Tesco’s Asian business achieved a 33.5-per-cent increase in operating profit last year, the last full trading year before it is sold to Thailand’s Charoen Pokphand group.

In results released overnight, Tesco reported a profit of £426 million, and a margin of 8.2 per cent in Asia, on sales of £5.2 billion, up 6.7 per cent on actual currency rates, or by 0.1 per cent on a constant-currency basis. 

Tesco’s overall result was a pre-tax profit of £1.315 billion, up 18.7 per cent year on year, on sales of £56.5 billion, up by 1 per cent on a constant-currency basis. 

Outgoing CEO Dave Lewis said the performance of the company in the UK and Asia demonstrated the success of the company’s turnaround plan.

“Over the last five years we have focused on serving customers better, re-engaging our colleagues, completely resetting our relationships with our suppliers and as a result we have been able to add value for our shareholders,” he said.

“These endeavours put us in a strong operational and financial position to deal with the challenges of Covid-19.”

But Lewis warned the impact of the coronavirus on the business could be significant and the company would not issue earnings guidance for the current year. 

“Covid-19 is having a material impact on the operations of our business and we are incurring significant additional costs, particularly in payroll as we recruit additional colleagues to meet demand and cover the work of those colleagues who are absent and being paid,” he said.

The company has carried out calculations based on various scenarios, which show a negative impact ranging between £650 million and £925 million, including significant cost increases in payroll, distribution and store expenses.

Lewis said Tesco’s Asian business had increased market share in Malaysia, opening two new small stores following favourable legislative changes, and the company plans a further four openings in the current financial year. 

In Thailand, Tesco’s new Express proposition roll out and large store re-invention programme are both progressing well and the company is testing two ‘ultra convenient’ E-Pop stores in Bangkok. 

“We have simplified our fresh-food offer, with more competitive prices and our ‘Food Love Stories’ campaign has further improved customer quality perceptions.”

A simplification of Tesco’s general merchandise ranges impacted headline sales by about 1 per cent during the year.

He said the company had also built trust with customers throughout the region due to a focus on reducing food waste and plastic usage.

The sale of Tesco’s Asian business is expected to be completed in the second half of this year, subject to regulatory approvals.