Tesco reports 27% profits increase

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Alastair Lockhart, insight director at shopper marketing agency Savvy, said Tesco's reintroduction of a dividend is the latest in a series of milestones that confirms not only momentum, but pace in the retailer's recovery.

Overall group sales rose 3.3 per cent during the period to £25.5bn.

Tesco's debt, downgraded to "junk" status in 2015 could return to investment grade "in the not too distant future", Lewis said.

"Today's announcement that we are resuming our dividend reflects our confidence that we can build on our strong performance to date".

The supermarket chain declared an interim dividend of 1.0 pence per share, its first payout since December 2014, as the board had sought to reduce costs.

First-half adjusted operating profit before exceptional items of £759m was up 27.3% and also beat the £703m consensus, while statutory profit before tax rose nearly eightfold to £562m.

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The U.K.'s biggest grocer by market share made a pretax profit of 562 million pounds ($744.5 million) for the 26 weeks ended August 26, compared with a pretax profit of GBP71 million a year earlier.

Revenue increased 3.7 percent to 28.3 billion pounds from 27.3 billion pounds a year ago.

Tesco remains the largest of Britain's supermarket groups by a clear margin, having a market share of nearly 28% according to the latest industry figures. The comments come ahead of the FTSE 100 supermarket's interims tomorrow when the company is expected to reveal that it continued to recover three years after an accounting scandal.

Two members of Tesco's financial team resigned in 2014 because they were concerned that their professional integrity was being compromised by what they were being asked to do by their bosses, a court heard on Tuesday. "While Sainsbury's tests a checkout-free payment app and Costcutter trials fingerprint payment, Tesco's new Tesco Pay+ is a much simpler yet effective move", he said.

He said the secret of Lewis's success has been to work with fewer suppliers and then use the formidable buying power of the country's largest grocer to drive down prices.

"The Competition and Markets Authority is due to deliver its findings soon, and the recent plight of Palmer & Harvey, one of Tesco's key suppliers, will serve to underline the potential knock-on effects of the deal".

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