// Tesco chairman John Allan says “I don’t remotely feel any sort of guilt” over increase in shareholder pay-out
// Comments come after Tesco this week announced a £315 million six-month dividend
// Supermarket has received a £249 million tax break since coronavirus lockdown
Tesco chairman John Allan said he would “defend to the death” the supermarket giant’s decision to pay a dividend after receiving a large tax break, according to the Mail on Sunday.
Earlier this week Tesco announced it would increase the dividend and make a one-off payment after interim profits rose by 28.7 per cent.
The Big 4 retailer said it made a pre-tax profit of £551 million in the first half of the year, a 28.7 per cent year-on-year increase, on the back of statutory revenue of £28.7 billion, up 0.7 per cent.
Shareholders will be paid a 3.2p interim dividend, up 21 per cent compared with last year, but were also told they could expect a share of a £5 billion payout after the sale of Tesco’s Asian arm completes at the end of the year.
In March, the global chain sold off its Thai and Malaysian arm, consisting of about 2000 shops, for £8 billion.
Following the sale, bosses promised to return £5 billion from the sale to shareholders – around 51p per share.
The results of Tesco’s half-year trading period announced on Wednesday covered the height of the Covid-19 lockdown when most shops were forced to close for about three months, except for “essential” retailers such as grocers.
Chancellor Rishi Sunak’s business rates holiday for the entire retail sector meant Tesco avoided paying £249 million since the coronavirus outbreak began.
After a board meeting to discuss the matter, Tesco announced a £315 million six-month dividend on Wednesday.
In an interview with the Mail on Sunday, Allan said Tesco would have likely made the decision without the tax break, because of its “strong balance sheet” and improving performance.
Allan said the rates holiday was a blanket decision and Tesco had not accepted any discretionary help, including the furlough scheme and VAT holiday.
“Our view was that we got some benefit from this but we also had an awful lot of additional costs,” Allan told the paper.
Tesco on Wednesday said it received a £533 million hit from coronavirus costs, but that this was offset by the business rates holiday.
“We were told very firmly that the expectation on us was that we would remain open seven days a week through all of this and we did. I would defend to the death that we’ve done the right thing over this… I don’t remotely feel any sort of guilt over it,” Allan told the Mail on Sunday.
“The company is solvent, is cash-generating, and lots of individuals are dependent on dividend payments – pensioners and small shareholders, which includes a lot of Tesco staff.
“It’s not just big institutions, and we felt that, if we were in a position to do so, we should continue to pay it. I do feel very strongly about this, even if it’s going to lead to some temporary unpopularity,” Allan added in his interview.