Tesco Plc Business Analysis

This project analyzes the business strategy of Tesco Plc, a leading multinational retailer, and compares its performance to rivals Morrisons Plc and Sainsbury Plc. It utilizes PESTLE analysis, Porter's Five Forces model, and financial ratio analysis to assess Tesco's competitive advantage and industry position. The project also includes a detailed evaluation of Tesco's strategies and recommendations for future growth.

Business Analysis Project

TABLE OF CONTENTS
1. INTRODUCTION.......................................................................................................................1
2. STRATEGIC ANALYSIS...........................................................................................................3
2.1 PESTLE Analysis.............................................................................................................3
2.2 Industry Analysis by conducting Porter’s five forces model (modified).........................5
3. FINANCIAL ANALYSIS...........................................................................................................8
3.1 Financial performance......................................................................................................8
3.2 Industry Specific Performance.......................................................................................12
4. Limitations of Analysis..............................................................................................................14
4.1 Limitations of Strategic Analysis...................................................................................14
4.2 Limitations of Financial Analysis..................................................................................15
5. Conclusion.................................................................................................................................15
6. Recommendation.......................................................................................................................16
7. Strategy Evaluation....................................................................................................................18
8. Financial Data Modelling..........................................................................................................20
9. References..................................................................................................................................27
Figure 1: Industry Specific Performance.......................................................................................13
Figure 2: Market share of three companies Source: statista.com..................................................14
Figure 3: Trend analysis of Tesco Plc related to current ratio ......................................................23
Figure 4: Trend analysis of Tesco Plc related to NP margin ........................................................24
Figure 5: Trend analysis of Tesco Plc related to GP margin ........................................................25
Figure 6: Trend analysis of Tesco Plc related to ROCE................................................................26
Table 1: Rationale............................................................................................................................2
Table 2: Ratio analysis of Tesco Plc................................................................................................9
Table 3: Ratio analysis of Morrison’s Plc........................................................................................9
Table 4: Ratio analysis of Sainsbury Plc.......................................................................................10
Table 5: Tesco Plc Trend analysis.................................................................................................18

1. INTRODUCTION
Purpose of project
The main purpose of conducting project is to analyse the business strategy of Tesco Plc.
Furthermore, comparison will be made with other two companies such as Morrisons Plc and
Sainsbury Plc which are listed on LSE (London Stock Exchange). By analysing strategic model
of company so that stakeholders may be able to invest in it.
Background of organisation
Tesco Plc is one of the biggest retail multinational organisations headquartered in UK. It
was founded in 1919 by Jack Cohen. Company has effectively diversified its business and
satisfies customers by providing quality products and enhanced services.
Rationale
Tesco Plc's competitive advantage will be compared and benchmarked with two UK
based organisations engaged in retail business i.e. Morrisons Plc and Sainsbury Plc. Tesco Plc
has competitive advantage as it satisfies customers up to a large extent and will be able to attain
good quantum of market share in the future course of action.
Tesco Plc Morrisons Plc Sainsbury Plc
Listing (London Stock
Exchange)
TSCO MRW SBRY
Target customers Middle and High
income customers. All
age group of people
are provided goods.
Experiential target
positioning is used
especially in beauty
products.
Upper Middle and
High income
consumers. Making
core supermarkets
strong enough by
supplying products at
competitive price.
Middle class and High
income group
customers. Its target
customers are family
unit particularly
mothers so that better
quality food products
may be provided.
Benefits Cost advantage Affordable items Making available
items at right place at
right time.

Customer Value Maximum satisfaction Competitive price
range
Quality products at
low prices

Table 1: Rationale
Key issues
The main issue faced by Tesco Plc is grocery inflation which has transformed from
negative to positive and this will weaken Pound Sterling implying that more of the gains will be
entertained by suppliers of UK. The prices would have to be cut down leading to lower profits
and thus, inculcating problems in stores.
Illustration 1: UK Customer Satisfaction Index (Retail food sector) Source:
thetravelconvention.com
It can be analysed that has 79 of customer satisfaction. However, other two companies
such as Morrisons Plc has 82 share and Sainsbury Plc has 81 which are more than growth of
Tesco Plc. Hence, issues need to be resolved so that firm may attain higher growth in retail
industry.
3

2. STRATEGIC ANALYSIS
2.1 PESTLE Analysis Political: The factors such as tax rate, legislation and political disruption prevails as
business operates in around 12 nations. Import duty has immediate effect on Tesco as it
purchases inventory from countries such as China and East Asia. This may affect business as
political instability has greater influence. Economic: The economic factors also affect business as economic policies of various
nations are different. Labour cost is a vital factor because annual wage bill is expanding over
4.5 GBP billion and 4.4 % wage rate is maximised for employees having age of 25 years.
Hence, cost has been increased. Furthermore, borrowing cost should be increased in the UK.
Diversification in international market is required as it will overall profit in an effective
manner. Social: Consumer behaviour has been changing now and then affecting Tesco Plc. up to a
large extent. Fast delivery and one-stop shopping is demanded by customers and
organisation is required to fulfil these demands to ensure that consumers attain maximum
satisfaction level. Obesity is a crucial issue by which people are more focused on individual
health. Thus, demand should be met by providing organic food (Mackey, Barney and
Dotson, 2017). Technological: Technology up-gradation is required to be produced more with greater
efficiency. Tesco Plc has faced issues in the past relating to pathetic customer experience
and so, to regain trust, technological advancement is to be implemented. It has initiated
RFID technology for enhancing customer experience which is used to count inventory and
to automatically remove it after sales has occurred. PayQwid is also developed by
organisation to pay bills through mobile app. Legal: The factors in relation to legal scenario is that company should focus on issues so
that it may legally carry out operations (Farooq, 2018). This is evident from the fact that in
2016, around 17 employees took actions against employer based on gender and age
discrimination. They were irritated with lower benefits for overtime work and shift of
holidays as well. It must abide by the guidelines imparted by Food Retailing Commission
(FRC).
4

 Environmental: Issues related to environment must be taken into account so that business
may not harm the society. Tesco Plc has initiated that van drivers will use the shortest
possible routes to effectively save fuel. Unwanted plastic bags would be gathered and
recycled.
Attractiveness to Business Environment
PESTLE Opportunity or Threat
(Low, Moderate and High)
Political
 Political disruption
 Tax rate in foreign
 Political instability
High Opportunity
Economic
 Labour cost
 Borrowing cost
 Diversification in international market
High Opportunity
Social
 Consumer behaviour
 Obesity in people
 Organic food
High Opportunity
Technological
 RFID technology
 Mobile app for payments
High Opportunity
Legal
 Gender discrimination
 Food Retailing Commission (FRC)
 Adequate wages for overtime
High Opportunity
Environmental
 Van drivers
 Unwanted plastic bags
High Opportunity
5

 Recycling
Table 2: Summary of PESTLE Analysis
2.2 Industry Analysis by conducting Porter’s five forces model (modified)
Porter's five forces model is quite effective in analysing competition and position of
company in the industry. The model in relation to Tesco Plc is listed as below:
Threat of new entrants
These are the barriers to entry as if market is performing well, more competitors will be
attracted to enter in market and earn profits. Hence, cut-throat competition can be seen leading to
entry barriers to new firms. The factors include existing loyalty of Tesco Plc, more fixed cost,
complying with government regulations and high requirement of capital.
New entrants Threats
Entry barriers High
Requirement of capital High
Threat of new entrants is low making it more profitable for retail sector and industry is
more attractive.
Bargaining power of suppliers
This is one of the main factors that can lead to affect operations of business as it is
heavily reliant on suppliers to provide raw materials. Tesco Plc is engaged in retail market and
requires materials from suppliers and if they demand more prices, then costs will be injected for
company. It prevails when very few of them are present in the industry. Buyers' need those
products which cannot be made without taking raw materials from suppliers (Morrison, 2016).
Bargaining power of suppliers Power of suppliers
Limited suppliers High
Cost of switching High
6

High bargaining power of suppliers prevails making less profitable for retail sector.
Bargaining power of customers
When even one customer has an impact on sales volume and profits, it implies that
substantial power is hold by him. It particularly relates when there are few customers in the
market. They purchase larger volume of goods from the organisation. Furthermore, they are
sensitive to prices of products. There are substitutes available in the market.
Bargaining power of customers Power of customers
Substantial power High
Substitutes High
Switching cost of customers to firm cost of
switching
Low
High bargaining power is found making less profitable for retail sector.
Threat of substitutes
It is one of the main reasons for which company' operations can be affected if there are
certain substitutes prevailing in market of its products. These substitutes are comparatively lower
than organisation's commodities and this attracts customers to purchase goods of lower prices
affecting profits up to a high range. Hence, consumer’s switching will take place leading to
suffer losses to the firm.
Substitutes Threats
Substitute items Moderate to High
7

Substitutes are moderate to high which means that industry is less to moderate attractive
and profits are affected.
Rivalry in industry
Tesco Plc is quite effective in attaining the profits by satisfying customers. The rivals
such as Morrisons Plc and Sainsbury Plc are major rivals prevailing in the UK market. It is
required that firm may make well-structured strategies to attain larger customer base. The retail
industry is highly competitive and firm earns lower profits as intense competition exists. Factors
which limits other organisation to enter are industrial growth, incurring high expenditures on
advertising and promotional tools (Fulker and et.al, 2016).
Rivalry Intensity
High expenditures High
Customer switching low High
Rivalry is high in retail industry which means that profits are low and less attractive
industry is found.
Technological disruption
It is enhanced point included in Porter’s five forces model. Technological disruption
means that innovation which creates and develop newer markets. In contrast to this, existing
markets are disrupted and sales are minimised as well. This affects large firms such as Tesco Plc
having variety of products and services. Hence, affecting overall market share of the existing
organisation.
Forces Threat level Industrial Attractiveness
Threat of new entrants Low Attractive
Bargaining power of High Unattractive
8

suppliers
Bargaining power of
customers
High Unattractive
Threat of substitutes Moderate to High Neutral to Unattractive
Rivalry in industry High Unattractive
Table 3: Favourability of Retail sector
3. FINANCIAL ANALYSIS
3.1 Financial performance
The financial ratios for company and its rivals are calculated as below:
Tesco Plc
Particulars Formula 2018 2017 2016 2015
Current ratio
Current
assets /
Current
Liabilities 0.71 0.79 0.75 0.6
Net profit
margin
Net profit /
sales revenue 2.1 -0.07 0.2 -9.22
Gross profit
margin
Gross profit /
sales revenue 5.8 5.2 5.3 -3.9
Return on
Capital
Employed
Earnings
Before Interest
and Taxes /
Capital
Employed 5.07% 0.55% 0.67% -26.13%
9

Table 4: Ratio analysis of Tesco Plc
Morrisons Plc
Particulars Formula 2018 2017 2016 2015
Current ratio
Current
assets /
Current
Liabilities 0.41 0.41 0.48 0.5
Net profit
margin
Net profit /
sales revenue 1.8 1.87 1.38 -4.53
Gross profit
margin
Gross profit /
sales revenue 3.7 3.7 3.8 4.5
Return on
Capital
Employed
Earnings
Before Interest
and Taxes /
Capital
Employed 5.77% 5.09% 3.31% -11.48%
Table 5: Ratio analysis of Morrison’s Plc
Sainsbury Plc
Particulars Formula 2018 2017 2016 2015
Current ratio
Current
assets /
Current
Liabilities 0.76 0.74 0.66 0.64
Net profit Net profit / 1.02 1.44 2 -0.7
10

margin sales revenue
Gross profit
margin
Gross profit /
sales revenue 6.6 6.2 6.2 5.1
Return on
Capital
Employed
Earnings
Before Interest
and Taxes /
Capital
Employed 3.50% 4.51% 5.35% -0.75%
Table 6: Ratio analysis of Sainsbury Plc
The ratios have been computed for three organisations above. Financial ratios are quite
useful for analysing overall financial performance of company. Profitability ratios such as Net
profit margin, gross profit and ROCE is calculated. Furthermore, current ratio is also computed
for the firms. All of three firms are profitable enough and have good customer base. In relation to
this, ratios would show how much effective, they all are in comparison to one another. Tesco Plc
had current ratio of 0.60 in 2015 which increased to 0.75 in later year. It further increased to 0.79
in 2017 and decreased to 0.71 in recent period. On the other hand, current ratio of Sainsbury Plc
was 0.64 in 2015 and slight increment was attained in 2016. Moreover, it reached to 0.74 and
0.76 in last two years.
11

Current ratio of Morrisons Plc in 2015 was 0.50 which went on decreasing and reached to
0.41 in 2018. This implies that liquidity position of organisation is not good as it should be at
least 2 :1 which is ideal ratio. It can be analysed from current ratio that Sainsbury Plc has good
position in comparison to Tesco Plc and thus, it will be able to pay-off current liabilities within
time. On the other side, gross profit margin of Tesco Plc was -3.9 in 2015 which became positive
in 2016 as it reached to 5.3 in 2016. It further elevated in 2017 to 5.2 and 5.8 in 2018. This
shows that it is perfectly controlling and reducing expenditures to earn more profits. Sainsbury
Plc had 5.1 in 2015 and increased to 6.2 in 2016 and same in next year. Furthermore, 6.6 was
reached to 2018. This means that company has initiated good control over operational expenses.
12
Illustration 2: Current ratio

13
Illustration 3: Gross profit margin
Illustration 4: Net profit margin

Morrisons Plc had 4.5 of gross profit in 2015 which came to 3.7 in 2018. It shows that
Sainsbury Plc has good margin in comparison to other three companies. Net profit margin was -
9.22 in 2015 of Tesco Plc and reached to 0.2 in 2016. It further decreased in 2016 to -0.07.
However, position was good in 2018 as it was 2.1. Morrisons Plc had -4.53 in 2015 and
maximised to 1.8 in 2018. Sainsbury Plc had -0.7 in 2015 and reached to 1.02 in 2018. The net
profit of Tesco Plc is good.
ROCE is computed which shows that Sainsbury Plc had -0.75 % in 2015 and increased to
3.50% in 2018. Morrisons had -11.48 % in 2015 and reached to 5.77 % in 2018. Tesco Plc has -
26.13 % in 2015 and increased to 5.07 % in 2018. This implies that Tesco Plc and Sainsbury Plc
has good performance in relation to financials.
The technological factor in Tesco Plc can be applied because firm has to perform good.
Moreover, new techniques are to be employed so as to enhance customer's experience. This
could lead to challenge for company as other organisations such as Sainsbury Plc and Morrisons
Plc have been deploying technologies now and then leading to tough competition. Hence,
industrial performance of organisation is low in comparison to rivals.
14
Illustration 5: ROCE

On the other hand, Porters-five-forces model has impact on company mainly threat of
substitutes because similar firms can have more products which may hinder growth of company
and sales may be affected up to a high extent. It is required that product differentiation should be
adopted so as to maximise sales and profits. Thereby, decreasing level of substitutes of similar
products. Hence, Tesco Plc will be benefited as sales will be enlarged in a better way and brand
value will not be differentiated as well. Thus, internal and external environment has great impact
on financial performance of company.
3.2 Industry Specific Performance
The above graph shows that retail industry decreasing trend in the past years. However,
2017 financial year had been fruitful for organisations as 50,000 million GBP of sales were
accomplished in October month. But it, reduced in last quarter to below 30,000. It can be
interpreted from the chart that retail sales will increase and more revenue would be achieved.
15
Figure 1: Industry Specific Performance

Market share of all three organisations have been summarised in above chart. It reflects
that Morrisons Plc has 10.6 % of total market share highlighted in red (Market share of grocery
stores in Great Britain from August 2012 to August 2017). On the other hand, Tesco Plc has
nearly 27.7 % and Sainsbury Plc's share in the UK market is 15.6 %. These figures clearly shows
that Tesco Plc has good quantum of market share whereas other organisations have lowest.
4. Limitations of Analysis
4.1 Limitations of Strategic Analysis
PESTLE analysis is carried out by assessing external environment which tends to change
as business operates in dynamic world (Brito and Harkiolakis, 2017). It is the biggest limitation
of such analysis as fluctuations in currency can prevail and purchasing power of people never
remains same (Pillai and Dam, 2017). Moreover, technological environment also changes which
has unfavourable results. PESTLE analysis provides an overview of external factors prevailing in
the nation but does not provide specific factors relating to industry and hence, are inaccurate
(Aithal, 2017). On the other side, Porters-five-forces model helps to effectively assess
16
Figure 2: Market share of three companies Source: statista.com

competitive advantage of Tesco Plc which means that it has useful for company. However, main
limitation is that industry remains static and never changes (Kung’u, 2017). Furthermore,
globalisation factor is also ignored in Porters-five-forces model which has large impact on firm
(Wentzensen and Wacholder, 2013). Porters-five-forces model is also not useful as it has
limitations such as inside-out strategy is not taken into account. Moreover, sometimes it is
required to form complete new markets which is a case of blue ocean strategy (Shenoy and
Aithal, 2017).
4.2 Limitations of Financial Analysis
Financial statements are used to analyse company's performance (Kumar, Krovi and
Rajagopalan, 2017). Main demerit is that these are based on historical data and no relevance with
regards to current performance (Kaffash and Marra, 2017). In simple words, past information is
evaluated through scrutinising financials (Sista, Miller, Kahn and Kline, 2017). It does not take
into account current data to assess performance which is the biggest limitation. Moreover,
inflation factor is also important factor which is ignored as well (Chan and Chong, 2017). It
distorts performance of organisation and thus, inflated figures do not find place in such analysis
(Axelrod and et.al, 2017). Furthermore, economic factors are another crucial elements affects
overall performance which is not included in financial statements (Pappas, Ongena, Izzeldin and
Fuertes, 2017). Hence, it can be said that financial analysis has certain limitation distorting
performance of company (Elenkov, 2014).
5. Conclusion
Hereby it can be concluded that business has to perform good so as to achieve good
customer base and eventually higher market share (Rosca, Arnold and Bendul, 2017). The report
highlights that market leader of retail sector is Tesco Plc and followed by Sainsbury Plc and
Morrisons Plc. The financial performance of Tesco Plc is increased in 2018 as shown by
conducting ratio analysis (Goldratt, 2017). Furthermore, trend analysis of liquidity and
profitability position also implies that company will outperform competitors (Hernandez-
Sherrington, Ho, Roth and Yan, 2017). The key issues such as price inflation, quality and
innovation are required so that Tesco Plc may be able to achieve greater heights. Priority based
ranking model has been applied. Rank 1 is given for lowest priority, 2 is for moderate priority
and 3 is given for high priority (O'connell and Walker, 2017).
17

Priority Rating
Analysis scope
Enhancement in
price
Improvement in
quality Innovation
Political 2 1 1
Economic 3 2 2
Social 3 2 3
Technological 2 3 1
Legal 1 2 3
Environmental 1 3 2
Threat of new entrants 1 2 1
Bargaining power of
suppliers 3 1 3
Bargaining power of
customers 3 2 1
Threat of substitutes 3 1 2
Rivalry in industry 3 2 1
Technological
disruption 2 2 3
Profit 3 3 2
Volume of sales 3 2 3
18

Market share 3 3 1
Average 36 31 29
Hence, necessary improvement needs to be done by firm so that organisation may attain
increased efficiency in generating sales and thus, profits can be maximised and market share can
be elevated as well (Cachanosky and Salter, 2017).
6. Recommendation
It can be recommended to Tesco Plc to initiate control upon its expenses so that profits
can be enhanced quite effectually. Furthermore, it shows that firm has to explore more markets
by which it may be able to garner income in foreign currency with ease. It will help organisation
to tap new markets and enlarge existing customer base and thus, increasing its overall growth.
Moreover, it is also recommended diversifying business operational activities to inject revenue
and stay on topmost position in sector. Innovative products are required to garner sales.
Alternative option recommended is to tap new markets and at low operational costs so that
profits could be enhanced by targeting people in more markets, thereby, increasing market share
up to a high extent.
Potential Strategy Direction
Bowman's Strategy Clock is used to analyse Tesco Plc strategies quite effectually.
Potential Strategy Direction Critical Evaluation
Low price It is done by organisation to be cost leader in
the market. Tesco Plc have to keep prices at
nominal level. It will have low margin on
profits but sales can be increased in a better
way by reducing costs of products and services
to attain favourable position in the market by
outperforming rivals. This will help to
19

effectively accomplish more sales volume.
Differentiation Differentiation is the key objective of Tesco
Plc which binds customers to it in the best
possible way. It is strategy of organisation to
provide quality and differentiated product and
value added services and attain more
customers. Focused differentiation is made in
all businesses such as telecommunication,
financial sector and non-food items to make
ensure that customers are provided with better
quality services and that too at affordable
prices.
Hybrid Hybrid strategy is again main element of
potential strategic direction. It will be fruitful
for firm as it has price competitive and
innovation can be enhanced in a better way by
company. This will give it increased efficiency
and profits would be higher as well. Low price
is required so that company may achieve
profits. Reinvestment cycle is perfectly carried
out by the firm.
Strategy Selection
Strategic direction
Requirement Weightage Low Price Differentiator Hybrid
Price 4 4 1 3
Quality 3 2 3 3
20

Innovation 2 1 4 3
Competitive
Advantage 1 2 2 4
Weighted score 10 26 23 31
7. Strategy Evaluation
The strategy evaluation can be divided into suitability, feasibility and acceptability by
implementing JSW model. Suitability outlines hybrid strategy which is used to analyse external
factors helping to achieve competitive advantage by Tesco Plc. On the other side, feasibility
states that there are 6M's such as Money, Machinery, Manpower, Markets, Material and Make-
up which are to be feasible to achieve stated goals within stipulated time. Acceptability is
reviewed from stakeholders and financial performance of company (Andrews, Linn and Yi,
2017). Main issue of Tesco Plc is to increase its global reach and improve upon profit margins.
Stakeholders have positively accepted and supported various plans to accomplish growth and
further, will accept as well. Financial growth is quite remarkable as profits are produced and is
increased year after year (Wang, Li, Feng and Tian, 2017).
Suitability
Suitability
analysis Price Quality Innovation
Competitiv
e
Advantage
Suitability
scoring
Environmen
tal Done Done Done Done 5 (out of 5)
Industry Done Done Done Done 5
21

Financial Done Done Done Done 5
Table 7: Suitability analysis
Hybrid strategy is best suited for Tesco Plc so that all competencies can be faced
organisation can be resolved.
Feasibility
Money Strong profitability is needed in terms of cash flow as Tesco has 1145
million cash flow for investment purpose (Abadi, Sahebi, Arab, Alavi
and Karachi, 2018).
Machinery Machinery is required to be purchased so as to earn profits.
Manpower Training and development of workers are required for increased
efficiency (Buckley and Voorhees, 2017).
Markets It is capturing more market on international basis in India, China.
Material Increased incentive will maximise its profitability.
Make-up The structure of organisation is well-aligned with mission statement.
Acceptability
Stakeholders They have positively accepted and supported various plans needed to
accomplish growth in a better way. This would induce more
transparency in organisation's structure and strength of employees will
increase (Rosca, Arnold and Bendul, 2017).
Financial Net income of Tesco Plc has increased in 2018 as it reached to 1206
million which was negative in previous year. This means that profits
will be enhanced in the future (Hill, 2017).
8. Financial Data Modelling
Past Trend Analysis
22

Tesco Plc Trend analysis
Increa
se /
Decre
ase
Incre
ase /
Decre
ase
Increas
e /
Decrea
se
Increa
se /
Decre
ase
Particulars 2015 2014
Amou
nt
Perc
ent
201
6
201
5
Amo
unt
Perc
ent
201
7
201
6
Amou
nt
Perc
ent 2018 2017
Amou
nt
Perce
nt
Sales
6228
4 63557 -1273
-
0.02
544
33
622
84 -7851
-
0.13
559
17
544
33 1484 0.03
5749
1
5591
7 1574 0.03
Cost of
Goods
Manufactur
ed
6439
6 59547 4849 0.08
515
79
643
96
-
1281
7
-
0.20
530
15
515
79 1436 0.03
5414
1
5301
5 1126 0.02
Gross
profit -2112 4010 -6122
-
1.53
285
4
-
211
2 4966
-
2.35
290
2
285
4 48 0.02 3350 2902 448 0.15
Operating
expenses 0 0 0 0
Sales and
Administra
tive
expenditure 2695 1657 1038 0.63
185
2
269
5 -843
-
0.31
173
4
185
2 -118 -0.06 1786 1734 52 0.03
Miscellane
ous
expenses
0 0 235 0 235 162 235 -73 -0.31
23

Total
Operating
expenses 2695 1657 1038 0.63
185
2
269
5 -843
-
0.31
196
9
185
2 117 0.06 1948 1969 -21 -0.01
Operating
income -4807 2353 -7160
-
3.04
100
2
-
480
7 5809
-
1.21 933
100
2 -69 -0.07 1402 933 469 0.50
Interest
expenses 635 553 82 0.15 653 635 18 0.03 630 653 -23 -0.04 431 630 -199 -0.32
Other
profit /
(expenditur
e) -934 459 -1393
-
3.03 -187 -934 747
-
0.80 -158 -187 29 -0.16 327 -158 485 -3.07
Profit
Before
Taxes
(PBT) -6376 2259 -8635
-
3.82 162
-
637
6 6538
-
1.03 145 162 -17 -0.10 1298 145 1153 7.95
Income tax -657 347 -1004
-
2.89 -54 -657 603
-
0.92 87 -54 141 -2.61 306 87 219 2.52
Minority
sake -25 -4 -21 5.25 -9 -25 16
-
0.64 -14 -9 -5 0.56 2 -14 16 -1.14
Other
profit -25 -4 -21 5.25 -9 -25 16
-
0.64 -14 -9 -5 0.56 2 -14 16 -1.14
Net profit -5719 1912 -7631 -
3.99
216 -
571
9
5935 -
1.04
58 216 -158 -0.73 992 58 934 16.10
24

Net profit
by ops
discontinua
tion -47 -942 895
-
0.95 -87 -47 -40 0.85 -112 -87 -25 0.29 216 -112 328 -2.93
Other
profits 25 4 21 5.25 9 25 -16
-
0.64 14 9 5 0.56 -2 14 -16 -1.14
Net profit
available to
equity
holders -5741 974 -6715
-
6.89 138
-
574
1 5879
-
1.02 -40 138 -178 -1.29 1206 -40 1246 -31.15
Table 8: Tesco Plc Trend analysis
The above past trend of Tesco Plc shows that in 2014, 2015 and 2016, performance was
not good which has affected net profits up to a high extent. However, after that period, financial
year 2017 and 2018 both have produced good income. Hence, Tesco Plc performance is
maximised in past couple of years.
Future Trend Analysis
Trend analysis of Tesco Plc
Year Current ratio
2015 0.6
2016 0.75
2017 0.79
2018 0.71
2019 0.81
2020 0.84
25

2021 0.88
2022 0.92
It can be analysed from the chart that future trend analysis of current ratio would be
improved as it will be able to reach at 0.6 in 2015 and would reach to 0.71 in 2018 financial year.
Moreover, it would reach to 0.92 at the end of 2022.
Year Net profit margin
2015 -9.22
2016 0.2
2017 -0.07
2018 2.1
2019 6.68
2020 10.04
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Figure 3: Trend analysis of Tesco Plc related to current ratio

2021 13.41
2022 16.78
Net profit margin will be increased up to a high extent as it was -0.07 in 2017 and would
increase in 2018 to 2.1 and further it will maximise in next year. It would increase in 2019 and
furthermore, at the end of 2022 year, it would reach to 16.78.
Year
Gross profit
margin
2015 -3.9
2016 5.3
2017 5.2
2018 5.8
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Figure 4: Trend analysis of Tesco Plc related to NP margin

2019 10.35
2020 13.25
2021 16.15
2022 19.05
It can be interpreted that Gross profit margin would attain 10.35 in financial year 2019. It
would increase in next year to 13.25 and would maximise 16.15 and reach to 19.05 in further
year.
Year
Return on Capital
Employed
2015 -26.13
2016 0.67
2017 0.55
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Figure 5: Trend analysis of Tesco Plc related to GP margin

2018 5.07
2019 18.41
2020 27.76
2021 37.11
2022 46.45
It can be analysed that ROCE would be 18.41 in 2019 and will be maximised to 27.76 in
2020. Furthermore, in 2021, it would increase to 37.11 and same trend will continue in 2022.
The future trend of ratios and income statement is done showing that Tesco Plc will
perform better in forthcoming period (D’Mello, Gao and Jia, 2017). It is clarified from net profit
margin, gross profit margin, ROCE and current ratio that values will be increased highlighting
good performance of firm. The trend line equation is being used to forecast trend of financial
ratios by putting values and next four years i.e. 2019, 2020, 2021 and 2022 have been computed.
Overall growth would be achieved in future course of action.
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Figure 6: Trend analysis of Tesco Plc related to ROCE

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