Tesco resumes dividend as profits rise to £562m in first half

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

The last payout was in 2014, after the giant admitted to overstating profits by around £250m.

The company had net debt of 3.3 billion pounds by August 26.

Tesco scrapped its previous round of dividends a month after that interim payment, as Chief Executive Dave Lewis began a turnaround plan for the company, following a scandal regarding overstatement of profits.

United Kingdom and Ireland operating profits leapt 21% higher to £471 million in its first half, while on a statutory basis, group pre-tax profits rose from £71 million to £562 million.

"All of this is possible because of the focus we have placed on serving shoppers a little better every day".

Hargreaves Lansdown analyst, Laith Khalaf, said there were not "many things more telling about the health of company than its ability to pay a dividend, and Tesco's return to the register after a three-year hiatus speaks volumes about the progress the company has made".

Tesco announced that it would pay out an interim dividend of 1p per share, reflecting "improved performance and board confidence".

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The supermarket chain struck a £3.7bn deal to buy food wholesaler Booker in January, which is now being probed by the Competition and Markets Authority.

While the numbers and story behind Tesco at the moment looks encouraging, our view is that competition is here to stay and will be ramped up by the German discounters making the margin improvement targets more hard to achieve over time.

It also coincides with the trial of three former Tesco execs who have been charged with fraud and false accounting.

The grocer said its inflation was around one per cent less than that across the rest of the supermarket sector as it worked with suppliers to protect customers from inflationary pressures.

"The combination of cheaper supplier costs and a gradual reduction of Tesco's own operating costs have allowed the brand to increase profits in the face of a weakening market and intense competition".

For the first half, profit before tax surged to 562 million pounds from 71 million a year ago.

Shore Capital analyst Clive Black said the dividend was "a sign that the group has left the medical ward and so confidence in future prospects".