Annual Report and Financial Statements 2007 - Tesco PLC

8 Tesco PLC Annual report and financial statements 2007 Find out more at www.tesco.com/corporate
Operating and financial review continued
Key Performance Indicators (KPIs)
We operate a balanced scorecard approach to managing the business that is known internally within the Group as our Steering
Wheel. This unites the Group’s resources around our customers, people, operations, finance and the community. This enables the
business to be operated and monitored on a balanced basis with due regard for all stakeholders. Some of the KPIs below are
tracked through our Steering Wheel and others are tracked as a monitor of investor return.
Sales growth
2007* 2006*
Change in Group sales over the year (including value added tax) 10.9% 13.2%
UK sales growth 9.0% 10.7%
International sales growth 17.9% 23.0%
International sales growth (at constant exchange rates) 17.4% 15.5%
Profit before tax £2,653m £2,206m
Underlying profit before tax £2,545m £2,248m
Trading margin
UK trading margin 5.9% 5.8%
International trading margin 5.7% 5.7%
Trading margin is calculated from the operating profit expressed as a percentage of Group revenue (sales excluding
value added tax). It is a measure of profit generation from sales and is a comparable performance measure with
other companies. This is how much we made from trade in our stores, taking account of the cost of the products
sold, wages and salaries, expenses associated with running the stores, depots and head office, and the cost of
depreciation of the assets used to generate the profits.
Net cash (outflow)/inflow £(265)m £165m
Net cash inflow is the cash received less cash spent during the financial period, after financing activities.
Capital expenditure £3.0bn £2.8bn
This is the cash invested in purchasing fixed assets.
UK £1.9bn £1.8bn
International £1.1bn £1.0bn
Net borrowings and gearing
Net borrowings £5.0bn £4.5bn
Gearing 48% 48%
Return on Capital Employed (ROCE) 12.6% ‡ 12.5%
ROCE is calculated as profit before interest less tax divided by the average of net assets plus net debt plus
dividend creditor less net assets held for sale. ROCE is a relative profit measurement that not only incorporates
the funds shareholders have invested, but also funds invested by banks and other lenders, and therefore shows the
productivity of the assets of the Group.
Underlying diluted earnings per share 22.36p 20.04p
Underlying diluted earnings per share is the calculation of profit after tax and minority interest divided by the
diluted weighted average number of shares in issue during the year. It is the amount which could be paid out on each
share if the Company decided to distribute all its profits as dividends instead of retaining some for future expansion.
* On a 52-week comparable basis.
‡ Including the one-off gain from Pensions A-Day, ROCE was 13.6%.