28. Level 1, IFC1 Esplanade, St Helier, Jersey, JE2 3BX
29. 20 Churchill Place, Canary Wharf, London, E14 5HJ
30. c/o RSM Finland Oy, Ratamestarinkatu 7 B, 00520, Helsinki, Finland
31. Ageas House Hampshire Corporate Park, Templars Way, Eastleigh, Hampshire, SO53 3YA
32. H-2040 Budaörs, Kinizsi, ÚT 1-3, Hungary
33. 47 Esplanade, St Helier, Jersey, JE1 0BD
34. 629/1 Nawamintr Road, Nuanchan, Buengkoom, Bangkok, 10230, Thailand
35. c/o The Corporation Trust Company, 1209 Orange Street,
Corporation Trust Center, Wilmington, DE 19801, USA
36. S-22 Greater Kailash, Part 1, Lower Ground Floor, New Delhi 110048, India
37. Carrera 48 no. 32B sur - 139, Envigado, Italy
38. 9th Floor, Shiroyama Trust Tower, 3-1, Toranomon 4-chome, Minato-ku, Tokyo, Japan
39. 38/39 Fitzwilliam Square, Dublin 2, Ireland
40. Willemsparkweg 150 hs, 1071 HS, Amsterdam, The Netherlands, Netherlands
41. 81 & 82, EPIP Area, Whitefield, Bangalore, 560066, India
42. 56 Kapelenka St, 30-347, Krakow, Poland
43. 3rd Floor, 54 Melrose Boulevard, Melrose Arch, Gauteng, 2196, South Africa
44. c/o FBT Ohio, Inc.,3300 Great American Tower, 301 East
Fourth Street, Cincinnati, OH 45202, USA
45. Windward 1, Regatta Office Park, PO Box 897, Grand Cayman KY1 - 1103, Cayman Islands
46. Beauport House, L'Avenue de la Commune, Jersey, JE3 7BY
47. 6th Floor, 125 London Wall, London, England EC2Y 5A
48. Av. El Golf 40, 7th floor, Las Condes, Santiago de Chile, Chile
49. 163 Tras Street, #03-01, Lian Huat Building, Singapore, 079024, Singapore
50. Paseo de General Martinez Campos, Campos n 9 1 izquierda, 28010 Madrid, Spain
51. Istiklal Caddesi Beyoglu Is Merkezi No: 187/5 Galatasaray, Istanbul, Turkey
52. Centre de Commerces et de, Loisirs, Cite Europe, 62231 Coquelles, France
53. Suite 1106-8, 11/F., Tai Yau Building, No 181 Johnston Road, Wanchai, Hong Kong
54. Unit 607, 6th floor, Trade Centre, Bandra Kurla Complex,
Bandra East, Mumbai, 400051, Maharashtra, India
55. 1-2-3 Marunouchi, Chiyoda-ku, Tokyo, Japan
56. Rosenkrantzgate 16, Oslo, O160, Norway
57. c/o TMF Denmark A/S, Købmagergade 60, 1. tv., 1150 København K, Denmark
58. Cesta na Senec 2, Bratislava, 821 04, Slovakia
59. 1400-340 Albert St, Ottawa ON K1R 0A5, Canada
60. 4th Fl, Tower B, Paras Twin Towers, DLF Golf Course Road,
Sector 54, Gurgaon, Haryana-HR, 122002, India
61. 48 rue Cambon, 75001, Paris, France
62. Room 1001, Enterprise Development Tower, No. 398, Jiangsu
Road Changning District, Shanghai 200050, People's Republic of
China
63. Room 501-4, No.398 Jiangsu Road, Shanghai, People's Republic of China
64. RSM New Zealand, Level 2, 60 Highbrook Drive, Auckland, 2013, New Zealand
65. Level 21, 55 Collins Street, Melbourne, VIC 3000, Australia
66. 10 Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul, Korea (07326)
67. Floor 3, 2 Harbour Square, Crofton Road, Dun Laoghaire, Dublin, Ireland
68. Veterná 7310/40, 917 01 Trnava, The Slovak Republic, Slovakia
69. Av President Masarik No. 111, Piso 1, Colina Polance V
Seccion Delegacion Miguel Hidalgo, C.P. 11560, Mexico
70. Regus Amsterdam Sloterdijk Teleport Towers, Kingsfordweg 151, 1043 GR Amsterdam
71. Dorey Court, Admiral Park, St. Peter Port, GY1 4AT, Guernsey
72. PO Box 237, Peregrine House, Peel Road, Douglas, Isle of Man, IM99 1SU
73. No. 319 Chamchuri Square Building, 16th Fl, Unit 01,
Phayathi Road Pathumwan sub District, Bangkok 10330, Thailand
74. Calle 32 b sur #48-100, Envigado, Antioquia, Colombia
75. ul. Po czyńska 121/125, 01-377 Warsaw, Poland
76. Unit 01, 02, 06, 07, 08, 09, Floor 17, No. 610 Xujiahui
Road, Huangpu District, Shanghai, People's Republic of China
77. Av.Brigadeiro Luis Antônio, 3530, 5deg Andar, 01402-001 São Paulo, Brazil
78. c/o Vaish Associates, 106, Peninsula Centre, Dr. S. S. Rao
Road, Parel Mumbai - 400012, Maharashtra, India
79. 125047, Moscow, 1st Tverskaya-Yamskaya Street, 23, building 1, floor 5, premise V, room 5
80. 5th Floor, Unit 401, Tower B, The Millenia, No. 1&2
Murphy Road Ulsoor, Bangalore, 560 008, India
81. Einsteinova 24, Bratislava 851 01, Slovakia
Supplementary information (unaudited)
Total sales performance at actual rates (exc. VAT, exc. fuel)
for continuing operations(a)
1Q 2Q 3Q 4Q 1H 2H FY
2020/21 2020/21 2020/21 2020/21 2020/21 2020/21 2020/21
UK & ROI 9.4% 7.8% 8.7% 9.4% 8.6% 9.1% 8.8%
UK 9.1% 6.3% 7.2% 9.3% 7.7% 8.3% 8.0%
ROI 23.0% 9.6% 15.3% 19.8% 16.3% 17.5% 16.9%
Booker 6.1% 15.7% 15.1% 5.9% 11.0% 10.6% 10.5%
Central Europe 0.8% (8.9)% (0.7)% 0.8% (4.3)% 0.1% (2.1)%
Tesco Bank (26.5)% (35.9)% (28.5)% (33.6)% (31.4)% (31.0)% (31.2)%
Group 7.9% 5.4% 7.2% 7.9% 6.6% 7.5% 7.1%
Total sales performance at constant rates (exc. VAT, exc. fuel)
for continuing operations(a)
1Q 2Q 3Q 4Q 1H 2H FY
2020/21 2020/21 2020/21 2020/21 2020/21 2020/21 2020/21
UK & ROI 9.2% 7.8% 8.5% 9.1% 8.5% 8.8% 8.6%
UK 9.1% 6.3% 7.2% 9.3% 7.7% 8.3% 8.0%
ROI 19.7% 9.4% 11.7% 14.0% 14.5% 12.9% 13.7%
Booker 6.1% 15.7% 15.1% 5.9% 11.0% 10.6% 10.5%
Central Europe 3.3% (5.7)% 0.7% (0.5)% (1.5)% 0.1% (0.6)%
Tesco Bank (26.5)% (35.9)% (28.5)% (33.6)% (31.4)% (31.0)% (31.2)%
Group 8.0% 5.6% 7.1% 7.5% 6.8% 7.3% 7.0%
(a) In order to ensure the best comparability year-on-year,
sales growth in 2H is reported as sales for 26 weeks ending 27
February 2021 against sales for 26 weeks ending 29 February
2020.
Like-for-like sales performance (exc. VAT, exc. fuel) for
continuing operations
1Q 2Q 3Q 4Q 1H 2H FY
2020/21 2020/21 2020/21 2020/21 2020/21 2020/21 2020/21
UK & ROI 8.2% 6.2% 6.1% 6.9% 7.2% 6.5% 6.8%
UK 8.7% 6.4% 6.7% 8.8% 7.6% 7.8% 7.7%
ROI 20.5% 10.6% 11.8% 13.3% 15.5% 12.6% 14.0%
Booker 0.6% 3.7% 0.1% (8.3)% 2.2% (4.0)% (0.8)%
Central Europe 3.9% (5.3)% 0.9% (0.6)% (0.9)% 0.1% (0.4)%
Tesco Bank n/a n/a n/a n/a n/a n/a n/a
Group 7.9% 5.2% 5.7% 6.3% 6.5% 6.0% 6.3%
Country detail - Retail
Revenue (exc. VAT,
inc. fuel)
Average Closing
Local currency exchange exchange
(m) GBPm rate rate
UK 43,750 43,750 1.0 1.0
ROI 2,998 2,684 1.1 1.2
Booker 6,736 6,736 1.0 1.0
Czech Republic 41,339 1,391 29.7 30.2
Hungary 545,409 1,376 396.4 417.9
Slovakia 1,357 1,215 1.1 1.2
UK sales area by size of store
27 February 2021 29 February 2020
No. of Million % of total No. of Million % of total
Store size (sq. ft.) stores sq. ft. sq. ft. stores sq. ft. sq. ft.
0-3,000 2,534 5.5 14.2% 2,508 5.4 14.0%
3,001-20,000 282 3.0 7.8% 284 3.0 7.8%
20,001-40,000 285 8.2 21.2% 284 8.2 21.3%
40,001-60,000 182 8.8 22.8% 182 8.8 22.9%
60,001-80,000 120 8.4 21.8% 120 8.4 21.8%
80,001-100,000 45 3.7 9.6% 45 3.7 9.6%
Over 100,000 8 1.0 2.6% 8 1.0 2.6%
Total* 3,456 38.6 100.0% 3,431 38.5 100.0%
* Excludes Booker and franchise stores.
Supplementary information (unaudited) continued
Group space summary
Actual Group space - store numbers(a)
Net gain/ Repurposing/
2019/20 Closures/ (reduction) 2020/21 extensions
year end Openings disposals (b) year end (c)
Large 796 1 (2) (1) 795 -
Convenience 1,920 20 (2) 18 1,938 -
Dotcom only 6 - - - 6 -
Total Tesco 2,722 21 (4) 17 2,739 -
One Stop (d) 697 - 8 705 -
Booker 196 (2) (2) 194 -
8
-
Jack's 12 - - - 12 -
UK (d) 3,627 29 (6) 23 3,650
-
ROI 150 1 - 1 151 1
UK & ROI (d) 3,777 30 (6) 24 3,801 1
Czech Republic (d) 186 1 (4) (3) 183 (1)
Hungary 202 - (1) (1) 201 -
Slovakia d) 150 3 - 3 153 (3)
Central Europe (d) 538 4 (5) (1) 537 (4)
Group (d) 4,315 34 (11) 23 4,338 (3)
UK (One Stop) 191 35 (19) 16 207 -
Czech Republic 107 20 (4) 16 123 -
Slovakia - 5 - 5 5 -
Franchise stores 298 60 (23) 37 335 -
Actual Group space - '000 sq. ft.(a)
Repurposing/ Net gain/ 2020/21
2019/20 Closures/ extensions (reduction) year
year end Openings disposals (c) (b) end
Large 31,336 20 (17) - 3 31,339
Convenience 5,204 44 (4) - 40 5,244
Dotcom only 716 - - - - 716
Total Tesco 37,256 64 (21) - 43 37,299
One Stop (d)(e) 1,139 15 - (4) 11 1,150
Booker 8,376 - (92) - (92) 8,284
Jack's 119 - - - - 119
UK (d) 46,890 79 (113) (4) (38) 46,852
ROI 3,274 56 - 5 61 3,335
UK & ROI (d) 50,164 135 (113) 1 23 50,187
Czech Republic (d) 4,289 14 (19) (18) (23) 4,266
Hungary 6,000 - (3) - (3) 5,997
Slovakia (d) 3,180 16 - (45) (29) 3,151
Central Europe (d) 13,469 30 (22) (63) (55) 13,414
Group (d) 63,633 165 (135) (62) (32) 63,601
UK (One Stop) 237 44 (25) - 19 256
Czech Republic 101 19 (2) - 17 118
Slovakia - 5 - - 5 5
Franchise stores 338 68 (27) - 41 379
(a) Continuing operations.
(b) The net gain/(reduction) reflects the number of store
openings less the number of store closures/disposals.
(c) Repurposing of retail selling space.
(d) Excludes franchise stores.
(e) Prior year restatement included within repurposing/extensions
Supplementary information (unaudited) continued
Group space forecast to 26 February 2022 - '000 sq. ft.(a)
2021/22
2020/21 Closures/ Repurposing/ Net gain/ year
year end Openings disposals extensions (reduction) end
Large 31,339 56 - - 56 31,395
Convenience 5,244 92 (7) - 85 5,329
Dotcom only 716 - - - - 716
Total Tesco 37,299 148 (7) - 141 37,440
One Stop (b) 1,150 - - - - 1,150
Booker 8,284 - - - - 8,284
Jack's 119 12 - - 12 131
UK (b) 46,852 160 (7) - 153 47,005
ROI 3,335 - - 29 29 3,364
UK & ROI (b) 50,187 160 (7) 29 182 50,369
Czech Republic (b) 4,266 86 - (41) 45 4,311
Hungary 5,997 - (15) (151) (166) 5,831
Slovakia 3,151 57 - (6) 51 3,202
Central Europe (b) 13,414 143 (15) (198) (70) 13,344
Group (b) 63,601 303 (22) (169) 112 63,713
UK (One Stop) 256 - - - - 256
Czech Republic 118 29 - - 29 147
Slovakia 5 16 - - 16 21
Franchise stores 379 45 - - 45 424
(a) Continuing operations.
(b) Excludes franchise stores.
Tesco Bank income statement
2021 (a) 2020 (a)
GBPm GBPm
Revenue 542 733
Interest receivable and similar income Fees and commissions
receivable 193 335
735 1,068
Direct costs
Interest payable (83) (166)
Fees and commissions payable (17) (25)
(100) (191)
Gross profit 635 877
Other expenses
Staff costs (176) (164)
Premises and equipment (75) (72)
Other administrative expenses (142) (191)
Depreciation and amortisation (57) (78)
Impairment loss on financial assets (360) (179)
Operating profit before exceptional items (175) 193
Exceptional items (b) (295) (119)
Operating profit (470) 74
Net finance costs: movements on derivatives and hedge
accounting (2) (11)
Net finance costs: interest (7) 23
Share of profit/(loss) of joint venture 16 10
Profit for the year (463) 96
(a) These results are for the 12 months ended 27 February 2021
and the previous period represents the 12 months ended 29 February
2020.
(b) Exceptional items in 2021 comprise of a goodwill impairment
charge of GBP(295)m (2020: PPI provision charge GBP(45)m,
restructuring costs GBP(13)m, accelerated amortisation and costs
related to the sale of the mortgage book and PCA GBP(61)m).
Glossary - Alternative performance measures
Introduction
In the reporting of financial information, the Directors have
adopted various APMs.
These measures are not defined by International Financial
Reporting Standards (IFRS) and therefore may not be directly
comparable with other companies' APMs, including those in the
Group's industry.
APMs should be considered in addition to, and are not intended
to be a substitute for, or superior to, IFRS measurements.
Purpose
The Directors believe that these APMs assist in providing
additional useful information on the underlying trends, performance
and position of the Group.
APMs are also used to enhance the comparability of information
between reporting periods and geographical units (such as
like-for-like sales), by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid users in
understanding the Group's performance.
Consequently, APMs are used by the Directors and management for
performance analysis, planning, reporting and incentive-setting
purposes.
Some of the Group's IFRS measures are translated at constant
exchange rates. Constant exchange rates are the average actual
periodic exchange rates for the previous financial period and are
used to eliminate the effects of exchange rate fluctuations in
assessing performance. Actual exchange rates are the average actual
periodic exchange rates for that financial period.
Changes to APMs
The Directors and management have redefined Free cash flow and
Retail free cash flow to be from continuing operations. Redefining
Free cash flow and Retail free cash flow to exclude the cash flows
of the Group's discontinued operations ensures consistency with the
Group's Retail operating cash flow APM, and is a more appropriate
measure of the ongoing cash generation of the Group.
The Directors and management have added Retail sales as a new
APM, which is defined as Group sales excluding Tesco Bank sales and
sales made at petrol filling stations. This metric is used to
demonstrate the underlying performance in the Group's core Retail
businesses and removes the volatilities associated with the
movement in fuel prices.
The Directors and management have added Diluted earnings per
share from continuing operations before exceptional items and
amortisation of acquired intangibles, net pension finance costs and
fair value remeasurements of financial instruments (adjusted for
share consolidation) as a new APM. This is defined as profit after
tax before exceptional items and amortisation of acquired
intangibles from continuing operations, net pension finance costs
and fair value remeasurements attributable to owners of the parent
divided by the weighted average number of ordinary shares in issue
during the financial period adjusted for the effects of potentially
dilutive share options and to reflect the full impact of the share
consolidation as if it had taken place at the start of the previous
financial year. This metric is used to demonstrate the underlying
earnings per share of the Group's continuing operations, and
removes any distortion from the sale of our businesses in Thailand
and Malaysia as the earnings from discontinued operations are
excluded, but the weighted average share base used in the statutory
IAS 33 denominator does not yet reflect the full impact of the
share consolidation and special dividend. To aid comparability,
this new APM, which is presented on a basis other than in
accordance with IAS 33 includes the full impact of the share
consolidation as if it had taken place at the start of the previous
financial year.
Closest equivalent Adjustments Definition
IFRS measure to reconcile and purpose
APM to IFRS measure
Income Statement
Revenue measures
Group sales Revenue - Exclude sales - Excludes the impact of sales made
made at petrol at petrol filling stations to demonstrate
filling stations the Group's underlying performance
in the core retail and financial services
businesses by removing the volatilities
associated with the movement in fuel
prices. This is a key management incentive
metric.
Growth in sales No direct - Consistent - Growth in sales is a ratio that measures
equivalent with accounting year-on-year movement in Group sales
policy for continuing operations for 52 weeks.
It shows the annual rate of increase
in the Group's sales and is considered
a good indicator of how rapidly the
Group's core business is growing.
Like-for-like No direct - Consistent - Like-for-like is a measure of growth
equivalent with accounting in Group online sales and sales from
policy stores that have been open for at least
a year (but excludes prior year sales
of stores closed during the year) at
constant foreign exchange rates. It
is a widely used indicator of a retailer's
current trading performance and is
important when comparing growth between
retailers that have different profiles
of expansion, disposals and closures.
Retail sales Revenue - Exclude Tesco - Group sales excluding Tesco Bank
Bank sales sales to demonstrate the Group's underlying
- Exclude sales performance in the core Retail businesses.
made at
petrol filling
stations
Profit measures
Operating profit Operating - Exceptional - Operating profit before exceptional
before exceptional profit* items items and amortisation of acquired
items and amortisation - Amortisation intangibles is the headline measure
of acquired intangibles of acquired of the Group's performance, and is
intangibles based on operating profit from continuing
operations before the impact of exceptional
items and amortisation of intangible
assets acquired in business combinations.
Exceptional items relate to certain
cost or incomes that derive from events
or transactions that fall within the
normal activities of the Group but
which, individually or, if of similar
type, in aggregate, are excluded by
virtue of their size and nature in
order to reflect management's view
of the underlying performance of the
Group. This is a key management incentive
metric.
* Operating profit is presented on the Group income statement.
It is not defined per IFRS, however, is a generally accepted profit
measure.
Glossary - Alternative performance measures continued
Closest Adjustments
equivalent to reconcile Definition
APM IFRS measure to IFRS measure and purpose
Profit measures
continued
Retail operating Operating - Tesco Bank - Retail operating profit is a
profit profit* operating measure of the Group's operating
profit profit from continuing operations
- Retail exceptional from the Retail business excluding
items Tesco Bank. It is based on Retail
- Retail amortisation operating profit before exceptional
of acquired items and amortisation of acquired
intangibles intangibles.
Operating margin No direct - Consistent - Operating margin is calculated
equivalent with accounting as operating profit before exceptional
policy items and amortisation of acquired
intangibles divided by revenue.
Progression in operating margin
is an important indicator of the
Group's operating efficiency.
Retail earnings Operating - Exceptional - This measure is based on Retail
before exceptional profit* items operating profit from continuing
items, interest, - Depreciation operations. It excludes Retail
tax, depreciation and amortisation exceptional items, depreciation
and amortisation - Tesco Bank and amortisation and is used to
(Retail EBITDA) earnings before derive the Total indebtedness
exceptional ratio and Fixed charge cover APMs.
items, interest,
tax, depreciation
and amortisation
- Discontinued
operations
Profit before Profit - Exceptional - This measure excludes exceptional
tax before before items items and amortisation of acquired
exceptional tax - Amortisation intangibles, net finance costs
items and amortisation of acquired of the defined benefit pension
of acquired intangibles deficit and fair value remeasurements
intangibles, - Net pension of financial instruments. Net
net pension finance costs pension finance costs are impacted
finance costs - Fair value by corporate bond yields, which
and fair value remeasurements can fluctuate significantly and
remeasurements of financial are reset each year based on often
of financial instruments volatile external market factors.
instruments Fair value remeasurements are
impacted by changes to credit
risk and various market indices,
which can fluctuate significantly.
Also included in these items are
fair value remeasurements of financial
instruments resulting from liability
management exercises.
Total finance Finance - Exceptional - Total finance costs before exceptional
costs before costs items items, net pension finance costs
exceptional - Net pension and fair value remeasurements
items, net finance costs of financial instruments is the
pension finance - Fair value net finance costs adjusted for
costs and fair remeasurements non-recurring one-off items, net
value remeasurements of financial pension finance costs and fair
of financial instruments value remeasurements of financial
instruments instruments. Net pension finance
costs are impacted by corporate
bond yields, which can fluctuate
significantly and are reset each
year based on often volatile external
market factors. Fair value remeasurements
are impacted by changes to credit
risk and various market indices,
which can fluctuate significantly.
Also included in these items are
fair value remeasurements of financial
instruments resulting from liability
management exercises.
Diluted earnings Diluted - Exceptional - This relates to profit after
per share from earnings items tax before exceptional items and
continuing per share - Amortisation amortisation of acquired intangibles
operations of acquired from continuing operations, net
before exceptional intangibles pension finance costs and fair
items and amortisation - Discontinued value remeasurements attributable
of acquired operations to owners of the parent divided
intangibles, - Net pension by the weighted average number
net pension finance costs of ordinary shares in issue during
finance costs - Fair value the financial period adjusted
and fair value remeasurements for the effects of potentially
remeasurements of financial dilutive share options.
of financial instruments - It excludes net pension finance
instruments costs and fair value remeasurements
of financial instruments. Net
pension finance costs are impacted
by corporate bond yields, which
can fluctuate significantly and
are reset each year based on often
volatile external market factors.
Fair value remeasurements are
impacted by changes to credit
risk and various market indices,
which can fluctuate significantly.
Also included in these items are
fair value remeasurements of financial
instruments resulting from liability
management exercises.
Diluted earnings Diluted - Exceptional - This relates to profit after
per share from earnings items tax before exceptional items and
continuing per share - Amortisation amortisation of acquired intangibles
operations of acquired from continuing operations, net
before exceptional intangibles pension finance costs and fair
items and amortisation - Discontinued value remeasurements attributable
of acquired operations to owners of the parent divided
intangibles, - Net pension by the weighted average number
net pension finance costs of ordinary shares in issue during
finance costs - Fair value the financial period adjusted
and fair value remeasurements for the effects of potentially
remeasurements of financial dilutive share options and to
of financial instruments reflect the full impact of the
instruments - Weighted share consolidation as if it had
(adjusted for average number taken place at the start of the
share consolidation) of diluted previous financial year. This
shares metric is used to demonstrate
the underlying earnings per share
of the Group's continuing operations,
and removes any distortion from
the sale of our businesses in
Thailand and Malaysia as the earnings
from discontinued operations are
excluded, but the weighted average
share base used in the statutory
IAS 33 denominator does not yet
reflect the full impact of the
share consolidation and special
dividend. To aid comparability,
this new APM, which is presented
on a basis other than in accordance
with IAS 33, includes the full
impact of the share consolidation
as if it had taken place at the
start of the previous financial
year.
- It excludes net pension finance
costs and fair value remeasurements
of financial instruments. Net
pension finance costs are impacted
by corporate bond yields, which
can fluctuate significantly and
are reset each year based on often
volatile external market factors.
Fair value remeasurements are
impacted by changes to credit
risk and various market indices,
which can fluctuate significantly.
Also included in these items are
fair value remeasurements of financial
instruments resulting from liability
management exercises. This is
a key management incentive metric.
* Operating profit is presented on the Group income statement.
It is not defined per IFRS, however, is a generally accepted profit
measure.
Glossary - Alternative performance measures continued
Closest Adjustments
equivalent to reconcile Definition
APM IFRS measure to IFRS measure and purpose
Tax measures
Effective tax Effective - Exceptional - Effective tax rate before exceptional
rate before tax rate items and items and amortisation of acquired
exceptional their tax intangibles is calculated as total
items and amortisation impact income tax credit/(charge) excluding
of acquired - Amortisation the tax impact of exceptional
intangibles of acquired items and amortisation of acquired
intangibles intangibles from continuing operations
and their divided by profit before tax before
tax impact exceptional items and amortisation
of acquired intangibles from continuing
operations. This provides an indication
of the ongoing tax rate across
the Group.
Effective tax Effective - Exceptional - Effective tax rate before exceptional
rate before tax rate items and items and amortisation of acquired
exceptional their tax intangibles, net pension finance
items and amortisation impact costs and fair value remeasurements
of acquired - Amortisation of financial instruments is calculated
intangibles, of acquired as total income tax credit/(charge)
net pension intangibles excluding the tax impact of exceptional
finance costs and their items and amortisation of acquired
and fair value tax impact intangibles items, net pension
remeasurements - Net pension finance costs and fair value remeasurements
of financial finance costs from continuing operations divided
instruments and their by the profit before tax before
tax impact exceptional items and amortisation
- Fair value of acquired intangibles, net pension
remeasurements finance costs and fair value remeasurements
of financial from continuing operations.
instruments
and their
tax impact
Balance sheet
measures
Net debt Borrowings - Net debt - Net debt excludes the net debt
less cash from Tesco of Tesco Bank but includes that
and related Bank of the discontinued operations
hedges to reflect the net debt obligations
of the Retail business. Net debt
comprises bank and other borrowings,
lease liabilities, net derivative
financial instruments, joint venture
loans and other receivables and
net interest receivables/payables,
offset by cash and cash equivalents
and short-term investments. It
is a useful measure of the progress
in generating cash and strengthening
of the Group's balance sheet position
and is a measure widely used by
credit rating agencies.
Total indebtedness Borrowings - Consistent - Total indebtedness is the net
less cash with accounting debt plus the IAS 19 deficit in
and related policy the pension schemes (net of associated
hedges deferred tax) to provide an overall
view of the Group's obligations.
It is an important measure of
the long-term obligations of the
Group and is a measure widely
used by credit rating agencies.
Total indebtedness No direct - Consistent - Total indebtedness ratio is
Ratio equivalent with accounting calculated as Total indebtedness
policy divided by the rolling 12-month
Retail EBITDA. It is a measure
of the Group's ability to meet
its payment obligations and is
widely used by analysts and credit
rating agencies.
Fixed charge No direct - Consistent - Fixed charge cover is calculated
cover equivalent with accounting as the rolling 12-month Retail
policy EBITDA divided by the sum of net
finance costs (excluding net pension
finance costs, finance charges
payable on lease liabilities,
exceptional items, capitalised
interest and fair value remeasurements)
and all lease liability payments
from continuing operations. It
is a measure of the Group's ability
to meet its payment obligations
and is widely used by analysts
and credit rating agencies.
Glossary - Alternative performance measures continued
Adjustments
Closest equivalent to reconcile Definition
APM IFRS measure to IFRS measure and purpose
Cash flow measures
Retail operating Cash generated - Tesco Bank - Retail operating cash flow is the
cash flow from operating operating cash cash generated from continuing operations,
activities flow excluding the effects of Tesco Bank's
- Discontinued cash flows. It is a measure of the
operations cash generation and working capital
efficiency of the Retail business,
recognising that Tesco Bank is run
and regulated independently from
the Retail operations. This is a
key management incentive metric.
Free cash flow Cash generated - Net cash - Free cash flow includes all cash
from operating generated from/ flows from continuing operations
activities (used in) investing from operating and investing activities,
activities, the market purchase of shares net
and the market of proceeds from shares issued in
purchase of relation to share schemes, and repayment
shares issued of obligations under leases. The
in relation following items are excluded: investing
to share schemes cash flows that increase/decrease
- Repayment items within Group net debt, and
of obligations cash flows from major corporate acquisitions
under leases and disposals. This measure reflects
- Investing the cash available to shareholders.
cash flows
that increase/decrease
items within
Group net debt
- Cash flows
from major
corporate acquisitions
and disposals
Retail free Cash generated - Tesco Bank - Retail free cash flow includes
cash flow from operating operating cash all cash flows from continuing operations
activities flow from operating and investing activities
- Retail cash for the Retail business, the market
generated from/ purchase of shares net of proceeds
(used in) investing from shares issued in relation to
activities, share schemes, and the repayment
and the market of obligations under leases. The
purchase of following items are excluded: investing
shares issued cash flows that increase/decrease
in relation items within Net debt, and cash flows
to share schemes from major corporate acquisitions
- Repayment and disposals. This measure reflects
of obligations the cash available to shareholders.
under leases This is a key management incentive
- Investing metric.
cash flows
that increase/decrease
items within
Net debt
- Cash flows
from major
corporate acquisitions
and disposals
As detailed in the basis of consolidation, refer to Note 1, for
the UK & ROI, the prior year results are for the 53 weeks ended
29 February 2020. For all other operations, the prior year results
are for the calendar year ended 29 February 2020.
In order to provide comparability with the current year results
for the 52 weeks ended 27 February 2021, the tables below present
the Group's prior year statutory results on a 53-week basis to 29
February 2020, adjusted to remove the results of week 53 for the UK
& ROI to also separately present the APMs on a 52-week basis to
22 February 2020. In determining the week 53 adjustment for the UK
& ROI, revenue, sales and cost of goods sold represent the
actual trading performance in that week, with overhead expenses
allocated proportionally to week 53 based on the reported results
for the 53 weeks to 29 February 2020. No week 53 adjustments are
required with respect to the Group's operations in Central Europe,
Asia or Tesco Bank, which report on a calendar year basis.
The prior year results on a 53-week basis to 29 February 2020
and APMs on a 52-week basis to 22 February 2020 have been restated
to present Thailand, Malaysia and Poland as discontinued
operations. See Note 7 for further details.
Glossary - Alternative performance measures continued
APMs: Reconciliation of income statement measures
APM
2020 2020
As reported
APM on a 53-week Exclude 52-week
week
2021 basis 53 basis
UK &ROI Notes GBPm GBPm GBPm GBPm
Continuing operations
Group sales 2 48,848 45,752 (843) 44,909
Revenue 2 53,170 52,898 (983) 51,915
Operating profit before exceptional
items and amortisation of
acquired intangibles 2 1,866 2,202 (46) 2,156
Operating margin 2 3.5% 4.2% - 4.2%
Growth in sales at actual rates 8.8% 2.0% (1.9)% 0.1%
Growth in sales at constant rates 8.6% 2.1% (1.9)% 0.2%
APM
2020 2020
As reported
APM on a 53-week Exclude 52-week
week
2021 basis 53 basis
Total Group Notes GBPm GBPm GBPm GBPm
Continuing operations
Group sales 2 53,445 50,788 (843) 49,945
Revenue 2 57,887 58,091 (983) 57,108
Operating profit before exceptional
items and amortisation of
acquired intangibles 2 1,815 2,571 (46) 2,525
Operating margin 2 3.1% 4.4% - 4.4%
Growth in sales at actual rates 7.1% 1.4% (1.8)% (0.4)%
Growth in sales at constant rates 7.0% 1.7% (1.8)% (0.1)%
2020 APM
As reported
APM on a 53-week Exclude 2020
week 52-week
Notes 2021 basis 53 basis
Operating profit before exceptional items
and amortisation of
acquired intangibles ( GBP m) 2 1,815 2,571 (46) 2,525
Share of post-tax profits/(losses) of
joint ventures and associates before
exceptional items and amortisation of
acquired intangibles (GBPm) 26 - - -
Net finance costs before exceptional
items and amortisation of acquired intangibles
(GBPm) 5 (937) (1,019) 27 (992)
Profit before tax from continuing operations
before exceptional items and amortisation
of acquired intangibles (GBPm) 904 1,552 (19) 1,553
Add: Net pension finance costs (GBPm) 5 43 71 - 71
Add: Fair value remeasurements of financial
instruments (GBPm) 5 214 246 (18) 228
Profit before tax from continuing operations
before exceptional items and amortisation
of acquired intangibles, net pension
finance costs and fair value remeasurements
of financial instruments ( GBP m) 1,161 1,869 (37) 1,832
Total income tax credit/(charge) before
exceptional items, net pension finance
costs and fair value remeasurements of
financial instruments (GBPm) 9 (249) (400) 7 (393)
Effective tax rate before exceptional
items, net pension finance costs and
fair value remeasurements of financial
instruments (%) 21.4% 21.4% 0.1% 21.5%
Profit before tax from continuing operations
before exceptional items and amortisation
of acquired intangibles, net pension
finance costs and fair value remeasurements
of financial instruments attributable
to the owners of the parent (GBPm) 9 1,168 1,869 (37) 1,832
Taxation on profit from continuing operations
before exceptional items and amortisation
of acquired intangibles, net pension
finance costs and fair value remeasurements
of financial instruments attributable
to the owners of the parent (GBPm) 9 (249) (400) 7 (393)
Profit after tax from continuing operations
before exceptional items and amortisation
of acquired intangibles, net pension
finance costs and fair value remeasurements
of financial instruments attributable
to the owners of the parent (GBPm) 919 1,469 (30) 1,439
Basic weighted average number of shares
(millions) 9 9,629 9,716 - 9,716
Basic earnings per share from continuing
operations before exceptional items and
amortisation of acquired intangibles,
net pension finance costs and fair value
remeasurements of financial instruments
(pence) 9.54 15.12 (0.31) 14.81
Diluted weighted average number of shares
(millions) 9 9,656 9,783 - 9,783
Diluted earnings per share from continuing
operations before exceptional items and
amortisation of acquired intangibles,
net pension finance costs and fair value
remeasurements of financial instruments
(pence) 9.52 15.02 (0.31) 14.71
Glossary - Alternative performance measures continued
Diluted earnings per share from continuing operations before
exceptional items and amortisation of acquired intangibles, net
pension finance costs and fair value remeasurements (adjusted for
share consolidation)
APM
2020 2020
As reported
APM on a 53-week Exclude 52-week
week
Notes 2021 basis 53 basis
Weighted average number of diluted
shares
Diluted weighted average number of
shares (millions) 9,656 9,783 - 9,783
Adjustment to reflect the post-consolidation
share base as if it had been in place
from the start of the previous financial
year (millions) (1,956) (2,045) - (2,045)
Adjusted diluted weighted average number
of shares (adjusted for share consolidation)
(millions) 7,700 7,738 - 7,738
Diluted earnings per share from continuing
operations before exceptional items
and amortisation of acquired intangibles,
net pension finance costs and fair
value remeasurements (pence) 9.52 15.02 (0.31) 14.71
Adjustment to reflect the post-consolidation
share base as if it had been in place
from the start of the previous financial
year (pence) 2.42 3.96 (0.07) 3.89
Diluted earnings per share from continuing
operations before exceptional items
and amortisation of acquired intangibles,
net pension finance costs and fair
value remeasurements (adjusted for
share consolidation) (pence) 11.94 18.98 (0.38) 18.60
Retail EBITDA
APM
2020 2020
As reported
APM on a 53-week 52-week
Exclude
week
2021 basis 53 basis
Notes GBPm GBPm GBPm GBPm
Operating profit/(loss) from continuing
operations before exceptional items
and amortisation of acquired intangibles 2 1,815 2,571 (46) 2,525
Add/(less): Tesco Bank operating loss/(profit)
before exceptional items 2 175 (193) - (193)
Retail operating profit/(loss) from
continuing operations before exceptional
items and amortisation of acquired
intangibles 2 1,990 2,378 (46) 2,332
Add: Depreciation and amortisation
(excluding amortisation of acquired
intangibles) 2 1,671 1,730 (29) 1,701
Less: Tesco Bank depreciation and amortisation 2 (57) (141) - (141)
Retail EBITDA 3,604 3,967 (75) 3,892
APMs: Reconciliation of balance sheet measures
Total indebtedness ratio
APM
2020 2020
As reported
APM on a 53-week Exclude 52-week
week
Notes 2021 basis 53 basis
Net debt ( GBP m) (a)(b) 32 11,955 12,298 (197) 12,101
Add: Defined benefit pension deficit,
net of deferred tax (GBPm)(a) 29 1,004 2,573 - 2,573
Total indebtedness ( GBP m)(a) 12,959 14,871 (197) 14,674
Retail EBITDA ( GBP m) 3,604 3,967 (75) 3,892
Total indebtedness ratio 3.6 3.7 0.1 3.8
(a) Net debt, Total indebtedness and the defined benefit pension
deficit, net of deferred tax on a 52-week basis are as at 22
February 2020.
(b) Free cash outflow in week 53 of GBP197m has been deducted
from Net debt as at 29 February 2020 to determine the Group's
52-week Total indebtedness ratio.
Glossary - Alternative performance measures continued
Fixed charge cover
APM
APM 2020 Exclude 2020
As reported
on a 53-week week 52-week
Notes 2021 basis 53 basis
Net finance cost (GBPm) 5 937 1,170 (27) 1,143
Less: Net pension finance cost (GBPm) 5 (43) (71) (71)
Less: Exceptional fair value remeasurement
on restructuring derivative financial
instruments (GBPm) 5 - (180) - (180)
Add: Exceptional gain on Tesco Bank
mortgage book disposal (GBPm) 5 - 29 - 29
Add: Fair value remeasurements on financial
instruments (GBPm) 5 (214) (246) 18 (228)
Total finance costs before exceptional
items, net pension finance costs and
fair value remeasurements on financial
instruments (GBPm) 680 702 (9) 693
Add: Capitalised interest (GBPm) 5 - - - -
Less: Finance charges payable on lease
liabilities (GBPm) 5 (446) (486) 6 (480)
Net finance cost, excluding net pension
finance costs, exceptional items, capitalised
interest, fair value remeasurements
of financial instruments and finance
charges payable on lease liabilities
(GBPm) 234 216 (3) 213
Add: Retail total lease liability payments
(GBPm) 12 1,104 1,170 - 1,170
Less: Retail discontinued operations
total lease liability payments (GBPm) (99) (122) - (122)
1,239 1,264 (3) 1,261
Retail EBITDA ( GBP m) 3,604 3,967 (75) 3,892
Fixed charge cover 2.9 3.1 - 3.1
APMs: Reconciliation of cash flow measures
APM
APM 2020 Exclude 2020
As reported
on a 53-week week 52-week
2021 basis 53 basis
Notes GBPm GBPm GBPm GBPm
Retail cash flows generated from operations
excluding working capital 2 723 3,633 (63) 3,570
Retail (increase)/decrease in working
capital 2 439 (53) 240 187
Retail operating cash flow 2 1,162 3,580 177 3,757
Retail interest and corporation tax
paid(a) 2 (841) (958) 27 (931)
Retail cash generated from/(used in)
operating activities 2 321 2,622 204 2,826
Retail cash generated from/(used in)
investing activities 2 6,890 (1,102) (7) (1,109)
Retail own shares purchased 2 (66) (149) - (149)
Retail repayments of obligations under
leases 2 (561) (565) - (565)
Less: Retail cash inflow from major
disposal(b) 2 (5,337) - - -
Less: Retail increase/(decrease) in
loans to joint ventures and associates 2 2 - - -
Less: Retail net investments in/(proceeds
from sale of) short-term investments 2 (62) 687 - 687
Retail free cash flow 2 1,187 1,493 197 1,690
Tesco Bank free cash flow 2 192 476 - 476
Free cash flow 1,379 1,969 197 2,166
(a) Retail interest paid in week 53 amounted to GBP27m.
(b) Retail cash flow from major disposal of GBP5,337m
principally comprises the GBP7.8bn proceeds on disposal of the
Group's Asia operations, excluding cash disposed and intercompany
loan repayments, less the GBP2.5bn additional pension contribution.
Refer to Notes 4 and 7 for further details.
Other
Capital expenditure (Capex) FTE percentage of promoters
The additions to property, FTE refers to full-time (scoring 9-10). This
plant and equipment, equivalents. generates a figure between
investment property and LIBOR -100 and 100 which is
intangible assets (excluding London Inter-Bank Offered the NPS.
assets acquired under Rate. Return on capital employed
business combinations). LPI (ROCE)
Capital employed LPI refers to limited Return divided by the
Net assets plus net debt price inflation. average of opening and
plus dividend creditor Market capitalisation closing capital employed.
less net assets of the The total value of all Return
disposal group and non-current Tesco shares calculated Profit before exceptional
assets classified as as total number of shares items and interest, after
held for sale. multiplied by the closing tax (applied at effective
CPI share price at year end. rate of tax).
CPI refers to consumer MTN RPI
price index. MTN refers to medium RPI refers to the retail
Enterprise Value term note. price index.
This is calculated as MREL SONIA
market capitalisation Minimum requirements Sterling Overnight Index
plus net debt. for own funds and eligible Average.
EURIBOR liabilities (European Total shareholder return
Euro Interbank Offered Banking Authority). The notional annualised
Rate. Net promoter score (NPS) return from a share,
ESG This is a loyalty measure measured as the percentage
Environmental, social based on a single question change in the share price,
and governance. requiring a score between plus the dividends paid
0-10. The NPS is calculated with the gross dividends,
by subtracting the percentage reinvested in Tesco shares.
of detractors (scoring This is measured over
0-6) from the both a one and five-year
period.
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END
FR SFUEDDEFSESL
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April 14, 2021 02:00 ET (06:00 GMT)
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