![]() Value. Quality. Service. Tesco PLC Annual Report and Financial Statements 2026 ![]() Every Little Helps. At Tesco, Every Little Helps has always been rooted in the real actions our colleagues take every day to support our customers. These three words have guided us for thirty years, and have never been more relevant. ![]() ![]() That’s not all, we have: Over 10,000 products on Clubcard Prices Customers made an average annual saving of £404 through Clubcard Prices\* 7m customers offered Clubcard Challenges Booker locked in 600 prices for catering customers over summer 2025 Value We recognise how much value matters to our customers, which is why our focus is on delivering great prices on the lines that matter most. We are committed to supporting our customers by helping them make their money go further and making everyday life that little bit easier. Our Everyday Low Prices commitment is keeping prices low on more than 3,000 branded products customers love. Quality We really care about great food, and our expert product development teams work hand-in-hand with our suppliers to develop exciting new products and continually improve existing ones. We are proud of our partnerships, whether that’s our work with farmers as British agriculture’s biggest customer, or the many other producers and suppliers we source from. Together, we have developed a wide range of award-winning products and ranges – with awards this year in everything from cheese and wine to fresh produce. 15% increase in Finest sales in the UK \* Average annual customer savings through Clubcard Prices. ![]() Whoosh. ® Whoosh. ® No.1 Supermarket of the Year at the International Wine Challenge 84 Taste of Ireland awards Launched over 2,000 new and improved products Over 350 in-store pharmacies 73% UK households are covered by Whoosh rapid delivery service 5 Consecutive wins for Best Mobile Network for Customer Service at Uswitch Telecoms Awards Service Our colleagues go the extra mile when it comes to service – whether that’s an extra hand for customers who need it, or supporting hundreds of schools to access free fruit and veg for their pupils. We want to make the shopping experience as convenient as possible for our customers, however they shop with us – whether that’s in store, buying groceries online through our core Grocery Home Shopping service and Tesco Whoosh, or more recent additions to our offer like Tesco Marketplace and F&F Online. ![]() Hello Strategic report Value, Quality and Service 02 Contents 04 Highlights of the year 05 Tesco at a glance 06 Our purpose framework 07 Chair’s statement 08 Group Chief Executive’s review 10 Market context 13 Our strategic ambitions 14 Our business model 16 Key performance indicators 17 Stakeholder engagement 18 Everyone’s welcome 20 Financial review 22 Sustainability 29 TCFD (including content finder index) 34 Principal risks and uncertainties 38 (including TCFD risks and opportunities) Longer term viability statement 48 Governance Governance overview 50 Governance introduction 52 Board of Directors 54 Governance framework 58 Board activity and section 172 statement 64 Nominations and Governance Committee 70 Sustainability Committee 74 Audit Committee 78 Directors’ remuneration report 88 Statement of Directors’ responsibilities 109 Financial statements Independent auditor’s report 110 Group income statement 121 Group statement of comprehensive 122 income/(loss) Group balance sheet 123 Group statement of changes in equity 124 Group cash flow statement 126 Notes to the Group financial statements 127 Tesco PLC – Parent Company balance sheet 200 Tesco PLC – Parent Company statement 201 of changes in equity Notes to the Parent Company 202 financial statements Related undertakings of the Tesco Group 208 Additional information Supplementary information (unaudited) 214 Glossary – Alternative 216 performance measures Glossary – Other 223 Five-year record 224 Directors’ report 225 NFSIS 229 Additional information for shareholders 230 Welcome to our Annual Report 2026 Tesco was built to be a champion for customers, serving them every day with affordable, healthy and sustainable food. Across the Group, our purpose is at the core of what we do: serving our customers, communities and planet a little better every day. Our fantastic team of over 340,000 colleagues go above and beyond to serve our customers. We work hard to be a place where everyone is welcome, where all colleagues can be at their best and build the skills to grow their careers. Task Force on Climate-related Financial Disclosures (TCFD) TCFD content has been integrated across the Annual Report and can be found using the index on page 34 and wherever you see this icon T Further reading Please visit our website: tescoplc.com/investors The Independent auditor’s reasonable assurance report in relation to the Electronic Format Annual Financial Report is appended to the end of the Annual Report Tesco PLC Annual Report and Financial Statements 2026 04 ![]() 2025/26 Highlights of the year The Group’s statutory financial results for the year ended 28 February 2026 reflect a 53-week reporting period. Alternative Performance Measures (APMs) are presented for the 52 weeks to 22 February 2026 to aid comparability, except for Net debt which is presented at the balance sheet date. There is no impact from the additional week on Insurance and Money Services and Central Europe, which report to the end of February every year. In line with its treatment when presented last year, the performance of the Banking operations in FY 24/25 is presented as a discontinued operation. The Insurance and Money Services business (IMS) is presented on a continuing operations basis and therefore within the headline performance measures. There are no discontinued operations in the current year. All growth rates are shown at actual exchange rates. Δ Alternative performance measures (APMs) – the Group has defined and outlined the purpose of its APMs in the Glossary starting on page 216. (a) Group sales exclude VAT and fuel. (b) Adjusted operating profit and Adjusted diluted EPS exclude the impact of adjusting items. Refer to Note 5 on page 137. (c) Further information on Net debt can be found in Note 31 on page 194. (d) Free cash flow is an APM defined and outlined in the Glossary starting on page 216. See the Glossary starting on page 216 for details of changes to APMs. (e) UK market share based on Worldpanel by Numerator Total Grocers Total Till Roll for the 12 weeks ended 22 February 2026. (f) Brand NPS is based on BASIS Global Brand Tracker for 13 weeks ended 28 February 2026. Group sales Δ(a) £66.6bn 4.6% (2025: £63.6bn) Adjusted operating profit Δ(b) £3,152m 0.8% (2025: £3,128m) Dividend per share 14.5p 5.8% (2025: 13.7p) UK market share (sales value) (e) 28.5% 24bps (2025: 28.3%) Adjusted diluted EPS Δ(b) 29.0p 6.0% (2025: 27.4p) Free cash flow Δ(d) £1,957m 11.8% (2025: £1,750m) Net debt Δ(c) £(10,563)m (11.7)% (2025: £(9,454)m) Group net promoter score (f) 29pts 1pt (2025: 28pts) Performance highlights Statutory measures (on a continuing operations basis) Revenue £73.7bn 5.4% (2025: £69.9bn) Profit before tax £2,403m 8.5% (2025: £2,215m) Operating profit £2,985m 10.1% (2025: £2,711m) Diluted EPS 27.1p 16.9% (2025: 23.1p) Tesco PLC Annual Report and Financial Statements 2026 05 Governance Financial statements Additional informationStrategic report ![]() Our customers are always at the core Our businesses Who we are The value our businesses bring to customers and the Group Tesco is a leading multinational grocery retailer, with 3,724 stores across the UK, ROI, Czech Republic, Hungary and Slovakia. Across a range of formats, including online, large and convenience stores, we offer customers great value and quality on food and groceries, as well as F&F Home and Clothing. One Stop is a retail convenience business with over 1,000 company and franchise stores across the UK. One Stop stores offer a wide range of groceries and additional services, in the heart of local communities. www.tesco.com www.onestop.co.uk dunnhumby is recognised as a leader in connecting customer insight and action to build loyalty, drive performance, and deliver results that last for retailers and brands. We achieve this through a distinctive combination of AI-enabled science, software, and trusted advice together with over 35 years of experience. Tesco Insurance and Money Services is the UK’s second largest provider of travel money, the third largest ATM network in the UK, and serves more than 2.5 million customers across life, home, travel, pet and car insurance. www.dunnhumby.com www.tescoinsurance.com and www.tescotravelmoney.com Booker is the UK’s leading food and drink wholesaler, delivering great choice, price and service to a wide range of customers – including caterers, independent retailers and other businesses. Booker also owns symbol brands including Budgens, Londis and Premier. Tesco Mobile is the UK’s largest mobile virtual network operator, serving more than 5.5 million UK customers. It was established in 2003 as a joint venture between Tesco and O2. We now have nearly 600 phone shops in total across the UK, ROI and Czech Republic. www.booker.co.uk www.tescomobile.com Tesco at a glance Tesco PLC Annual Report and Financial Statements 2026 06 ![]() Our values put our purpose into practice Our three values underpin our purpose, setting out how we work together as a team and guiding the decisions and choices we make across the Group. Understanding people – customers, colleagues, communities – and what matters to them, and then trying to make those things better, is at the heart of Tesco. It is about listening to people and then acting by changing and innovating to meet their needs. At Tesco, there is an opportunity for all; everyone is heard, valued, supported, and empowered to be their best. By respecting each other and working together, we can make Tesco great for our colleagues and customers. Every little help makes a big difference – it’s the value we live by to ensure we serve our customers, colleagues and their communities a little better every day. It captures how, when we add up all the small things we do, Tesco can make a big difference to the issues customers, colleagues, communities and wider society care about. Our Tesco values are a vital part of our culture – and an essential underpinning of our growth and success. They ensure that every person at Tesco understands what is important – how we work together as a team and how customers are at the centre of what we do. They are universal values, which have helped guide our people as Tesco has grown. 1 No one tries harder for customers 2 We treat people how they want to be treated 3 Every little help makes a big difference Our purpose framework What we stand for Our core purpose is Serving our customers, communities and planet a little better every day. Serving our customers, communities and planet a little better every day means we always keep customers at the heart of what we do, and also reflects our responsibilities to the communities we serve and to society more broadly. Customers Everything we do begins and ends with our customers. By understanding our customers, we can anticipate and respond to their needs and expectations. As a Group we serve a wide range of different customers, in different settings, from retail customers through to insurance, mobile, Booker’s wholesale customers, and dunnhumby’s retailer and consumer goods clients. Communities The role we play in the thousands of communities we serve is vital – whether it is creating good jobs, supporting local suppliers and producers, redistributing surplus food, or helping children and schools through our community programmes. Planet Our commitment to sustainability is core to our business. It drives our work across our own operations and our supply chain to reduce our environmental impact and support a healthier way of living. Tesco PLC Annual Report and Financial Statements 2026 07 Governance Financial statements Additional informationStrategic report ![]() I‘m very proud of the many ways Tesco has continued to deliver for all our stakeholders in what has been a rapidly changing and competitive landscape. Throughout the year, Tesco’s core purpose of serving our customers, communities and planet a little better every day has acted as a guiding principle, underpinning every decision and every investment we make. This clarity of purpose, combined with the extraordinary dedication of our colleagues, has helped us navigate challenging headwinds, both domestically and internationally, and make meaningful progress across all parts of the business. Customers have always been the cornerstone of everything we do, and this year has been no exception. Colleagues across Tesco – from the shop floor and distribution to our head office support and technology teams – have stepped up, finding ways to surprise and delight customers with more personalised offers, industry-leading availability, innovative new products and the very best value. Economic environment We have delivered on our strategic priorities against an economic backdrop that is undeniably challenging. Inflation has been high; geopolitics remains unstable and commodity prices have fluctuated; Government regulatory and policy costs have increased; we have seen relentless competition; and continuing cost of living pressures have impacted the finances of millions of households. Our response to those pressures has been to double down on the basics of a brilliant shopping trip – an absolute focus on value, quality and service. That approach has resonated with shoppers in all of our markets and we’ve seen that not only in our market share, which reached its highest levels since 2015, but in our customer satisfaction scores which continue to perform ahead of our competitors. This would not have been possible without the collective efforts of over 340,000 colleagues across the business. Investments Together with our save to invest programme, our strong performance has enabled us to back long-term development programmes and capital investment. In this challenging environment, we’re always looking for new ways to invest in our colleagues and customers. Earlier last year I saw first-hand one of our future-facing investments when I visited our newly-opened distribution centre in Aylesford. This semi-automated centre is already helping us to serve our customers in the south east of England with fresh and frozen food, as well as creating jobs and other benefits for the local area. As well as Aylesford, we have signed an agreement in the past year to develop another new distribution centre at London Gateway, which is due to open in 2029. Health As a leading food business we continue to do everything we can to provide customers and communities with healthy choices every time they shop. We have consistently found ways to support customers and communities to live happier and healthier lifestyles, whether that’s through the free fruit we gave to children shopping with their families in around 800 stores at the start of this year or the extension of our free Fruit & Veg for Schools programme, which has so far provided 15.7 million portions of fruit, to over 500 schools across the country. At the end of December 2025, we achieved our healthy food sales target – 65% (by volume) of all the food we sell in the UK and ROI is now classified as healthy. We are determined to ensure healthy lifestyles are accessible for everyone – wherever they live and regardless of their budget. Chair’s statement Chair’s statement Gerry Murphy, Chair Tesco PLC Annual Report and Financial Statements 2026 08 ![]() Spotlight on: Sustainability Meanwhile, our sustainability agenda – particularly our progress towards net zero emissions, decarbonisation initiatives and partnerships with our farmers and wider supply chain – has continued to reflect our role as a responsible retailer and an industry leader in tackling broader societal challenges. In the past year we have made measurable progress on our sustainability ambitions. From reducing emissions in our operations to accelerating progress on sustainable sourcing and packaging reduction, we are continuing to set a strong example in our sector. Board Over the course of the past 12 months, the Board has continued to make decisions that strengthen oversight of strategic risk and focused on long-term value creation in areas like AI – ensuring that Tesco is well positioned to seize opportunities in the coming years. I am grateful to all my fellow Directors and the Executive team for their expertise and wisdom which have been fundamental to our continued success this year. I would also like to extend a particular thanks to Alison Platt who, after nine years as a Non- executive Director and an important period chairing our Remuneration Committee, retired from the Board after the 2025 Annual General Meeting. The Board and I would like to thank Alison for her long service and wish her all the best in the future. Year ahead In the year ahead we will navigate the current period of uncertainty by staying true to our values and doing everything we can to support customers, colleagues and communities through this challenging time. Our investment in strategic growth, our outstanding leadership team and our continued focus on innovation give us the right fundamentals to do a great job for all the stakeholders we serve. Moreover, it gives us solid foundations to build on Tesco’s established strengths and grow new capabilities as we implement our evolved strategy. This is based firmly on our renewed commitment to Every Little Helps, providing consistent, sustainable value for all our stakeholders – customers, colleagues, suppliers, communities and shareholders alike. On behalf of all the Board, as always, I would like to thank our colleagues for their dedication, tireless effort and support. Gerry Murphy Chair, 15 April 2026 Tesco’s core purpose of serving our customers, communities and planet a little better every day has acted as a guiding principle, underpinning every decision we make and every investment we undertake. Supporting schools with fruit and veg In 2024, in partnership with the British Nutrition Foundation (BNF), we launched our free Fruit & Veg for Schools programme in the UK, providing over 400 schools which had a high proportion of children on free school meals with funding to purchase fruit and vegetables. According to the BNF, only 12% of children aged between 11 and 18 were meeting the government’s recommendation of five portions of fruit and vegetables a day. By targeting schools with higher levels of free school meal eligibility, the programme aims to provide pupils with a nutritious boost. Since the scheme began in October 2024, we have provided a total of 15.7m portions of fruit and veg, averaging 85 portions per pupil. Our target for 2026 is to extend the programme to around 1,000 schools across the UK. In ROI, our focus on children’s access to fresh produce and opportunities for young people to develop lifelong food confidence has grown substantially. By the end of 2025, we were providing free, nutritious fresh food every week during the school term to more than 300 schools most in need across Ireland, with 73% reporting better school attendance. In recognition of its impact, the programme received the Chambers Ireland Sustainable Business Impact Award in the Community category in November 2025. 15.7m extra portions of fruit and vegetables distributed in the UK, averaging 85 portions per pupil. Tesco PLC Annual Report and Financial Statements 2026 09 Governance Financial statements Additional informationStrategic report ![]() Over the past 12 months, we have continued to do everything we can to deliver for our customers. We have demonstrated not only the strength but also the resilience of our business by ensuring our focus never wavers from delivering the best possible shopping trip, with great value, quality and service. Against an uncertain economic and geopolitical backdrop, we have been able to win consistently with customers and build on the positive momentum we came into the year with. And we’ve done it by doubling down on what matters most to customers. A convenient shopping experience that customers can rely on, with great product availability and even better service. Outstanding food and drink that’s surprised and delighted customers. Even greater levels of personalisation through Clubcard, and innovations, from Whoosh to Marketplace, that help us meet an even wider range of customer needs. One of our strengths is the relationships we have, and we never lose sight of all the different groups we serve, day-in, day-out – from our customers, colleagues and communities to our suppliers and shareholders. Customers For our customers, we know value is as important as it has ever been in our 107-year history. So, we have done everything we can in the past year to deliver what customers expect when they shop at Tesco: brilliant quality products at the best possible prices. We have done that through offering Aldi Price Match on more than 600 lines, Clubcard Prices on thousands of products each week, and the bold commitment to keep prices low on 3,000 of the nation’s most-loved brands through Everyday Low Prices. And we have paired that value with first-class quality. From fresh food to everyday essentials we have continued to innovate with producers and suppliers to ensure our shelves are packed with hundreds of new and improved products that reflect customer tastes as they evolve. Our Finest range had another phenomenal year, recording its third year of double-digit sales growth, and our Finest wine took home the most awards of all supermarket wine ranges at the International Wine Challenge awards. All these efforts have helped us to continue the positive momentum in our customer satisfaction scores. And we’ve grown our market share as more customers have voted with their feet and chosen to make Tesco part of their plans, both in-store and online. Group Chief Executive’s review For more information about our results use the QR code above Group Chief Executive’s review Ken Murphy, Group Chief Executive Tesco PLC Annual Report and Financial Statements 2026 10 ![]() Communities For the communities we serve, we’ve been doing what we can to step up and make a positive difference wherever we operate. Through our Stronger Starts grant scheme we awarded some £7.6m to around 7,300 projects all over the UK – investing directly into community initiatives that support local children and young people to access new sports and play equipment, as well as funds for healthy and nutritious food. At the same time, we expanded our flagship Free Fruit & Veg for Schools programme to cover more than 500 schools, helping even more young people in schools with higher levels of free school meal eligibility to access more fruit and vegetables. In the year ahead, we are doubling the size of that programme to around 1,000 schools nationwide. Colleagues For our colleagues, we recognise that none of our success is possible without their dedication and commitment to customers. I want to thank all our colleagues for their hard work and for the pride they bring to serving our customers and communities. Every day, they deliver the great service and standards that our customers rely on. We recently announced an above-inflation pay award that invested more than £200m in UK hourly pay. Recognising their exceptional service over the past year, we were pleased to announce a £65m special performance award for colleagues in our stores, distribution centres and customer engagement centres. We continue to invest in our broader package of benefits, from our Save As You Earn share scheme, to health and wellbeing support. Strong foundations Our effectiveness in meeting the needs of our different stakeholders – and recognising how their needs are continuing to evolve over time – has underpinned the strong growth we’ve achieved across the business this year, as well as the market share gains we’ve made. And they’re also a testament to the strategy we set five years ago, in 2021, to build on the unique advantages we have at Tesco in our scale and reach. The four strategic drivers we set to help maintain our competitiveness and accelerate our growth – magnetic value, easily the most convenient, I love my Tesco Clubcard and save to invest – have fulfilled that purpose and built strong foundations throughout the business. Colleagues have also played a pivotal role in helping us to constantly upgrade our online and digital capabilities. We’ve doubled the size of our tech team in the past six years, and you can see the impact that has had on improving the Tesco shopping experience, further personalising the offers we give customers through Clubcard and making our operations more efficient. Online has been our fastest growing channel – with sales up 11.2% this year, and we’ve continued to grow and improve what we offer our customers when they shop online with Tesco – whether that’s launching F&F Online or growing our third-party seller base on Marketplace. Meanwhile, our rapid delivery service, Whoosh, has proven incredibly popular with our customers – so much so that we’ve now expanded it to cover 73% of UK households. And at the same time as doing all this, we’ve remained incredibly disciplined and our save to invest programme has helped us to carry on driving efficiencies across the business; enabling us to offset some of the inflationary pressures we’ve been facing. One of our strengths is the relationships we have, and we never lose sight of all the different groups we serve, day-in day-out – from our customers, colleagues and communities to our suppliers and shareholders. Tesco PLC Annual Report and Financial Statements 2026 11 Governance Financial statements Additional informationStrategic report ![]() Whoosh. ® Whoosh. ® Evolving our strategy Together those drivers have helped keep our focus on doing the basics brilliantly, while exploring new opportunities in areas like digital, convenience and personalisation. But as the world continues to rapidly change all around us, so too must our approach. So, we have evolved our strategy to ensure that we can keep winning with even more customers, with our five strategic ambitions: winning in food; meeting more everyday customer needs; being the most strategic partner for suppliers; connected, personalised and loved by customers; and long-term business sustainability. On pages 14 and 15, we set out more detail on these ambitions, and how they fit together. The ambitions are interconnected and mutually reinforcing, and none of them are possible without us building on all of our existing strengths. Winning in food gives us permission to meet more everyday needs; meeting more needs gives us greater insight which helps us personalise better and support our suppliers more; and by using that to improve the experience we offer customers, we want them to love engaging with Tesco. Need Anything From Tesco? We have been serving customers and communities across the UK for more than a century, and we listen to them when they tell us that their needs are changing. That spirit – of truly understanding our customers – is the essence of our new Need Anything From Tesco campaign, and it underpins our recommitment to Every Little Helps. Every Little Helps will continue to guide everyone at Tesco to think about the actions they can take to make everyday life a little easier, or a little better, for our customers. It could be free nappies for premature babies or the biggest own brand Free From range of any supermarket. Or it could be making money go further with Clubcard Reward Partners on everything from meals out and holidays abroad to £2.50 cinema tickets. Year ahead We are all living through a period of real uncertainty and, when faced with that uncertainty, we will continue to do what we have always done: put our customers first. We are entering the year ahead in a position of strength. Our evolved strategy combined with our existing scale, our constantly improving customer proposition and our disciplined approach to managing costs will help ensure Tesco continues to adapt and grow in what is a rapidly changing world. Ken Murphy Group Chief Executive 15 April 2026 Rapid delivery service continues to grow It was a strong year for Whoosh, which has resonated with customers looking for a convenient and speedy way to get groceries delivered to their door. This year, Whoosh sales grew by 51% and we saw an increase in the number of customers using the service and how many products they bought. We have been able to use our existing store infrastructure to grow Whoosh availability quickly, and the service is now available to 73% of the UK population. This year, we have also launched Whoosh in Ireland, which is now available in 31 stores, and introduced in the UK the option for customers to schedule an order for later in the day. Group Chief Executive’s review continued Spotlight on: More than £400m total Whoosh sales 51% year-on-year growth in Whoosh sales Tesco PLC Annual Report and Financial Statements 2026 12 ![]() Spotlight on: Consumer sentiment Spotlight on: Competitive environment Spotlight on: Health and sustainability Spotlight on: Shopping behaviour Market context How we are responding – We price-match Aldi on more than 600 lines, we have more than 3,000 lines on Everyday Low Prices and thousands of Clubcard offers each week. – Growing personalisation, with the launch of Your Clubcard Prices, expansion of Clubcard Challenges and more than 7 million customers receiving personalised coupons every two weeks. – New AI partnerships to inspire customers with personalised product recommendations and recipe ideas. The UK is one of the world’s most competitive grocery markets, with seven retailers each holding more than 5% market share. At the start of the year we saw a further increase in the competitive intensity of the UK market. We are committed to ensuring that customers get the best value in the market by shopping at Tesco and we see further opportunities to protect and strengthen our competitiveness. Sources: Worldpanel Many households have seen real wage growth during the year, but subdued consumer confidence has contributed to an uptick in household savings. Further, elevated geopolitical tension is putting pressure on household incomes and many consumers are delaying major purchases. Value for money remains paramount. Sources: Kokoro, ONS, GfK The rising cost of dining out has resulted in a shift towards eating in and a higher demand for restaurant-quality food at home. Online retail has grown to levels seen during the COVID-19 pandemic, and the convenience market also continues to grow, driven by a trend towards little and often shops and an increased demand for rapid delivery services. Sources: Kokoro, Worldpanel Health is increasingly a priority for consumers, leading to some changes in food consumption and preparation, for example more cooking from scratch. Consumers are also more conscious of the social and environmental impact of their consumption. Sources: Kokoro How we are responding – We reduced the price of 10,000 lines in the UK by an average reduction of 9.5% since the start of the financial year. – Exclusive Clubcard deals on everyday services such as fixed prices for the length of a contract with Tesco Mobile. – Enhanced Clubcard reward partner deals including triple voucher value at seven leading restaurant chains and Tesco Tuesdays – allowing Clubcard members to get reduced price cinema tickets at Cineworld. How we are responding – Sales of our Finest range products increased by 15% year on year, with 750 new Finest products launched. – Online sales growth of 11.2%, having offered 100,000 additional online delivery slots the week before Christmas. – Tesco Whoosh sales increased by 51%, with further growth in active customers and basket sizes. – Strong value and availability for Booker’s catering customers has driven robust growth and improved customer satisfaction scores. How we are responding – Our focus on offering healthy, sustainable and affordable food meant that we met our 65% healthy sales target for the UK and ROI. – Our 5-a-day campaign encouraged over 2.4 million customers to eat more fruit and vegetables by offering extra Clubcard points and vouchers, and we offered free fruit for kids in our stores during the summer. – We remain focused on our commitment to reaching net zero across our full value chain by 2050. – More than 500,000 customers served in our UK pharmacies every week. To serve our customers well, we have to understand what’s important to them by using our data and insights. While the priorities for customers – and the political and economic contexts in which we operate – can vary across the UK, Ireland and our three countries in Central Europe, we have identified a number of key trends shaping the market. Market context Tesco PLC Annual Report and Financial Statements 2026 13 Governance Financial statements Additional informationStrategic report ![]() Our strategic ambitions Our goal is to create long-term sustainable value for all our stakeholders, by consistently delivering for customers. Over the past five years, we have made meaningful progress, with material investments into price, quality and service driving a significant increase in customer satisfaction and leading to our highest market share for a decade. The retail landscape continues to evolve. Households have had to adjust to persistent cost of living pressures and competition remains intense, with new entrants and technologies giving customers more choice than ever. Customer expectations are increasing too – in addition to great-tasting, high-quality food at the best possible price, they also want nutritious products that support their health goals, from a brand they can trust to do the right thing. To continue delivering for all our stakeholders, we have evolved our strategic ambitions into five mutually reinforcing goals. Our strategic ambitions Connected, personalised and loved by customers Delivered through our unique digital gateway and unrivalled network of physical stores Being the most strategic partner for suppliers Unlock stronger supplier relationships and financial benefits which can flow back into our core customer offer L o n g - t e r m b u s i n e s s s u s t a i n a b i l i t y Deliver the best quality, value and innovation in food Winning in food Grow household spend, generating higher revenue and enhanced data Meeting more everyday customer needs 14 ![]() We are always looking for ways to further strengthen our resilience, efficiency and sustainability. From best-in- class store, transport and distribution infrastructure, optimised through our ongoing save to invest programme, to resilient and secure supply chains, we are constantly evolving our business model to adapt to environmental and geopolitical change. As a key enabler, we will continue to enhance our best-in-class retail technology capability, harnessing the power of new and emerging AI. Long-term business sustainability We want shopping with us to be easier, more personalised and increasingly rewarding. As the glue that holds the whole Tesco ecosystem together, Clubcard and new AI tools can make every interaction more seamless and relevant by anticipating needs, offering timely nudges and making smarter recommendations. Our unrivalled store network will continue to meet local needs better than anyone, with our colleagues continuing to provide the most helpful service. Connected, personalised and loved by customers We want to help customers with more of their daily needs, and the frequency and trust we earn through food allows us to serve them a wider range of products and services. In addition to further growth in existing offers such as F&F Clothing, Pharmacy, Insurance and Money Services and Tesco Mobile, we are building emerging digital businesses such as Tesco Marketplace and F&F Online. Meeting these additional needs helps deepen our relationship with customers, whilst generating capital-light revenue streams. Meeting more everyday customer needs By using our unique data and insights to build new revenue opportunities and partnerships, we can work with our suppliers to become the most strategic retail partner for innovation and brand-building. By leveraging our store and digital footprint we will grow advertising income with Tesco Media and, as we meet more everyday needs, we can further build our understanding of customers, creating a more holistic data set. The additional insights, innovations and financial benefits we generate can flow back into our core customer offer, further enhancing the value we offer customers and reinforcing our ability to win in food. Being the most strategic partner for suppliers We want to deliver the very best value, quality, range, and innovation in food. Delicious, affordable and nutritious food matters more than ever to our customers and their families, and our ability to provide this at the very best price underpins our whole business. Through our market-leading presence across stores, online grocery and rapid delivery, combined with the reach of Booker’s wholesale business, we are better placed than anyone to serve customers great value and great tasting food wherever, whenever and however they want to be served. Winning in food Tesco PLC Annual Report and Financial Statements 2026 15 Governance Financial statements Additional informationStrategic report ![]() Customer Product Channel Serving our customers, communities and planet a little better every day I n s i g h t s I n s i g h t s Our business model With our winning combination of reach, innovation, insight and expertise, we can provide customers with the products they want – whenever, wherever and however they want to be served. Customers Listening to our customers and acting on what is most important to them when they shop with us. Products Using our expertise and working collaboratively with suppliers to source quality products at the right price for our customers. Channels Serving customers whenever, wherever and however they want to be served – from large and convenience stores to grocery home shopping and Whoosh. Our unique strengths Our reach With thousands of stores and a thriving online business, we have unparalleled scale to reach customers, wherever they are A best-in-class supply chain Flexibility and resilience in our supply chain helps us respond better to external events Breadth of offer Leading range development driven by insight and sourcing expertise helps us react to evolving customer demand Knowing our customers Through our retail expertise and insight, we have a unique understanding of what our customers want Strong supplier relationships Excellent links with suppliers help drive greater quality, value and availability Investing in our business Strong free cash flow enables investment in growth and innovation Our business model Tesco PLC Annual Report and Financial Statements 2026 16 ![]() Key performance indicators Our Big 6 KPIs The Group’s statutory financial results for the year ended 28 February 2026 reflect a 53-week reporting period. Alternative Performance Measures (APMs) are presented for the 52 weeks to 22 February 2026 to aid comparability, except for Net debt which is presented at the balance sheet date. There is no impact from the additional week on Insurance and Money Services and Central Europe, which report to the end of February every year. In line with its treatment when presented last year, the performance of the Banking operations in FY 24/25 is presented as a discontinued operation. The Insurance and Money Services business (IMS) is presented on a continuing operations basis and therefore within the headline performance measures. There are no discontinued operations in the current year. Δ APMs. Measures with the Δ symbol are defined in the Glossary section on pages 216 to 223. (a) Group sales exclude VAT and fuel. (b) Growth is at constant exchange rates. (c) Operating cash flow is the same as the statutory measure Cash generated from/(used in) operations presented on a continuing operations basis, excluding Insurance and Money Services. See Glossary, reconciliation of cash flow measures, for a reconciliation to the Group equivalent. (d) Brand NPS is based on BASIS Global Brand Tracker for 13 weeks ended 28 February 2026. (e) Carbon emissions are based on total Scope 1 and 2 (market-based) footprint and stated as tonnes of CO 2 equivalent (tCO 2 e) on a 52-week basis, see pages 37 and 228. Grow sales Deliver profit Group sales Δ Group adjusted operating profit Δ Colleagues recommend us as a great place to work and shop Climate – reduce Scope 1 and 2 emissions by 60% by 2025 Recommend as a place to shop Carbon emissions (tCO 2 e) (e) Great Place to Work Why it is important: Sustainable growth in sales is important to our business model. What we measure: Group sales is a measure of revenue excluding fuel sales. It demonstrates the Group’s performance in the retail, insurance and money services businesses by removing volatilities associated with the movement in fuel prices that are outside the control of management. How we performed: Group sales rose by 4.3% at constant exchange rates, with growth across all operating segments. £66.6bn (2025: £63.6bn) 4.3% (a)(b) 0.6% (b) £3,152m (2025: £3,128m) (5)pts 44pts (2025: 49pts) (3)% 82% (2025: 85%) (8)% vs last year (68)% cumulative reduction vs baseline 0.7m (2025: 0.8m) Why it is important: Delivering profitable growth is essential as we aim to create long- term value for all stakeholders. What we measure: Group adjusted operating profit is the headline measure of the Group’s performance. How we performed: Group adjusted operating profit rose by 0.6% at constant exchange rates to £3,152m. Continued investments in value, quality and service, drove strong sales growth which, combined with a further contribution from our save to invest programme, more than offset operating cost inflation. Improve operating cash flow Customers recommend us and come back time and again Operating cash flow (c) Group NPS (d) 11.2% (c) £5.2bn (2025: £4.6bn) 1pt 29pts (2025: 28pts) Why it is important: Strong cash generation is important to our underlying philosophy with which we manage our business. What we measure: Free cash flow is the cash generated from continuing operations. It is a measure of the cash generation and working capital efficiency of the retail business. How we performed: We delivered another strong year of operating cash flow of £5.2bn, with the increase year-on-year driven by profit growth and disciplined working capital management. Why it is important: Customers are at the heart of everything we do, and customer satisfaction is an important driver of loyalty. What we measure: Our score reflects the percentage of Fans minus Critics answering the question: ‘How likely is it that you would recommend Tesco to a friend or colleague?’ How we performed: Our Group NPS score has increased as customers have recognised our commitment to delivering great value. Why it is important: When we get things right for our 340,000 colleagues, we make it easier for them to do what they do best – serving our customers, communities and planet a little better every day. What we measure: Our Great Place to Work measure is the percentage of colleagues who agree or strongly agree with the statement ‘I would recommend Tesco as a great place to work’. Great Place to Shop is an NPS measure, answering the question ‘I would recommend Tesco as a place to shop’. How we performed: Although these scores are strong and ahead of industry benchmarks, it is our priority to address the small decline. Why it is important: This measure reflects the importance we place on minimising our impact on the planet and aligns to our commitment to be net zero in our own operations by 2035. What we measure: Based on our commitment to reduce Scope 1 and 2 carbon emissions by 60% by 2025, we measure the reduction in tonnes of CO 2 equivalent (tCO 2 e) vs our 2015/16 baseline. How we performed: We have achieved a reduction in carbon emissions by switching to renewable electricity, maintaining a consistent focus on driving energy efficiencies and making significant inroads to decarbonising our remaining key hotspots. Carbon emissions have reduced by (8)% vs last year. Tesco PLC Annual Report and Financial Statements 2026 17 Governance Financial statements Additional informationStrategic report ![]() importance on healthy, sustainable products that are widely accessible and affordable and recognises that continual innovation is essential to meeting customer expectations and responding to external challenges. Suppliers In the 2025 Advantage survey, our suppliers have ranked us the #1 retailer to work with in the UK for the 10th year running. More detail can be found in our Sustainability Report. Priorities and engagement We continue to build trusted relationships with our suppliers and work with them to deliver healthier, sustainable and affordable products for our customers. We will always make clear our responsible sourcing and ethical requirements when working with suppliers. We are proud to support British farmers, growers and suppliers. They are vital in safeguarding the future of the food industry in the UK, and we have built long-term relationships with many of our suppliers and growers. Outcomes and highlights in 2025/26 We are pleased to have been voted the number one retailer to deal with in the Advantage supplier survey for the 10th year in a row. We are committed to continuing to collaborate with our suppliers as we work towards our own net zero targets and support suppliers with their own commitments. In August 2025 we launched a programme of additional financial incentives and data collection support for 400 farmers across our dairy, pig, lamb and beef Sustainable Farming Groups to achieve key environmental and animal welfare goals. Farmers could benefit from more than £9.5m worth of additional payments in the scheme’s first year. Our overall supplier satisfaction score was 89%, which was up 1% year-on-year. The Board is committed to ensuring decisions align to our purpose, culture and values while considering the benefits, risks, financial implications and the wider impact on our stakeholders. Our ongoing engagement across the business ensures the Board is informed of stakeholder priorities and viewpoints. Further information on our stakeholder groups and engagement activities is set out within this section. In fulfilling their duties under section 172 of the Companies Act 2006, the Directors considered the matters in section 172(1)(a)-(f) throughout their decision making. The Board’s activities together with our section 172 statement, are detailed in the Corporate governance report on pages 68 to 69. Colleagues More detail on our colleague policies, reward and benefits can be found in our Sustainability Report. More detail on everyone’s welcome can be found on pages 20 to 21. More detail on our Colleague Contribution Panels can be found on page 66. Priorities and engagement We aim to create a positive culture at Tesco which aligns our purpose, values and behaviours and to create an inclusive workplace, where colleagues feel welcome and able to be themselves. Our News & Views communications 82% of colleagues recommend Tesco as a great place to work. platform continues to enhance colleague engagement. Through our Colleague Contribution Panels and the results of our Every Voice Matters engagement survey we receive valuable feedback and insight on colleague views. We have continued to collaborate with trade unions on safety measures. Following an industry-wide campaign, the government has set out its plans to introduce a new standalone offence of assaulting a retail worker. Outcomes and highlights in 2025/26 We announced a more than £200m investment in UK colleague pay. Our colleagues have benefited from an enhanced benefits package in recent years, including access to a virtual GP service and health and wellbeing advice. Colleagues have also seen enhancements to paid maternity, neonatal, fertility, adoption and kinship leave. We take the safety of our colleagues very seriously and have invested in measures including body worn cameras, protective screens and door entry systems for colleagues in store. Recently, we deployed next-generation body cameras to 1,285 Express and 122 Dot Com sites. We also gave all UK colleagues free access to the Peoplesafe personal safety app, which can track their journeys to and from work and help them to raise the alarm if they don’t feel safe. Board oversight The Board recognises the importance of fostering an environment where colleagues can feel valued and achieve their full potential. By drawing on a range of colleague insights, regular updates on culture and other feedback mechanisms, the Board maintains a clear understanding of what matters most to our people and what is needed to support future growth. As our business evolves, we aim to equip colleagues with the skills they need to succeed now and in the future. Customers 10,000 products on Clubcard Prices. More detail on how we support our customers can be found on pages 14 to 15. Priorities and engagement We serve millions of customers in store and online every day. We actively seek customer feedback on a regular basis which, combined with Clubcard data as well as independent consumer research, helps us to really get to know our customers. We know household budgets remain under pressure, so we have continued to invest in making sure that customers get the best possible value at Tesco. Outcomes and highlights in 2025/26 We are committed to offering our customers great value through Aldi Price Match on more than 600 lines, more than 3,000 products on Everyday Low Prices and thousands of exclusive offers per week through Clubcard Prices. Clubcard Prices save customers up to £404 off their annual grocery bill. We reduced the price of 10,000 lines by an average of around 9.5% since the start of the financial year. We are pleased that 65% of all the food we sell in the UK and ROI is now classified as healthy (by volume). Board oversight The Board is committed to responding to the needs of our customers, so that we continue to provide the highest possible quality at great value. Oversight is maintained through regular engagement surveys and customer insight updates. The Board places particular Stakeholder engagement 29 pts Group net promoter score (NPS). Stakeholder engagement Tesco PLC Annual Report and Financial Statements 2026 18 ![]() As part of the programme, 260 UK dairy farmers which make up a significant part of our Tesco Sustainable Dairy Group can earn up to an extra 2.5p per litre of milk if key targets on emissions reduction, animal health, feed conversion efficiency and genetic improvements are achieved. Board oversight The Board recognises the importance of building responsible and collaborative relationships with our suppliers, ensuring alignment with our Code of Business Conduct. Our product teams closely engage with suppliers. Updates are provided to the Board and the Audit Committee. The Board oversees sourcing priorities through our sustainability strategy and receives regular updates on product and supplier strategies. Shareholders More detail can be found in the Financial review on pages 22 to 28. Priorities and engagement Regular dialogue with our shareholders, potential investors and analysts provides insight to their views and priorities, which is reflected in our decision making. Our capital allocation framework prioritises reinvesting in the business, maintaining a strong investment-grade balance sheet, paying a progressive dividend, considering inorganic growth, and returning surplus cash to shareholders. Outcomes and highlights in 2025/26 Our investments in value, quality and service continue to resonate with customers and have allowed us to make further market share gains. We continue to see the buyback programme as an ongoing and critical driver of shareholder returns. In addition to £937m of dividends paid £1.45bn share buyback. 14.5p per ordinary share full year dividend. across the last year, we have now completed our April 2025 commitment to buy back £1.45bn worth of shares. We have had regular dialogue with shareholders during the year, with a particular focus on consumer sentiment, the competitive environment and our strategic priorities. This engagement helps us to understand shareholder priorities and their views on how we are progressing. We welcome engagement with private shareholders, this year our AGM will be digitally-enabled which will provide all shareholders the opportunity to participate in the meeting. Board oversight Senior management and our Investor Relations team engage with existing and potential institutional investors and analysts to discuss company performance and strategy. Regular updates are provided to the Board to ensure they remain well-informed about market conditions, shareholder priorities and wider sector or macroeconomic factors. This enables the Board to take these considerations into account when making decisions and supports the delivery of long-term value and strategic growth. Communities More detail can be found in our Sustainability Report. Priorities and engagement We invest in communities to help them thrive, by supporting schools and children’s groups, food banks and other good causes. We redistribute surplus food from our distribution network and stores through our charity and community partners, FareShare and Olio. Colleagues and customers join our regular food collections to support FareShare and Trussell. We also provide financial support to help the charities in their work. Our Community Champions in stores across the UK help us build Fruit & Veg for Schools supporting more than 500 schools. 123 million meals donated across the Group this year. relationships with communities and support local events and initiatives. The Tesco Health Charity Partnership with Cancer Research UK, British Heart Foundation, and Diabetes UK was again voted the most admired corporate-NGO partnership for a third consecutive year in the C&E Corporate–Non- Profit Partnerships Barometer. Since 2018, this partnership has raised more than £36m to support health research and healthier lifestyles. Outcomes and highlights in 2025/26 This year we extended our national free Fruit & Veg for Schools programme to more than 500 schools, as part of our broader work to give children a healthier, stronger start in life and help them thrive. Our Community Food Connection scheme has grown into the biggest food redistribution initiative of its kind in the UK. To date it has provided the equivalent of more than 380 million meals to charities and local communities who depend on the food they receive to support people facing hunger. Our Winter Food Collection, in aid of Trussell and FareShare, saw almost 1.5 million meals worth of long-life food items donated by shoppers. Board oversight The Board places great importance in helping the communities we serve, recognising the vital role we play, through the people we employ, businesses we work with, and the causes we support. Understanding the initiatives and positive impact we have on local communities is a key part of the Board’s oversight. Planet More information on the planet initiatives can be found on pages 30 to 31 and in our Sustainability Report. More detail can be found in the Financial review on pages 22 to 28. 68% reduction in emissions of own operations since 2015/16. Priorities and engagement Tesco has longstanding commitments to tackle climate change and operate in a responsible and sustainable way that reflects our values. We will continue to deliver action on climate through our planet plan, which has been successfully rolled out across our business. Priorities include reducing emissions across our own operations and supply chain and building on our work to provide customers with affordable, healthy, sustainable food. Outcomes and highlights in 2025/26 Following the publication of our Greenprint for UK Farming report, our two low carbon farms trial innovations that can help to reduce carbon emissions, improve efficiency and protect and restore nature. Broccoli from our low carbon farm in Lincolnshire, grown by supplier TH Clements, reached our supermarket shelves for sale in September 2025. We continued to reduce the environmental impact of deliveries to our stores by rolling out our 1,000th electric home delivery van. We drove emissions reduction by adding 42 low-carbon trucks to our fleet, which transport food and goods across Scotland, Cumbria and Northumbria. The new fleet is powered by biomethane, produced from food waste. Board oversight Tesco’s commitment to tackling climate change underpins our approach to operate responsibly, sustainably and in line with our values. Our planet plan, overseen by the Sustainability Committee, brings together the full range of initiatives to reduce our Scope 1, 2 and 3 emissions. Regular reporting to the Board and the Sustainability Committee on progress against each pillar of the plan enables effective monitoring of key milestones and enhances understanding of how our operations contribute to our sustainability commitments. Tesco PLC Annual Report and Financial Statements 2026 19 Governance Financial statements Additional informationStrategic report ![]() Data as at 28 February 2026 No. of Board members % of the Board No. of senior members on the Board No. of Executive Committee % of Executive Committee No. of top global leaders 1 % of top global leaders 1 No. of employees % of employees Data as at 28 February 2026 No. of Board members % of the Board No. of senior members on the Board No. of Executive Committee % of Executive Committee Our colleagues are at the heart of everything we do. How they are led, supported and developed shapes the service we offer our customers. Our everyone’s welcome Group policy sets out how every colleague has a part to play to deliver on our commitments to treat people how they want to be treated and represent the diverse customers and communities we serve. Our colleague networks amplify, consult, and celebrate inclusion across every part of our business. These networks offer support and guidance across six key areas: armed forces, disability, LGBTQ+, parents and carers, race and ethnicity, and gender equality. They create spaces for colleagues to share challenges, explore career growth, and connect with like-minded individuals. Our five colleague commitments guide our work and are based on what colleagues have told us will make the biggest impact. At Tesco, everyone’s welcome. This means that whoever you are and wherever you work, we always want you to feel valued, celebrated, supported and that you can be yourself. Creating an inclusive culture is at the heart of who we are. Inclusion for all We want colleagues to work in an environment where they feel they can be themselves, are valued, and see themselves represented at every level. This year, we launched our everyone’s welcome policy, which sets out our expectations of colleagues in living our values and creating an inclusive culture. We have continued to strengthen our managers’ capabilities, and improved our employee assistance programme so that colleagues can request to talk to someone who has a similar background to them. We also continued delivering our women’s development programme, supporting over 218 women to realise their potential. In the UK, we ranked in the Times Top 50 for Gender Equality five years running and we remain a Stonewall Top 50 LGBTQ+ employer. This year we were accredited as a Stonewall trailblazing employer — which is the highest level of Stonewall’s Proud Employers Accreditation. Flexibility for all We are enabling colleagues to thrive at Tesco, with a culture that embraces and supports flexible working. Colleagues tell us flexibility really matters. To reflect this, our flexible working options let colleagues choose what suits them best, whether that is part-time hours, job-sharing or something inbetween. In 2025/26 we launched online flexible working zones in all markets, giving colleagues and managers practical resources and guidance to understand the flexible working options available. Accessible first We are supporting our colleagues with different accessibility needs, whether that’s in a physical environment, our technology systems or the communications we share. In 2025, dunnhumby and Booker joined Tesco Stores, Tesco Mobile and One Stop in achieving Disability Confident leader (Level 3) and Tesco Insurance and Money Services (IMS) achieved Everyone’s welcome Everyone’s welcome Below is the schedule in accordance with UK Listing Rule 6.6.6R(10). Gender and ethnicity data is collected through the Group’s payroll system using the legally registered gender for each colleague. Ethnicity data for the Board and Executive Committee is obtained through the Group’s Directors’ disclosures questionnaire and the voluntary diversity questionnaire – This is Me. 1. Definition of top global leaders: work levels 4 to 6. Men 7 64 3 7 64 175 65 168,169 49 Women 4 36 1 4 36 93 35 174,124 51 Not specified/prefer not to say 0 0 0 0 0 0 0 10 0.003 Gender identity White British or other White (including minority-white groups) 9 82 3 8 73 Mixed/multiple ethnic groups 0 0 0 0 0 Asian/Asian British 2 18 1 2 18 Black/African/Caribbean/Black British 0 0 0 0 0 Other ethnic group, including Arab 0 0 0 0 0 Not specified/prefer not to say 0 0 0 1 9 Ethnic background 20 ![]() Disability Confident Employer (Level 2). Our teams in ROI and India have also reached the equivalent UK standard – reflecting progress in recruitment, policy and wellbeing. We know workplace adjustments are critical to making employment sustainable for some colleagues, so we have launched new resources for colleagues and managers to empower them to make quicker decisions with real examples of workplace adjustments. Our partnership with the Business Disability Forum has helped us ensure we evolve our processes and follow best practice. Transform recruitment We know that we can attract and retain the best talent if our colleagues and candidates experience a positive and inclusive recruitment experience. We launched the Tesco global careers website in March 2025 across the Group, creating an efficient and inclusive candidate experience. This makes it easier for people to explore opportunities to join Tesco and for colleagues to progress their careers. Developing careers We believe every young person deserves the chance to build a future, no matter who they are or what their background is. We welcomed our next cohort of 363 Stronger Starts retail apprentices across the UK, as part of our commitment to supporting under- represented young people from high- deprivation areas. We also supported 400 young people through the Movement To Work placement programme, as part of a national coalition focused on supporting young people aged 16–30 who are not in education, employment or training. In 2025/26 our Stronger Starts programme was highly commended for DE&I Apprenticeship Employer of the Year at the National Apprenticeship and Skills Awards, and we proudly took home the Inclusive Recruitment Award at the TIARA Awards Europe, alongside The King’s Trust Volunteering Award. Colleague safety Colleague safety is a subject that is crucially important to Tesco. We have invested tens of millions of pounds in safety measures over the last four years, including investing in security officers, the refurbishment of our security hub in Daventry, and in other practical measures including body worn cameras, protective screens and door entry systems. In September we made the Peoplesafe App available to around 300,000 UK colleagues as a free benefit, to track their journeys and help them to raise the alarm if they don’t feel safe. The introduction of the app follows feedback from colleagues who said they sometimes felt unsafe travelling to and from work. It helps address situations such as walking in an unfamiliar area late at night, facing aggression on the night bus or tube after a night out or using a private taxi alone. As a further safety measure, we have provided body worn cameras to 7,000 delivery drivers working from 122 stores. The cameras, which have already been rolled out to in-store colleagues, act as a deterrent and have been shown in trials to reduce serious incidents against drivers by 50%. The cameras will only be turned on if a driver feels unsafe. Spotlight on: Around 300,000 UK colleagues have access to the Peoplesafe App as a free benefit Spotlight on: Women in leadership at Tesco Bengaluru In January 2026, Dame Carolyn Fairbairn, Caroline Silver and Karen Whitworth visited Tesco Bengaluru. During the visit, they hosted a Women in Leadership session with around 25 senior women leaders from the business. The session provided an open forum for discussion, beginning with reflections from the Non-executive Directors on their career journeys, followed by an interactive question and answer session. The discussion covered a range of themes, including the transition from executive director to non-executive director, how non-executive directors continue to develop their knowledge and balance priorities, and the importance of psychological safety and the role it plays in supporting women in leadership positions. Tesco PLC Annual Report and Financial Statements 2026 21 Governance Financial statements Additional informationStrategic report ![]() Imran Nawaz, Chief Financial Officer Financial review Group review of performance On a continuing operations basis 1 FY 25/26 FY 25/26 FY 24/25 Change at actual rates Change at actual rates Change at constant rates 53 weeks 52 weeks 52 weeks 53 weeks 52 weeks 52 weeks Sales (exc. VAT, exc. fuel) 2 £67,725m £66,588m £63,636m 6.4% 4.6% 4.3% Fuel £5,987m £5,876m £6,280m (4.7)% (6.4)% (6.5)% Revenue (exc. VAT, inc. fuel) £73,712m £72,464m £69,916m 5.4% 3.6% 3.3% Statutory operating profit £2,985m £2,711m 10.1% Adjusted operating profit 2 £3,194m £3,152m £3,128m 2.1% 0.8% 0.6% Adjusted net finance costs 2 £(541)m £(531)m £(536)m (0.9)% 0.9% Joint ventures and associates £(1)m £(1)m £(4)m Tax on adjusted profit £(712)m £(703)m £(690)m (3.2)% (1.9)% Adjusted profit after tax 2 £1,940m £1,917m £1,898m 2.2% 1.0% Adjusting items after tax £(153)m £(294)m Statutory profit after tax £1,787m £1,604m 11.4% Adjusted diluted EPS 2 29.0p 27.4p 6.0% Statutory diluted EPS 27.1p 23.1p 16.9% Dividend per share 14.5p 13.7p 5.8% Net debt 2 £(10,563)m £(9,454)m (11.7)% Free cash flow 2 £1,957m £1,750m 11.8% Capex 4 £1,511m £1,457m 3.7% The Group’s statutory financial results for the year ended 28 February 2026 reflect a 53-week reporting period. Alternative Performance Measures (APMs) are presented for the 52 weeks to 22 February 2026 to aid comparability, except for net debt which is presented at the balance sheet date. There is no impact from the additional week on Insurance and Money Services and Central Europe, which report to the end of February every year. Unless otherwise stated, commentary is on a 52-week basis. Sales 2 increased by 4.3% at constant rates with growth across all operating segments. Group volumes continued to grow, supported by further investments in the customer offer, made partially in response to an increased level of competitive intensity in the UK. Revenue increased by 3.3%, which included a (6.5)% decline in fuel sales, driven primarily by lower retail fuel prices year-on-year. Adjusted operating profit 2 increased by 0.6% at constant exchange rates or 0.8% at actual rates. We continued to invest in value, quality, and service, driving strong sales growth. Combined with a further c.£535m delivered through our save to invest programme, this sales growth more than offset our investments into the customer offer and operating cost inflation. Financial review Tesco PLC Annual Report and Financial Statements 2026 22 ![]() Statutory operating profit for the 53 weeks to 28 February 2026 increased by 10.1%. The prior year was impacted by a £(286)m non-cash net impairment charge versus £(53)m in the current year. The current year also benefited from an additional week’s trading. Adjusted net finance costs 2 were slightly lower year-on-year, reflecting lower effective borrowing rates on new debt issued, partially offset by higher lease interest costs. In addition, FY 25/26 benefited from interest income earned on the c.£700m proceeds from the disposal of our Banking operations, which has now been returned to shareholders. The increase in tax on adjusted profit was driven by higher adjusted profit, with the Group’s Adjusted effective tax rate steady at 26.8% (FY 24/25: 26.7%). Adjusted diluted EPS 2 grew by 6.0%, supported by £1.45bn of share buybacks during the year and growth in Adjusted profit after tax 2 . Statutory diluted EPS for the 53 weeks grew by 16.9%, higher than Adjusted diluted EPS 2 growth due to an additional week’s trading and last year’s non-cash impairment charge. We propose to pay a final dividend of 9.7 pence per ordinary share, taking the full year dividend to 14.5 pence, up 5.8%. We generated free cash flow 2 of £1,957m, up 11.8% year-on-year. Strong working capital management and solid sales performance drove a net working capital inflow of £385m, which more than offset increased cash tax payments and increased capex in technology and our distribution network. Net debt 2 increased by £(1,109)m with the prior year including c.£700m of proceeds from the sale of our Banking operations which has now been returned to shareholders, and lease liabilities increased by £(168)m driven by lease renewals and extensions. This increased our Net debt/EBITDA ratio to 2.1 times versus 2.0 times at the end of last year. Further commentary on these metrics can be found below and a full income statement can be found on page 121. Operating segment presentation – UK & ROI and Booker As communicated at the half year, following changes to the Group Executive Committee, Booker, which was reported as part of the UK & ROI operating segment in previous years, now meets the definition of an operating segment, as set out in IFRS 8 ‘Operating Segments’. Our full-year results are therefore presented on this basis. 1. In line with its treatment when presented last year, the performance of the Banking operations in FY 24/25 is presented as a discontinued operation. The Insurance and Money Services business (IMS) is presented on a continuing operations basis and therefore within the headline performance measures. There are no discontinued operations in the current year. 2. The Group has defined and outlined the purpose of its APMs, including its performance highlights, in the Glossary starting on page 216. The Group’s statutory financial results for the year ended 28 February 2026 reflect a 53-week reporting period, with the prior year reflecting a 52-week period to 22 February 2025. APMs for FY 25/26 are presented for the 52 weeks to 22 February 2026 to aid comparability, with net debt presented as at the balance sheet date. There is no impact from the additional week on the IMS and Central Europe businesses, which report to the end of February every year. 3. Like-for-like (LFL) sales growth is a measure of growth in Group sales from stores that have been open for at least a year and online sales (at constant exchange rates, excluding VAT and fuel). LFL excludes revenue from dunnhumby, IMS and mall rental income as this revenue is not directly linked to the sale of goods. 4. Capex excludes additions arising from business combinations, property buybacks (typically stores) and other store purchases and their associated refit costs. Refer to page 220 for further details. Segmental review of performance: Sales performance: (exc. VAT, exc. fuel) 2,3 52-week basis On a continuing operations basis 1 Sales (£m) LFL sales change 3 Total sales change at actual rates Total sales change at constant rates – UK 49,819 4.2% 4.9% 4.9% – ROI 3,239 4.6% 8.9% 6.6% UK & ROI 53,058 4.2% 5.1% 5.0% Booker 9,040 0.2% 0.6% 0.6% Central Europe 4,490 2.2% 7.2% 3.7% Group 66,588 3.5% 4.6% 4.3% Further information on sales performance is included in the Supplementary information starting on page 214. Adjusted operating profit 2 performance: 52-week basis On a continuing operations basis 1 Profit (£m) Change at actual rates Change at constant rates Margin % at actual rates Margin % change at actual rates UK & ROI 2,745 0.7% 0.7% 4.7% (15)bps Booker 292 0.7% 0.7% 3.2% 0bps Central Europe 115 2.7% (0.9)% 2.5% (10)bps Group 3,152 0.8% 0.6% 4.3% (12)bps Further information on operating profit performance is included in Note 2 starting on page 134. UK & ROI overview: Like-for-like sales for the UK & ROI segment increased by 4.2%, with market share gains and volume growth in both markets. The sales performance in the UK reflects a strong customer reaction to our targeted investments in price and the shopping experience, made partially in response to an increase in competitive intensity in the UK, with both markets also benefitting from warmer weather in the first half of the financial year. UK & ROI adjusted operating profit was £2,745m, up 0.7% at constant rates. The strong sales performance and a further contribution from our ongoing save to invest programme more than offset our investments in the customer offer and ongoing cost inflation, which included increased National Insurance contributions and the new Extended Producer Responsibility (EPR) levy. UK – Strong positive response to targeted investments driving further market share gains: Like-for-like sales grew by 4.2%, with growth delivered across all channels. Overall market share increased by +24bps to 28.5%. Across the last three years we have gained +122bps of market share and in December 2025 we reached our highest share in a decade. Tesco PLC Annual Report and Financial Statements 2026 23 Governance Financial statements Additional informationStrategic report ![]() Throughout the year we have continued to prioritise investment in our customer offer. As a result, we have maintained our strong price position against the market, helping support a further year-on-year improvement in our net promoter score, including improvements across Value and Reputation. Food like-for-like sales grew by 5.2%, with a strong contribution from fresh food which grew 6.9%. We launched over 2,000 new and improved products, including a large-scale refresh of our frozen food offer. Dine-in ranges, such as our Finest Valentine’s and Finest Steakhouse ranges have performed well, as customers looked to enjoy restaurant-inspired meals at home. In the first half of the year, good weather helped support our sales and, later in the year, we were pleased with our continued market share gains and the customer response to our new and improved Christmas ranges. Tesco Finest saw sales growth of 14.5%, continuing to benefit from strong volume growth. In January, we expanded our Everyday Low Prices commitment from 1,000 to 3,000 products, sitting alongside Aldi Price Match on over 600 lines and thousands of Clubcard Prices every week. Over 10,000 products were cheaper at the end of the year than at the start, with an average price reduction of 9.5%. Clothing like-for-like sales grew 5.1% driven by a continued strong performance in womenswear, with expanded ranges in activewear and our curated ‘F&F Edit’ ranges both performing well. Growth was also supported by the launch of F&F Online during the year, which offers customers access to a much fuller range of clothing. Home like-for-like sales declined (0.7)% but grew 1.8% on an underlying basis when excluding the impact of the transition to a commission model with the Entertainer for toys, which completed in the second half of FY 24/25. The partnership, which offers customers an even better range of toys in our stores, means we no longer recognise toy sales and instead earn commission income. Underlying growth was primarily driven by the continued success of our relaunched F&F Home range. Like-for-like sales grew across both our large and convenience store formats. Large store like-for-like sales grew 3.9% as we maintained our market-leading availability and saw a positive customer response to investments made to the overall shopping experience, in particular in customer service and at the checkout. Convenience like-for-like sales grew by 0.3%, with convenience market share growing +71bps year-on-year, with strong food performance offsetting the ongoing decline in the tobacco market. Online sales grew by 11.2%, including a c.2ppts contribution from Tesco Whoosh, our rapid delivery service, where we extended national coverage to 73% of households. Average online orders per week for our grocery home shopping business grew 6.0% year-on-year as we rolled out further improvements to our website. The number of delivery saver subscribers increased by 7.6% to 834k, while online market share (which excludes rapid grocery) grew +30bps to 35.7%. FY 25/26 Online performance (excluding Tesco Marketplace) 52 weeks YoY change Sales inc. VAT £7.5bn 11.2% Online % of UK total sales 14.3% 0.8% Grocery home shopping: – Orders per week 1.22m 6.0% – Basket size £112 2.7% Average weekly traffic to Tesco Marketplace more than doubled during the year and average basket spend grew by c.90%. As part of our work to further enhance the seller experience and provide an even better proposition for customers, we have now successfully migrated Tesco Marketplace to a new Mirakl platform. ROI – Ongoing volume growth driving further market share gains: Our Ireland business delivered sales growth of 6.6% at constant rates, with strong like-for-like sales growth of 4.6%. Our market share grew +32bps to 24.2%, the fourth consecutive year of share growth. New space also supported sales growth, which included the opening of four new superstores and five Express stores during the year. Food like-for-like sales grew by 5.1%, with a strong contribution from our core fresh food offer. Food growth was further supported by a strong Tesco Finest performance where sales were up 11.8% year-on-year. We delivered like-for-like sales growth across all channels, with Online delivering 17.4% growth year-on-year. We launched Tesco Whoosh in Ireland this year, which is now in 31 stores, and we expect the service to meaningfully contribute to our online business moving forward. Large store sales grew 3.1% as we continue to improve price competitiveness in the market, with our price index improving year-on-year. Non-food sales were broadly flat on an underlying basis when excluding the impact from the transition to a commission model with the Entertainer for toys. Booker overview Robust growth across core retail and catering: Sales £m 52 weeks LFL Core retail 3,307 2.2% Core catering\* 2,752 3.8% Tobacco 1,532 (9.5)% Best Food Logistics 1,449 0.6% Total Booker 9,040 0.2% \* Includes sales to small businesses and sales from Venus Wine and Spirit Merchants Limited, which was acquired in June 2024 and is included in like-for-like growth from June 2025. Booker like-for-like sales grew 0.2%, with robust growth in core retail and catering offset by the continuing decline in the tobacco market. Best Food Logistics delivered like-for-like growth of 0.6% despite continued weakness in parts of the fast-food market. Core retail grew by 2.2%, including the impact from the ending of a lower-margin national account in August 2025. We continue to see strong growth in our core symbol brands with a further 369 net new retailer partners across the year and we saw further improvements in customer satisfaction scores across our retail customer base. Core catering performed well with like-for-like sales growth of 3.8%, supported by a strong contribution from Venus, our specialist wine and spirit merchant, and good weather over the summer. Customer satisfaction scores also improved in catering, and we continued to deliver great value and availability. Booker operating profit grew 0.7% to £292m, with a strong contribution from save to invest and sales growth helping to offset significant cost inflation. Financial review continued Tesco PLC Annual Report and Financial Statements 2026 24 ![]() Central Europe overview Strong delivery amidst increased competition and ongoing regulatory pressure: Like-for-like sales grew by 2.2%, with food growing by 2.6% across the region. Fresh food grew by 4.1% as customers continued to value our competitive price position and high-quality offer amid increased competition and ongoing regulatory pressure. Tesco Finest sales also continued to perform well, up 33.5%. Large, Convenience and Online all delivered like-for-like growth across the region, with Online growing by 17.5%. Convenience like-for-like sales grew 3.1% and Large store like-for-like sales grew 1.4%, with the channel weighed by softer non-food sales, impacted by challenging consumer confidence and poor weather during key trading periods. Central Europe delivered adjusted operating profit of £115m, up 2.7% at actual exchange rates but down by (0.9)% at constant rates. The decline in constant rate profitability includes the impact from the disposal of certain mall properties in the prior year. Excluding this impact, adjusted operating profit grew 8.1% year-on-year at constant rates, supported by a strong contribution from our save to invest initiatives, helping to offset the impact of increased competition, particularly in Slovakia, and ongoing regulatory pressure. Adjusting items: FY 25/26 £m 53 weeks FY 24/25 £m 52 weeks Net impairment charge on non-current assets (53) (286) Amortisation of acquired intangible assets (78) (76) Separation costs related to disposal of Banking operations (28) (14) Restructuring and adjusting property transactions (50) (41) Total adjusting items included within operating profit (209) (417) Net finance (costs)/income (40) 44 Taxation 96 79 Total adjusting items included within profit after tax from continuing operations (153) (294) Adjusting items included within discontinued operations – (65) Total adjusting items (153) (359) Adjusting items are excluded from our adjusted profit performance by virtue of their size and nature, to provide a helpful perspective of the year-on-year performance of our ongoing business. Total adjusting items in statutory operating profit from continuing operations resulted in a net charge of £(209)m, compared to a net charge of £(417)m in the prior period. Whilst overall performance was strong across our operating segments, we recognised a non-cash net impairment charge of £(53)m in the current year, principally reflecting an increase in the competitive intensity in the Slovakian market. In the prior year there was a £(286)m non-cash net impairment charge, mainly reflecting an increase in discount rates across the Group. We continue to present amortisation of acquired intangible assets, principally relating to the merger with Booker, as an adjusting item. The amortisation of acquired intangible assets was £(78)m (FY 24/25: £(76)m). We incurred £(28)m of separation costs relating to the disposal of our Banking operations (FY 24/25: £(14)m), with the transition activities expected to complete in FY 26/27. Restructuring and adjusting property transactions in the current year mainly relates to our save to invest programme and costs associated with our multi-year programme to optimise our distribution network in the UK. The prior year costs primarily related to our save to invest programme. Adjusting items in net finance (costs)/income and tax are explained in the relevant sections below. Adjusting items included within discontinued operations in the prior year primarily related to fair value remeasurement of assets of the disposal group associated with the sale of our Banking operations to Barclays in November 2024. Further detail on adjusting items can be found in Note 5, starting on page 137. Net finance costs: On a continuing operations basis 1 FY 25/26 £m 53 weeks FY 25/26 £m 52 weeks FY 24/25 £m 52 weeks Net interest costs (140) (137) (157) Net finance expenses from insurance contracts (11) (11) (9) Finance charges payable on lease liabilities (390) (383) (370) Adjusted net finance costs (541) (531) (536) Fair value remeasurements of financial instruments (26) 76 Net pension finance costs (14) (32) Adjusting items included in net finance costs (40) 44 Statutory net finance costs (581) (492) Adjusted net finance costs of £(531)m on a 52-week basis were slightly lower than last year (FY 24/25: £(536)m), reflecting lower effective borrowing rates on new debt issued, partially offset by higher lease interest costs. In addition, FY 25/26 benefited from interest income earned on the cash received from the disposal of our Banking operations in the second half of FY 24/25. Now that these proceeds have been returned to shareholders, we expect adjusted net finance costs to normalise to levels similar to FY 23/24 (£(558)m). Within adjusting items, fair value remeasurements of financial instruments led to a charge of £(26)m, compared to income of £76m in the prior year. The charge mainly relates to non-cash mark-to-market movements on certain derivative financial instruments which hedge inflation on some of our lease arrangements. The movement principally reflects changes in long-term UK inflation expectations since the start of the year. Net pension finance costs decreased by £18m, driven by a reduction in the opening net deficit position of the defined benefit pension plans. Statutory net finance costs of £(581)m were £(89)m higher than last year, largely due to the impact of adjusting items explained above. Further detail on finance income and costs can be found in Note 6 on page 138, as well as further detail on the adjusting items in Note 5, starting on page 137. Tesco PLC Annual Report and Financial Statements 2026 25 Governance Financial statements Additional informationStrategic report ![]() Group tax: On a continuing operations basis 1 FY 25/26 £m 53 weeks FY 25/26 £m 52 weeks FY 24/25 £m 52 weeks Tax on adjusted profit (712) (703) (690) Tax on adjusting items 96 79 Statutory tax on profit (616) (611) Tax on adjusted profit on a 52-week basis was £(703)m, slightly higher than last year primarily reflecting an increase in adjusted profit, with the adjusted effective tax rate steady at 26.8% (FY 24/25: 26.7%). The adjusted effective tax rate is higher than the UK statutory rate of 25%, primarily due to the depreciation of assets which do not qualify for tax relief. We expect our FY 26/27 adjusted effective tax rate to remain around 27%. Adjusting tax credits in both years primarily relate to deferred tax on impairment charges on qualifying assets and the amortisation of acquired intangible assets. Statutory tax on profit of £(616)m was £(5)m higher than last year, primarily due to an increase in adjusted profit, partially offset by higher tax credits on adjusting items. Earnings per share: On a continuing operations basis 1 FY 25/26 £m 53 weeks FY 25/26 £m 52 weeks FY 24/25 £m 52 weeks YoY change Adjusted diluted EPS 29.0p 27.4p 6.0% Statutory diluted EPS 27.1p 23.1p 16.9% Statutory basic EPS 27.5p 23.4p 17.3% On a total basis, including discontinued operations Statutory diluted EPS 27.1p 23.5p 15.1% Statutory basic EPS 27.5p 23.8p 15.4% Adjusted diluted EPS was 29.0p, 6.0% higher year-on-year, driven by a reduction in the number of shares in issue from our ongoing share buyback programme and growth in adjusted operating profit. Statutory diluted EPS was 27.1p, a year-on-year increase of 16.9%. The higher statutory growth rate in diluted EPS is due to a lower level of adjusting items in the current year and the effect of an additional week’s trading profits. Dividend: We propose to pay a final dividend of 9.7 pence per ordinary share, which combined with the interim dividend of 4.8 pence per ordinary share paid in November 2025, takes the full year dividend to 14.5 pence per ordinary share. The full year dividend is based on our dividend policy to pay a progressive dividend, broadly targeting a 50% payout of adjusted earnings per share. The proposed final dividend was approved by the Board of Directors on 15 April 2026 and is subject to the approval of shareholders at this year’s Annual General Meeting. The final dividend will be paid on 26 June 2026 to shareholders who are on the register of members at close of business on 15 May 2026 (the Record Date). Shareholders may elect to reinvest their dividend in the dividend reinvestment plan (DRIP). The last date for receipt of DRIP elections and revocations will be 5 June 2026. Summary of Net debt (at the balance sheet date): Feb-26 £m Feb-25 £m Movement £m Net debt before lease liabilities (2,679) (1,738) (941) Lease liabilities (7,884) (7,716) (168) Net debt (10,563) (9,454) (1,109) Net debt/EBITDA\* 2.1x 2.0x \* Net debt to EBITDA is calculated using EBITDA on a 52-week basis. Net debt was £(10,563)m, an increase of £(1,109)m year-on-year. The increase in Net debt is mainly due to the prior year including c.£700m of proceeds from the sale of our Banking operations which were returned to shareholders via additional share buybacks during the year. Lease liabilities increased by £(168)m driven by lease renewals and extensions, partially offset by the buyback of seven leasehold sites across the UK and Booker. We generated Free cash flow on a 52-week basis of £1,957m, which more than covered cash outflows relating to our ongoing share buyback programme of £(750)m and dividend payments of £(937)m. Our Net debt to EBITDA ratio was 2.1 times at the end of the year, up from 2.0 times at the end of last year. We continue to hold strong levels of liquidity totalling £2.9bn including cash, highly liquid short-term deposits and money market investments. In addition, we have an undrawn £2.5bn committed revolving credit facility which is in place until at least November 2027. Fixed charge cover remained broadly in line with last year at 4.1 times (FY 24/25: 4.2 times). Defined benefit pension schemes (at the balance sheet date): Feb-26 £m Feb-25 £m Movement £m Defined benefit schemes in surplus 324 56 268 Defined benefit schemes in deficit (127) (307) 180 Deferred tax asset 23 71 (48) Surplus/(deficit) in schemes at the end of the year (net of deferred tax) 220 (180) 400 Net of tax, the net IAS 19 pension position improved from a deficit of £(180)m to a surplus of £220m, principally reflecting asset performance. The principal defined benefit pension plan within the Group is the Tesco PLC Pension Scheme (the Scheme), a UK scheme that has been closed to future accrual since 2015. During the year, we completed the 31 March 2025 triennial funding valuation for the Scheme together with the Scheme trustee. This showed that the actuarial position of the Scheme for funding purposes was in surplus, with a funding level of 106% (31 March 2022: 104%). As a result, it was agreed with the Scheme trustee that no pension deficit contributions would be required from the Group. Further detail on post-employment benefits can be found in Note 28, starting on page 185. Financial review continued Tesco PLC Annual Report and Financial Statements 2026 26 ![]() Summary free cash flow: The following table reconciles Group Adjusted operating profit to Free cash flow (on a 52-week basis). Further details are included in the Glossary starting on page 216. On a continuing operations basis 1 FY 25/26 £m FY 24/25 £m Movement £m Adjusted operating profit (53-week basis) 3,194 Less: Adjusted operating profit (for week 53) (42) Adjusted operating profit (52-week basis) 3,152 3,128 24 Less: IMS adjusted operating profit (167) (155) (12) Retail adjusted operating profit 2,985 2,973 12 Add back: Depreciation and amortisation 1,764 1,680 84 Share-based payments and other items 66 69 (3) Pensions (31) (30) (1) Decrease/(increase) in working capital 385 (45) 430 Cash generated from operations before adjusting items 5,169 4,647 522 Cash capex (1,515) (1,392) (123) Net interest paid (518) (503) (15) Tax paid (497) (355) (142) Dividends received 52 2 50 Repayment of capital element of obligations under leases (634) (595) (39) Own shares purchased for share schemes (100) (54) (46) Free cash flow (52-week basis) 1,957 1,750 207 Memo (not included in Free cash flow definition): – Net acquisitions and disposals (18) (61) – Property buybacks, store purchases and disposal proceeds (144) (93) – Restructuring and property transactions in adjusting items (54) (55) We delivered Free cash flow of £1,957m, with cash generated from operations improving by £522m year-on-year, driven by working capital inflows and growth in Adjusted operating profit. Free cash flow was £207m higher than last year, with the increase in cash generated from operations partly offset by higher cash capex, tax payments and own shares purchased for employee share schemes. The net working capital inflow of £385m is mainly driven by our solid sales performance, which led to higher trade payables, strong working capital management, and a payable relating to the new EPR levy. Cash capex was £(123)m higher than last year, reflecting incremental investments to optimise our distribution network, refresh and enhance our store estate, and deliver a more personalised and connected experience for our customers. Net interest paid was £(15)m higher year-on-year, principally due to the timing of coupon payments. Tax payments increased by £(142)m year-on-year mainly driven by the end of historical tax deductions and the prior year benefitting from a tax deduction arising on the disposal of our Banking operations. Dividends received were £50m higher, reflecting dividends received from Insurance and Money Services. Within the memo lines shown, the net £(18)m acquisitions and disposals outflow includes the settlement of deferred consideration on Booker’s acquisition of Venus Wine and Spirit Merchants PLC. The £(144)m net outflow relating to property transactions primarily relates to the buyback of seven stores in the UK and Booker. Restructuring and property transactions in adjusting items of £(54)m primarily relates to operational restructuring changes as part of our save to invest programme. Tesco PLC Annual Report and Financial Statements 2026 27 Governance Financial statements Additional informationStrategic report ![]() Capital expenditure and space: UK & ROI Booker Central Europe Group FY 25/26 FY 24/25 FY 25/26 FY 24/25 FY 25/26 FY 24/25 FY 25/26 FY 24/25 Capex (52-week basis) £1,347m £1,284m £57m £63m £107m £110m £1,511m £1,457m Openings (k sq.ft.) 361 311 – – 48 84 409 395 Closures (k sq.ft.) (94) (98) (11) – (6) (45) (111) (143) Repurposed (k sq.ft.) 2 (235) – – (57) (145) (55) (380) Net space change (k sq.ft.) 269 (22) (11) – (15) (106) 243 (128) Space in the above table is defined as net space in store adjusted to exclude checkouts, space behind checkouts, customer service desks and customer toilets. The data reflects space changes over the 53-week statutory financial year and excludes space relating to franchise stores. Capital expenditure shown in the table above reflects expenditure on ongoing business activities across the Group, excluding property buybacks. Our capital expenditure for the full year was £1,511m, an increase of £54m compared to last year. We continue to invest in opportunities to grow our store estate and further enhance the in-store experience for our customers. Over the course of the year, we opened a total of 77 stores in the UK, 9 in ROI and 7 in Central Europe. Additionally, we refreshed 300 stores across the Group. In addition to continuing to invest in our core assets, we have stepped up our investment in delivering efficiencies across our operations, including the opening of our Aylesford distribution centre and a first phase investment in our new distribution centre at DP World London Gateway. The London site is expected to open in 2029 and will leverage the latest technology to enhance our supply chain and support future growth. Statutory capital expenditure for the financial year was £1.7bn, including property buybacks and store purchases. We expect around £1.6bn of capital expenditure in FY 26/27, as we continue to invest in attractive opportunities to optimise our existing operations, improve our technology and digital capability, whilst continuing to enhance our existing store estate. Further details of current space can be found in the Supplementary information starting on page 214. Property value (at the balance sheet date): UK & ROI Booker Central Europe Group Feb-26 Feb-25 Feb-26 Feb-25 Feb-26 Feb-25 Feb-26 Feb-25 Property 1 – fully owned Estimated market value £15.5bn £15.0bn £0.4bn £0.4bn £1.8bn £1.6bn £17.7bn £17.0bn NBV £15.2bn £14.9bn £0.4bn £0.4bn £1.4bn £1.3bn £17.0bn £16.6bn % store selling space owned 58% 58% 29% 29% 65% 64% 60% 59% % property owned by value 2 61% 61% 27% 26% 62% 55% 60% 60% 1. Stores, malls, investment property, offices, distribution centres, fixtures and fittings, work-in-progress. Excludes joint ventures. 2. Excludes fixtures and fittings. The estimated market value of our fully-owned property as at the year end increased by £0.7bn to £17.7bn. The increase was largely driven by a modest increase in rental values, with yields remaining fairly stable across the Group. The UK & ROI increase in market value also reflects the buyback of seven stores in the UK. The market value represents a surplus of £0.7bn over the net book value. Group store selling space ownership percentage was 60%, marginally higher year-on-year, driven by store buybacks in the UK. Financial review continued Tesco PLC Annual Report and Financial Statements 2026 28 ![]() Since 2015/16 we have reduced Group Scope 1 and 2 emissions by 68% We aim to be net zero across our own operations by the end of 2035 Sustainability Focused Sustainability is built into our purpose, strategy and business plans. We know that our business depends on the world around us. As the UK’s leading food retailer, we know we can make a big difference. Our commitment to operating in a responsible and sustainable way reflects our beliefs and values. Tesco PLC Annual Report and Financial Statements 2026 29 Governance Financial statements Additional informationStrategic report ![]() Sustainability Global food production generates a third of greenhouse gas emissions and as much as 40% of food produced goes uneaten. Meanwhile the impact of extreme weather events such as droughts and floods, and threats to nature such as declining soil health are impacting food supply chains, including the farmers and suppliers we rely on. It’s clear sustainability will become ever more critical to building a stronger, more resilient business. We continue to be guided by our planet plan, which brings together our key areas of activity under six pillars, and reflects the interdependencies of the food system and the natural environment. Alongside delivering the plan for our own operations, we continue to look at ways we can have the greatest impact, both in the supply chain, and in our customers’ homes. The plan includes work in the following areas: improving the way we source our products; helping our customers to eat a healthier and more sustainable diet; championing new solutions that will mean we all waste less; and ensuring we protect and restore nature in landscapes connected to food production. We recognise the growing link between environmental and human impacts in our supply chain. To read more about our work to protect and maintain the human rights of everyone working in our business and our wider supply chains, please see our Modern Slavery Statement for more details www.tescoplc.com/modern- slavery-statement. Our plan continues to be focused on our commitment to reaching net zero across our full value chain by 2050, validated in line with the Science Based Targets initiative (SBTi) pathway for limiting global warming to no more than 1.5°C average above pre-industrial levels. We took positive steps in a number of areas last year, but we know future progress will be harder won and will depend on tackling some of the most challenging issues facing our food system at an industry level. This year marked a significant year for our commitments, with a number coming to an end in December 2025. The new commitments we have made this year to take us to 2030 and beyond reflect our aim to prioritise areas where we can have the most significant impact, as well as meeting the expectations of our stakeholders. Read more in our Sustainability Report. Improve our products This pillar comprises the largest emissions hotspots across our value chain, at around 50%, and covers the production of all our products, from raw material extraction and agriculture to logistics and manufacturing. It’s vital we continue to improve the way we source our products, helping to reduce emissions, protect nature and create more resilient supply chains for the future. We continue to support our British farmers in producing affordable, healthy, sustainable food, and recognise the role they play in helping us reach our climate and nature goals. In response to recommendations set out in our Greenprint for UK Farming report, we have implemented a number of new initiatives across our Sustainable Farming Groups designed to improve our farmers’ profitability and efficiency. Up to 400 of our UK-based farmers across our dairy, lamb, beef and pig farming groups can now benefit from additional financial incentives to achieve key environmental and animal welfare goals. We have also invested in an environmental data baselining programme for 360 of our beef and lamb farmers, which will see them collect soil, water and biodiversity data for the first time. Our low carbon concept farm in Lincolnshire has been trialling a number of innovations throughout the year. With the help of our trusted farmers and suppliers, we have also completed the global roll-out of LEAF Marque certification, helping 5,600 fruit and vegetable growers implement measures to reduce emissions, protect nature, and bolster resilience. We continue to make progress in animal welfare, completing the roll out of enhancements in chicken welfare across our UK supply base, and meeting our commitment to source 100% cage-free shell eggs and ingredient eggs for Tesco UK and ROI. This commitment will now be incorporated into our sourcing policy for eggs. Due to market challenges in Hungary and Slovakia, and avian influenza challenges in the UK, we fell short of achieving our commitments in CE and Booker. We continue to play our part in protecting marine environments and fishing stocks, ensuring all our Own Brand tuna products are now MSC-certified across the Group. Decarbonising transport Transport comprises around 50% of our operational (Scope 1 and 2) emissions. We are working to switch all our fleets to low-carbon alternatives by 2035, where possible, based on available market solutions. Last year we introduced our 1,000th electric home delivery van in the UK, as well as rolling out 42 low carbon bio-CNG trucks at our Livingston distribution centre. We are also celebrating 20 years of our Tesco rail service this year. The service now moves a total of 7 million cases of goods a week across the country rather than by lorry, helping to reduce emissions. Reduce store emissions We continue to work towards reaching net zero in our own operations by the end of 2035. Last year, we were pleased to have reduced our Scope 1 and 2 emissions by 68%, exceeding our operational emissions reduction target of 60%. In December 2025, we launched our low carbon concept store in Harrogate, Yorkshire. The store brings together a number of sustainability features, including solar panels on the roof – which are expected to generate 20% of the store electricity use, rainwater harvesting to help flush the toilets, and doors on fridges to reduce our energy consumption, as well as reducing the energy used to heat and cool the store. See more in our low carbon concept store spotlight, page 75. More widely in the UK, we continued to roll out improvements across our store estate, including adding doors to our fridges, with 332 larger stores now completed. Planet plan The Sustainability Committee receive detailed updates on the planet plan at each meeting, covering progress, achievements, challenges and risks across all six pillars: Planet To protect our planet for future generations, we recognise we have a role to play in creating a more resilient and sustainable food system – it’s central to how we do business and plays a pivotal role in our purpose. Improve our products Reduce store emissions Support sustainable consumption Eliminate waste Decarbonise transport Protect nature Tesco PLC Annual Report and Financial Statements 2026 30 ![]() Support sustainable consumption We are committed to supporting the diets of our customers by making healthy options affordable and attractive for all and making healthier choices simpler and more convenient. Healthy food should be accessible to everyone – wherever they live, whoever they are, and whatever their budget. We are pleased to have reached our target of increasing the proportion of healthy food sold to 65% of total UK and ROI sales by the end of 2025. We have achieved this goal by helping customers switch to more whole foods including fruit and veg, whole grains, beans and pulses. However, we know there is more work to do, and our new commitment on health reflects this. Last summer we introduced a series of initiatives to help customers get more of their 5-a-day, including Clubcard Prices and personalised Clubcard rewards on fruit and veg, as well as free fruit for kids in store. We have also continued to make our Own Brand products healthier by reducing salt, fat and sugar, minimising additive use where possible, and adding in veg, protein and fibre. We know longstanding change comes through industry-wide collaboration. That is why we are encouraging the whole food industry to play their part too. We have measured and published our own healthier food sales for a number of years. In May, alongside our health charity partners, we called on the government to commit to mandatory reporting on sales of healthy food for all supermarkets and major food businesses. We welcomed the government’s announcement in the summer to introduce mandatory reporting and look forward to working with them on the detail of the new Healthy Food Standard. Eliminate waste We aim to minimise food waste and packaging across our supply chain, our own operations and in our customers’ homes. While we didn’t hit our stretching target to reduce food waste across our own operations by 50% by 2025, we remain committed to achieving this before 2030, in line with the UN SDG Target 12.3 to halve global food waste by this date. We continue to make good progress – across CE and Booker we have achieved our 50% reduction target, and recorded a 24% reduction across the Group. Our food waste hierarchy guides our plans, covering end-to-end food waste reduction, including increasing food redistribution through our charity partners and colleagues. This year, we celebrated the 10th anniversary of our Community Food Connection programme. Since its launch, we have donated over 83.1 million meals to charities and communities across the UK. This milestone reflects the strength of our partnerships with FareShare, FoodCloud and Olio. We have made further progress to reduce food waste in our operations, opening a new facility with engineering company, RenEco to turn surplus food into animal feed. The site in Northamptonshire unpacks bakery and fresh produce items which are no longer suitable for human consumption, and transforms it into a pulp or crumb to feed to animals. We continue to reduce plastic use across our operations, while also ensuring 99% of our Own Brand packaging is recyclable, either at home or through in store collections. This year, we have launched our new commitment to lead the industry in accelerating the transition to circularity by 2035, starting with an effective Extended Producer Responsibility (EPR) policy and the rollout of a Deposit Return Scheme (DRS) for the UK. Protect nature The food system relies on healthy soils, clean freshwater, and thriving pollinator populations. We are collaborating with our suppliers and partners to adopt a landscape-based approach, transforming our supply chains holistically to achieve lasting environmental benefits for both climate and nature. Tackling deforestation in supply chains remains a key priority in this pillar, and we continue to work on the implementation of the delayed EU Regulation on Deforestation-free Products (EUDR) legislation. For more information on our approach to nature, please visit the nature section of this report. Spotlight on: Low carbon concept farms Our Greenprint for UK Farming report sets out a key part of our approach to sustainable agriculture is understanding the barriers farmers face, and the support they need. Informed by our farmers, our Greenprint for UK Farming report set out recommendations for industry and government to help farmers transition to a low carbon agriculture sector. One of the key areas identified in the report was supporting innovation. Our low carbon concept farms – in partnership with key vegetable suppliers, and with livestock processor, ABP, are exploring current and future innovations such as low carbon fertilisers, alternative fuels, state-of-the-art cold storage, and carbon removal techniques, as well as improvements in soil health, grazing management, biodiversity assessment and management, and genetic improvements. The farms aim to provide farmers in our supply network with a practical demonstration of a route to net zero. Our suppliers Branston, TH Clements and Heygates, have successfully grown potatoes, broccoli and wheat on our arable farm this year. 50 tonnes of broccoli and purple sprouting broccoli hit the shelves in September last year, giving customers a taste of veg grown using a variety of low carbon techniques including cover cropping, which locks nutrients into the soil and improves drainage. More than 20 acres of potatoes were grown using low carbon methods, with around 260,000 two kilo packs of potatoes hitting Tesco shelves earlier this year. The potato crops grown at the farm have benefited from a variety of growing techniques to reduce their environmental impact. As we begin the second year of the project, we will be adding peas and leeks into the rotation with our supplier Greenyard Frozen. More than 20 acres of potatoes were grown using low carbon methods 31 Governance Financial statements Additional informationStrategic report Tesco PLC Annual Report and Financial Statements 2026 ![]() Sustainability continued The global food system is one of the leading contributors to nature and biodiversity loss. It’s vital we play our part in protecting nature in at-risk landscapes including forests, freshwater catchments and marine environments. Given the interconnectedness between the climate and nature crises, we continue to strive for a nature-led transition to net zero. Our planet plan includes a full pillar of work on nature, informed by focus areas in the Taskforce on Nature-related Financial Disclosures (TNFD) framework: protecting and restoring habitats and species; preventing freshwater resources from overuse and pollution, and building healthy soils. TNFD disclosures We continue to progress towards alignment with the framework, which provides organisations with the tools to report on risks related to biodiversity loss and ecosystem degradation. The below is designed to provide a status update on our work so far on nature-related governance, strategy, risk and impact management, and metrics and targets. We have also provided information on our LEAP (locate, evaluate, assess and prepare) assessment, pioneered by TNFD. Governance We have a comprehensive climate governance framework encompassing the Board, its associated Committees, and the Executive Committee. This governance framework includes all pillars of our planet plan, including the Protect Nature pillar, and reflects our holistic approach to achieving a nature-led net zero. Strategy Undertaking TNFD’s LEAP assessment gave us an overarching view of nature risk and opportunity. In the last year, we have focused efforts on taking forward recommendations from the assessment. This includes working more closely with sourcing teams and suppliers to embed bottom-up insights into our approach and define practical actions to mitigate risk and leverage opportunities. This work is also supporting us to further refine our strategy, ensuring we continue to focus on areas that are most relevant to our business. In 2025, we expanded the reach of our Nature Programme, to incorporate seven different projects across key sourcing landscapes in our supply chain, building healthy and resilient ecosystems alongside food production. These projects include: working with Forestry England to increase biodiversity in the Blackdown Hills region of England; with RSPB, to build habitats for at-risk bird species such as Turtle Doves across East Anglia; with the Rivers Trust, to improve water management practices in the River Boyne catchment in Northern Ireland; with Herefordshire Rural Hub, delivering landscape recovery in the river corridors of the Wye and Lugg in Herefordshire; with ANSE (Asociación de Naturalistas del Sureste) and key fruit supplier AMFRESH in southeastern Spain, to help create a more resilient supply chain in the region; with Earthworm Foundation, working with two cocoa cooperatives in Cote D’Ivoire to build capacity for agroforestry and soil health; and with the Sea Ranger Service, to help restore seagrass off the coast of the Netherlands – an area used to source several species of wild caught fish, including plaice, cod and haddock. Risks and impacts Acting on the recommendations from the TNFD LEAP assessment, we have taken steps to further integrate nature-related risks and opportunities into our existing risk management processes. This includes updating our principal risks to embed nature further, acknowledging both the impacts and dependencies of our business on the natural world. Metrics and targets For forest risk commodities such as soy and palm, we remain fully committed to sourcing only from verified deforestation and conversion free farms. For soy, our focus remains on engaging with industry and our suppliers to align on pathways to bring deforestation and conversion free soy to the UK. Across all forest risk commodities, we will be working with our suppliers to implement the delayed EUDR legislation. We will also continue supporting farmers directly through the Responsible Commodities Facility (RCF), a system of financial incentives for farmers in Brazil who commit to deforestation and conversion free soy production. We recognise the critical importance in protecting water resources for food security, nature and local communities. We continue to support a combined industry aim of sourcing 50% of the UK’s fresh food and drink from areas of sustainable water management by 2030 through the UK Food and Drink Pact’s Water Roadmap. Alongside other signatories, we fund several multi-year water stewardship projects, led by delivery partners such as local Rivers Trusts, WWF and Good Stuff International, which support suppliers, farmers and local Nature As a food retailer, we rely on healthy soils, clean, fresh water and thriving pollinator populations to help produce our food. 32 ![]() communities to improve water quality, availability and resilience in key sourcing regions across our UK and global supply chains. Assessing nature-related impacts and dependencies remains complex, particularly within our supply chains, due to diverse sourcing locations, varying data availability and evolving global methodologies. Through our Nature Programme and within our Sustainable Farming Groups, we are trialling TNFD aligned nature- related metrics with selected project partners and suppliers, focusing on areas such as water, soil health and biodiversity outcomes. This approach will support us to build a more consistent, actionable evidence base that will strengthen future reporting and inform targeted action in priority sourcing regions. Nature Programme partnership with ANSE As part of our Nature Programme, we have partnered with local e-NGO ANSE (Asociación de Naturalistas del Sureste), which leads on the conservation of natural habitats and biodiversity in southeastern Spain, AMT FRESH, part of AMFRESH Group, and a group of key produce suppliers to Tesco, to support a more resilient food supply chain in the region. We are working with nine suppliers to collect baseline data on soil health, water management, and biodiversity and provide tailored support to growers to implement nature-friendly practices such as planting hedgerows, incorporating organic matter into the soil, and trialling water-efficient irrigation systems. These measures aim to support improvements in soil health, reduce water consumption, and enhance the overall resilience of farming systems. The actions taken aim to support continuous improvement against the Linking Environment and Farming (LEAF) certification standards, with learnings being shared with the wider industry. As the project progresses, the hedgerows and permanent ground cover will mature, providing habitats for wildlife and improving soil health and water retention. Over time, these practices aim to contribute towards creating a nature-positive farming system that is resilient to climate change and supports long-term food production, while contributing to the protection of the Mar Menor basin. Since the launch of the project, we have made strong progress, implementing on-farm improvements, including the planting of more than 22 hectares of native plants, such as hedgerows, grasses, shrubs, and trees to support sustainable pest control, water management and soil health. Spotlight on: We are working with nine suppliers to collect baseline data on soil health, water management, and biodiversity. 33 Governance Financial statements Additional informationStrategic report Tesco PLC Annual Report and Financial Statements 2026 ![]() Climate-related financial disclosures We have disclosed a TCFD statement since 2019 and have now met the full disclosure requirement for the fifth consecutive year. Our TCFD disclosures are integrated throughout the Annual Report, providing deeper insight into the actions underpinning our planet plan and our work to build a more resilient supply chain (see the TCFD content finder on the right of this page). Our sustainability efforts continue to focus on our ability to create and preserve long-term value for our customers, colleagues, shareholders, the planet and the communities we serve. Governance We have a comprehensive climate governance framework encompassing the Board, its associated committees and the Executive Committee. This governance framework includes all pillars of our planet plan, reflecting our holistic approach to becoming a net zero business. In addition to climate-related issues, the governance framework also encompasses food waste, sustainable agriculture, nature, healthy sustainable diets and packaging. TCFD Task Force on Climate-related Financial Disclosures TCFD content finder Governance Board oversight of climate risks and opportunities pages 58, 59, 63 and 75 Management’s role in assessing and managing climate-related risks and opportunities page 41 Strategy Climate-related risks and opportunities identified over the short, medium and long-term and their impact on Tesco’s businesses, strategy and financial planning pages 35, 36, 46 and 47 Strategic resilience taking into account different climate-related scenarios pages 35, 36, 46 and 47 Risk management Processes for identifying, assessing and managing climate-related risks page 38 How they are integrated into the organisation’s overall risk management pages 39 and 82 Metrics and targets Climate-related metrics and targets pages 36 and 37 Greenhouse gas emissions and related risks page 37 T Content elsewhere in the Annual Report that relates to TCFD is indicated with this icon Board level Executive level Functional/Management level Board Audit Committee Sustainability Committee Remuneration Committee ESG reporting and disclosure group Operational decarbonisation steering group Planet steering group Executive Committee Planet committee We are committed to net zero across our own operations by 2035. Our approach prioritises avoiding and reducing emissions first, with offsetting used only for residual emissions. To reflect this approach, ‘net zero operations’ is a more accurate description than our previous wording of ‘carbon neutral’. This is a change in wording only. Our targets, baselines and methodologies remain unchanged, and the updated language aligns with evolving expectations from regulators, investors and assurance providers. Tesco PLC Annual Report and Financial Statements 2026 34 ![]() manufacturing or transport of products. To address these hotspots, our strategy is to engage our farmers and suppliers across multiple ways: Implementing strong standards: We have been strengthening our standards over the years, ensuring suppliers put in place best practices to produce high-quality products while lowering emissions and impacts on the environment. We build on existing guidance from external partners such as LEAF to ensure actions are scaled across our whole supply chain. Incentives and partnership with farmers: We also incentivise more sustainable practices through the Sustainable Farming Groups. In August 2025 we launched a programme of additional financial incentives for more than 400 farmers across our dairy, pig, lamb and beef Sustainable Farming Groups to achieve key environmental and animal welfare goals. Cross-industry collaboration: Implementing some of these new practices will take a collaborative and coordinated approach with the rest of the industry. That is why we have collaborated with Arla and Műller in the Future Dairy Partnership with an ambition to prove that net zero dairy at scale, in harmony with nature, is possible. Our approach to partnership goes beyond retail only, for example on the Exchange Market with the Soil Association Exchange bringing together landowners, banks, suppliers and retailers to collectively incentivise regenerative practices in arable farming. Engaging suppliers: The technology to reduce manufacturing emissions is readily available so our focus is on engaging suppliers and sharing how we are achieving Scope 1 and 2 decarbonisation. Last year, we ran open webinars aimed at sharing best practice for decarbonising manufacturing and transport emissions across our supply chain. We have also begun site visits with key suppliers to better understand their progress and share practical learnings. Science-based targets and net zero: Reaching net zero will require industry-wide efforts and shared accountability right through the supply chain, so we are working with our suppliers to help and encourage them to set their own climate targets. To support our strategic ambition, we have asked all UK suppliers to set an SBTi-aligned net zero target and to begin measuring and reporting their carbon footprint. We are also working closely with our top 50 food and grocery supplier partners to develop joint sustainability plans. 2. Decarbonise transport Our strategy is to shift all fleets to low carbon alternatives by 2035, based on market-ready solutions. We are on track to deliver a fully electric UK home delivery fleet by 2030 under our EV100 pledge, while also working with suppliers on long-term sustainable transport options. This includes moving more freight by rail, improving transport efficiency through backhauling and double stacking trials, adding electric hook ups at our Aylesford distribution centre, and fitting all new Booker vehicles with low rolling resistance tyres. To bridge the gap while long-term technologies develop, we have expanded alternative fuel trials. This year we tested Hydrotreated Vegetable Oil (HVO) across the entire Booker Best Food Logistics fleet, one Tesco UK DC and three One Stop DCs, we also introduced 42 new Bio-CNG trucks at Livingston DC, these fleet changes cut emissions by up to 83% compared with diesel. These trials provide an interim solution as we transition to long-term, low- carbon technologies. 3. Reduce store emissions Reducing store emissions relies on managing consumption and ensuring renewable energy is available to power our stores. We moved to 100% renewable electricity procurement across the Group six years ago, a decade ahead of our RE100 target. We achieved this through a combination of renewable energy certificates, investing in the installation of solar panels and wind turbines at our stores and DCs to generate renewable electricity on-site, and through off-site PPAs. We are working to further develop on-site and off-site renewable generation supply to cover 60% of our electricity demand by 2030. In the UK, we have continued to reduce energy consumption by fitting fridge doors across 79% of our convenience stores and in 332 larger stores. These measures mean fridges need to use less electricity to keep cool, and less heating is needed to maintain the ambient temperature in store. For heating and cooling, we are phasing out gas boilers and introducing electric heat pumps, now used in over 95% of UK convenience stores. We are also optimising heating settings and retiring older, less efficient combined heat and power units. 4. Support sustainable consumption Shifting demand towards sustainable choices, such as diverse proteins and more fruit and veg, is key to achieving a net zero food system. Our long established approach focuses on making healthier, more sustainable diets easy and affordable through reformulation, pricing, promotions and stronger ranges, including plant-based protein. We continue to expand health focused products, such as our Gut Sense and Protein ranges, and encourage customers to choose naturally plant-based options like beans and pulses through great value and simple recipe inspiration. Across the Group, our innovation programme identifies and scales future healthy and sustainable ingredients by working with global technology partners, established suppliers and new entrants. We offer great value fruit and veg through Aldi Price Match, Fresh 5 and Clubcard Prices, and our 5-a-day campaigns use Clubcard personalisation to reward and guide customers towards healthier choices tailored to their needs and preferences. 5. Eliminate waste Food waste occurs across every stage of the value chain – from surplus at farm level, through manufacturing and transport, to operational waste in our stores and distribution centres, and ultimately in customers’ homes. Meaningful progress therefore requires coordinated, industry-wide collaboration with suppliers, redistribution partners, policymakers and other retailers. Strategy Reducing emissions to net zero and implementing mitigation measures within our supply chain are the key to addressing the risks driven by climate change. That is why, in 2023 we set ambitious net zero commitments aligned with a 1.5°C pathway across the full value chain validated by the SBTi – one of the first companies globally to set a validated forests, land and agriculture (FLAG) target. To achieve our commitments, we have mapped out voluntary stretching interim targets to reduce absolute Scope 1 and 2 emissions from our own operations by 85% by 2030 from a 2015/16 baseline year, and to achieve net zero on Scopes 1 and 2 by 2035, 15 years ahead of our SBTi-validated target. To date, we have reduced our Scope 1 and 2 emissions by 68% vs our 2015/16 baseline. On Scope 3, our interim targets include a 55% reduction by 2032 from a 2019/20 baseline on emissions from energy and industrial sources, and absolute Scope 3 emissions from FLAG emissions by 39% by 2032 from a 2019/20 baseline year. Ultimately, we aim to reach net zero across all scopes by 2050 via a reduction of 72% of FLAG emissions, and 90% on Scope 3 non-FLAG emissions. Residual emissions will be neutralised in line with the SBTi and GHG Protocol guidance. Our strategy to deliver against this commitment is called the planet plan, covering six different areas. Pages 30 and 31 describe the planet plan in detail and below is a summary of our strategy across the six pillars. This includes considerations for a strategic and rounded approach as recommended by the Transition Plan Taskforce framework. As such, we aim to not only focus on our own net zero targets, but also work on building adaptation and resilience to the effects of climate change, and drive industry system change. 1. Improve our products Pillar one of our planet plan is about minimising the impact on the environment and communities of producing the things we sell. This includes addressing the main hotspots of emissions in the process of growing the food on farm and in the Tesco PLC Annual Report and Financial Statements 2026 35 Governance Financial statements Additional informationStrategic report ![]() Across our operations, we apply the food waste hierarchy to minimise surplus and waste. Edible food is redistributed daily through our partners such as FareShare and Olio, and converted to animal feed through RenEco. We also work with suppliers through the Target, Measure, Act framework to help halve supply chain food waste by 2030, in line with SDG 12.3. Annual reporting of food waste volumes and destinations helps us track progress and identify hotspots. Household food waste represents around 60% of total UK food waste, making customer facing interventions essential. We encourage customers to adopt a ‘useup day’ and make use of the food already in their kitchens before shopping. Tools such as our realfood.tesco.com/what-can-i- make-with webpage provide recipe inspiration to help customers reduce waste at home. We continue to reduce plastic use across our operations, while also ensuring 99% of our Own Brand packaging is recyclable, either at home or through in-store collections. This year, we have launched a new commitment to lead industry to accelerate the transition to circularity by 2035, starting with an effective Extended Producer Responsibility (EPR) policy and Deposit Return Scheme (DRS), this includes DRS rollout in the UK by Autumn 2027. 6. Protect nature Protecting and restoring nature is fundamental to the resilience of our business. Our ability to source quality food relies on healthy soils, clean water, thriving ecosystems, and stable climates. Climate volatility caused by climate change and ecosystem loss reduces yields and puts key sourcing regions at risk. We aim to deliver this through two connected areas of work. We work with our suppliers and farmers to protect nature on farms and build supply chain and on-farm resilience through responsible sourcing practices. We also collaborate with others through partnerships that aim to protect nature within sourcing regions and food production landscapes. Tackling deforestation in supply chains remains a key priority in this pillar, and we continue to work on the implementation of the delayed EU Regulation on Deforestation-free Products (EUDR) legislation. Find out more about the work we are doing to protect nature on page 32. Ability to adjust or adapt our strategy Climate considerations are embedded within our overall business strategy, capital allocation processes and risk management framework, supporting informed decision making across short, medium and long-term time horizons. Our scale, cash-generative business model and diversified funding base provides resilience to climate-related risks and flexibility to respond to both transition and physical scenarios, including periods of heightened market volatility or increased investment requirements. Funding oversight is governed through established governance arrangements, including Audit Committee oversight. Risks and opportunities modelling Our approach to identifying climate-related risks and opportunities aligns with our corporate risk management framework (RMF). Climate and environmental sustainability and security of supply are recognised as principal business risks, comprising a number of underlying climate- related critical risk events, each assessed against risk appetite and defined mitigations. This assessment has been leveraged and supplemented with a qualitative evaluation of the related financial implications, enabling the modelling of a focused set of material climate- related risks. This approach draws on the robustness of our RMF to ensure attention is directed to the risks most likely to have a significant financial impact on our business. Our scenario modelling combines scientific research, economic forecasts and analysis of the current operating environment with internal data, including financial forecasts, emissions information and the locations of our facilities. Climate-related risks and opportunities are Metrics and targets Metrics are used to identify opportunities for decarbonisation initiatives, including assessing progress in decarbonising owned assets to understand where and when plans could be accelerated. In recognition of how critical sustainability is to our business success, our 2026 Performance Share Plan (PSP) continues to incorporate sustainability metrics including those for Scope 1 and 2 emissions reduction. For more information on the sustainability metrics included within our PSP, see page 92. Metrics and targets supporting our Scope 1 and 2 commitment include: Metric 2025/26 2024/25 Target/Commitment Emissions reduction in Scope 1 and 2 vs 2015 baseline 68% 65% Reduce absolute Scope 1 and 2 emissions by 85% by 2030, (ahead of our SBTi target of 82% by 2032). EV100 – % of UK delivery van fleet that is electric 21% 13% Fully UK electric Tesco home delivery fleet by 2030. Proportion of generated volume from on- site and off-site PPAs, as a percentage of electricity consumption at a Group level 24% 19% Procure Group electricity demand increasingly via Power Purchase Agreements (PPAs) and on-site generation at 60% by December 2030. To support the delivery of our decarbonisation plans we have an internal carbon price (ICP). This aims to ensure that any strategic decisions such as potential new stores, business acquisitions and divestments, or other decisions which would give rise to changes in the level or classification of our emissions, are identified at the earliest opportunity and mitigated accordingly. The price is reviewed annually and governed by our Group operational decarbonisation steering group. Task Force on Climate-related Financial Disclosures continued evaluated at Group level, with subsequent modelling carried out on the same basis. Three warming scenarios were modelled, covering 3°C (current policies), 2°C (delayed transition) and 1.5°C (net zero 2050) pathways which were selected as three plausible scenarios providing the necessary assessment on which to review our mitigation plans. For transitional risks, pathways are based on the Network for Greening the Financial System (NGFS) scenarios. For the chronic physical risk, pathways are based on the Intergovernmental Panel on Climate Change’s (IPCC’s) Representative Concentration Pathways (RCPs). Our disclosure incorporates the 1.5°C pathway, aligned to the Paris Agreement and our stated targets, and a 3°C pathway aligned to current policies, to ensure we cover a range of possible evolutions. We continue to quote the costs or financial value at risk as a range, reflecting the uncertainties of climate-related modelling and our resulting reliance on assumptions. The disclosed risk values are based upon modelling conducted this year and therefore reflect our current risk assessment. Whilst our scenario analysis is informed by the latest credible economic and climate projections, there is an inherent level of uncertainty within both the underlying models and our assumptions, particularly when considering medium to long-term time horizons. We will continue to develop our climate-related modelling capabilities to enhance our assessment of potential climate-related risks and opportunities. This includes expanding data coverage and strengthening key assumptions used to assess the potential financial impacts of different climate pathways. Further information about our principal risks and uncertainties, including our TCFD risks and opportunities, can be found on pages 38 to 49. Tesco PLC Annual Report and Financial Statements 2026 36 ![]() Next steps Thanks to the significant progress we have made in recent years in reducing our Scope 1 and 2 emissions, these now represent around 1% of our total emissions. To further reduce emissions we will continue rolling out efficiency measures like installing doors on fridges, low-carbon asset replacement for refrigeration, and heat pump installations. We also continue to expand our Dotcom fleet electrification and explore options for our larger fleet assets. On Scope 3, we are working to improve our emissions reporting. We have identified our top suppliers by emissions and will continue to support and accelerate their decarbonisation transition. We are focusing on establishing joint plans, innovation and best practice, and regularly reviewing progress against key measures. As our pilots across dairy, beef, produce and arable continue we will apply the learnings in our wider supply chain. Greenhouse gas emissions and energy consumption\* 2025/26 (52 Week) 2025/26 (53 Week) 2024/25 Base year 2015/16 Scope 1 (tonnes of CO 2 e) 734,003 ◊ 748,889 ◊ 802,425 1,240,871 Scope 2 (a) market-based method (tonnes of CO 2 e) 5,789 ◊ 5,992 ◊ 5,497 1,095,671 Scope 2 location-based method (tonnes of CO 2 e) 498,345 ◊ 507,856 ◊ 582,298 1,657,316 Total Scope 1 and Scope 2 market-based (tonnes of CO 2 e) 739,792 ◊ 754,881 ◊ 807,921 2,336,542 Scope 1 and Scope 2 market-based carbon intensity (kg CO 2 e/sq.ft. of Tesco stores and DCs) 8.39 ◊ 8.56 ◊ 9.25 26.29 CO 2 e saved from exporting renewable energy to the National Grid (tonnes of CO 2 e) 61 62 398 – Total annual energy consumption (GWh) 5,113 5,221 5,420 6,823 UK only total Scope 1 and Scope 2 market-based (tonnes of CO 2 e) 638,552 651,181 699,447 1,751,572 UK only Scope 1 and Scope 2 market-based carbon intensity (kg CO 2 e/sq.ft. of Tesco stores and DCs) 9.69 9.88 10.65 26.29 UK only annual energy consumption (GWh) 4,253 4,341 4,549 5,502 \* For both energy and emissions data, we have included all major subsidiaries within Group measures and have included all UK-based subsidiaries in our consolidated UK disclosures. Business travel emissions for the 53-week year were 15,560 tonnes of CO 2 e. (a) We use the market-based method for calculating Scope 2 emissions for our total emissions to account for our efforts in generating and purchasing low-carbon energy. The location-based method is provided for disclosure only and all intensity, net and gross emissions shown are calculated using the Scope 2 market-based method. ◊ We engaged Deloitte LLP to provide independent limited assurance over the GHG emissions data highlighted in the above table with a ◊ using the assurance standards ISAE (UK) 3000 and 3410. Deloitte has issued an unqualified opinion over the selected data. Our method statement can be accessed at www.tescoplc.com/reporting-hub?activeTab=methodologies. Metrics supporting our Scope 3 commitment include: Metric 2025/26 2024/25 Target/Commitment Percentage of palm oil physically certified to Roundtable on Sustainable Palm Oil (RSPO) standard 100% 100% We continue to report 100% palm oil in our Own Brand products is certified to RSPO standards. In addition, against our commitment to be 100% vDCF excluding derivatives by December 2025, we delivered 99%. Percentage of soy used in our own brand supply chain that is verified deforestation conversion-free (vDCF) 14% 9% Achieve deforestation and conversion-free soy. Percentage change in tonnes of food wasted as percentage of tonnes of food handled compared to baseline year (2016/17) 24% reduction 14% reduction Halve food waste in our own operations and supply chain by December 2030. Details of the methodologies for the above metrics and further information on our progress against these targets can be found at www.tescoplc.com/latest-sustainability-report. We continue to review our targets and metrics and focus on disclosing recognised cross-industry metrics where these align to the risks and opportunities we identify. Our total emissions footprint (based on 52 weeks) 68.1m tCO 2 e/year Scope 1 Refrigerants, HVAC, transport (logistics) 1% Scope 2 Purchased electricity 0% Scope 3 Purchased goods and services (including deforestation) (Cat 1) 53% Fuel- and energy-related activities (Cat 3) 5% Upstream transportation and distribution (Cat 4) 1% Downstream transportation and distribution (Cat 9) 5% Use of sold products (Cat 11) 33% End-of-life treatment of sold products (Cat 12) 1% Investments (Cat 15) 0% Capital goods, waste generated in operations, business travel and employee commuting, processing use of sold products, downstream leased assets and franchises (Cat 2, 5, 6, 7, 10, 13, 14) 1% Our total footprint has been calculated using Scope 1 and 2 emissions from 2025/26, fuel related emissions from 2025/26 and other Scope 3 emissions based on 2024/25. Our net zero validated targets are based on the SBTi scope, which excludes certain emissions like emissions from cooking the food purchased in our stores or consumers driving to our stores. Our total 2025/26 emissions within SBTi scope were estimated at 55.7 million tCO 2 e per year. We report on the categories that are material to Tesco based on their contribution to our end-to-end footprint. Upstream leased assets (category 8) are not singled out as a separate category as any emissions coming from leased buildings are already incorporated into our operational footprint. Our Group inventory shows a reduction of 7% of emissions since our baseline in 2019/20. Our total emissions footprint is now 68.1 million tCO 2 e/year, down from 73.1 million tCO 2 e/year in 2024/25. This change has primarily been driven by a reduction in fuel and energy related activities, including the sale and use of fuel, reflecting wider customer behaviour change. Deloitte have assured selected categories of our Scope 3 footprint to the value of 15,709,312 tCO 2 e. Compliance statement Tesco PLC has complied with all of the requirements of UKLR 6.6.6R (8) by including climate-related financial disclosures in this section (and in the information available at the locations referenced therein) consistent with the TCFD recommendations. Tesco PLC has also complied with all reporting requirements under sections 414CA and 414CB of the Companies Act 2006 consistent with the CFD requirements. Deloitte’s assurance Deloitte has provided independent third-party limited assurance in accordance with the International Standard for Assurance Engagements 3000 (ISAE 3000 revised) and Assurance Engagements on Greenhouse Gas Statements (ISAE 3410) issued by the International Auditing and Assurance Standards Board (IAASB) over the TCFD on pages 34 to 37 and 46 to 47 and selected metrics highlighted in this report with a ◊. Items marked with a T throughout the Strategic report and Corporate Governance sections of the Annual Report are also included within the scope of Deloitte’s limited assurance. Deloitte’s full unqualified assurance opinion, which includes details of the selected metrics assured, can be found at www.tescoplc.com/esg-assurance. Tesco PLC Annual Report and Financial Statements 2026 37 Governance Financial statements Additional informationStrategic report ![]() Risk identification & assessment Risk appetite Clear governance Policies, procedures & controls Culture & leadership Communications & training Investigations & follow up Data Monitoring & auditing C o n t r o l s A s s u r a n c e R i s k 2 3 4 5 6 7 8 1 Principal risks and uncertainties Managing our risks Effective risk management is core to our management practices which help deliver our strategy and our commitments to our customers, community, and the planet. We are focused on conducting our business responsibly, safely, and legally, while making risk-informed decisions when responding to opportunities or threats that present themselves. The Board and Executive Committee are responsible for the effective management of risk across the Group, and we manage our risks in line with the risk appetite set by the Board. Risk management framework (RMF) The diagram to the right, provides an overview of our framework defining the Group’s risk management process and governance. Our RMF continues to be embedded throughout the organisation enabling us to clearly identify, prioritise, respond, and monitor our most significant risks and emerging risk themes. Our RMF supports decision making, with culture and leadership being at the heart of our framework, including a clear tone from the top on the importance of risk management. Our colleagues play a vital role in carrying our culture forward through their commitment to our shared values on risk management. We provide regular learning opportunities to strengthen our colleague awareness on various risks and controls, for example providing appropriate training to help prevent cyber-security incidents, as well as communicating the opportunities and safeguards while using artificial intelligence tools. During the Risk management framework Risk control assurance methodologyGovernance \* In addition to the Group risk and compliance committee, there are other internal stakeholder risk committees (e.g. cyber and privacy risk committee, AI strategy governance group, planet committee). T Content elsewhere in the Annual Report that relates to TCFD is indicated with this icon. Principal risks are significant risks that could affect our strategic ambitions, future performance, viability, and/or reputation. Full disclosure of these risks is included on pages 40 to 45. Board Audit Committee Group Chief Executive and Executive Committee Group risk and compliance committee\* Business and functional leadership team Top down Bottom up T Tesco PLC Annual Report and Financial Statements 2026 38 ![]() year, we refreshed the risk controls and assurance (RCA) methodology and embedded it further in the business; by conducting workshops to continue to train colleagues and reinforce the RMF. Risk A complete view of our risk universe starts with the analysis of our business, the external environment within which we operate, the regulatory landscape and our internal operations. This includes the impacts on our strategy, initiatives, governance and processes. We use a consistent assessment criterion to identify and prioritise risks at the Group, business unit and functional level, along with horizon-scanning for emerging risk themes. The identified risks are categorised into one or more of the following risk types: strategic, change, operational, financial, or compliance. This enables effective governance and monitoring of the risks. T Management assesses the risks on a continuous basis, taking into account the risk to the Group’s strategy, our colleagues and our operations, as well as our impact on society and the environment. There is regular formal oversight through clearly defined governance structures, e.g. the cyber and privacy risk committee oversees the various elements of cyber security and data privacy risks. We take a structured and proactive approach to defining and applying our risk appetite, using it as a key mechanism to guide decision making across the Group. Our risk appetite is defined based on the critical risk events which underpin our principal risks, and are reviewed annually, challenged by senior leadership, and approved by the Board to ensure they remain aligned to our strategy, operating model and external environment. This process informs the controls we prioritise, the mitigations we design and the level of risk we are prepared to accept in pursuit of our objectives. During the year, we have further embedded and strengthened our approach to risk appetite, with a continued focus on building a strong risk culture and reinforcing behaviours that support informed and balanced decisions across all business operations. A clear example is our approach to Artificial Intelligence, where our risk appetite helps us differentiate between use cases that offer meaningful productivity benefits within acceptable risk parameters, and those that require enhanced controls due to higher risk profiles. Controls A strong risk and controls culture forms the foundation of our RMF, with responsibilities shared across all management levels and oversight by the Board, which actively engages in risk discussions. The Audit Committee annually assesses RMF effectiveness, focusing on principal and emerging risks, while the Group risk and compliance committee oversees key risks on behalf of the Executive Committee. For further details refer to the Corporate governance section on pages 58 and 59. For risks where our risk appetite is low, we take a robust approach to determine appropriate controls and responses. For these risks (typically regulatory and compliance risks) we have established policies and blueprints to guide the business in managing the risks. These risks are monitored formally by one or more of our various governance bodies, such as our Group risk and compliance committee, as well as by the Audit Committee. For other risks, which are typically strategic, pervasive, or dynamic in nature, the controls and responses are determined on a case-by- case basis, in line with the strategic goals of the organisation. Our approach to risk appetite provides the framework to consistently respond to risk and establish boundaries for coherent risk decision making. This element of the risk management framework has been enhanced during the current year, to further align our risk appetite approach and support its application across the organisation. T We provide continuous training programmes to equip our colleagues with updated skills and knowledge, driving innovation and adaptability. Investigations and follow-up ensure that control deficiencies or irregularities are promptly identified, analysed, and addressed to prevent recurrence. This process strengthens our overall control environment by promoting accountability and mitigating risks. Assurance Group audit (internal audit) undertakes assurance activities including regular risk-based internal audits driven by the annual internal audit plan, which is reviewed and approved by the Audit Committee. The internal audit plan is aligned to principal risks and remains under review and subject to change, to reflect any updates to the risk profile through the year. The Audit Committee reviews and approves all changes to the audit plan and receives regular updates on the outcome of the work performed. Further, second-line functions such as finance controls, ethics and compliance, and safety systematically test key processes and controls established by management to mitigate risks. The work of second-line functions is subject to review by internal audit on a cyclical basis. Data-driven assurance activities support the decision-making process, thereby improving the accuracy and reliability of our audit conclusions. Data-informed insights and clear visibility of risks help our leaders in making strategic decisions. Principal risks and uncertainties The most significant risks – those that could affect our strategic ambitions, future performance, viability, and/or reputation – form our principal risks. Our principal risks are detailed in the following pages. This includes a summary of key information including the type of risk, links to our strategic drivers, risk movement, key responses and controls, and the oversight committees at the Executive Committee and Board level. We have strengthened the governance environment by updating the terms of reference for key oversight committees, ensuring each forum has the right mandate, decision-making authority and cadence to provide robust risk and control oversight. The principal risk list does not include all our risks. Additional risks, not presently known, or those we currently consider to be less material, may also have adverse effects. We also highlight principal risks that are included in our long-term viability scenarios, on page 49. As at year-end FY 25/26, there are 12 Group principal risks. In light of recent geopolitical uncertainties, heightened market volatility, and the accelerating effects of climate change on supply security incidents, we have increased the likelihood of a minor disruption in our ‘Security of supply’ risk. Our approach to these events is to continue to scan the external environment for threats, assess the risk to our business and build resilience to minimise business disruption and prioritise the safety of our colleagues and customers in the event of such incidents. We understand the short-term risks and impacts, and we have the right teams, governance mechanisms, customer offerings and strategies in place. However, the long-term impacts remain uncertain, and we will continue to monitor the external landscape closely and respond accordingly. Additionally, the ‘Climate change’ risk has been broadened to include elements of sustainability, hence has been renamed to ‘Climate and environmental sustainability’. This risk will now include nature-related risks such as biodiversity loss, pollution, soil degradation and water scarcity. The ‘Responsible sourcing’ and ‘Product safety and food integrity’ risks have been consolidated into a single combined risk to better reflect how the business operates, as it allows us to assess these risks holistically rather than in isolation. Our principal risks are interdependent and interconnected with each other, with comprehensive and cogent strategies designed to mitigate the cascading effects on our overall risk exposure. Further, the emerging themes that have a potential impact and require a response, have been considered as part of our risk assessment process described on pages 40 to 45. We have an ongoing dedicated programme to respond to the requirements under the updated Provision 29 of the UK Corporate Governance Code effective FY 26/27, with regular updates to the Audit Committee. Refer to Corporate governance section on page 61, for further detail on the preparation for Provision 29. Tesco PLC Annual Report and Financial Statements 2026 39 Governance Financial statements Additional informationStrategic report ![]() Being the most strategic partner for suppliers 3 Meeting more everyday customer needs 2 Long-term business sustainability 5 Winning in food 1 Connected, personalised and loved by customers 4 Principal risks and uncertainties continued Risk type Strategic Change Operational Financial Compliance Residual risk movement (after taking current responses and controls into consideration) Risk increasing No risk movement Risk decreasing Principal risk Residual risk movement Key responses and controls Cyber security † A cyber security incident can result in disruption and operational impact to our organisation as well as unauthorised access to, or misuse of, our information systems, technology, or data. This could lead to leakage of sensitive information, loss of our critical assets, impact on trade, and reputational damage. Oversight: Cyber and privacy risk committee, Group risk and compliance committee, Executive Committee, Audit Committee, Board. 3 2 5 1 As in previous years, the importance of cyber security remains paramount. We continue to invest in building the right defensive capabilities, including focus on recovery and resilience, and skills across our teams, which combined with colleague training and Executive-level oversight, supports us in managing the risk effectively on an ongoing basis. – Our layered cyber security defence model (LDM) consists of preventative, detective, and responsive technical controls and foundational capabilities. The security model continues to be strengthened in line with our strategy and detailed roadmap, with our progress tracked against milestones and defined outcomes. – We regularly test our cyber security defences using independent third-party agencies to provide insight into the maturity of our cyber security position. – We ensure our security operations centre’s ability to detect, report, and respond to security incidents stays aligned with the changing threat environment. – We learn from external events and continuously adapt our cyber security controls as a result, including for example the increasing use of artificial intelligence by threat actors. – Governance and oversight committees at both senior management and Board levels monitor and oversee the results of the cyber security programme and its progress against the strategy and compliance with regulation. – Significant progress continues to be made in enhancing our ability to recover from catastrophic attacks on core infrastructure and systems, along with addressing vulnerabilities associated with outdated technology. – We recognise the importance of training and communication to help prevent cyber security incidents. We hold regular induction, awareness, and refresher courses for all our colleagues. – We regularly run business resilience exercises to assess the effectiveness of our plans against severe scenarios and interconnected risks, such as geopolitical risk. – Our third-party supplier assurance programme assesses and manages cyber security risks associated with service providers and suppliers as well as the use of third-party software. Data privacy † Failure to comply with legal or regulatory requirements relating to data privacy in the course of our business activities results in reputational damage, fines, or other adverse consequences. These can include criminal penalties and consequential litigation, which may result in an adverse impact on our ability to do business. Oversight: Cyber and privacy risk committee, Group risk and compliance committee, Executive Committee, Audit Committee, Board. 4 We hold large amounts of customer and colleague personal data. Although the threat landscape is ever changing, we continue to enhance how we monitor and manage the risk closely through structured implementation of our Group privacy compliance programme, robust governance, and oversight mechanisms, therefore, the risk remains stable. – Our data privacy policies and processes (including via privacy impact assessments and data governance) establish how we protect and appropriately use personal data. – There is regular reporting on progress and performance of the privacy compliance programme to governance and oversight committees. Our multi-year technology security programme is driving enhanced data security capabilities. – Our Group privacy compliance programme includes ongoing assessment and monitoring of privacy risks and controls across our businesses. The privacy assurance programme is established alongside the implementation of controls. – We continue to learn from external events and adapt our controls as a result. – We have an established team in our security operations centre to detect, report and respond to security incidents (including personal data incidents). – We have a third-party supplier assurance programme focusing on third-party data security and privacy risks. – We recognise the importance of ongoing training and communication to raise awareness of good data-handling practices, and to help prevent personal data incidents. We carry out regular induction, awareness, risk-based tailored training (including refresher training) for our colleagues. † Indicates that the principal risk has been included as part of the longer term viability scenarios detailed on page 49. Strategic ambitions Tesco PLC Annual Report and Financial Statements 2026 40 ![]() Principal risk Residual risk movement Key responses and controls Climate and environmental sustainability † Failure to meet our climate and nature commitments under our planet plan and failure to respond effectively to evolving regulatory, stakeholder, and market expectations could lead to significant financial, operational, and reputational impacts. These include increased costs, supply chain disruption, regulatory penalties, loss of consumer trust, and reduced competitiveness. This encompasses both physical and transition impacts, such as inadequate response to climate change, regulatory changes and consumer preferences, insufficient progress on sustainable packaging, and failure to manage nature-related risks including biodiversity loss, pollution, soil degradation and water scarcity. Oversight: Planet committee, Executive Committee, Sustainability Committee, Audit Committee, Board. 3 5 Climate change is a widely acknowledged global emergency, with the need to act faster becoming evident. Managing the greenhouse gas emissions associated with our supply chain is critical to reducing our impact on climate change. This risk remains in line with the previous year. Our sustainability efforts focus on our ability to create and preserve long-term value for people, planet, and the key communities we serve. – The Planet committee oversees and governs the delivery of the Group’s sustainability commitments, including those related to climate change. The committee is chaired by the Chief Communications and Sustainability Officer, and brings together the different parts of the business, further enabling coordination during key decision making. – We have several metrics with appropriate management oversight and governance mechanisms to enable us to monitor progress. We are working internally and with third-party organisations to continue developing this suite of metrics. There is a level of external assurance over the metrics, and we are working to further enhance and extend this. – We have stated a commitment to be net zero by 2050. This pledge is in the process of being supported by road maps and targeted decarbonisation plans. These combine supplier engagement with innovative farming methods to support the reduction of our carbon footprint e.g. technology investments in pursuit of low-carbon energy and transport. Our targets are validated by the Science Based Targets initiative (SBTi). – We have aligned our climate-related ambitions with our reward policies and have two sustainability-linked bonds. We also continue to report our climate-related financial disclosures, see TCFD section on pages 34 to 37. T – Closely aligned with our work on climate, we continue to evolve our approach to nature, including our ongoing work to align with the Taskforce on Nature-related Financial Disclosures (TNFD) framework. We have leveraged the LEAP (locate, evaluate, assess, and prepare) approach to establish nature-related dependencies, impacts, risks and opportunities for high-risk commodities, and to identify and evaluate the effectiveness of levers to address these risks as well as identify opportunities to support business priorities. We report our progress on this in our section on Nature, see pages 32 and 33 and in our Sustainability Report. Geopolitics and other global events † Failure to address geopolitical uncertainties, such as wars, civil unrest, terrorism, elections, government restrictions, rising geopolitical competition, fractured international relations, including the potential impact of increased tariffs, and potential future pandemics, could significantly disrupt our business. This may result in restricted access to our products, threats to our employees, operational challenges, and broader global economic impacts. Oversight: Geopolitics governance forum, Group risk and compliance committee, Executive Committee, Audit Committee, Board. 3 2 5 1 Uncertain global events and disruptions are leading to greater volatility in the business environment, which requires us to be responsive and resilient. Our approach is to foresee events where possible, assess the risk to our business, customers and colleagues and implement appropriate response strategies. In the prior year, the risk score was increased to reflect heightened geopolitical uncertainty and in response we also established a Geopolitics governance forum to enhance oversight and risk management. During the year, geopolitical risks have continued to materialise, including the ongoing Middle East conflict. The Group continues to monitor events closely and implement appropriate mitigating actions and therefore the overall net risk position has not been increased further. – We continuously monitor the external environment for emerging risks that could disrupt our business, creating comprehensive plans with specific milestones and dedicated oversight to ensure resilience. The newly established Geopolitics governance forum further strengthens this by providing structured insight and challenge on global developments. Our long-term plans are adjusted to account for sensitivities, the interconnectivity of our principal risks, and scenario planning related to the broader macroeconomic environment. – We closely track global developments and government guidelines. This includes engagement with trade, government, industry and labour bodies and ongoing monitoring of potential changes to the future political landscape. – Our disaster recovery, crisis management and business continuity plans are continually tested and enhanced to minimise disruption due to geopolitical and other global events. – Our management, along with the Geopolitics governance forum, with regular Board oversight diligently monitors events, including the current conflict in the Middle East, evaluates their impacts, and formulates appropriate response strategies. – Learnings from events are integrated into our operations, such as securing supply chain capacity, implementing hygiene protocols, enhancing store security, and supporting at-risk colleagues, customers, and suppliers. – The engagement of leadership and senior management is critical to the successful management of this risk area. We have established structured communication plans to provide a clear tone from the top and our leadership actively contributes to planning and scenario testing activities. Tesco PLC Annual Report and Financial Statements 2026 41 Governance Financial statements Additional informationStrategic report ![]() Principal risks and uncertainties continued Principal risk Residual risk movement Key responses and controls Technology Failure to design, build, operate and maintain resilient key IT systems and infrastructure may result in loss of operating capabilities, financial impacts, and damage to our reputation. Oversight: Technology risk and compliance committee, AI strategy governance group, Executive Committee, Audit Committee, Board. 3 2 5 4 As Tesco increasingly relies on technology to drive transformational change and achieve its strategic goals, the need for enhanced technology capability and robust technology resilience grows. We consider this risk stable compared to the previous year, as we continue to invest in the resilience and capacity of our underlying technology platforms and infrastructure, upskilling our team and attracting new talent. Enhanced governance is provided through dedicated technology and AI committees. – The enhancement of our technology infrastructure and platforms to improve resilience continues at pace. Significant investment and activity continues to ensure maximum stability of our internal infrastructure and to increase our capability to respond and recover from unplanned outages of critical systems. – Continued testing and auditing of our disaster recovery and business continuity plans provides assurance of our resilience and identifies opportunities for further improvement. – Our continued investment in data centres, cloud hosting facilities and connectivity is providing greater resilience and control for our key systems. – We have robust and proven IT development, change management and lifecycle procedures in place and skilled colleagues to build, operate and maintain our systems. – Tesco’s technology risk and compliance committee provides oversight and governance of Tesco’s technology risk and compliance management plans. – The AI strategy governance group ensures Tesco has a well-balanced approach to exploit AI opportunities, in alignment with good practice and accepted principles for responsible use of AI. Product safety and responsible sourcing † Failure to ensure that our products are safe, legal, and responsibly sourced. This includes not meeting required product safety, integrity and traceability standards, as well as failing to uphold fundamental human rights, fair working conditions and ethical practices within our production and sourcing activities. Such failures could result in illness, injury, death, regulatory or legal action, and significant reputational harm, ultimately affecting our company performance. Oversight: Group risk and compliance committee, Sustainability Committee, Executive Committee, Audit Committee, Board. 3 2 1 Product safety and responsible sourcing are closely linked. Both risks relate to our global supply chain and share regulatory and reputational consequences. We manage these risks in a similar way through standards, policies and compliance programmes. By combining these risks, we are aligning to how we manage these within the business. The regulatory environment has continued to evolve alongside global supplier cost pressures, and heightened expectations around ethical production. However, we have continued to strengthen our established safety, quality and ethical sourcing frameworks, including enhanced governance and monitoring to ensure standards are continually met. As a result of these actions, the overall risk remains stable year-on-year. – Our product standards, policies and guidance, help ensure that products are safe, legal and of the required quality. They cover food and non-food, as well as goods and services not for resale. We have specialists who maintain product quality and standards through routine site visits, checks and inspections. They also respond to product complaints and quality issues. Our responsible sourcing policies and guidance help to ensure human rights are respected across our supply chain. These include a focus on appropriately monitoring conditions and progress, tackling endemic sector risks, and addressing wider community needs. We respond promptly to any identified product quality, safety, or human rights issues, ensuring they are fully investigated and addressed through clearly defined processes. – We closely monitor any updates to product safety regulations, to ensure our standards and products continue to conform with all relevant regulations. – We conduct detailed due diligence of our suppliers prior to onboarding, and on an ongoing basis, to ensure that adequate infrastructure, capabilities, and capacities are in place to meet Tesco’s standards. – We run colleague training programmes on food and product safety, hygiene controls, and also provide support for stores for product safety. – Our crisis management procedures are embedded within our operations to quickly resolve issues if non-compliant products are produced or sold. Clear escalation protocols include the product recall processes. We operate unannounced supplier audits and product analysis programmes to monitor product safety, traceability, and integrity. We use data analytics to identify which supplier sites may have increased risk exposure, adjusting our audit frequency accordingly. This approach allows us to use our resources effectively, while ensuring appropriate assurance over suppliers’ sites is maintained. – We operate risk-based quality assurance programmes, which are focused on sample-based testing of our products to ensure compliance with our standards and regulations, and monitor supplier compliance with our standards related to human rights. – Our contractual agreements with suppliers clearly articulate the expected standards related to human rights and modern slavery. Suppliers’ obligations are monitored and discussed as part of regular governance meetings. We also provide targeted training for colleagues and suppliers dealing with specific regulations related to human rights and modern slavery. – We use certification schemes and participation in voluntary industry schemes to support our standards. † Indicates that the principal risk has been included as part of the longer term viability scenarios detailed on page 49. Tesco PLC Annual Report and Financial Statements 2026 42 ![]() Principal risk Residual risk movement Key responses and controls Health and safety Failure to meet health, safety, and security standards in relation to our workplace may unfortunately result in death or injury to our customers, colleagues, or third parties, or damage to our operations and lead to adverse financial, legal, and reputational consequences. Oversight: Group risk and compliance committee, Executive Committee, Audit Committee, Board. 5 1 We continue to make significant investments in safety and security controls to address the rise in theft and violence that led to a greater threat to the safety of our colleagues. We implemented specific response strategies and enhanced our monitoring to ensure we continue to provide a safe environment for all our colleagues and customers, and that we manage increased regulatory enforcement of health and wellbeing. As a result of these actions, the overall risk remains stable year-on-year. – Our business-wide, risk-based safety framework defines how we implement and report on safety controls to ensure that colleagues, contractors and customers have a safe place to work and shop. – We regularly review and update our health and safety framework to address operational changes. This includes implementing enhanced controls and physical security measures to protect colleagues from increased threats of violence, and abuse. – We require each business to maintain a comprehensive health and safety risk assessment and risk improvement plan to document and track enhancements. Our store colleagues are provided with equipment and training to deter, de-escalate, manage and evidence violent and abusive behaviour. – Governance and oversight are established in the form of our Group risk and compliance committee and business unit-specific health and safety committees. These committees review critical metrics and monitor the effectiveness of related controls. We have enhanced monitoring by adopting a severity model to understand the impact of our controls in driving down severity. – Our safety audits, Protector Line arrangements and the results of our annual colleague surveys inform management on the delivery of targeted safety initiatives, including communication plans. – Our assurance activities, such as store and distribution compliance reviews, safety health checks and audits, help us assess our compliance with established policies and processes. They also enable us to continuously seek and identify areas for potential improvement. – Our information exchange platform provides leading indicators of safety, enabling early identification of threats and design of action plans which support injury prevention. People Failure to attract, retain and develop the required talent and capabilities, embed our values in our culture, and maintain compliance across our people-related obligations, could impact on the delivery of our purpose and business performance. Oversight: People risk and compliance committee, Nominations and Governance Committee, Remuneration Committee, Executive Committee, Audit Committee, Board. 2 5 1 4 Market competition for key leadership and specialist talent remains strong within the retail sector and wider economy. Wage inflation and other macroeconomic conditions continue to influence this risk. We are strengthening our people-related compliance programmes in response to an increasingly complex landscape. We have also established a strategic workforce planning capability to enable us to anticipate and plan for workforce trends, talent and skill requirements. On this basis, with these mitigations in place, focused on attracting and retaining colleagues, maintaining competitive compensation, and securing specialist skills, the risk remains unchanged. – Our talent planning and people development processes are established across the Group to identify, monitor and develop the skills required to deliver our strategic objectives. This includes succession planning for key roles, and identification of any new skillsets and plans to secure these via internal development or external recruitment. – Increased focus on strategic workforce planning will provide visibility of areas of future demand and identification of new skillsets required. This will enable us to take informed, targeted actions to meet future demand. – There are formal talent development programmes in place with regular discussions on talent and succession planning by management and the Executive Committee, with oversight by the Nominations and Governance Committee. – We continue to invest in our ability to attract and develop talent. During the year, we have further embedded our global careers website and recruitment platform to support the building of inclusive, diverse talent pipelines and to enhance the candidate experience. – Our Remuneration Committee agrees the objectives and remuneration arrangements for senior management. Additionally, we perform a regular review of our ‘total reward’ offers to ensure remuneration offered for colleagues is competitive and appropriate. We also continue to engage closely with trade unions to inform and adapt our future plans and strategy. – We conduct an independent assessment of all leadership level promotions and external hires to ensure capability, potential, leadership, and values remain central to our decision making related to hiring. – We carry out periodic internal compliance reviews, including Right to Work checks, National Minimum Wage and working time requirements, to maintain robust people related controls across the Group. – Our speak up programmes and dedicated training across the Group include our continuous engagement with colleagues on Protector Line and complaints process. These allow colleagues to raise in confidence any workplace concerns such as dishonest activity, bullying, harassment, bias or anything that endangers colleagues, the public or the environment. – Led by colleague voice, we continue to strengthen our mental, physical, and financial wellbeing offer, supported by core health services such as virtual GP access, occupational health and our employee assistance programme to help colleagues stay well and return to work safely. – Our Group diversity, equality and inclusion strategy helps to ensure that everyone is welcome and that we provide all our colleagues with equal opportunities for growth and development. This is embedded in our values, and we are committed to building an inclusive workplace where we treat people how they want to be treated. Tesco PLC Annual Report and Financial Statements 2026 43 Governance Financial statements Additional informationStrategic report ![]() Principal risks and uncertainties continued Principal risk Residual risk movement Key responses and controls Macroeconomic exposures † Our financial performance may be impacted by the broader macroeconomic environment, including uncertainties with respect to, inter alia, inflationary pressures, commodity and other input costs, government policies, monetary policies, and labour market conditions. If not managed appropriately, such costs may negatively impact our financial performance through higher operating and financing costs. Oversight: Executive Committee, Audit Committee, Board. 3 2 5 1 The risk is stable year-on-year, principally because of our established processes and policies for the management of such costs relating to inflationary pressures, commodity costs, government and monetary policies and labour market conditions. – We maintain and monitor appropriate systems, policies, and reports to ensure discipline and oversight on all financial risk. Such policies are reviewed and approved by the Executive Committee, Audit Committee, and the Board. – The Chief Financial Officer leads a team of in-house professionals, who monitor our adherence to such policies through regular oversight and governance meetings. – We continually monitor macroeconomic risk and impact on costs, to enable prompt and data-driven mitigations. – We review the impact of proposed and actual changes in government policies and regulations. – Long-term plans are flexed to consider sensitivities and scenario planning that relate to the wider macroeconomic environment. – We regularly review liquidity levels, sources of cash, and access to committed credit facilities and debt capital markets is maintained. – The Audit Committee maintains regular oversight of key areas, including management’s monitoring of available liquidity, financing and funding, its hedging strategy as well as its associated internal controls. Customer, competition and markets † Inability to clearly understand changing customer behaviours and respond to the fast evolving competitive digital landscape pose significant challenges to our business. In this environment, our ability to deliver an effective, coherent, and consistent strategy is crucial. Failure to do so may result in a loss of market share, adversely affecting customer trust in our brand and overall business performance. Oversight: Executive Committee, Audit Committee, Board. 3 2 5 1 4 Strong and sustained UK market share gains reflect continued focus on value, quality, and service. Ongoing investment in price competitiveness, customer experience, and digital engagement (including Clubcard and retail media) has contributed to a resilient position in a challenging market and therefore the risk remains stable. – Our key strategic drivers underpin decision making and are central to the design of our customer offerings, propositions and experience being provided through our different channels. The Board develops and regularly challenges the strategic direction of our business to enhance our ability to remain competitive on price, range, and service. – Our product ranges, propositions and Clubcard benefits are designed to provide our customers with the flexibility to achieve balance between value and quality. – We have a consistent approach to building impactful customer propositions by offering high-quality and competitive value while improving the customer experience. – The Executive Committee and operational management regularly review markets, trading opportunities, competitor strategy, and activity. We carry out market scanning and competitor analysis to refine our customer proposition. – Our Group-wide customer insight analysis enables us to dynamically improve our propositions. It does this by monitoring customer behaviour and buying sentiments (including any changes due to external factors such as inflation). This approach includes enriching customer engagement through tailored campaigns, which also helps to improve customer retention as well as loyalty. – Our well-established product development and quality management processes ensure the needs of our customers are central to our decision making. We continuously improve our digital platform, adding more flexibility, delivery options, and an increased range of merchandise on offer to compete against new players in the market. – We monitor the effectiveness of our processes by regularly tracking our business and competitors against measures that customers tell us are important to their shopping experience. We continue to improve our Clubcard offerings and have introduced promotions and targeted campaigns to compete with other retailers on price and product quality. † Indicates that the principal risk has been included as part of the longer term viability scenarios detailed on page 49. Tesco PLC Annual Report and Financial Statements 2026 44 ![]() Principal risk Residual risk movement Key responses and controls Security of supply † Disruption in our supply chain due to adverse macroeconomic conditions, geopolitical events, climate change, nature related risks and/or loss of resilience in our key supplier network, may result in Tesco being unable to secure the products required to fulfil customer demand on time and at acceptable prices. This could result in customer dissatisfaction, reputational impact, loss of market share, loss of sales, and erosion of expected profit margins. Oversight: Group risk and compliance committee, Executive Committee, Audit Committee, Board. 3 2 5 1 Continued macro uncertainty and global disruptions, such as extreme weather, crop failures, logistical challenges, and geopolitical tensions, continue to impact the availability of raw materials and food supply, with particular concern where no viable substitutes or alternatives exist. We maintain a robust supplier review programme and actively monitor emerging geopolitical and climate risks to safeguard continuity of supply. Whilst we have not seen any significant disruptions in our product availability across stores, the external landscape of heightened geopolitical uncertainties, market volatility, potential cyber threats across the supply chain, and accelerating climate-related impacts on supply security has meant we see an increased likelihood of a minor event occurring. – We have a robust supply base review process allowing us to review and reduce our reliance on single suppliers, where appropriate. This is further supplemented by a wide product range which enables us to offer alternate products to our customers, in case of supply chain disruptions. – We have introduced a proactive and reactive approach to managing security of supply risks. This also includes developing a technology solution for identifying high risk raw materials and regions, with associated governance to support. – We have an established mechanism to identify products which are key in our customer baskets and have identified alternate or contingent suppliers to fulfil any slack in supply. Additionally, we maintain appropriate stock levels within our warehouses for fast moving goods. – We have a detailed supplier onboarding and due diligence process, which allows us to review resilience of suppliers, in terms of appropriate infrastructure as well as financial stability. Furthermore, the due diligence process includes assessment of any third parties or raw materials which the supplier may be reliant upon. – We have established regular governance forums through which our dedicated teams engage with suppliers to proactively identify and resolve any issues (or potential threats) being faced by our suppliers. – We have committed significant investment with some of our key suppliers to enhance the underlying infrastructure to ensure they are able to meet any increases or spike in demand volumes. Furthermore, we monitor the financial stability of our key suppliers, and where possible, provide support to those suppliers which may be facing financial duress. – We have business continuity plans in place, which can be executed in case of any logistical disruptions or inclement weather events which may affect our ability to transport goods. Regulatory and compliance † Failure to comply with legal and other requirements (such as anti-bribery, fraud, competition law, grocery regulations, and supplier code) in an increasingly litigious environment, may result in fines, criminal penalties for Tesco or colleagues, litigation (including class actions e.g. the ongoing equal pay claim), that may lead to adverse financial, legal, and reputational consequences. Oversight: Group risk and compliance committee, Executive Committee, Audit Committee, Board. 3 5 1 We continue to monitor controls implemented across the Group, which support the business to demonstrate compliance with regulations. We have assessed the risk to be in line with the previous year given our current response strategies, monitoring, and control environment. – Wherever we operate, we aim to ensure that we incorporate the impacts of regulatory changes in our strategic planning and policies. This includes engagement with trade, government and industry bodies and ongoing monitoring of potential changes to the future regulatory landscape. – We have compliance programmes and committees to manage our most important risks (e.g. grocery regulations, supplier code, anti-bribery fraud and competition law). We conduct assurance activities for each key risk area. – We support our Code of Business Conduct and various policies by new starter and annual compliance training and other tools such as our Protector Line. – The engagement of leadership and senior management is critical to the successful management of this risk area. We have established structured communication plans to provide a clear tone from the top. Emerging risk themes Emerging risk themes are reported and discussed at the Audit Committee and Board alongside our principal risks. We conduct horizon scanning to enable a medium and longer-term view of potential disruptors to our business. As part of our risk assessment process, we analyse internal and external sources of emerging risk themes through reviewing leading external publications, attending industry seminars and forums, gathering insights via top-down and bottom-up risk discussions with internal stakeholders, and seeking professional consultation where required. We are currently tracking several emerging risk themes such as political, economic, technological, environment and talent. Artificial intelligence (AI) has been recognised as an emerging risk for several years, and this year we have embedded its potential impacts within our principal risks. This approach ensures that AI-related risks and opportunities are considered across our risk framework, supporting informed decision making and safeguarding long-term resilience for our stakeholders. Tesco PLC Annual Report and Financial Statements 2026 45 Governance Financial statements Additional informationStrategic report ![]() Principal risks and uncertainties continued T TCFD risks and opportunities The following tables summarise the financial value at risk associated with two material transition risk categories (policy and consumer market) and one physical risk (food sourcing) over the short term (five years) and medium term (10 years), alongside a qualitative assessment of how these risks could evolve over the longer term (20 years). These time periods have been selected so that the five-year, short-term view can inform our internal financial planning process, 10-year horizon provides insight into the development of transition-related risks and opportunities and 20 years captures the evolution of physical and transition risks. Additionally, we have provided a qualitative policy risk disclosure relating to petrol and diesel demand but have chosen not to disclose values due to commercial sensitivity. Risk management Following the establishment of climate change as a standalone principal risk in 2020/21, reviews have been conducted at various levels including the Executive Committee and the Board. These include the identification and documentation of climate-related risks and the review and consideration of appropriate risk responses. Management assesses risk on a continuous basis, considering the risk to our strategy, our colleagues and our operations, as well as our impact on society and the environment. There is regular formal oversight through clearly defined governance structures. Our risk management framework page 38, which includes controls and assurance activities, continues to be embedded throughout the organisation, enabling us to clearly identify, prioritise, respond to, and monitor our most significant risks and emerging risk themes. The most recent principal risk review was presented to the Board, Audit Committee and Executive Committee in February 2026. Following this review, and recognising the interdependencies between climate and nature, the ‘Climate change’ risk has been broadened and renamed to ‘Climate and environmental sustainability’. This risk now incorporates nature-related risks such as biodiversity loss, pollution, soil degradation and water scarcity. Climate and environmental sustainability is assessed to be one of our most material risks determined by a combination of likelihood and potential financial impact. Additionally, in light of the accelerating effects of climate change on supply security incidents, and other external factors, we have increased the likelihood of a minor disruption in our ‘Security of supply’ risk. More information can be found on pages 41 and 45. Policy risk Annual mitigated profit impact Pathway Five-year outlook 10-year outlook 20-year outlook 3°C Not material Not material Carbon prices and their global application remain at current levels, which leads to a minimal financial impact to our business. 1.5°C £200–250m £300–350m Carbon prices begin to eventually plateau and are sustained at this level, with widespread adoption across the developed and developing economies. We continue to assess the impact of carbon pricing, which mainly influences the costs we pay suppliers. Under a 3°C pathway, we assume no change to current carbon taxes, resulting in a non-material impact, while the 1.5°C pathway models widespread adoption of increasing rates of carbon taxation. The model assumes emissions reduce in line with our net zero plan, with most financial risk mitigated through consumer behaviour and general market pricing. Our model is based upon current carbon prices and the extent of emissions covered, which is then extrapolated out across each warming scenario. Our assumption for the 1.5°C pathway over the longer term would be for carbon pricing to eventually plateau, while for the 3°C pathway we would expect the currently low levels of global carbon prices and adoption to remain stable, and therefore immaterial financial impact. Our risk assessment for the 1.5°C scenario has increased since our previous disclosure, reflecting the limited global progress on emissions reductions since it was last modelled. As a result, achieving this aspirational pathway would now require more rapid and decisive action, which is reflected in a higher assumed carbon price, broader policy coverage, and therefore the higher risk value modelled. Our 3°C scenario output values remain in line with our previous disclosure. In addition to carbon pricing, we are actively monitoring any further policy risk associated with the UK Government’s legislated timeline to end sales of new combustion engine vehicles by 2030 and hybrid vehicles by 2035. In this context, our modelling, which is aligned to the UK National Energy System Operator’s Future Energy Scenarios, indicates a potential volume risk as electric vehicle adoption continues to accelerate. While this decline represents a headwind for the business, our petrol filling stations (PFS) benefit from being well-integrated within our store estate and remain conveniently located for the shopping missions of our customers, providing an important degree of defensive resilience. We continue to monitor policy, technology, and consumer behaviour trends closely and are assessing a range of strategic options to ensure our PFS network remains relevant and well positioned as mobility patterns evolve. Tesco PLC Annual Report and Financial Statements 2026 46 ![]() Food sourcing risk Annual mitigated profit impact Pathway Five-year outlook 10-year outlook 20-year outlook 3°C £0–50m £0–50m Chronic risks challenge the viability of suppliers in certain regions, leading to a high likelihood of material disruption. 1.5°C £0–50m £0–50m Physical risks remain, impacting security of supply, but more significant impacts are avoided. Over the last year, we have evolved our methodology for assessing this risk and developed an approach that more closely aligns with our sourcing strategy. Our model focuses on a defined group of fresh produce lines and commodities where we believe there is the greatest insight to be gained from detailed climate modelling. We assess the impact of chronic drought and water scarcity on global production of these commodities, evaluating how changes in crop yields may affect unit pricing. The analysis considers both positive and negative yield impacts arising from changing weather patterns, recognising that climate change may result in regional variability rather than uniform outcomes. The modelling assumes that sufficient volumes can continue to be sourced to meet demand. This approach enables us to better understand potential cost volatility linked to physical climate-related risks, rather than focusing on absolute availability constraints. We have assumed that most of the financial risk would be mitigated by means of shifts in consumer behaviour and general market pricing, this assumption has the effect of condensing the risk values within the £0-50m range in all scenarios. Overall, this methodology allows us to identify commodities that may be more exposed to climate- driven price variability and to use these insights to inform sourcing strategy, supplier engagement, and longer-term resilience planning. Consumer market risk Annual unmitigated profit impact Pathway Five-year outlook 10-year outlook 20-year outlook 3°C £0–50m £0–50m Consumer participation in the resale market continues to grow steadily, but the impact is more greatly felt within the high-value and luxury brand markets. 1.5°C £50–100m £100–150m Consumers reduce clothing purchase frequency, with resale platforms increasingly serving the mass market. This risk models the impact of customers’ sustainable purchasing decisions, for example placing a greater importance on the environmental impact of a product. Previous modelling indicated the financial risk in our core food business to be negligible, due to our proven ability to adapt our product offer to meet changing consumer demands and the existing high levels of substitutability available to customers by means of our broad plant-based and dairy-alternative product ranges. Our modelling therefore focuses on non-food categories and this year we refined our approach to reflect evolving consumer trends within the clothing market. We assess the financial impact of consumers adopting more sustainable behaviours, including wearing garments for longer and increasing their participation in second-hand and upcycling markets. Our modelling assumes demand is equally affected across all clothing categories and the risk presented assumes no mitigating actions are taken. During 2025/26, we strengthened our capability to ‘design for circularity’ by training colleagues in the UK and across our sourcing hubs on circular design principles. This means creating products which are designed for durability and longevity so they stay in use for as long as possible, whilst also considering how products can be managed when they reach the end of their lifespan. Additionally, we operate clothing takeback and textile recycling bins in around 2,000 UK stores in partnership with the Salvation Army Trading Company Limited. This helps to ensure that donated textiles are managed responsibly by sorting them for reuse or recycling. Technology risk We previously disclosed a risk that existing capital assets are rendered obsolete through the introduction of low-carbon equivalent technology, resulting in the need to write off the value of our assets. Given our continued programme of capital investment, aligned to our operational net zero commitment and a 1.5°C pathway we have assessed this risk is now highly unlikely to materialise. We will continue to monitor this risk internally but have discontinued the disclosure on grounds of immateriality. Opportunities As the impacts of climate change escalate, we witness increasing negative impacts on communities. Therefore, our efforts focus on understanding and mitigating the risks to our business and stakeholders. However, we recognise risk mitigation can unlock some positive outcomes, for example: – Lower impact ranges: shifting consumers’ diets is unlocking growth in new product ranges, including alternative proteins, legumes, pulses, fruits and vegetables. As a retailer, we can expand our plant-based ranges to cater to consumer demand and mitigate some of the risks due to consumption habits changing. – Resource efficiency: lowering emissions intensity within our operations and supply chain via efficient energy solutions such as refrigeration and heating systems in our stores, can unlock energy savings and thus financial savings. Fridge doors have been added to 79% of our UK convenience stores, and we have now fitted them in 332 of our larger stores. – Electric vehicle charging: we are uniquely positioned to offer customers a convenient place to charge their electric vehicles while they shop, with over 2,600 EV charging bays located across our UK store car parks. In June 2025, we expanded this offering through our partnership with POD, introducing the ability for customers to earn Clubcard points on EV charging top-up transactions. – Access to less volatile energy prices by increasingly procuring energy for stores via our onsite and offsite long-term PPAs and self-generating on-site. This year, we opened Aylesford Distribution Centre which is equipped with the largest number of solar panels across our estate. We have also added rooftop solar panels to 29 of our existing stores in 2025/26, with a potential annual generation of over 8,000MWh. Tesco PLC Annual Report and Financial Statements 2026 47 Governance Financial statements Additional informationStrategic report ![]() Longer term viability statement Assessing the Group’s longer-term prospects and viability The Directors have based their assessment of viability on the Group’s current long-term plan, which is updated and approved annually by the Board. The plan delivers the Group’s purpose of ‘serving our customers, communities and planet a little better every day’ and is underpinned by a clear strategic focus on creating sustainable, long-term value for every Tesco stakeholder. The Group conducts an annual strategic planning process, comprising a comprehensive reassessment of progress against the Group’s strategic objectives, alongside an evaluation of the longer-term opportunities and risks in each market the Group operates. The process for identifying the principal and emerging risks in each market is an important input to this process. The Group’s strategic plan and viability statement are both considered over a three- year period, as this time horizon most appropriately reflects the dynamic and changing retail environment in which the Group operates. Long-term planning process The long-term planning process builds from the Group’s current position and considers the evolution of the strategic objectives over the next three years. Three years is selected as the Group’s planning horizon and viability period based on the pace of change in both the competitive landscape and customer shopping behaviours within the retail sector. Current position Our multi-year performance framework, strategic drivers and capital allocation framework, which were introduced in 2021, continue to guide management’s actions. The multi-year performance framework sets out the objectives of the business: to drive top-line growth; to grow absolute profits while maintaining sector leading margins; and to generate stable free cash flow each year. The delivery of these objectives will enable the Group to maintain a strong balance sheet, invest for growth and deliver improved returns for shareholders. The Group continues to invest in delivering great value, quality and customer service, whilst delivering sustainable growth, supported by: – a strategic focus on driving growth and continued focus on cost reduction from simplification of the operating model; – a clear set of financial priorities to deliver cash profit, free cash flow and earnings per share growth, underpinned by a robust capital allocation framework; and – a diversified business portfolio covering retail, wholesale, insurance and money services, and data science. Refer to the Chief Executive’s review on page 10 and the Financial review on pages 22 to 28 for further detail regarding the Group’s strategic and financial progress. Longer-term prospects The following factors are considered both in the formulation of the Group’s strategic plan, and in the longer-term assessment of the Group’s prospects: – the principal risks and uncertainties faced by the Group, as well as emerging risks as they are identified, and the Group’s response to these; – the prevailing economic climate and global economy, competitor activity, market dynamics and changing customer behaviours; – any structural changes in how customers shop, additional costs incurred by the Group and potential macroeconomic consequences of inflation due to geopolitical events and global supply challenges; – opportunities for further cost reduction through operational simplification and leveraging technology; and – the resilience afforded by the Group’s operational scale. Assessing the Group’s viability The viability of the Group has been assessed, considering the Group’s current financial position, including external funding in place over the assessment period, and after modelling the impact of certain scenarios arising from the Group’s principal risks outlined on pages 38 to 47. Three ‘severe but plausible’ scenarios have been modelled which address the principal risks that the Group has assessed would have the most direct and material impact on the Group. None of the modelled scenarios, either individually or in aggregate threaten the viability of the Group. The hypothetical scenarios described are also used as the basis for the risk-weighted cash flows which are included in our impairment of non-current asset sensitivity analysis. For more information, please refer to Note 15 on pages 148 to 152. Longer term viability statement Tesco PLC Annual Report and Financial Statements 2026 48 ![]() Scenario Associated principal risk Description Geopolitical events trigger higher inflation which, together with weak macroeconomic fundamentals, weaken consumer confidence, further intensifying competition in the sector – Geopolitics and other global events – Security of supply – Product safety and responsible sourcing – Macroeconomic exposures – Customer, competition and markets Geopolitical events trigger supply chain volatility and commodity price inflation, resulting in resurgent cost inflation in the markets in which we operate over a sustained period. The Group incurs elevated levels of cost inflation across goods purchased for sale to customers and the operating cost base. The ability of the Group to manage these cost tensions through cost savings is constrained. Options to offset cost increases through retail prices are constrained as inflationary pressures together with weak macroeconomic fundamentals and an uncertain fiscal and regulatory environment, weaken consumer confidence, leading to competition in the grocery sector intensifying further. UK interest rates remain elevated beyond current forecasts as central banks seek to maintain target inflation levels. Management has applied a downside scenario which reduces projected like-for-like sales growth across the three years of the Group’s strategic plan by c.(2)%. Data breach – Cyber security – Data privacy – Regulatory and compliance – Customer, competition and markets The volume and nature of the customer and supplier data we hold as a business could result in a serious data or security breach which sees a significant financial penalty levied against the Group, aligned to the UK GDPR penalty framework which could see a maximum fine levied of 4% of Group revenue. For the purposes of this stress test, management have included a fine quantified as 2% of Group revenue, being the mid-point of the potential maximum fine. A significant data breach poses a reputational risk, resulting in a decline in customer sentiment and an adverse trading impact. The extent of this trading impact is very uncertain, both in terms of the financial impact and the period it may take to regain customer trust. As such, the potential brand reputation element of this scenario has been modelled via a ‘reverse stress test’. This assesses the risk in the context of the residual headroom after all other scenarios have been applied. The resultant like-for-like sales decline which would have to occur to eliminate the residual cash headroom, including all other scenarios happening in aggregate, is significantly higher than any decline the Group has faced in recent history. Climate change – Climate and environmental sustainability – Geopolitics and other global events – Security of supply – Product safety and responsible sourcing – Regulatory and compliance – Customer, competition and markets Rising global temperatures result in an increasing incidence and severity of extreme weather events, leading to a higher incidence of store closures due to flooding and disruption to our global supply chain. The quantification of the potential financial impacts of physical and transitional risks and opportunities linked to climate change on the Group have been taken from our ongoing climate-related risk modelling work based on 1.5°C warming pathway. We expect to be able to refinance external debt and renew committed facilities as they become due, which is the assumption made in the viability scenario modelling. Our committed facilities remain undrawn as at the end of the financial year. Please refer to Note 22 on page 156 for further details on our debt profile, including maturity dates. The scenarios on the left are hypothetical and purposefully severe with the aim of creating outcomes that could threaten the viability of the Group. In the case of these scenarios arising, additional mitigation options are available to the Group to maintain liquidity to continue in operation, such as: (i) accessing new external funding early; (ii) short-term cost reduction actions; and (iii) reducing capital expenditure. None of these mitigating actions are assumed in our current scenario modelling. Viability statement Based on these severe but plausible scenarios, the Directors have a reasonable expectation that the Company will continue in operation and meet its liabilities as they fall due over the three-year period considered. This Strategic report (on pages 5 to 49 and incorporating by reference pages 68 and 69 and pages 225 to 228) has been prepared in accordance with the requirements of the Companies Act 2006, and has been approved and signed on behalf of the Board. Ken Murphy Group Chief Executive 15 April 2026 Tesco PLC Annual Report and Financial Statements 2026 49 Governance Financial statements Additional informationStrategic report ![]() Corporate governance report Governance overview Contents Governance overview 50 Governance introduction 52 Board of Directors 54 Governance framework 58 Purpose and culture 62 Role of the Board 63 Board activity 64 Board performance review 67 Section 172 statement 68 Committee reports Nominations and Governance 70 Sustainability 74 Audit 78 Directors’ remuneration report 88 Directors’ report 225 Compliance with the UK Corporate Governance Code 2024 (the Code) During the year, the Company was in full compliance with all applicable principles and provisions set out in the Code. The Board is aware of the upcoming requirements under Provision 29 which is applicable in FY 26/27, and it intends to be compliant. More information can be found on page 61. Monitoring compliance with the Code is the responsibility of the Nominations and Governance Committee, which receives regular updates and reports its finding to the Board. Details of how the Code has been applied can be found throughout this Corporate governance report, the Strategic report and the committee reports. Principles of the Code Read more Pages Board leadership and company purpose Long term, sustainable success of the Company Viability statement Pages 48 to 49 Chair’s letter Pages 52 to 53 Board activity Pages 64 to 65 Our strategic ambitions Pages 14 to 15 Purpose and culture Everyone’s welcome Pages 20 to 21 Purpose and culture Page 62 What we stand for Page 7 Resources and controls Managing our risks Pages 38 to 39 Stakeholder (inc. workforce) engagement Stakeholder engagement Pages 18 to 19 Q&A with the Colleague Contribution Panels hosts Page 66 Section 172 statement and key strategic decisions Pages 68 to 69 Approach to remuneration Page 91 Division of responsibilities Role of the Board and Executive Division of responsibilities Page 60 Governance framework Page 58 Role of the Board Page 63 Executive Committee Page 59 Composition, succession and evaluation Composition Our Board Pages 54 to 57 Appointments to the Board and succession planning Board composition, expertise and succession planning Pages 70 to 71 Balanced board Nominations and Governance Committee Pages 70 to 73 Board performance and evaluation Board performance review Page 67 Audit, risk and internal control Audit Committee report Audit Committee Pages 78 to 87 Principal risks and uncertainties Principal risks and uncertainties Pages 38 to 47 Remuneration Directors’ remuneration report Directors’ remuneration report Pages 88 to 108 Tesco PLC Annual Report and Financial Statements 2026 50 ![]() Governance at a glance Tenure Average tenure: 4 years and 6 months 0 1 2 3 4 5 6 5+ 3 – 5 0 – 3 Gender % Ethnicity % 28 Feb 26 Male 64% Female 36% 28 Feb 26 White 82% Ethnically diverse 18% Geographic expertise Independence 28 Feb 26 UK 11 Europe 7 Rest of World 5 28 Feb 26 Independent 8 Executive 2 Chair 1 Board Attendance during FY 25/26 (a) Board Nominations and Governance Committee Audit Committee Sustainability Committee Remuneration Committee Gerry Murphy 6/6 4/4 – – – Ken Murphy 6/6 – – – – Imran Nawaz 6/6 – – – – Melissa Bethell 6/6 4/4 5/5 – 4/4 Bertrand Bodson 6/6 4/4 – 4/4 – Carolyn Fairbairn 6/6 4/4 5/5 4/4 4/4 Thierry Garnier 6/6 4/4 – 4/4 – Stewart Gilliland 6/6 4/4 – 4/4 4/4 Chris Kennedy (b) 6/6 3/4 5/5 – – Caroline Silver (c) 6/6 3/4 5/5 – – Karen Whitworth 6/6 4/4 5/5 4/4 4/4 (a) Alison Platt stepped down from the Board in June 2025. During this period, she attended all meetings she was eligible to attend. (b) Tesco PLC Board and Committee meetings are scheduled two years in advance. Chris Kennedy joined the Board in February 2025 and was unable to attend one scheduled Nominations and Governance Committee meeting due to prior commitments. (c) Caroline Silver was unable to attend one scheduled Nominations and Governance Committee meeting due to prior commitments. Key highlights Total dividend per share for the year 14.5p Shares bought back since April 2025 351,658,966 Average vote % in favour of all resolutions at the 2025 AGM 97% Number of colleagues who would recommend Tesco as a Great Place to Work 82% Board composition Tesco PLC Annual Report and Financial Statements 2026 51 Strategic report Financial statements Additional informationGovernance ![]() Dear Shareholder I am pleased to present our Governance report for the year ended 28 February 2026. This report demonstrates our commitment to maintaining high standards of governance. We are fully compliant with the UK Corporate Governance Code (the Code) this year. These standards support the Board in providing effective leadership and sound decision making. Our robust corporate governance framework enables us to deliver long-term sustainable growth and ensures the Board maintains appropriate oversight of the material issues facing the Group. This section includes the reports of the Nominations and Governance Committee, Sustainability Committee, Audit Committee and Remuneration Committee and highlights key developments and achievements during the year. Our evolving strategy The Board remains focused on ensuring that our strategy delivers long-term value for all stakeholders, recognising their continuing evolving needs while staying aligned with our purpose and values. Over the year, we have actively overseen the Group’s strategic progress, receiving regular updates from management on performance against our strategic drivers and the evolution of the long-term strategy and the Group’s priorities. The Board’s oversight has included reviewing the development of our new strategic ambitions, including progress in data and the role of artificial inteligence in how we serve and keep winning with even more customers. We also considered wider market forces, cost pressures and the investment needed to strengthen the core of the business. Taking a structured and disciplined approach enables us to ensure that the evolving strategy is delivered responsibly and continues to support sustainable performance. Engaging with our stakeholders The insight our stakeholders provide shapes how we make decisions. The Board receives regular updates on customer expectations and colleague sentiment. This includes deep dives, stakeholder dashboards and direct engagement with colleagues through our Colleague Contribution Panels and Every Voice Matters surveys, which are central to our oversight of culture and help inform decision making. We receive views from suppliers through feedback mechanisms and independent surveys, informing our oversight of responsible sourcing and long-term partnerships. In addition, we consider the views of shareholders through ongoing dialogue and remain committed to supporting the communities we serve and overseeing delivery of our sustainability commitments. Together, this engagement ensures our decisions reflect the needs of the people who rely on us. Further information on how the Board engages with stakeholders can be found on pages 18 to 19. Our culture A strong and healthy culture, across the business and within the Boardroom, is essential to delivering long-term, sustainable success, and the Board places significant importance on monitoring it effectively. Our purpose and values underpin the way we work and help embed a culture where everyone feels welcome. All colleagues are assessed against our Win Together behaviours through the Your Contribution framework, and for senior management, performance outcomes are reviewed to ensure alignment not only with our long-term priorities but also with our purpose and values. Further information on how the Board monitors culture can be found on page 62. Board performance It is essential we also remain focused on maintaining a high-performing, skilled and diverse Board. This year, we completed an internal Board performance review and also reviewed the performance of each director and Board Committee to ensure they continue to engage and operate effectively and provide robust oversight of governance, risk management, sustainability and the long-term strategy. Governance introduction Gerry Murphy, Chair We remain focused on maintaining high standards of governance to deliver long-term sustainable growth for our stakeholders. Corporate governance report continued Tesco PLC Annual Report and Financial Statements 2026 52 ![]() The internal review concluded that the Board continues to operate effectively, with a healthy culture of openness and constructive challenge, while remaining connected to stakeholders views and operational performance. Over the coming year, the Board’s focus will be on further developing our long-term strategy, and continuing to monitor succession and composition, ensuring the right balance of skills, expertise and diversity are on the Board in line with the work undertaken by the Nominations and Governance Committee. Further information on the Board’s performance review can be found on page 67. Board changes There has been one change to the composition of the Board during the year. In June 2025, Alison Platt stepped down at the Annual General Meeting, having served nine years as a Non- executive Director on the Board. I am grateful to Alison for her outstanding contribution and commitment to the Board. As at the date of this Report, the Board comprises 36% female directors, reflecting Alison Platt’s retirement during the year. We recognise that we have not met the Listing Rule requirement of 40% female representation, and we are not in line with our diversity, equity and inclusion (DE&I) policy objective of between 40% and 60% Board gender balance. Following Alison’s departure, the Board took the opportunity to strengthen its succession planning through a review of its composition and future requirements, alongside an external assessment of the Board’s current skills and expertise and those required to deliver the Group’s long-term strategy. This assessment, facilitated by Calibro Consult Limited, has informed the Board’s thinking on future capability needs and the development of a role profile. As a result of this work, the Board has commenced the search for a new Non-executive Director, with diversity considerations embedded alongside skills and expertise. The Board is committed to restoring compliance with the Listing Rules and meeting its DE&I policy objectives over the coming year. Further information on our succession planning and DE&I commitments can be found within the Nominations and Governance Committee Report on pages 70 to 73. Our Code readiness programme We have continued momentum on the next phase of our readiness programme for Provision 29 of the Code. The Board receives regular updates on the strengthening of our risk and internal control framework. The steps that have been taken have further embedded consistency across the Group and positioned us well for full implementation of the new requirements, ahead of the Board providing our first declaration in the 2027 Annual Report. Further information on our Code readiness can be found on page 61. Looking ahead Given the challenging market conditions, we are focused on continuing to deliver consistent sustainable value for all our stakeholders in the years ahead, by implementing our new strategic ambitions and focusing on innovation and growth. On behalf of the Board, I would like to thank our colleagues for their dedication and support. I would also like to extend my thanks to all our stakeholders for their continued support and trust in our future success. Gerry Murphy Chair 15 April 2026 Key highlights from the Board in 2025/26 Investing in our long-term strategy Evolved the long-term strategy and continued to invest in future success, with focus on exploring new opportunities while we keep winning with even more customers. This included exploring opportunities in AI, advancing personalisation and further strengthening our online proposition. Embedding sustainability Oversaw the continued integration of sustainability into our long-term strategy, receiving regular updates on the planet plan, while the Sustainability Committee received deep dives on each pillar. This year, we transitioned from our 2025 commitments to a sharper set of ambitions that support sustainable, long-term growth. Return of capital to our shareholders Further progress made in returning capital to shareholders as part of our ongoing share buyback programme. In April 2025 we committed a further £1.45bn for share buybacks to April 2026, taking our total planned buybacks since the programme began in October 2021 to £4.25bn and reinforcing our focus on long-term value creation. Developing Board succession, skills and expertise Conducted a review of the Board’s skills and expertise to ensure continued alignment with our long-term strategy and DE&I commitments. This year, we commenced an assessment of the Board’s collective capabilities as part of our succession planning process. We considered the future skills mix required to deliver the strategy over the coming years, supporting the maintenance of an effective Board and ensuring orderly succession in the years ahead. 2026/27 Key focus – Continue to evolve and embed the long-term strategy, ensuring we deliver sustained value, quality and service for our customers, while strengthening the capabilities needed to support future growth. – Maintain a strong focus on Board composition, progressing our diversity, equity and inclusion commitments and ensuring that succession planning and skills development supports an effective Board for the years ahead. – Deepen alignment between the strategy and our sustainability commitments, ensuring that the planet plan commitments are fully integrated into long-term plan and supported by investment and expertise. Tesco PLC Annual Report and Financial Statements 2026 53 Strategic report Financial statements Additional informationGovernance ![]() Ken Murphy, Group Chief Executive Appointed October 2020 Skills, experience and competences Ken is a growth-orientated business leader with strong commercial, marketing and brand experience within retail and wholesale businesses. He has experience in global product brand management, product development, sales and marketing, sourcing, manufacturing and distribution. External appointments Current: None Past: Executive vice president, chief commercial officer and president of global brands: Walgreens Boots Alliance Various roles: Procter & Gamble and Coopers & Lybrand (now PwC) Imran Nawaz, Chief Financial Officer Appointed May 2021 Skills, experience and competences Imran has over 20 years’ experience in the global food industry and broad financial, strategic and international experience gained across a number of large multinational organisations. His financial, strategic, leadership and international strengths are a valuable asset to Tesco as we deliver on our strategic priorities. External appointments Current: None Past: Chief financial officer: Tate & Lyle PLC Various roles: Mondelēz International, Inc., Kraft Foods, Philip Morris and Deloitte N Dr Gerry Murphy, Chair Appointed September 2023 Skills, experience and competences Gerry has extensive global leadership experience through both executive and non-executive roles. His executive career was spent in retail and other customer-focused businesses in senior leadership and commercial roles. His significant business and board level experience and deep understanding of corporate governance, enable him to provide the Board with valuable leadership in the delivery of the Group’s strategic objectives. External appointments Current: Chair: Burberry Group plc Trustee: The Burberry Foundation Senior advisor: Perella Weinberg Partners Mentor: Chair Mentors International Past: Chair: The Blackstone Group International Partners LLP and Tate & Lyle PLC Non-executive director: Intertrust N.V., British American Tobacco plc, Merlin Entertainment plc, Reckitt Benckiser plc, Abbey National plc and Novar plc Chief executive officer: Greencore Group plc, Exel plc, Carlton Communications plc (now ITV plc) and Kingfisher plc Board of Directors Board of Directors Tesco PLC Annual Report and Financial Statements 2026 54 ![]() Key: A Audit Committee N Nominations and Governance Committee R Remuneration Committee S Sustainability Committee Committee Chair Dame Carolyn Fairbairn DBE, Senior Independent Director Appointed September 2023 Skills, experience and competences Carolyn brings a wealth of experience to the Board with her deep understanding of the macroeconomic, regulatory and political environment and significant experience across the media, government and financial sectors. External appointments Current: Non-executive director: HSBC Holdings plc Honorary fellow: Gonville and Caius College, Cambridge, and of Nuffield College, Oxford Advisory council member: Frontier Economics Past: Director-general: Confederation of British Industry Non-executive director: Lloyds Banking Group plc, The Vitec Group plc, Capita plc, BAE Systems plc, UK Competition and Markets Authority and Financial Services Authority Chair of the board of trustees: Royal Mencap Society Senior positions: McKinsey & Company, BBC and ITV plc Member: Number 10 Policy Unit SRNA Melissa Bethell, Independent Non‑executive Director Appointed September 2018 Skills, experience and competences Melissa’s wealth of international corporate, strategy and financial experience across a range of industries, with a focus on private equity, advisory services, strategic consultancy and the financial, media and technology sectors, is invaluable in delivering our strategy. External appointments Current: Non-executive director: Diageo PLC, Exor N.V., Brillio LLC, The Magnum Ice Cream Company N.V. Senior advisor: Atairos Director: Ocean Outdoor Past: Non-executive director: Samsonite International S.A., Worldpay Group PLC and Atento S.A. Senior positions: Atairos Europe, Bain Capital and Goldman Sachs & Co RNA Bertrand Bodson, Independent Non‑executive Director Appointed June 2021 Skills, experience and competences Bertrand is an accomplished business executive, with significant experience of digital transformation, technology and the application of AI. He brings exceptional leadership and business expertise to the Board, as well as experience in delivering corporate transformation programmes while maintaining a focus on performance. His significant knowledge of digital and technology matters gained across a number of sectors, including retail, enhances the Board’s oversight of these areas and the delivery of the strategy. External appointments Current: Chief executive officer: Keywords Studios Ltd Past: Supervisory board: Wolters Kluwer N.V. Senior positions: Novartis AG, Sainsbury’s Argos and EMI Music Co-founder and CEO: Bragster.com SN Tesco PLC Annual Report and Financial Statements 2026 55 Strategic report Financial statements Additional informationGovernance ![]() Thierry Garnier, Independent Non‑executive Director Appointed April 2021 Skills, experience and competences Thierry brings extensive experience in the retail sector, both in the UK and internationally, with a successful track record of implementing business transformation and driving leading- edge digital innovation in competitive and rapidly-changing retail environments. External appointments Current: Chief executive officer: Kingfisher plc Past: Executive committee member: Carrefour SA Senior positions: CEO, Carrefour Asia and Carrefour International and managing director of Carrefour in France SN Stewart Gilliland, Independent Non‑executive Director Appointed March 2018 Skills, experience and competences Stewart brings over 40 years’ experience and knowledge in international marketing, logistics and business management, having held a number of senior roles, predominantly in customer-centric businesses. His experiences as an executive and non-executive director, and understanding and advocacy of supplier relationships, customers, colleagues and sustainability, which directly support Tesco’s strategy, provide him with the skills and capabilities as Chair of the Sustainability Committee. The breadth and diversity of Stewart’s experience is a benefit to the Board. External appointments Current: Chair: Nature’s Way Foods Ltd Interim executive chair: IG Design Group plc Past: Chair: Booker Group plc and C&C Group plc Chief executive: Müller Dairies UK and Ireland Non-executive director: Chapel Down Group plc and Mitchells & Butlers plc Senior positions: Whitbread PLC and Interbrew SRN Chris Kennedy, Independent Non‑executive Director Appointed February 2025 Skills, experience and competences Chris is a seasoned business leader with extensive experience across the media and hospitality sectors. He brings a wealth of knowledge in financial management, strategic planning, and corporate governance. External appointments Current: Chief financial officer and chief operating officer: ITV plc Trustee: EMI Group Archive Trust Past: Chief financial officer: Micro Focus International plc, ARM Holdings plc and easyJet plc Non-executive director: Whitbread PLC, Great Ormond St Hospital Foundation Trust Senior positions: EMI Group NA Board of Directors continued Tesco PLC Annual Report and Financial Statements 2026 56 ![]() Caroline Silver, Independent Non‑executive Director Appointed October 2022 Skills, experience and competences Caroline brings to the Board over 20 years of non-executive experience, together with a wealth of knowledge gained across senior commercial, financial and governance roles. Her strategic insight and significant experience, both in the financial sector and as a serving UK listed company Chair, provides guidance and constructive challenge to senior management in delivering our strategy. External appointments Current: Chair: Barratt Redrow plc and ICE Clear Europe Non-executive director: Intercontinental Exchange, Inc. Chair of audit committee: National Film and Television School Other: International Advisory Board of Adobe Inc, board of trustees of V&A Foundation, Moelis & Company Past: Chair: PZ Cussons plc Non-executive director: Meggitt PLC, M&G PLC and Bupa Limited Board member: London Ambulance Service NHS Trust Other: Moelis & Company, Morgan Stanley, Merrill Lynch and Victoria and Albert Museum NA Karen Whitworth, Independent Non‑executive Director Appointed June 2021 Skills, experience and competences Karen has significant retail, strategic and financial experience gained through a number of commercial, operational and governance roles. In addition, she brings to the Board extensive knowledge of the retail sector, logistics and supply chain gained across a number of senior retail roles. External appointments Current: Senior independent director: The Rank Group plc and Tritax Big Box REIT plc Non-executive director: Nuffield Health Past: Supervisory board member: GS1 UK Limited Non-executive director: Pets at Home Group Plc Member: Commercial board and director of non-food grocery and new business at J Sainsbury plc Senior positions: BGS Holdings Limited, InterContinental Hotels Group PLC and Coopers & Lybrand (now PwC) Independent advisor and board member: GrowUp Farms Limited SRNA Chris Taylor, Group Company Secretary Appointed April 2025 Skills, experience and competences Chris is an experienced chartered Company Secretary, having held positions at a number of listed companies. Chris provides governance, legal and regulatory advice and support to the Board and the boards of all other legal entities in the Group. Director changes during the year Alison Platt stepped down as a director in June 2025 after nine years’ service as a Non-executive Director on the Board and Remuneration Committee Chair. Additional external commitments During the year, the Board approved the additional external commitments taken on by Gerry Murphy, Karen Whitworth, Carolyn Fairbairn, Melissa Bethell and Stewart Gilliland. An assessment of time-commitment, effectiveness, independence and the impact of any cross-directorships was considered. It was agreed that these additional external commitments would not impact their role and commitment to Tesco PLC. More information on the review of Directors’ time commitments can be found in the Nominations and Governance Committee report on page 72. Key: A Audit Committee N Nominations and Governance Committee R Remuneration Committee S Sustainability Committee Committee Chair Tesco PLC Annual Report and Financial Statements 2026 57 Strategic report Financial statements Additional informationGovernance ![]() T T T Audit Committee Nominations and Governance Committee Remuneration Committee Sustainability Committee Committee Chair: Karen Whitworth Oversees the integrity of the financial reporting and audit process, and the maintenance of appropriate internal controls and risk systems, including the effectiveness of internal and external audit, financial fraud risk, and whistleblowing. In addition, it reviews sustainability- related disclosures, KPIs, and management’s process for identifying sustainability risks and internal controls. Committee Chair: Gerry Murphy Reviews the size, composition, tenure and skills of the Board. As part of this, it leads the Board appointment process and makes recommendations to ensure orderly succession to both the Board and senior management positions, as well as overseeing a diverse talent pipeline. In addition, it oversees the governance arrangements of the Group and ensures they are managed to a high standard. Committee Chair: Melissa Bethell Determines remuneration policy and packages for Executive Directors and senior managers, having regard to pay across the Group and the views of stakeholders. Additionally, sets the broad structure for the Company’s remuneration policy and determines the remuneration of the Chair, the Executive team and Group Company Secretary. It is also responsible for reviewing workforce remuneration and the alignment of incentives and reward with company culture. Committee Chair: Stewart Gilliland Provides oversight on the Group’s planet plan, community and human rights initiatives to support the delivery of the Group’s purpose, strategic ambitions and sustainability commitments. Additionally oversees the Group’s social and environmental obligations, including climate-related matters, and is responsible for monitoring progress towards our commitments. More information can be found in the Audit Committee Report on pages 78 to 87. More information can be found in the Nominations and Governance Committee Report on pages 70 to 73. More information can be found in the Directors’ remuneration report on pages 88 to 108. More information can be found in the Sustainability Committee Report on pages 74 to 77. Our governance framework underpins the Group’s ability to achieve its purpose and deliver on its strategy. By maintaining the highest standards of corporate governance and ensuring a clear division of responsibility, the Board ensures it operates effectively and provides robust oversight of matters material to the Group. This approach enables sound decision making by the Board, informed by the interests of a diverse range of stakeholders. The Board is supported by four Board Committees, each operating under a terms of reference which ensure that specific matters receive appropriate discussion, consideration and challenge. In addition, Committees work together in collaboration to oversee specific matters. For example, the Sustainability Committee works closely with the Remuneration Committee on sustainability-related performance reward metrics and with the Audit Committee on sustainability reporting. Furthermore, while the Board sets the Group’s purpose, value, and long-term objectives and reserve certain matters, the day-to-day management of the Group is delegated to the Group Chief Executive, who is supported by the Group Executive Committee. Disclosure Committee The Board delegates responsibility to the Disclosure Committee to consider timely and accurate disclosure of sensitive information. Further details of the Board, Matters Reserved and the Executive Committee can be found on pages 63 and 59 respectively. Board Chair Executive Directors Senior Independent Director Non-executive Directors The Board has collective responsibility to promote the long‑term, sustainable success of the Group, ensuring due regard is paid to the interests of its stakeholders. More information on the role and responsibilities of the Board can be found on page 63. Board Committees Governance framework Governance framework Tesco PLC Annual Report and Financial Statements 2026 58 ![]() T Executive Committee The Board delegates responsibility to the Group Chief Executive for overseeing the day-to-day operations of the Group, as well as formulating, implementing and managing the Group’s strategic objectives as approved by the Board. The Group Chief Executive is supported by the Executive Committee, which is comprised of the Executive Directors, CEOs of our business units, and senior management in key functional roles. The Committee operates within, and is guided by, its terms of reference which are reviewed annually and available on our website at www.tescoplc.com. The Executive Committee has 11 scheduled meetings per year, together with more informal weekly check-in meetings. During the year, Matthew Barnes and Matt Simister left the business and were succeeded by Ashwin Prasad, whose role expanded from his previous position as Chief Commercial Officer to become UK CEO, and Jonny McQuarrie who joined the Committee as the new CEO, Central Europe. In addition, Natasha Adams was appointed as the newly established Chief Strategy and Transformation Officer, with Geoff Byrne succeeding her and joined the committee as CEO, Ireland and Northern Ireland. Christine Heffernan also took on additional responsibility to become the Chief Communications and Sustainability Officer. Ken Murphy Group Chief Executive Member since October 2020 Imran Nawaz Chief Financial Officer Member since May 2021 Natasha Adams Chief Strategy and Transformation Officer Member since June 2018 Geoff Byrne CEO, Ireland and Northern Ireland Member since June 2025 Guus Dekkers Chief Technology Officer Member since May 2021 Christine Heffernan Chief Communications and Sustainability Officer Member since March 2019 Kay Majid Group General Counsel Member since July 2024 Jonny McQuarrie CEO, Central Europe Member since July 2025 Ashwin Prasad UK CEO Member since September 2020 Emma Taylor Chief People Officer Member since March 2022 Andrew Yaxley CEO, Booker Member since July 2018 Biographies for each of the Executive Committee members can be found on our website at www.tescoplc.com which sets out their roles, responsibilities and experience. The Executive Committee’s key responsibilities include: – Making recommendations to the Board and implementing the objectives and strategy set by the Board. – Developing the Group’s budget and Long Term Plan for consideration by the Board. – Supporting the delivery of the Group’s strategic priorities. – Developing the sustainability agenda to balance short, medium and long-term objectives. – Review of capital investments required to achieve the net zero objectives, ensuring that the investments are included in the Long Term Plan and annual budget. – Ensuring risks and internal controls are being identified, managed and monitored appropriately. – Approving material contracts and transactions in accordance with the delegation of authority framework. – Monitoring the people agenda across the Group including: culture; succession planning; talent management; and diversity, equity and inclusion. Executive level committees There are a number of executive level committees established to support the Executive Committee in the delivery of their role. Some of the key executive level committees are detailed below. These committees provide updates to the Board, Audit, Sustainability and Executive Committee on matters of significance. T Group risk and compliance Oversight of key business, operational and compliance risks on behalf of the Executive Committee, including the assessment of emerging risks and the effectiveness of mitigation activities, and reports twice‑yearly to the Executive Committee and Audit Committee. Planet Reviews and monitors delivery of the Group’s planet plan, commitments, climate initiatives and expenditure, making recommendations to the Executive Committee and Sustainability Committee. Read more about our sustainability governance framework in our Sustainability Report. Cyber and privacy Oversees and monitors the Group’s cyber risk exposure, including the effectiveness of governance and management plans, with significant matters escalated to the Board or Audit Committee as appropriate. AI strategy governance Responsible for the definition and execution of the Group’s AI strategy, guiding prioritisation decisions, informed by the relative risk and reward. Matters of significance are raised at the Board or Audit Committee as appropriate. Tesco PLC Annual Report and Financial Statements 2026 59 Strategic report Financial statements Additional informationGovernance ![]() Governance framework continued The Board has agreed a clear division of responsibilities with the responsibilities of the Chair, Group Chief Executive, Senior Independent Director and other Directors clearly defined so that no individual has unrestricted powers of decision and no small group of Directors can dominate the Board’s decision making. In addition, Non-executive Directors take on the role of workforce engagement and host the Colleague Contribution Panels (CCP) held in the UK and Central Europe. These additional responsibilities are set out in the table to the right. Further details on the CCP can be found on page 66. All Directors have access to the advice of the Group Company Secretary and the Group provides access, at its expense, to the services of independent professional advisors in order to assist Directors in their role. A Directors’ and Officers’ liability insurance policy is maintained for all Directors and each Director has the benefit of a Deed of Indemnity. Chair The Chair is responsible for the leadership of the Board, ensuring effectiveness and leading strategic oversight of the Group by setting the Board’s agenda, culture and values. In addition, the Chair is responsible for fostering open and constructive debate among Directors and, as part of this, meets regularly with Non-executive Directors without Executive Directors present. Furthermore, the Chair maintains key internal and external stakeholder relationships and communicates their views to the Board, as well as overseeing key governance matters such as performance evaluations of the Board and Committees and driving succession planning. Senior Independent Director The Senior Independent Director acts as a sounding board to the Chair and a trusted intermediary for other Non-executive Directors. The role’s key responsibilities include overseeing the annual evaluation of the Chair’s performance, conducted with the Non-executive Directors and informed by Executive Director feedback, and then discussing the findings directly with the Chair. In addition, the Senior Independent Director oversees the recruitment process for a new Chair and provides an additional point of contact for shareholders through direct engagement and regular briefings from the Group Company Secretary. Non-executive Directors Non-executive Directors provide independent insight and experience to the Board, providing objective oversight and independent judgement to the decision-making process. Their responsibilities include constructively challenging the Executive Directors, monitoring and scrutinising management’s performance in achieving agreed goals and objectives and playing leading roles within Board Committees to best utilise their independent and diverse skills and experience. Group Chief Executive The Group Chief Executive has delegated authority from the Board to oversee the day-to-day operations of the Group and is supported in this role by the Group Executive Committee. In addition, the role provides effective leadership, coordination, and performance management of the Executive team to ensure alignment and delivery of the Group’s objectives. Chief Financial Officer The Chief Financial Officer supports the Group Chief Executive in the development and execution of the Group’s strategy. In addition, the role is responsible for the financial leadership of the Group, overseeing the annual budget process and ensures effective financial reporting and controls are in place. Workforce engagement Board host The workforce engagement Board hosts work with the CCP representatives to develop a greater understanding of colleagues’ views on the operations of the business. They monitor actions to address issues raised by the CCP and, with support from the Chief People Officer, report back to the Board to ensure all Directors have awareness of colleague views and that these are reflected in decision making. In addition, they provide CCP representatives with an awareness of Board and business priorities and the impact on business practices. More information on the CCPs can be found on page 66. Group Company Secretary The Group Company Secretary supports the Board and Committee Chairs in shaping forward agendas and ensures that Board members receive information in a timely manner. The role assists the Chair with developing and implementing Board induction programmes, coordinating ongoing director training, and provides advice on Board procedure and wider corporate governance matters. Additionally, the role serves as a key point of contact for shareholders on corporate governance related matters and oversees internal evaluations of the Board and its Committees at the Chair’s request. Division of responsibilities Tesco PLC Annual Report and Financial Statements 2026 60 ![]() Worked closely with key stakeholders across the business to define our approach to Provision 29 and initiate our readiness programme. Full implementation of the new requirements under Provision 29. The Board to carry out a review of the effectiveness of the Group’s risk management and internal control framework. Our first declaration on the effectiveness of our material controls will be included as part of the 2027 Annual Report. Identified the risks that the Board considers material to the business, derived from our principal risks. Code readiness Provision 29 of the UK Corporate Governance Code 2024 introduces new requirements for Boards to describe how they monitor the effectiveness of their internal control and risk management framework, and to provide a declaration on the effectiveness of their material controls. To prepare for our first declaration in the 2027 Annual Report, we initiated a three‑year programme in 2024 to strengthen where required and align our processes across the business. The timeline summarises the steps we have taken so far and the activities planned as we move towards full implementation. Spotlight on: FY 24/25 FY 26/27 1. Preparation phase2. Reporting phase FY 25/26 – Identified the material controls which support the mitigation of the material risks in scope. – Developed expected standards for our material controls to ensure they are designed to operate effectively. – Assessed all material controls against our expected standard, identified any specific enhancements where required and worked with all relevant stakeholders to deliver these. – Strengthened the governance environment by updating the terms of reference for key governance forums, ensuring each forum has the right mandate, decision‑making authority and cadence to provide robust risk and control oversight. – Mapped existing assurance activities against the material controls, to ensure that the Board is comfortable with the level of assurance to support the future Board declaration. – Developed a robust end‑to‑end sign‑off process with material control owners and simulated the roll up for the Board declaration process, further embedding alignment to the Code ahead of full implementation. – Regular updates provided to the Audit Committee and the Board to support effective oversight and feedback on the proposed approach. Tesco PLC Annual Report and Financial Statements 2026 61 Strategic report Financial statements Additional informationGovernance ![]() Purpose and culture How the Board monitors culture Our colleagues are central to the strength of our culture, and the Board draws on a range of reports and engagement channels to understand how our values are lived across the Group. Regular people updates, including succession, talent and DE&I progress, sit alongside insights from Every Voice Matters, our Colleague Contribution Panels and the independent Protector Line. Together with site visits, these mechanisms provide the Board with a clear view of colleague sentiment and behaviours, helping us monitor cultural health and ensure our culture supports our purpose and strategy. Code of Business Conduct Our Code of Business Conduct plays a central role in embedding our purpose, values and expected behaviours. All colleagues complete mandatory training on joining and refresh annually thereafter. The Board and its Committees draw on insights from Code compliance reporting, training completion, and trends from the Protector Line to assess whether our culture is operating as intended. The annual compliance results are reported to the Audit Committee and contribute to the Board’s overall view of culture across the Group. Please visit www.tescoplc.com to view Tesco’s Code of Business Conduct. Our Protector Line The Protector Line is our independent and confidential whistleblowing service, providing colleagues and suppliers with a safe way to raise concerns about misconduct or breaches of our Code of Business Conduct. The Audit Committee receives biannual reports on case trends and outcomes and escalates significant issues to the Board. This insight helps us assess whether colleagues feel able to speak up and whether our response reflects the culture and values we expect across the Group. Colleague Contribution Panels Colleague Contribution Panels (CCPs) enable the Board to hear directly from a range of colleagues about how our culture is experienced across the business. The panels are hosted by two Non-executive Directors, Carolyn Fairbairn and Melissa Bethell, and meet four times a year split across the UK and ROI, and Central Europe. After each panel, the hosts provide a formal report to the Board summarising key themes, cultural insights and any areas requiring follow-up. This regular reporting gives the Board clear line of sight into colleague sentiment and how consistently our values are being lived across the Group. 4 CCPs held during the year For further information on the CCPs, page 66. Every Voice Matters Every Voice Matters (EVM) is a key way for us to understand how colleagues experience our culture across the Group. As our largest colleague engagement programme, it provides regular insight into what colleagues value and where further focus may be needed. The Board receives updates on EVM results, including sentiment trends and priority themes, helping us assess how consistently our values are being lived across the business. The Executive Committee reviews the findings and ensures appropriate action is taken, giving the Board assurance that colleague feedback leads to meaningful change. The Board also receive high level insights from supplier engagement surveys, providing an external perspective on how our culture is reflected. Together, these inputs help the Board monitor the health of our culture. Colleague participation in the Every Voice Matters survey 73% Diversity, equity and inclusion We are committed to fostering a diverse and inclusive culture, guided by our five colleague commitments: Inclusion for All, Flexibility for All, Accessible First, Transforming Recruitment and Developing Careers. Across the Group, more than 25 colleague networks help celebrate diversity and amplify the voices of colleagues to create a workplace where everyone feels represented and able to be themselves. The Board supports and monitors delivery of our diversity, equity and inclusion strategy, receiving regular updates on progress against each of the five commitments. For further information on diversity, equity and inclusion at Tesco, page 20. Colleague performance – Your Contribution Performance and reward also play an important role in reinforcing the culture we want to see across the Group. Through the Your Contribution framework, all colleagues are assessed against both strategic delivery and our Win Together behaviours, ensuring performance outcomes reflect how results are achieved as well as what is delivered. For Executive Committee members and senior management, the Board, Remuneration Committee and Nominations and Governance Committee monitor performance outcomes to ensure they remain aligned with our purpose, values and long-term priorities. Further information on Executive remuneration can be found in the Directors’ remuneration report on pages 94 to 96. Our purpose: Serving our customers, communities and planet a little better every day means we always keep customers at the heart of what we do, while also reflecting our responsibilities to the communities we serve and to society more broadly. Our values: No one tries harder for our customers We treat people how they want to be treated Every little help makes a big difference Our three values underpin our purpose, setting out how we work together as a team and guiding the decisions and choices we make across the Group. Governance framework continued Tesco PLC Annual Report and Financial Statements 2026 6262 ![]() Role of the Board Effective governance begins with clarity and transparency around how the Board conducts its work and the framework within which it operates. This section outlines the role and responsibilities of the Board, its oversight activities and how it ensures it works to support the long-term success of the Group. Schedule of matters reserved T for the Board The Board has adopted a formal schedule of matters reserved, detailing matters that are considered of significance to the Group owing to their strategic, financial or reputational importance. To ensure these matters remain robust and relevant to the material topics of the Group, these are reviewed annually and were last reviewed in February 2026. The full schedule of matters reserved for the Board can be found on our website at www.tescoplc.com. Board purpose and T responsibilities The Board is responsible for setting the purpose and strategic direction of the Group and promoting long-term sustainable success. In doing so, the Board actively sets and monitors culture to ensure that the long-term aspirations of the Group are supported by the right culture, values and behaviours. To support its work, the Board operates within a robust governance framework and is bolstered by its Committees. Each Committee provides specialist oversight of specific areas and produce written and verbal feedback to the Board following their meetings. This structure helps facilitate efficient oversight and promotes informed decision making. The Board strives to ensuring the business operates responsibly and sustainably, consistent with our values. As part of this, climate-related considerations are integrated into our governance framework, with defined roles and responsibilities captured within the schedule of matters reserved for the Board and Committee terms of reference. The Board retains overall responsibility for ensuring that resources are available to deliver objectives and strategic priorities. It oversees the responsible and efficient use of these resources through comprehensive systems and controls across the Group to support effective management and decision making. Clear guidance on governance frameworks is provided through the Group’s delegation of authority, matters reserved for the Board and Committee terms of references. For more information on our governance framework see page 58. Board operations The Board held six scheduled meetings during the year, each including discussion on relevant strategic matters, as well as an additional strategy day at which senior management presented on each of our business areas. In the rare event of a Director being unable to attend all or part of a Board or Committee meeting, the Chair of that meeting discusses the matters proposed with the Director concerned whenever possible, seeking their support and feedback accordingly. The Chair subsequently represents those views at the meeting. In the event of an urgent, business critical matter requiring Board approval in accordance with the schedule of reserved matters for the Board, or under the Group delegation of authority, which arises between scheduled Board meetings, a sub-Committee of the Board is formed, the quorum for which is any two of the Chair, Group Chief Executive or Senior Independent Director. Any approvals granted through the Board sub-Committee are noted by the Board at its following meeting. The Board and its Committees have a forward- looking programme of agenda items scheduled for discussion throughout the year to ensure operational and financial performance, strategy and governance which includes our sustainability commitments, risk, internal controls, culture, and stakeholders are discussed at the appropriate time. These planners are subject to regular review by the Chair of the Board, or relevant Committee, to ensure sufficient time is allotted to encourage constructive discussion, debate, and challenge during meetings. Standardised paper templates are used so that Directors receive high-quality, clear and timely information. These templates help to maintain consistency across papers, highlight key issues and decisions required, and support effective oversight, challenge and decision making. If Directors have concerns about the Company or a proposed action which cannot be resolved, it is recorded in the Board minutes. In addition, upon resignation, Non-executive Directors are encouraged to provide a written statement of any concerns for circulation to the Board. No such concerns were raised during the year. Each Board meeting begins with a meeting of the Chair and Non-executive Directors only, providing an independent forum for discussion, free from management. For more information, see our Board activity on pages 64 to 66. Culture and strategy The Board is responsible for shaping and reviewing the Group’s strategy throughout the year. Regular strategic updates and dedicated sessions provide visibility of performance against our priorities, as well as an insight into emerging customer behaviours, market trends and the wider environment in which we operate. Deep-dive discussions into each of our business areas enable the Board to consider opportunities and challenges and ensure the strategy remains robust. This continuous oversight maintains a clear direction and helps to embed strategy across the organisation. The Board is also responsible for defining the Company’s purpose, values and behaviours and ensuring these are embedded across the Group. This culture underpins our ability to deliver our strategic objectives and aims to create a workplace where all colleagues feel welcome and able to be themselves. In support of this, the Group maintains a clear diversity, equity and inclusion strategy as well as a Board-level diversity, equity and inclusion policy. For more information on the Purpose and culture, see page 62. Risk management and internal controls The Board retains ultimate responsibility for the Group’s risk management and internal control systems. As part of this, a comprehensive risk management framework is in place across the Group, setting out the policies, tools and standardised processes that enable management to identify, assess and monitor risks. While the framework is established at a Group level, day-to-day management of risks is undertaken by the relevant business units and functions. The Audit Committee, on behalf of the Board, also undertakes an annual effectiveness assessment of the principal and emerging risks facing the Group and considers any actions taken to mitigate them, reviews key risk movements and monitors the implementation of any actions arising from these assessments. For more information, see our Principal risks and Internal controls on pages 40 to 45. Tesco PLC Annual Report and Financial Statements 2026 63 Strategic report Financial statements Additional informationGovernance ![]() Board activity Operational performance 20% Strategy and purpose 28% Financial performance, risk management and internal controls 18% Governance and culture 15% Stakeholder engagement 19% Operational performance Strategy and purpose Financial performance, risk management and internal controls The Board – Receives regular updates from the Group Chief Executive on the operational performance of the Group. – Receives business unit updates throughout the year to cover an overview of performance, market conditions, customer perception, challenges and opportunities. – Receives trading updates on managing capacity through peak trading, stock management and resourcing. – Receives health and safety updates focusing on people safety, the safety framework and strategy, progress against priorities and opportunities for improvement. – Undertakes regular site visits, both individually and collectively, throughout the year which provide invaluable oversight and understanding of the Group’s day-to-day operations. The Board – Receives updates from the Group Chief Executive and Chief Strategy and Transformation Officer detailing all material matters, wider performance against strategic drivers and KPIs, and ongoing developments on the Group’s evolving strategy. – Undertakes annual strategy-focused Board days which provide an opportunity to deep- dive into each business area, and to provide oversight, challenge and inform the Group’s short, medium and long-term strategy. – Receives technology updates providing an overview of technical capability, transformation and AI, as well as updates on new and emerging technologies that could be adopted to deliver our purpose. – Reviewed and agreed the strategic agenda for FY27. The Board – Receives updates from the Chief Financial Officer on the Group’s financial position, viability, performance against budget and the long-term plan. Additional updates are provided on the performance against the Big 6 KPIs. – Monitors significant or principal risks facing the Group and receives information on internal controls and reporting and risk management systems. – Approves capital allocation framework, dividend policy and shareholder return mechanisms, as well as debt capital market activities. – Maintains visibility of the property strategy, including the approval of the annual property valuation. Focus: festive strategy The Board reviewed the Christmas 2025 strategic plan aimed at building on last year’s success and maintaining operational excellence during the festive season. These discussions focused on trade plans, product innovation, marketing and seasonal investment with the aim of maximising performance and customer experience during the period. Focus: strategy and brand Throughout the year the Board focused on the evolving strategy. As part of that, the Board discussed the development of Tesco’s refreshed brand strategy, offering challenge, guidance, and insight to ensure that the brand strategy remained firmly rooted in the Group’s purpose and values. Focus: competitive pressures The Board received regular updates on the competitive intensity in the UK market during the year and approved the necessary price investment to react to the competitive intensity. The Board closely monitored the customer reaction to the price investment and was encouraged by the Group’s continued market share momentum. More information on operations and performance found on pages 6 and 17. More information on our strategy and purpose can be found on pages 7 and 14. More information on our financial performance, risk management and internal controls can be found on pages 22 to 28, and 38 to 39. Board activity Tesco PLC Annual Report and Financial Statements 2026 64 ![]() Governance and culture Stakeholder engagement The Board – Oversees the Group’s diversity, equity and inclusion strategy and receives regular updates on progress against these commitments, as well as any areas identified for further development. – Oversees and monitors the management succession and talent plans to ensure the talent pipeline meets the future requirements of the Group. – Reviews governance matters at each meeting, including regulatory developments, ongoing shareholder programmes, shareholder documentation and Non-executive Director fees. – Reviews the annual renewal of the Directors’ and Officers’ liability insurance and approves any material contracts taking into consideration the associated operational and financial benefits. The Board – Receives updates on colleague engagement initiatives and colleague matters to understand the views of our workforce. These are reported in the form of our CCP hosts, Every Voice Matters surveys, talent updates and the colleague News and Views communnications platform. – Reviews the results, action plans and development areas from our customer, colleague and supplier insight surveys. – Receives regular reports on sustainability and community strategies, including performance against our sustainability goals and objectives, as well as longer-term community investment initiatives. – Receives regular updates from Investor Relations which provide the Board with feedback on investor views, expectations, market conditions, share price performance and outlook. Focus: evolving Colleague Contribution Panels (CCPs) Following colleague feedback, improvements were introduced to support deeper conversations and clearer feedback between the CCPs and the Board, including simplified agendas, broader representation, and enhanced briefing and feedback for the hosts before each meeting. Focus: continuation of the share buyback programme Following the sale of our Banking operations and the strength of our balance sheet, the Board reviewed various shareholder return mechanisms and approved an additional share buyback programme totalling £1.45bn during the year, which completed in January 2026. More information on how the Board monitors and engages with culture can be found on page 62. More information on our stakeholders, mechanisms of engagement, and sustainability initiatives can be found on pages 18 to 19 and 30 to 31. Board visits During the year, Directors spent time individually and collectively visiting operational sites, enabling direct engagement with senior management and colleagues. These visits provided valuable insight into day-to-day operations, challenges and opportunities across the Group, strengthening the Board’s understanding of performance, culture and colleague experience. Visits covered a broad range of offices, stores, depots, distribution and fulfilment centres. These included: Aylesford Distribution Centre (DC), a flagship site modernising the fresh and frozen network which showcased the new AI capabilities and investment in innovation to improve our distribution capacity; Livingston, Reading DCs and the Belfast Fresh Depot and Enfield customer fulfillment centre to review picking and delivery operations and meet with senior management and colleagues; Harrogate, our first low carbon concept store; Beckton Gallions Reach, a multi- format store converted to include an urban fulfilment centre; several Booker sites to review save to invest initiatives, catering range development and the fresh operating model and multiple stores across the Republic of Ireland and Northern Ireland. Directors spent time visiting our Tesco Business Solutions offices in Bengaluru and the contact engagement centre in Dundee, which provided an opportunity to review financial and commercial developments, evolving technology and AI and TBS’s role in driving efficiencies and the initiatives that TBS have undertaken within the community. In addition, Directors visited Star locations, which are part of our joint venture operation in India, including the new purpose-built DC in Bengaluru which combines fresh, chilled and ambient operations, as well as several stores, such as Hoodi and Sampi, to experience the new blueprint model. Spotlight on: 65 Strategic report Financial statements Additional informationGovernance ![]() Why are the CCPs important to you as Board Hosts? C: For me, the CCPs are an essential part of my role as a Board member. They help ensure that we remain connected to the experiences of our colleagues and understand how our decisions impact them at work. Hosting the CCPs has provided invaluable insight into colleagues’ lived experiences and the issues that matter most to them. I value the open discussions at each panel and the way these insights directly inform Board-level decision making. M: As the CE Board host, the CCPs are important because they ensure the perspectives of our international colleagues are directly heard. Hosting the CE panel provides an important connection to our international colleagues and reinforces that Group decisions can have different impacts across our markets. It is critical that we understand those differences, hear colleagues’ experiences first hand and recognise the contribution they make across the business. What stood out most from the CCP discussions that were held this year? C: What stood out most was colleagues’ interest in the role of AI in improving productivity, personalisation for our customers, and health and safety. While many colleagues are optimistic, we like many other businesses recognise the need to continue to provide colleagues with clarity, training and reassurance about how AI will be used responsibly. I particularly valued colleagues’ openness about wanting to build their confidence in using AI. I also noticed a clear increase in confidence between the July and November sessions, reflecting the impact of the training that we have already introduced to some colleagues. The feedback is very helpful as we continue to explore how AI can further support us as a business. M: Colleagues in CE are also curious about technology, but what stood out most for me was their strong desire to be involved in shaping change. This was particularly evident in discussions on sustainability, where colleagues showed real passion for how initiatives work in practice and how their local store or distribution centre contributes to our sustainability commitments. Colleagues were keen to highlight where infrastructure or operational constraints can create barriers, and how these could be addressed to support delivery. This was closely linked to feedback on communications, with colleagues wanting to know more about our sustainability activity. How have these insights influenced Board discussions and actions? C: The insights from the CCPs have reinforced the importance of pace, clarity and engagement as our thinking on AI continues to develop. The feedback helps us to be aware of the support that colleagues would like as any new technology is introduced. M: The feedback has shown us that colleagues have a real passion about sustainability as a topic and want to know more about our ambitions in this area. So, we are now exploring how we can raise even more awareness at a local level. What are your priorities for CCPs in the year ahead? C: As we continue to evolve our approach to AI, sustainability and wellbeing, the CCPs will remain an important forum for testing our thinking and understanding how change is experienced across all levels of the business. M: Looking ahead, it will be important to build on the strong engagement we have seen. I would like to see us continue to adapt the format to reflect local needs, while maintaining consistency of themes across the Group. Above all, the CCPs should continue to provide colleagues with a meaningful opportunity to be heard and to help shape the future of the business. Colleague Contribution Panels (CCPs) are one of the Board’s key mechanisms for hearing directly from colleagues across the Group. They help us understand how colleagues experience our culture, how strategic decisions land in their day-to-day work, and where we can do more to support them. Each year, CCPs provide the Board with valuable insight into the issues that matter most to colleagues, helping to shape a working environment where everyone feels heard, valued and able to thrive. During the year, four panels were held: two covering the UK & ROI and subsidiaries, and two for Central Europe (CE). The sessions were hosted by Carolyn Fairbairn (C) and Melissa Bethell (M) on behalf of the Board, in their roles as Workforce Engagement Hosts, with additional Board members in attendance. Panels were held both virtually and in person, including a site visit for our UK colleagues to our new distribution centre in Aylesford. A summary of colleague feedback and actions were provided to the Board, with key discussion themes also shared at Executive and management level to ensure feedback is acted upon. Q&A with the hosts Spotlight: Colleague Contribution Panels Melissa Bethell Carolyn Fairbairn Board activity continued Tesco PLC Annual Report and Financial Statements 2026 66 ![]() Performance review The Chair and Board focus on maintaining a high-performing, skilled and diverse Board aligned to our strategy. Performance is assessed annually through a structured review of the Board, its Committees and individual Directors. These performance reviews follow a three-year cycle, combining internal and external evaluations to drive continuous improvement. Last year, we completed an externally facilitated Board evaluation. This year marked the start of a new three-year cycle, with the Board undertaking an internal review led by the Chair and supported by the Company Secretary. The Chair also receives a separate annual performance review, led by the Senior Independent Director. During the year the Nominations and Governance Committee undertook a Board composition and succession review to enable it to plan for succession both to the Board as a whole and to the Board Committees. More information on the review can be found in the Nominations and Governance Committee Report on pages 70 to 73. Progress against FY 24/25 external Board performance review Action identified Progress against action Develop and implement the Group’s long-term strategy and growth ambitions The Board continued to develop the Group’s long-term strategy through regular updates from the Group CEO and dedicated strategy sessions during the year. This included a three-day strategy session in June 2025, the annual strategy day in November 2025, and consideration of the FY26/27 strategy in February 2026. Shape the agenda and Board focus with a balance of operational oversight and strategic development Following a review of the Board forward planner, regular strategy sessions were embedded into the annual agenda. The Board also received a presentation on organisational readiness to support delivery of the long-term strategy. Enhance our strategic enablers through technology and our people with a focus on succession and talent planning, capability, diversity and expertise The Board reviewed its composition and succession planning, which included an external assessment of the Board skills matrix. This work supported planning for orderly succession and will help ensure that the right balance of skills, experience and diversity are considered. Evolve the appetite for risk in alignment with the long-term strategy The risk appetite framework was refreshed alongside the risk, control and assurance methodology. In addition, the Audit Committee undertook deep dives on key principal risks and risk events throughout the year to ensure alignment with the long-term strategy. FY 25/26 internal Board performance review Board Outlook was appointed to facilitate the internal Board performance review. Board Outlook has no other connection to Tesco. The platform provides a customisable questionnaire-based framework which is designed to use data and analytics to identify both strengths and opportunities for improvement. The questionnaires were finalised by the Chair with the support of the Company Secretary, and the evaluation process was overseen by the Nominations and Governance Committee. September Priorities session Discussions with the Chair on scope and customisation of questionnaires October Online questionnaires Questionnaires circulated to the Board December Results Findings were shared with the Chair and Company Secretary February Action plan Findings and key themes were discussed with the Board Areas of focus identified by the review: Based on the feedback received during the evaluation process, the following key themes and actions will be monitored by the Nominations and Governance Committee during the year. Key themes and actions Strategy development and oversight Ensure that strategy development and integration are regular Board agenda items, with clear KPIs to enable progress and implementation to be measured. Future capability and organisational readiness Continue to monitor the progress of the people and technology strategic enablers to ensure that the necessary infrastructure, talent and succession plans are developed and implemented in order to deliver the longer-term strategy. Board composition and succession Continue to monitor succession at Board and senior management level, taking into consideration the longer-term strategy, as well as broader diversity requirements. Board ways of working An ongoing action to review Board processes and papers to ensure that Board meetings are focused on discussing the strategic pillars and areas where Board input will help drive the business forward. As part of the Board performance review, a review of each Board Committee was undertaken. No issues were identified, and all Committees were confirmed as operating effectively, further information on each Committee’s performance review can be found within their respective Committee reports. The performance of each Director was evaluated as part of the internal review, with all Directors confirming they continue to have sufficient time, commitment and independence to discharge their responsibilities. Year 1 2025/26 Internal Review Year 2 2026/27 Internal Review Year 3 2027/28 External Review Tesco PLC Annual Report and Financial Statements 2026 67 Strategic report Financial statements Additional informationGovernance ![]() Section 172 statement The Board recognises that stakeholder engagement and understanding the consequences of any decision in the long term are vital to the sustainable success of the Company. The differing interests of stakeholders are considered in the business decisions we make across Tesco at all levels and are reinforced by the Board. However, it is not always possible to provide positive outcomes for all stakeholders, and sometimes the Board has to make decisions based on balancing competing stakeholder priorities, while ensuring it is in the best interests of the Group. Through engagement with our key stakeholders, the Board understands these competing priorities. In addition, the interests and views of Tesco pensioners and our relationship with regulators and NGOs are taken into consideration. Details of our key stakeholders are set out on pages 18 to 19. In performing their duties during the year, the Directors have had regard for the matters set out in section 172 of the Companies Act 2006. Examples of how the Directors have oversight of stakeholder matters and had regard for these matters when making decisions is included throughout this Annual Report. Directors have acted in a way they consider to be in good faith and to be most likely to promote the long-term success of the Company. This statement is incorporated by reference into the Strategic report. Section 172 (a)–(f) additional information Pages A Consequences of any decisions in the long term Chair’s statement and Group Chief Executive’s review 8 to 9 and 10 to 12 Our market context and Our strategic ambitions 13 to 15 Our business model and Key performance indicators 16 to 17 Longer term viability statement 48 to 49 Board activity and Key strategic decisions 64 to 65 and 69 B Interests of the employees Key performance indicators 17 Everyone’s welcome 20 to 21 Stakeholder engagement 18 to 19 Corporate governance report 62 and 65 Nominations and Governance Committee 70 to 73 Directors’ remuneration report 89 to 92 and 97 to 102 Directors’ report 227 C Foster business relationships with suppliers, customers and others Chair’s statement and Group Chief Executive’s review 8 to 9 and 10 to 12 Our market context and Our strategic ambitions 13 to 15 Our business model and Key performance indicators 16 to 17 Principal risks and uncertainties 38 to 45 Stakeholder engagement 18 to 19 D Impact of our operations on the community and environment Our market context 13 Planet, Nature and TCFD 30 to 37 and 46 to 47 Stakeholder engagement 18 to 19 Board activity and Key strategic decisions 64 to 65 and 69 Sustainability Committee report 74 to 77 E Maintain a reputation for high standards of business conduct Our purpose framework and Our business model 7 and 16 Governance framework 58 to 60 Purpose and culture 62 Board activity and Key strategic decisions 64 to 65 and 69 F Acting fairly between members of the Company Our strategic ambitions and Key performance indicators 14 to 15 and 17 Board activity and Key strategic decisions 64 to 65 and 69 Stakeholder engagement 18 to 19 More information on the Board’s activities and how we engage with our stakeholders can be found on pages 18 to 19 and pages 64 to 65. Board activity continued Tesco PLC Annual Report and Financial Statements 2026 68 ![]() Key strategic decisions Competitive pressures Brand At the start of the financial year, we identified an increase in the competitive intensity of the UK market. At a point where regulatory cost pressure had increased; notably higher National Insurance contributions and the Extended Producer Responsibility (EPR) levy, our reaction needed careful consideration to balance the needs of all our stakeholders. A comprehensive review of the FY25/26 budget against the long-term plan and strategic priorities, enabled the Board to endorse the necessary price investment to react to the increased competitive intensity. In backing this decisive action, the Board took careful account of the need to protect Tesco’s leading customer proposition whilst ensuring the Group continued to deliver for all stakeholders. Throughout the year, the Board has closely monitored customer response to the investment and is particularly encouraged by the Group’s continued market share momentum. Building upon the insights gained from the budget review and in light of the increase in competitive intensity, the Board approved the extension of the Group’s save to invest programme, targeting approximately £500m in savings for FY25/26. Strong progress has been made, driven by management identifying opportunities to simplify operations and improve productivity, resulting in savings beyond the £500m target. The Board recognises the critical role our colleagues have in delivering excellent customer experience and oversaw continued investment in our colleagues, ensuring teams are fairly rewarded, equipped, and able to support and serve our customers. Additional stakeholder considerations included a clear focus on shareholder interests, ensuring the Group continues to deliver sustainable returns through our dividend policy and ongoing share buyback programme. During the year, the Board provided strategic oversight of the development and recent launch of Tesco’s refreshed brand strategy which builds upon the strength of the Every Little Helps promise. Recognising the distinctiveness of our brand, the Board endorsed the creation of a new brand message Need Anything From Tesco? designed to give a renewed relevance to our iconic slogan and invite a nationwide conversation that brings Every Little Helps to life. Throughout this year, the Board received regular updates on the evolving brand strategy, offering challenge, guidance, and insight to ensure the outcome was aligned to our purpose and ensure that our customers remain central to any proposals. As part of the brand strategy refresh, the Board recognised the importance of our colleagues and the role our teams play in delivering the promises embedded within our purpose and aimed to ensure that the brand strategy championed the role of our colleagues. In doing so, the Board was supportive of colleague-based initiatives and the colleague first approach which aimed to drive colleague advocacy while promoting a culture of helpfulness and community. In addition, when considering the brand strategy, the Board recognised the important role Tesco plays within our communities and ensuring the brand strategy remained firmly rooted within the Group’s purpose and values. Strategy Throughout the year, the Board provided robust oversight of our long-term strategic ambitions offering its expertise and constructive challenge to help us navigate changing customer needs and emerging opportunities. Through its approval of the budget and long-term plan, the Board scrutinised the investments needed for the Group to fulfil these ambitions. During the period, the Group announced a multi-million pound investment in a new automated distribution centre at DP World London Gateway, which is expected to open in 2029. A key element of our strategic ambition is to create the most connected, personalised and rewarding customer experience supported by the use of data and partnerships to fuel growth. Rapid advancements in AI present significant opportunities to enhance our customer offering through Clubcard and the development of new strategic partnerships. The Board has played an active role in shaping and adapting the strategy to ensure that these opportunities are fully captured. The Board closely monitored the Group’s progress in strengthening digital engagement, notably through the Tesco app, and in rolling out personalised reward programmes including Clubcard Challenges and the most recent launch of Your Clubcard Prices. As the Group builds its capabilities the Board have overseen the use of in-house and external expertise, including the agreement signed with Mistral AI to create new generated AI solutions for different parts of Tesco’s business. The Board has also reviewed the continued contribution of dunnhumby, whose analytics have supported initiatives such as new ranging tools designed to better adapt ranges to suit local customer preferences. Together with dunnhumby, Tesco Media has delivered strong growth and played an important part in making Tesco the most strategic long-term partner for innovation and brand building. Strengthening long-term business sustainability remains a core strategic ambition. With this ambition covering many of our principal risks, including security of supply and climate and environmental sustainability, the Board plays a central role in identifying, monitoring and overseeing the associated risks and controls, supported by the Audit and Sustainability Committees. Tesco PLC Annual Report and Financial Statements 2026 69 Strategic report Financial statements Additional informationGovernance ![]() Nominations and Governance Committee Key responsibilities Board and senior management succession planning – Board and Board-level Committee composition. – Board and senior management succession plans. – Directors’ skills and experience matrix. – Recommendation of annual election and re-election of Directors. – In-depth three-year and six-year review of Non-executive Directors’ performance. Talent management – Talent management priorities and progress made against these priorities. – Review and implementation of Board diversity, equity and inclusion policy. – Monitor the progress of the Group’s diversity, equity and inclusion strategy. Group governance – Review of corporate governance framework, including matters reserved for the Board and Committee terms of reference. – Monitor compliance against the UK Corporate Governance Code. – Board and Committee effectiveness review process and progress against actions identified. – Effectiveness review of Non-executive Directors including review of time commitments, independence and conflicts of interest. – Governance-related legal and regulatory developments including impact of the UK Corporate Governance Code 2024. The terms of reference for the Committee are reviewed on an annual basis and are published on our website at www.tescoplc.com. Further details on compliance with the UK Corporate Governance Code 2024 is set out on page 50. 2025/26 Committee effectiveness review The 2025/26 Committee effectiveness review formed part of this year’s internal Board and Committee performance review and concluded that the Committee continued to operate effectively. The frequency and duration of meetings, as well as the Committee’s overall composition, were considered appropriate and fostered high-quality discussion. Meetings were considered to be well-chaired and supported by clear, informative papers. Committee priorities for 2026/27 The Committee will continue to consider future succession planning at both Board and senior management level. This will include consideration of the Group’s strategic ambitions and longer- term plans, together with continued attention to broader diversity requirements. Committee membership and meetings The Committee is composed of the Non-executive Chair and eight independent Non-executive Directors. The Committee held four scheduled meetings during the year with a focus on talent management and future requirements, succession planning, diversity, equity and inclusion, Board composition and Board effectiveness. Board composition, expertise and succession planning To maintain alignment between the Board’s composition and the Group’s strategic priorities, the Committee regularly reviews the size and structure of the Board and its Committees. These reviews ensure that membership reflects an appropriate mix of skills, knowledge, experience and diversity. The Committee acknowledges the importance of attracting individuals with a diverse range of backgrounds who can contribute a wealth of knowledge, understanding and experience of the communities where Tesco operates. As reported last year, there has been one change to the Board during the year. Alison Platt retired as a Director following nine years’ service in June 2025. Following his appointment in February 2025, Chris Kennedy undertook a tailored induction plan during the year. Details of his induction are outlined on page 72. The Committee oversees a formal and transparent process for identifying and assessing potential candidates, whilst ensuring that robust succession plans are in place for orderly succession to the Board. Committee membership 1 and tenure Director Member since Gerry Murphy, Committee Chair September 2023 Melissa Bethell June 2024 Bertrand Bodson June 2024 Carolyn Fairbairn June 2024 Thierry Garnier June 2024 Stewart Gilliland April 2019 Chris Kennedy February 2025 Caroline Silver June 2024 Karen Whitworth June 2024 1. Alison Platt was a member of the Nominations and Governance Committee until her departure in June 2025. She attended one meeting during this period. Committee priorities for 2026/27 – Board and Committee composition: succession planning, skills and experience matrix. – Senior management succession planning and future talent requirements. – Diversity, equity and inclusion strategy and progress. – Board governance: Board performance review and progress against 2025/26 actions, time commitments and independence. – Non-executive Director recruitment. Chair of the Board and Committee Chair Gerry Murphy Nominations and Governance Committee 70 Tesco PLC Annual Report and Financial Statements 2026 ![]() NED succession planning and skills matrix As part of the succession planning process, the Board reviews Committee composition to ensure that each Committee is appropriately sized and has the necessary skills and expertise. This includes meeting certain governance requirements for key roles such as the Chairs of the Audit and Remuneration Committees. The Chair leads the Committee in annually evaluating the balance of skills, experience, independence, and knowledge on the Board, preparing a description of the role and capabilities required for a particular appointment. To support effective succession planning, the Committee maintains and annually reviews a detailed skills matrix which highlights the key competencies, experience, and skills of the Board. This process ensures that there is broad experience on the Board and that it retains the critical skills needed to achieve the Group’s long-term strategy and objectives, while maintaining a cultural alignment between members. The skills matrix also identifies any expertise that could be lost when a Non- executive Director retires from the Board and helps inform succession plans accordingly. Following Alison Platt’s retirement from the Board in June 2025, the Board took the opportunity to strengthen its succession planning through a comprehensive review of skills and expertise. As part of this exercise, the Committee engaged with Calibro Consult Limited to undertake an assessment of the skills required to deliver on our strategic priorities, a summary of their findings can be found to the right of this page. In light of this exercise, it was decided to pause the Non-executive Director recruitment process until the skills assessment exercise had completed, to ensure the relevant skills and experience required were captured in the role profile and the wider succession planning review. Following completion of the skills assessment exercise, Korn Ferry have been engaged and a search is underway for a new Non-executive Director. Calibro Consult Limited has no other connection to Tesco or any of its Directors and Korn Ferry has no other connection to Tesco or any of its Directors beyond its capacity in assisting with the Group’s leadership, talent and succession planning. For more details on the experience of the Board, see pages 54 to 57. Senior talent planning The Board recognises the need to create conditions that foster talent and encourage all colleagues to achieve their full potential. During the year, the Board has placed greater emphasis on talent management and diversity, and ensuring the required future capabilities and skills are in place. The aim is to foster a diverse group of leaders with the right skills to deliver our business strategy and the Committee has focused on achieving this by critically evaluating internal talent pipelines against our ambitions. The Committee strongly believes that an inclusive culture is a key driver of business success and is committed to building a leadership team that offers diverse perspectives, insights and critical challenge to strengthen decision making, risk management and strategic planning and delivery. Succession planning at executive and senior management level continues to be a priority for the Committee and throughout the year, the Committee monitored the future leadership pipeline and the available pool of talent in the Group. The Committee and management are aligned in taking a more strategic and future- focused view of succession, using refreshed success profiles to support more robust career and development discussions with successors. This is essential to ensure a consistent level of quality in management, and mitigate instability arising from unforeseen events, such as the departure of a key individual. The Committee’s review included a review of talent management, key role profiles and succession planning, all through a lens of inclusion. As part of the Group’s talent planning and succession programme, the Committee discussed changes to the Executive Committee during the year, which included appointing Ashwin Prasad as UK CEO, combining his previous remit as Chief Commercial Officer with oversight of our retail, customer, and product teams; appointing Natasha Adams as Chief Strategy and Transformation Officer, a newly established role to accelerate strategic delivery and drive innovation; Christine Heffernan taking additional responsibility as Chief Communications and Sustainability Officer; as well as the appointments of Geoff Byrne as CEO of Tesco Ireland and Northern Ireland and Jonny McQuarrie as CEO of Central Europe. Committee activity April 2025 July 2025 October 2025 February 2026 Board and Committee composition and evaluation Talent management and succession planning Governance Diversity, equity and inclusion Terms of reference and Committee performance review Spotlight on: Expertise To support long-term succession planning and ensure the Board continues to provide strong oversight and challenge, Calibro Consult Limited carried out an assessment of the Board’s current capabilities and future needs. Through individual discussions with Directors, the review evaluated the expertise required to support delivery of the Group’s strategy, identified skills expected to be lost through upcoming Non-executive Director retirements, and considered the succession needs of both the Board and its Committees. The assessment also highlighted priority skills for future recruitment, drawing on insights from the most recent Board Performance Review undertaken by Board Outlook Limited, the results of which are set out below: Board skills Retail and supply chain E-commerce and digital Innovation and transformation Technology and data Consumer and market Strategy Marketing and brand Talent, leadership and culture Government engagement Corporate governance Investor engagement Remuneration Tesco PLC Annual Report and Financial Statements 2026 71 Strategic report Financial statements Additional informationGovernance ![]() Nominations and Governance Committee continued Board effectiveness and performance Effectiveness of the Board encompasses many aspects of Board governance including: matters reserved for the Board and delegation of authority; review of the Board and Committee performance; Board and Committee composition and succession planning; review of skills and expertise; independence; time commitments; conflicts of interest; and Director election and re-election. The Committee undertakes detailed reviews of each of these aspects at least annually. The Committee oversees the Board performance effectiveness review process. The Committee discussed the proposed approach to the 2025/26 external effectiveness review of the Board, Committees and Directors, considering the key themes and focus of the review. The Board reviewed the progress made against the actions identified through the 2024/25 effectiveness review and discussed whether any further actions were required. The Committee also undertakes a thorough evaluation of performance when a Non-executive Director reaches three- and six-years’ service and consider the Director’s commitment, contribution, and overall effectiveness. During the year, the Committee reviewed the effectiveness of Caroline Silver, who completed her three years of service. Following a comprehensive assessment, it was concluded that Caroline should continue in her role as Non-executive Director. Details of the 2025/26 Board performance review can be found on page 67. A review of the Committee’s terms of reference and the Matters Reserved for the Board were undertaken during the year and are published on the Corporate website at www.tescoplc.com. The Committee reviewed the Governance sections of the Annual Report and reviewed compliance with the UK Corporate Governance Code. The relevant sections of the Annual Report were recommended for adoption by the Board. Director induction All new Directors receive a comprehensive six-month induction programme designed to support their understanding of the business and tailored to their individual needs. The Chair and the Group Company Secretary are responsible for delivering the programme which covers the Company’s purpose and values, strategy, key areas of the business and corporate governance. The programme includes introductory meetings with each Board and Executive Committee member, the Group Company Secretary, the Company’s advisors and senior managers across the Group, including Tesco Mobile, dunnhumby, Booker, F&F, Insurance and Money Services. Directors also undertake site visits across various store formats, distribution centres and urban fulfilment centres, providing first-hand insight into business operations and an opportunity to meet colleagues. As part of the induction, Directors meet the Committee Chairs relevant to their appointments, along with senior management covering key issues within each Committee’s remit. The Committee reviews the induction plan ahead of a new Director joining. Following appointment, Directors agree individual training and development needs with the Chair. Chris Kennedy induction Since his appointment in February 2025, Chris Kennedy has completed a bespoke induction programme that has involved introductory meetings with key stakeholders including members of the Board, senior management and the external auditor. In addition, he has undertaken a series of site visits, including Tesco Business Solutions in Bengaluru, distribution and urban fulfilment centres, and a large multi- format store. This programme spanned several months and aimed to provide detailed business insights along with a greater understanding of the Group’s operations. Feedback will be taken from this induction programme to help inform future induction plans going forward. NED time commitments The Board recognises the importance of Non-executive Directors having sufficient time to commit to the business. Before appointment, the Committee reviews each candidate’s existing commitments, including other directorships, to ensure they can devote the necessary time to the role. On appointment, letters of appointment set out the expected time commitment, acknowledging that this may vary depending on business needs. The Committee regularly reviews Directors’ commitments to confirm they continue to have adequate time for their duties. Each Director completes a self assessment of time spent on external commitments, which supports the Committee’s evaluation. This assessment considers the number and nature of each Director’s external roles and whether they have demonstrated the capacity to meet their responsibilities at Tesco, including during periods of corporate stress. The Board is currently satisfied that the number of appointments held by each Director in addition to their position with Tesco is appropriate to allow them to fulfil their obligations to Tesco. All Directors make themselves freely available as required, even at short notice, in order to meet the needs of the business. External appointments, which may affect existing time commitments relevant to the Board, must be agreed with the Chair in advance. Once requested, an assessment will be conducted which considers time commitments, effectiveness, independence and the impact of any cross-directorships to ensure that any additional roles or commitments will not impact a Directors’ role or commitment to Tesco. Further details on Non-executive Directors’ external appointments are set out on pages 54 to 57. NED independence The Non-executive Directors provide a strong independent element to the Board and a solid foundation for good corporate governance, fulfilling the vital role of corporate accountability. The Committee formally reviews the independence of each of the Non-executive Directors at least annually. In assessing each Director’s independence, the Committee concluded that each provides objective challenge, strategic guidance, holds management to account and is willing to stand up and defend their own beliefs and that each Non-executive Director continues to be independent in character and judgement in line with the definition set out in the UK Corporate Governance Code 2024. Conflicts of interest In accordance with the Companies Act 2006 and the Company’s Articles of Association, Directors are required to report actual or potential conflicts of interest to the Board for consideration and, if appropriate, authorisation. If such conflicts exist, Directors excuse themselves from consideration of the relevant matter. On behalf of the Board, the Committee reviews the register of authorised conflicts of interests at least annually to confirm its ongoing authorisation of any potential or actual conflicts arising from a Director’s interest. During the period, in reviewing the cumulative conflicts of interests of each of the Directors, the Committee concluded that no Director had a conflict that would have a detrimental impact on their independence and judgement or their time commitment to Tesco. Annual re-election of Directors Annually, the Committee considers and recommends to the Board the re-election of Directors by shareholders at the AGM. This is supported by each Director’s individual assessment undertaken as part of the annual Board effectiveness review. Following a review of each of the Independent Non-executive Directors’ time commitment, contribution and effectiveness, the Committee considered and recommended to the Board that each of the Directors be proposed for election or re- election by shareholders at the 2026 AGM. Tesco PLC Annual Report and Financial Statements 2026 72 ![]() Diversity, equity and inclusion We recognise the importance of having an inclusive and diverse Board and workforce. Our ambition is to build a culture where people see themselves represented, feel they can be themselves at work, meet their career aspirations and thrive. The Board supports and monitors Tesco’s diversity, equity and inclusion strategy and management’s efforts to ensure that the diversity of Tesco’s senior management is continuously enhanced. The Committee reviews progress against the strategy at least twice a year, including our five commitments to our colleagues: Inclusion for all 1 Flexibility for all 2 Accessible first 3 Transform recruitment 4 Developing careers 5 Board diversity, equity and inclusion policy The Board’s diversity, equity and inclusion policy (the Policy), introduced in July 2019, is reviewed annually by the Committee to monitor progress and make updates where necessary. The Policy sits alongside the Group’s values, business code of conduct and the Company’s wider strategy, which aims to create an inclusive workplace where colleagues see themselves represented, feel they can be themselves at work and thrive. Through its succession plans, the Board considers the overall diversity of the Tesco PLC Board, its Committees and the Executive Committee, while ensuring the right blend of skills and experience are in place for oversight, challenge and to support the Group’s success. Gerry Murphy Committee Chair 15 April 2026 Board diversity Policy objectives Implementation Progress against objectives A gender balance between 40% and 60% on the Board. Regular succession planning sessions are undertaken throughout the year to review Board and Committee composition to ensure that the appropriate balance of skills and experiences required to deliver on the strategic objectives are in place over the short, medium and long term. Appointments are always based on merit and relevant experience, while taking into account the broadest definition of diversity. The Committee continues to challenge the external search consultants where necessary, to ensure that diversity is always considered when drawing up candidate shortlists. The Board comprises 36% female directors. Following the retirement of Alison Platt in June 2025, the Board reduced from five female directors to four. As a result, the Board conducted a review of its composition and succession plan, in conjunction with an external assessment of the current skills and expertise on the Board and the skills required to deliver on our strategic priorities. This assessment has supported the Board’s thinking on future requirements and has supported the development of a role profile. The Board have now commenced their search for a new Non-executive Director taking into consideration the Policy. The Board recognises the importance of having a diverse composition to support the delivery of the long-term strategy. The Board is committed to ensuring compliance with the Policy over the next year. At least one Director from a non-white ethnic minority background on the Board. Consideration is given to this as part of the succession planning process. The Board is currently 18% ethnically diverse, with both Melissa Bethell and Imran Nawaz being from Asian backgrounds. Therefore, meeting the Parker Review recommendations. At least one woman in the role of Chair, CEO, CFO or Senior Independent Director. Consideration is given to this as part of the succession planning process. Carolyn Fairbairn was appointed as the Senior Independent Director in June 2024. Diversity in senior roles Policy objectives Implementation Progress against objectives To achieve 37% female representation of our top global leaders by 2026, expanding to include senior managers after this point, with a target of 42% representation at senior manager and above by 2028. Scheduled updates to the Board, Nominations and Governance Committee and Executive Committee to discuss talent management, succession planning and diversity, equity and inclusion to assist the development of a pipeline of high- potential and high-performing candidates with diverse backgrounds in senior management roles. KPIs have been established to measure progress. During the year, members of the Committee have taken on mentoring roles to some of our senior leaders within the business. Representation at Board and senior management level is considered as part of the talent management and succession planning processes. We have achieved 35% female representation of our top global leaders (director and above) which is aligned to the threshold target of the 2023 Performance Share Plan (PSP) diversity and inclusion measure. In 2026, the Board intends to update the Policy to align with the threshold PSP target. To achieve 19% ethnically diverse representation of our top global leaders by 2028. 13.4% ethnically diverse representation of our top global leaders (director and above). Further details on the Group’s diversity, equity and inclusion strategy and the schedule in accordance with UK Listing Rule 6.6.6R(10), can be found on page 20. All data within this table is as at 28 February 2026 Tesco PLC Annual Report and Financial Statements 2026 73 Strategic report Financial statements Additional informationGovernance ![]() Key responsibilities Integrated sustainability strategy – Support and advise the Board on matters relating to the integrated sustainability strategy, planet plan, human rights and our communities. – Review progress towards the Group’s commitments. – Provide constructive challenge of sustainability initiatives to support delivery of the Group’s purpose and strategic priorities. – Support the development of the sustainability agenda to balance short, medium and long-term objectives. – Monitor KPIs relating to sustainability and climate metrics. – Monitor external developments on sustainability. Planet plan – Receive and review progress updates and deep dives on initiatives supporting each of the planet plan pillars. Community – Receive updates on our community programmes. – Approve the use of share forfeiture funds for good causes. Governance and stakeholder engagement – Annual review of sustainability communication and customer plan. – Review of human rights strategy; oversight of human rights risk and assurance; review of the governance and monitoring of human rights matters. – Review and approve current and forthcoming sustainability-related corporate reporting requirements. – Regular updates on stakeholder engagement on sustainability matters. – Review of the effectiveness of the Committee and annual review of Committee terms of reference. The Committee’s terms of reference are reviewed on an annual basis and are published on our website at www.tescoplc.com. Committee composition and performance The Sustainability Committee is composed of five independent Non-executive Directors and is chaired by Stewart Gilliland. The Board is satisfied that all members of the Committee bring a mix of skills and experience to support the Board’s oversight of sustainability matters. The Committee held four scheduled meetings during the year. In addition, a joint meeting of the Committee and the Remuneration Committee was held to consider matters relating to the sustainability metrics for senior leadership’s Performance Share Plan. Each meeting followed an agenda structured around the Group’s planet plan, commitments, performance monitoring, and key areas of focus for the year. Regular attendees include the Non-executive Chair, Group Chief Executive, Chief Communications and Sustainability Officer, Group Finance Director, Group Quality, Technical and Sustainability Director and the Group Company Secretary. A forward-looking planner is maintained and regularly reviewed to ensure that the Committee’s responsibilities are discharged in full and that relevant developments in sustainability, regulatory expectations and stakeholder priorities are brought to the Committee’s attention. The planner also incorporates site visits across the Group, enabling the Committee to see sustainability initiatives and progress in action. In addition, the Committee receives scheduled deep dives on priority topics which align with the Group’s sustainability strategy and material issues. These deep dives are described in more detail later on in this report, page 76. Committee Chair Stewart Gilliland Sustainability Committee Committee membership and tenure Director Member since Stewart Gilliland, Committee Chair June 2021 Bertrand Bodson June 2021 Carolyn Fairbairn September 2023 Karen Whitworth June 2021 Thierry Garnier June 2024 Focus during 2025/26 – Monitored delivery of the planet plan, the progress against the net zero glidepath and Scope 1–3 emissions, including the transition from our 2025 commitments. – Received deep dives across all six planet plan pillars, covering product sustainability, transport and store decarbonisation, healthy diets, waste, and nature. – Oversaw the delivery and impact to the sustainability strategy of key regulatory and reporting developments. – Reviewed human rights, community programmes and current sustainability issues including sourcing, animal welfare, food security and stakeholder expectations. Committee priorities for 2026/27 – Continued deep dives into the six planet plan pillars and the review of progress towards the Group’s commitments. – Enhanced focus on competitive advantage and the integration of the new commitments into the long-term strategy. – Strengthen customer messaging to ensure our sustainability efforts are communicated clearly and consistently. – Ongoing oversight of emerging sustainability-related reporting and regulatory requirements, including forthcoming climate and nature disclosures, and supporting the strengthening of material controls to ensure sustainability-related risks are embedded within the Group’s internal control framework. Sustainability Committee 74 Tesco PLC Annual Report and Financial Statements 2026 ![]() An internal review of the Committee’s effectiveness was conducted during the year. The review concluded that the Committee continues to operate effectively and that the Board has confidence in its oversight of sustainability matters. It highlighted strong Committee structure, composition and leadership, and recognised the value of the Committee’s work in supporting the Group’s sustainability commitments. Focus areas going forward will include customer messaging, strengthening the integration of sustainability into strategy and brand, and maintain a clear and balanced agenda. In order to streamline the effectiveness of the Committee, a review of the forward planner has been undertaken. In addition, scheduled deep dives into each of the sustainability-related principal risks and critical risk events will be undertaken by the Board as part of the assurance of non-financial controls under Provision 29 of the UK Corporate Governance Code 2024. How the Committee discharged its responsibilities During the year, the Committee’s principal activities were as detailed below: Integrated sustainability strategy Throughout the year, the Committee oversaw integration of sustainability into the Group’s long-term strategy, receiving updates on progress against the net zero glidepath, Scope 1, 2 and 3 emissions, and the progress of 2025 commitments. It considered the strategic integration of sustainability into the brand and customer proposition, including opportunities linked to security of supply, healthy and sustainable customer experience, packaging circularity, and emerging green business models. The Committee also reviewed the development of post-2025 commitments, noting the importance of aligning long-term targets with customer priorities and commercial outcomes. Spotlight on: Our low carbon concept store In November 2025, the Chair of the Committee visited our new Harrogate superstore ahead of its launch, to gain first-hand insight into how our low carbon concept is being delivered in practice. The visit provided the opportunity to witness the innovations being rolled out across the estate and highlighted where further opportunities exist. Harrogate marks an important step in delivering our long-term climate commitments. The Committee will use the insights from the visit to inform its oversight of future developments and retrofitting existing stores, ensuring we continue to design and operate stores that support a lower carbon, more resilient business. For more information on our Harrogate superstore, please visit www.tescoplc.com. Committee activity April 2025 July 2025 September 2025 February 2026 Sustainability glidepath and strategy Planet Plan Pillar 1: Improve our products Pillar 2: Decarbonise transport Pillar 3: Reduce store emissions Pillar 4: Support sustainable consumption Pillar 5: Eliminate waste Pillar 6: Protect nature Regulatory and reporting compliance Human rights Community programmes Current issues External trends, risks and sustainability coverage Governance-related matters T 75 Strategic report Financial statements Additional informationGovernance ![]() Sustainability Committee continued to strengthen our approach to additives included updated supplier guidance and the rollout of a refreshed additive policy. Evolving customer trends and the external regulatory landscape were also discussed. The update outlined emerging priorities for shifting diets towards lower-carbon and nutrient-dense foods, supported by data-led insight into protein consumption patterns and opportunities to promote alternatives such as fish, beans and pulses. Eliminate waste The update highlighted progress in preparing for the Extended Producer Responsibility (EPR) and Deposit Return Scheme (DRS) legislation, which is reshaping packaging design, recyclability requirements and future compliance costs. The deep dive also highlighted the Group’s efforts to reduce food surplus, including improvements to store routines, upgrades to supply chain settings and the commissioning of a new animal feed processing facility capable of converting surplus waste at scale. There was a dedicated focus on strengthening traceability and assurance across waste streams, with focus on improving soft-plastic recycling capacity and capability. Protect nature The update highlighted work to improve freshwater resources, improve soil health and restore habitats through a combination of nature-based solutions, enhanced environmental standards and landscape-scale partnerships. Progress through the Nature Fund projects included farm assessments, tailored management plans and on-farm interventions aimed at strengthening biodiversity and building long-term resilience. The session also covered our TNFD readiness, including modelling of nature-related risks across priority commodities. Ongoing challenges were discussed such as data availability and the impact of water stress, and the Committee reviewed actions to strengthen supplier engagement and integrate nature considerations into commercial decision making. Planet plan The Committee received deep dives on the planet plan at each meeting, covering progress, achievements and risks across all six pillars: Improve our products Reduce store emissions Support sustainable consumption Eliminate waste Decarbonise transport Protect nature These updates provided insights on priority topics that connect directly to the planet plan pillars and the Group’s commitments. These sessions provide the Committee with the opportunity to explore specific issues in more detail and understand operational challenges and risks. The deep dives provided to the Committee are aligned to each pillar, and further detail of each deep dive is provided on this page. Further information on our planet plan can be found on pages 30 and 31. Improve our products The Committee received a deep dive covering the broad and complex set of upstream sustainability impacts across agriculture, deforestation, manufacturing and marine sourcing. Much of this activity sits outside our direct control, requiring close collaboration with suppliers, industry bodies and government. The Committee were advised of the strong delivery across the 2025 commitments, but also the challenges in achieving verified deforestation and conversion-free soy given the scale and complexity of global supply chains. The session highlighted increased supplier engagement, with major suppliers reporting manufacturing Community programmes Community activity was monitored through updates on Group-wide programmes including Stronger Starts, the Blue Token scheme, Fruit & Veg for Schools and wider charitable partnerships across the UK, ROI and Central Europe. These reviews covered programme reach, customer and colleague engagement, operational delivery in stores and opportunities to strengthen visibility and participation. Highlights from the year included the role played by our Community Champions in supporting local schools, communities and charities in the UK. The reach of our Stronger Starts programme in Central Europe which has provided more than £6.5m in funding since 2016 and 25 million meals donated to FareShare since 2021 by Booker. Alignment with the emerging brand strategy was considered, particularly around health and nutrition, alongside options to enhance supplier involvement and deepen impact measurement. Members of the Committee visited Greenley’s Junior School in Buckinghamshire, one of the first to be supported by our Fruit & Veg for Schools programme, to see first hand how the funding is helping improve access to nutritious food for the 150 pupils who attend. Serving a community where 32% of housing is social housing, Greenley’s have used the funding to increase variety in fruit and vegetables offered at breakfast, lunch and break times, with all children now receiving daily fresh fruit. The school has seen a noticeable improvement in children who would typically avoid fruit and vegetables, with pupils becoming more open to trying new foods. The Committee also reviewed the progress made in ROI to increase children’s access to fresh produce, and with support from the Group’s suppliers, by the end of 2025 we were delivering free, nutritious fresh food every week of the school term to over 300 schools. Building on this impact, and following the completion of the Group’s annual share forfeiture programme, the Committee approved the use of approximately £3.1m of these forfeited funds to expand the Fruit & Veg for Schools programme, increasing its reach from 517 schools to more than 1,000 schools across the UK. emissions data, alongside progress through sustainable farming groups, low-carbon concept farms and trials of low-carbon fertiliser and methane-reducing additives. The Committee also discussed the pressures facing UK agriculture and the importance of supporting innovation and resilience across the value chain. Our operations These pillars cover emissions generated across our operations, including all sites and logistics. Decarbonise transport The session outlined the reductions already achieved, driven by the continued electrification of our home-delivery fleet, expansion of biofuel and hydrotreated vegetable oil use, and trials of low-emission refrigeration technologies. Members reviewed the operational challenges associated with transitioning heavy logistics to zero-emission solutions, including the limited availability of long-range electric vehicles, infrastructure constraints and the substantial electrical capacity required at distribution centres. Reduce store emissions The deep dive highlighted strong performance on store emissions driven by the transition to renewable electricity, continued rollout of CO₂-based refrigeration systems, completion of the phasing out of F-gas across most of the estate and the installation of heat pumps and chiller doors to improve energy efficiency. The operational constraints affecting the pace of delivery include limited market capacity for refrigeration and HVAC equipment and the need to reshape future plans to match supplier availability. The session also covered the increasing pressure on electrical infrastructure, alongside work which is underway to strengthen energy resilience. Healthy sustainable diets The session highlighted that we have met our healthy-sales target, achieved through reformulation, expanded Own Brand innovation and initiatives that encourage customers to choose healthier options. The actions taken Tesco PLC Annual Report and Financial Statements 2026 76 ![]() Human rights A deep dive on human rights provided members with an overview of key risks, progress on enhanced due diligence and updates on serious incidents across the supply chain. Updates highlighted the expansion of digital threat intelligence tools and the deployment of new on-the-ground human rights specialists by relevant teams in our food supply chain, alongside strong progress in rolling out our Human Rights Blueprint. The Committee acknowledges the importance of maintaining a proactive approach addressing areas such as modern slavery, worker welfare and sustainable livelihoods, supported by clearer visibility, stronger supplier collaboration and continued investment in due diligence capability. Governance and stakeholder engagement During the year, the Committee oversaw governance and reporting requirements linked to sustainability, including regular updates on emerging regulation such as EU Deforestation Regulation, EPR, DRS and Corporate Sustainability Reporting Directive, and reviewed associated risks, supplier readiness and compliance activity. It reviewed the Group’s sustainability-related disclosures, and supported the Audit Committee with assurance processes, including the work on non-financial controls under Provision 29. The Committee completed its annual review of the Committee terms of reference and an internal effectiveness review. The Committee also received updates on stakeholder engagement, covering ESG investor expectations, sustainability communications and media coverage, and engagement with industry bodies and non-governmental organisations on issues such as human rights, animal welfare, river pollution and deforestation. Stewart Gilliland Committee Chair 15 April 2026 2.4 million customers were invited to earn personalised Clubcard stamps on fresh fruit and veg 5-a-day campaign Helping customers eat more fruit and veg is one of the simplest and most effective ways to help support the health of the nation. The government’s published ‘Good Food Cycle’ rightly identified the importance of getting more people eating more fresh produce and the health benefits of doing so are clear. With customers telling us that cost, convenience and kitchen confidence makes it harder for families to follow a healthy diet, we launched a summer 2025 campaign to help millions eat more fruit and vegetables. Running across Tesco stores and online, the campaign featured a range of initiatives aimed at helping improve the accessibility and affordability of healthier food. These included inviting 2.4 million customers to earn personalised Clubcard stamps on fresh fruit and veg, which could be converted into bonus Clubcard points and vouchers. We also launched Clubcard Challenges, which offered customers the chance to earn extra points on frozen fruit and vegetables, beans and pulses, and introduced new Clubcard Prices and offers on fruit, veg and healthy lunchbox snacks. Building on the success of the summer 2025 campaign, in January 2026 we ran a second campaign across stores and online to further support healthier choices. The campaign featured promotions on fresh and frozen fruit and vegetables and included free fruit for kids in stores. Based on post-campaign customer research, 41% of customers reported that the campaign reminded or encouraged them to choose healthier options. Spotlight on: healthy and sustainable diets 77 Strategic report Financial statements Additional informationGovernance ![]() Key responsibilities The Audit Committee continues to focus on issues most relevant to the Group’s financial reporting and internal controls, considering key accounting judgements and ensuring the ongoing quality of related disclosures, and supporting the Board in the oversight of the effectiveness of risk management and internal controls processes and systems. Key responsibilities are set out below. Financial statements and reporting – Monitor the Group’s financial reporting processes, reviewing and submitting recommendations to the Board. – Where necessary, review and challenge areas of judgement within the Financial statements and disclosures, including any impacts from the external environment on key accounting judgements. – Review the Group’s assessments of going concern, available liquidity, longer term prospects and viability, and the distributable reserves position prior to any declaration of dividends. – Review externally reported sustainability- related disclosures and sustainability KPIs, including any definitions, data sources and levels of assurance for each. External auditor – Consider and make recommendations to the Board on the appointment of the external auditor. – Approve the external auditor’s remuneration. – Review the external auditor’s terms of engagement, audit representation letter and management’s response to any recommendations. – Assess the effectiveness of the external auditor’s work. – Monitor the provision of non-audit services and associated fees in line with policy on non-audit services. Risk management and internal controls – Identify, prioritise, respond to and monitor the Group’s principal risks and material and critical internal controls. – Review the effectiveness of the Group’s internal control and risk management framework, including key financial, operational and compliance risk and controls. – Review management’s approach to the identification and assessment of principal and emerging risks, including the management and mitigation of those risks. – Review the effectiveness of the risk appetite framework and mitigating controls. Group Audit – Review the effectiveness of Group Audit processes. – Review the annual audit plan. – Review reports from the Group Audit function and consider management’s response to any major external or Group audit actions. – Approve the appointment of the Chief Audit and Risk Officer. The terms of reference for the Committee are reviewed on an annual basis and are published on our website at www.tescoplc.com. Committee Chair Karen Whitworth Audit Committee Committee membership and tenure Director Member since Karen Whitworth, Committee Chair June 2021 Melissa Bethell September 2018 Carolyn Fairbairn June 2024 Chris Kennedy February 2025 Caroline Silver October 2022 Focus during 2025/26 – Key accounting judgements and estimates. – Reporting and assurance. – Internal controls. – Risk management and risk appetite. – Readiness for Provision 29 of the UK Corporate Governance Code 2024. Committee priorities for 2026/27 – Oversee and monitor the financial and non-financial controls programme to support the declarations required by the Board in 2027 in accordance with Provision 29 of the UK Corporate Governance Code 2024. – Enhance the internal and external audit process through data-led metrics. – Continue to review the transition, controls and system separation of the Insurance and Money Services business. – Further enhance the risk management framework. For more details on our fair, balanced and understandable consideration, see page 80. The Committee has continued to oversee high-quality financial reporting and assurance while driving further enhancements to the Group’s risk management, governance and internal controls, supporting our preparations for Provision 29. This work has further strengthened our governance and control environment and improved the clarity and consistency of how risks and controls are managed across the business. Audit Committee Tesco PLC Annual Report and Financial Statements 2026 7878 Tesco PLC Annual Report and Financial Statements 2026 78 Tesco PLC Annual Report and Financial Statements 2026 ![]() Committee composition and performance The Committee is composed of five independent Non-executive Directors, chaired by Karen Whitworth. The Board is satisfied that all members of the Committee have significant, relevant and recent financial experience. Each of Karen Whitworth, Caroline Silver and Chris Kennedy are chartered accountants and are considered suitably qualified. In addition, Chris Kennedy is currently a serving chief financial officer at another FTSE listed company. The Board considers that the Committee members collectively have competence relevant to the Company’s sector, in addition to their general management and commercial experience. The Committee members’ expertise and experience is set out in each of their biographies on pages 54 to 57. The Committee held five scheduled meetings during the year. Each meeting followed an agenda to reflect the financial reporting cycle and particular matters for the Committee’s consideration. Regular attendees to meetings include the Non-executive Chair, Group Chief Executive, Chief Financial Officer, Group General Counsel, Chief Audit and Risk Officer, Group Company Secretary, senior management from Group Finance and representatives of the external auditor. Members of the Committee meet regularly with management to understand more about developments in the business operations, which provides greater oversight and enables them to scrutinise processes and controls in a more effective way. Members hold private sessions with both the external auditor and the Chief Audit and Risk Officer following each meeting which provides an additional opportunity for open dialogue and feedback without management being present. The Committee Chair also meets with the Chief Audit and Risk Officer and external auditor on an ad hoc basis and prior to each Committee meeting to discuss matters relating to its remit and any issues arising from the audits. The Committee Chair provides a written report to the Board following each Audit Committee meeting for discussion. Provision 29 of the UK Corporate Governance Code 2024 The Board will be required to provide a declaration on the effectiveness of material controls, under Provision 29 of the UK Corporate Governance Code 2024, at the end of FY27. The Board will be required to provide: – a description of how the Board has monitored and reviewed the effectiveness of the risk management and internal control framework; – a declaration of effectiveness of the material controls as at the balance sheet date; and – a description of any material controls which have not operated effectively as at the balance sheet date, the action taken, or proposed, to improve them and any action taken to address previously reported issues. Provision 29: Four material control pillars Financial Operational Reporting Compliance Further information on the status of our preparations for Provision 29 of the UK Corporate Governance Code 2024 is on page 61. Over the past two years, the Committee has undertaken a comprehensive review of the Provision 29 requirements and assessed which controls are material. Materiality has been determined against a range of measures across our principal risks and supporting critical risk events using both quantitative and qualitative assessments. The Board and Committee have been actively engaged throughout the scoping and assessment of the material risks and material controls. Consideration has also been given to the appropriate levels of assurance required to provide support for the future Board declaration. The Board has strong visibility of progress across all four pillars of the programme, and the Committee will continue to oversee compliance with the requirements. Going concern and viability The Committee considered the going concern and longer term viability statement covering a period of 18 months and three years from the balance sheet date respectively. This included their underlying assumptions and longer-term prospects of the Group. The Committee considered the base case liquidity headroom and the net impact of the following agreed stress-test scenarios applied and the mitigating actions available: – Geopolitical events triggering higher inflation which, together with weak macroeconomic fundamentals, weaken consumer confidence, further intensifying competition in the sector; – data breach; and – climate change. More information on the viability statement scenarios can be found on pages 48 and 49. The Committee evaluated going concern over an 18-month period, which included a review of available cash in the base case and in the severe but plausible case applying three stress-test scenarios and considering certain mitigating actions within management’s control. The Committee considered it appropriate to prepare the Group’s Financial statements on a going concern basis. The Committee has a forward-looking planner which is regularly reviewed to ensure the responsibilities of the Committee are discharged in full and that regulatory developments and other business-critical matters are brought to the Committee’s attention. Risk deep dives on particular topics which align to the Group’s principal risks are held as part of the Audit Committee meetings. These deep dives will support the Board’s Assurance Statement to be made under provision 29 of the UK Corporate Governance Code 2024 when that comes into effect in FY27. The 2025/26 Committee effectiveness review was undertaken as part of the Board performance review. The review found that the Committee was effective. Meetings were well chaired, with appropriate challenge and good quality papers. The review found that there was a good mix of skills and members were well informed, prepared and able to challenge. Audit Committees and the External Audit: Minimum Standard The Committee confirms that it has complied with the Financial Reporting Council’s Audit Committees and the External Audit: Minimum Standard (Standard). This report describes how the Committee has complied with each relevant provision of the Minimum Standard during the year. A copy of the Standard can be found at www.FRC.org.uk. Statutory Audit Services Order 2014 The Group has complied with the provisions of the Statutory Audit Services Order 2014. Tesco PLC Annual Report and Financial Statements 2026 79 Strategic report Financial statements Additional informationGovernance ![]() Audit Committee continued The Committee, having completed its review, recommended to the Board that, when taken as a whole, the Annual Report and Financial Statements 2026 is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. Confirmation by the Board is set out in the Statement of Directors’ responsibilities on page 109 and is supported by the independent auditor’s report on pages 110 to 120 outlining their reporting responsibilities. Financial statements and regulatory reporting During the year, the Committee considered and recommended the approval of the interim financial results, preliminary results and this Annual Report, taking into consideration key accounting judgements, adjusting items and quality of earnings, as well as monitoring the external audit. The Committee considered the Annual Report and Financial Statements 2026 and concluded that the disclosures, as well as the processes and controls underlying its production, were appropriate. The Committee reviewed the Group’s funding, liquidity and capital allocation, which included a review of shareholder returns and the Company’s distributable reserves ahead of dividend declarations. It also considered changes to segmental reporting, the impact of FY 25/26 being a 53-week year, and the implications of new Extended Producer Responsibility regulations. The Committee received updates on key accounting judgements including store impairments, defined benefit pension valuations and adjusting items. The impairment methodology and details of the impairment review of non-current assets can be found in Note 15. In April 2026, in light of the conflict in the Middle East, the Committee considered management’s assessment of the impact on the financial statements, in particular with respect to impairment, pensions and related sensitivity disclosures. For further information, refer to Note 1. The Committee reviewed the tax strategy and reporting alongside updates from business unit finance directors. More detail on our 53-week disclosures can be found on page 216. Fair, balanced and understandable On behalf of the Board, the Audit Committee undertook a review of the Annual Report and Financial Statements 2026, as well as the effectiveness of processes and controls which underpin its production and recommended to the Board that the Annual Report and Financial Statements 2026 provided the necessary information to assess the Company’s position and performance, business model and strategy. As part of the fair, balanced and understandable review, the following points were considered: – Are the Annual Report and Financial Statements 2026 open and honest? – Are weaknesses, difficulties and challenges as well as successes reported where appropriate? – Do the Annual Report and Financial Statements 2026 have a sense of realism and balance? – Are the most important issues included? – Is there a clear explanation of KPIs that were met, are on track, and were not met? – Is there a strong link between the business model, strategy, KPIs and reward? – Is there consistency between the different sections of the report? The Annual Report and Financial Statements 2026 has been reviewed by management, as well as independent functions, who performed verification and assessment. Frequency of reporting April 2025 July 2025 September 2025 November 2025 February 2026 Financial statements and reporting Key accounting judgements Going concern and viability Full and half-year reporting and disclosures Sustainability reporting and assurance Did you know: The Group is committed to fair and balanced reporting which is understandable for its stakeholders. Tesco PLC Annual Report and Financial Statements 2026 80 ![]() Significant financial statement reporting matters The Committee considered the following significant issues during the year. As part of these considerations, the Committee received updates from management and sought assurance from Group Audit and the external auditor. The Committee was satisfied with how each of the significant issues discussed were addressed. Matter considered How the matter was addressed by the Committee Sources of further information Going concern basis for the financial statements and viability statement The Committee reviewed and challenged management’s assessment of forecast cash flow scenarios including the impact of trading and expenditure plans, higher inflation, weakening consumer confidence, intensifying competition, a data breach as a result of a cyber event and climate change. The Committee also considered the Group’s financing facilities and future funding plans. Based on this, the Committee confirmed that the application of the going concern basis for the preparation of the Group financial statements continued to be appropriate, with no material uncertainties noted, and also recommended the approval of the viability statement. For further information see pages 48 and 49. Impairment The Committee reviewed and challenged management’s impairment testing of the Group’s portfolio of store cash-generating units and goodwill, giving rise to a net charge of £53m for the year. The Committee considered the key assumptions and methodologies used in both the value in use and fair value less costs of disposal models, in order to conclude on the appropriateness of the impairment charges. The Committee challenged key inputs into the impairment calculations including the projected cash flows, the discount rates and the use of independent third-party valuations. The Committee reviewed management’s weighting assessment of risk and uncertainties within the cash flows arising from higher inflation, weakening consumer confidence, intensifying competition, and climate change. The Committee confirmed its agreement with management’s judgements. The Committee also reviewed the impairment disclosures, including the sensitivity to key assumptions, and considered them to be appropriate. For further information see Note 15 to the financial statements. Pensions Accounting for defined benefit pension schemes remains an area of significant focus for the Group given the sensitivity of the liabilities to changes in certain assumptions. The Committee reviewed and challenged the key actuarial assumptions used by management in estimating the defined benefit pension obligations, including the discount rate, inflation rate and mortality assumptions, and concluded they were reasonable. The Committee also reviewed the sensitivity disclosures provided on the key assumptions. For further information see Notes 1 and 28 to the financial statements. Segmental reporting Following changes to the Group Executive Committee and management reporting to the Chief Operating Decision Maker in the year, the Committee reviewed the change to the Group’s segmental reporting to present Booker as a separate operating and reportable segment. The Committee concluded that they were comfortable with this change. For further information see Notes 1 and 2 to the financial statements. Recognition and disclosure of commercial income The Committee continued to monitor commercial income controls across the Group and discussed the outcome of internal audits on commercial income, including any identified improvement recommendations. The Committee reviewed key drivers of movements in the income statement and balance sheet and concluded that they were comfortable with the accounting and presentation of commercial income. For further information see Notes 1 and 21 to the financial statements. Adjusting items The Committee considered the presentation of the Group’s financial statements, the appropriateness of the presentation of adjusting items, and the nature of the adjusting items identified. The total charge from adjusting items this year was primarily driven by impairment charges, restructuring and the amortisation of intangible assets, principally related to the acquisition of Booker. The Committee concurred with management that the treatment was clear, balanced and consistently applied. For further information see Note 1 to the financial statements for a definition of adjusting items and Note 5 for an analysis of adjusting items. Alternative performance measures (APMs) The Committee reviewed the Group’s APMs presentation and disclosure, including their level of prominence and the clarity of APM reconciliations. The Committee was comfortable that the definitions were appropriate and any changes in presentation resulting from week 53 reporting were appropriately disclosed. For further information on the Group’s APMs, see pages 217 to 222. Tesco PLC Annual Report and Financial Statements 2026 81 Strategic report Financial statements Additional informationGovernance ![]() Frequency of reporting April 2025 July 2025 September 2025 November 2025 February 2026 Financial strategy and planning Capital allocation, funding proposals, liquidity management and dividend Business updates Business transformation Audit Committee continued team based in TBS work hand-in-hand with the business to identify data-led insights and opportunities for value creation and working capital optimisation, whilst the finance operations team continue to drive automation and standardisation in our processes. The Committee received periodic updates about the impact of market movements on the funding position of the Group’s pension schemes and discussed the results of the main UK pension scheme triennial valuation from March 2025, the movement in the IAS19 position, and the assumptions used. The funding position remained in surplus. In addition, the Committee received updates about other key areas of the business, including Group Tax to review the Group’s approach to tax which is published on the Company’s website; Group Property to review the annual property valuation; and updates on transformation projects. Environmental disclosures and assurance The Committee also reviewed climate risk- related disclosures and continued to monitor the reporting and disclosure plans relating to sustainability-related matters, including key areas of strategic progress and KPI performance and a review of progress to strengthen internal controls under the Internal Controls over Non-Financial Reporting (ICNFR) programme to support the Provision 29 UK Corporate Governance Code assurance statement in 2027. The external auditor has provided limited assurance over selected information including sustainability metrics in the Performance Share T Funding, liquidity and capital allocation As appropriate during the year, the Committee reviewed the Group’s capital allocation framework and its plans for shareholder returns, including ordinary dividends and the share buyback programme. It also discussed with management its plans for refinancing as well as an optimal net debt position. Business updates Throughout the year, the Committee received detailed business updates which provided insight into the financial performance and key achievements, priorities and challenges across the Group. Including UK, ROI, Central Europe, Tesco Business Solutions (TBS), Group Pensions, and Insurance and Money Services. In addition, the Committee had oversight of the transition and separation from the banking operations which were sold in 2024. Given the importance of the Group’s TBS team in India to the overall effectiveness of the Group’s financial control environment, all members of the Committee have made visits to them. The TBS team delivers large components of our end-to-end transactional financial processes from paying our suppliers to closing our books, with responsibility for a significant proportion of our internal controls over financial reporting. They have continued to drive standardisation and efficiencies in process delivery, along with driving continuous improvement in the control environment, with particular focus this year on the transition and transformation of a number of the Booker financial processes. The Financial Planning & Analysis team and enterprise analytics Plan targets and sustainability-linked financing, the description of activities undertaken to meet TCFD recommendations including the climate scenario analysis and resulting financial effects of climate-related risks and opportunities. KPIs which are not assured by the external auditor are internally validated and the Committee reviewed the assurance status prior to external disclosure. The Committee received regular updates on the regulatory developments of sustainability reporting which included updates on the EU Omnibus review of the Corporate Sustainability Reporting Directive (CSRD), the UK consultation on the adoption of International Sustainability Standards Board standards under a UK Sustainability Reporting Standard and the Hungarian ESG Act and the impact these developments would have on the Group. For further information on the Group’s environmental commitments and details of the sustainability-linked targets, visit www.tescoplc.com. Spotlight on: TBS Audit Committee members visits Members travelled to India to meet with the Tesco Business Solutions (TBS) management team and colleagues across the TBS business. Discussions focused on TBS performance, strategy, talent and capabilities with examples of how the TBS team provide support across the business. Members received a deep dive on the work to support the ICFR programme and the progress on data-led insights. Members received a detailed overview of the technical capabilities, finance operations and controls functions within TBS and had the opportunity to host a colleague engagement session and join the local colleague engagement session. Tesco PLC Annual Report and Financial Statements 2026 82 ![]() Internal financial controls During the year, on behalf of the Board, the Committee conducted a review of the effectiveness of management’s internal financial controls framework. The Committee did this principally through updates provided to it by management, Group Controls and Compliance, Group Audit, and the external auditor. Management is responsible for identifying and managing financial risks, and for maintaining an effective internal financial controls framework that identifies financial risks, maps these to controls and gives assurance over the effective operation of its control activities. Throughout the year, work continued to embed the Internal Controls over Financial Reporting (ICFR) programme as a business-as-usual activity, and the Committee received regular updates from the Group Financial Controller on the progress of the ICFR programme, including the progress made within TBS, IT General Controls and IT automated business process controls. Management operates a three lines of defence model, including financial controls testing by the Group Controls and Compliance team which is independent of the relevant control operators and use of the Group Audit function as a third line of defence. Such testing includes validation of IT general controls, IT automated controls as well as manual business process control activities, and entity level controls. The ICFR programme will support the Provision 29 Code assurance statement in FY27. The ICFR Framework Did you know: Significant progress has been made over the last two years in improving and enhancing the Tesco IT general control environment, facilitating greater reliance on automated controls within our ICFR framework, and enhanced reliance on our control environment by our external auditor. Such controls mitigate Group-wide risks to our financial reporting. They are designed to ensure Tesco has a strong control environment. Examples include Annual Code of Conduct Attestations, Group Audit Independence and the Audit Committee review of Key Regulatory Disclosures. A defined set of financial controls established to provide assurance over the effective financial operation of the business. From FY27 the Board are required to provide a formal declaration of the effectiveness for each of these controls. The ICFR programme along with specific business controls over significant judgement and estimates form our material controls for ICFR. These are tested annually as part of our internal assurance programme over our material controls. A larger set of controls which provide breadth of coverage across our financial processes and a strong foundation on which our material controls are built. These will be tested annually. These are the controls over our business processes that mitigate the financial risks associated with our end-to-end processes impacting our financial reporting. They are designed to ensure our financial statement assertions are covered. All remaining controls other than those classed as ‘Material’ and ‘Critical’ are classed as ‘Other ICFR’ controls and will be tested on a rolling three-year basis. ITGCs are controls over our systems, mitigating IT/system risks relating to the integrity of our financial reporting. They are designed to ensure that the data within our systems and processes they perform is controlled. Examples: change management, user access and data recovery, those systems which are key to support our material and critical controls are tested on an annual basis across two testing cycles. Entity Level Controls (ELCs) IT General Controls (ITGCs) Other controls Critical controls Material controls Tesco PLC Annual Report and Financial Statements 2026 83 Strategic report Financial statements Additional informationGovernance ![]() Audit Committee continued Risk management Maintaining a strong risk and internal control environment is fundamental to the Group’s governance framework. Throughout the year, the Committee received updates on the strengthening of the risk management framework, Group risk register and principal and emerging risks, discussing risk appetite, critical risk events supporting each principal risk and mitigations in place. The Audit Committee, on behalf of the Board, undertakes an annual effectiveness assessment to manage the principal risks facing the Group and actions taken to mitigate them, validating the key risk movements and approving any required outcomes arising from the risk assessments. Risk deep dives are scheduled with the Committee throughout the year to align with our principal risks and these will support the Provision 29 Code assurance statement. An invite to these sessions is extended to the Board, providing them with greater insight to the risks and challenges faced, the mitigations in place and the actions to be undertaken to reduce the risk. During the year deep dives on cyber, technology, data governance and AI have been undertaken. The Committee reviewed the prioritisation of risks, risk movement and the changes proposed. Following discussion, there were changes to the principal risks, namely a reduction in the number of risks from the previous year. This reduction was attributed to the consolidation of the ‘Product Safety and Food Integrity’ and Responsible Sourcing risks into a single combined risk, Product Safety and Responsible Sourcing. This consolidation is to better reflect how the business operates to manage these risks. The Security of Supply risk score has increased reflecting a combination of factors within our supply chain, including recent geopolitical uncertainties, heightened market volatility, and the accelerating effects of climate change on supply security incidents. In addition, the previously named Climate Change risk has been broadened to Climate & Environmental Sustainability to incorporate wider sustainability considerations. During the year management has further embedded the framework and optimised mitigation plans to enhance and strengthen the Group’s risk culture, to support risk-informed decision making across all business units. The Committee reviewed Group Risk’s future risk roadmap which set out Group Risk’s newly defined purpose and the opportunities to support the business through enhancing how risk and opportunity are built into key decision making. A robust assessment of the Group’s principal risks and detailed scenario analysis work to stress test liquidity was performed as part of the viability scenario modelling. Additionally, an assessment of emerging risks was undertaken. Further details on our Principal risks and uncertainties and the Group’s risk management framework are set out on pages 38 to 47. Frequency of reporting April 2025 July 2025 September 2025 November 2025 February 2026 Risk management and internal controls Review of principal and emerging risks Risk management business updates Internal controls: ICFR, IT general controls and ICNFR Readiness for Provision 29 Risk deep dive Spotlight on: AI governance AI is crucial for delivering Tesco’s long-term strategic opportunities. Our approach to AI is focused on improving the experience for our customers, colleagues, and suppliers, while also enhancing our operations. We use AI developed both in-house and with partners. For example, Artificial Intelligence allows us to find the most efficient routing for online orders to create more delivery slots for customers, helps with complex demand forecasting to ensure great product availability and reduce waste. It is also used to better serve customers and provide them with the most helpful and relevant experiences. Our AI capability continues to rapidly expand and in December 2025, we announced a three-year agreement with Mistral AI, as part of our strategy to bolster the use of artificial intelligence in our retail operations. The Audit Committee has considered AI from the perspective of both a standalone emerging risk and as a capability increasingly embedded across core processes. We took the decision to embed AI risks across the most relevant principal risks rather than having it as a standalone principal risk as this is in line with how it is managed across the business, and ensures it is overseen through the most relevant governance structures. In parallel, management has formalised our AI governance to provide clear oversight, establishing dedicated executive level and operational forums. The Committee has reviewed this structure and the governance in place to ensure that risks are identified and managed proportionately. We are using our risk, controls and assurance framework to ensure these risks are identified and managed effectively, underpinned by responsible AI principles we have adopted in line with regulation and good practice. Tesco PLC Annual Report and Financial Statements 2026 84 ![]() risk profile, business objectives and the external environment. Any changes proposed to the plan are approved by the Committee. At each meeting, the Committee receives updates on the outcome of the work performed and the follow up actions required. This year audits have covered a wide spectrum of business activities with a focus on technology and cyber resilience, assurance over core governance and regulatory readiness, and risk management of new strategic initiatives. The audit process continues to be strengthened through the use of data analytics and AI, and this will remain a focus through FY27. The Committee has reviewed the 2026/27 audit plan, which aligns to the Group’s principal risks, and has a focus on technology and cyber defences, data governance, and upcoming regulatory reporting, such as Provision 29 of the UK Corporate Governance Code. Audit and assurance policies Periodically, the Committee receives internal policies for review and adoption including the non-audit fees policy, the employment of former Group audit plan Group audit is part of the Group Risk and Audit function. It reports directly to the Committee Chair and administratively to the Chief Financial Officer, with a remit to provide independent and objective assurance, to evaluate and improve the effectiveness of risk management, control and governance. Its purpose, authority and responsibilities are defined in the Group Audit charter, which is reviewed and approved annually by the Committee. The Committee monitors the activity, role and effectiveness of the Group Risk and Audit function and regular meetings were held without management present to foster open communication. Group audit’s activity is primarily driven by the annual Group audit plan which is discussed and approved by the Committee. The plan is aligned to the Group’s principal risks and focuses on the biggest risk areas and strategic drivers. The Group audit plan is reviewed throughout the year to ensure it remains appropriate and is updated as necessary to reflect any changes in Frequency of reporting April 2025 July 2025 September 2025 November 2025 February 2026 Group audit Audit outcomes Group audit plan Group audit and risk effectiveness employees of the external auditor policy and the external reporting assurance (non-financial information) policy which sets out the Group’s approach to assuring the quality of non-financial information externally reported to stakeholders ensuring accuracy, reliability and integrity of externally reported non-financial information. Through a risk-based approach, this policy enables information owners to determine appropriate levels of assurance for different categories of information, supporting the work undertaken as part of the internal controls framework. Group Audit, external audit and Group risk effectiveness reviews In accordance with the Audit Committee terms of reference and the Internal Audit Code of Practice, an annual assessment of the effectiveness of the Group audit and external auditor functions is required. This year, this was expanded to the effectiveness of the Risk function following the appointment of the Chief Audit and Risk Officer and Group Risk Director who joined the business at the start of the year. The effectiveness review was facilitated by an independent third party, Lintstock Limited, through questionnaires completed by the Board and senior management and business representatives. The effectiveness results were presented to the Audit Committee. The Committee noted the strengths and discussed areas for improvement concluding that, through this assessment and ongoing review and oversight of assurance activities, the Committee was satisfied with the effectiveness of the Group Audit and Risk functions and the external auditor. Key outputs from Audit and Risk effectiveness reviews Effectiveness review Areas covered Summary of findings Risk management Composition and expertise Quality of work Risk culture and overall performance The assessment highlighted strengths in risk expertise, governance, and integration of risk considerations into strategic and operational decision making. Areas for improvement included further strengthening strategic collaboration with functions and focusing further on concentration risks in AI, technology, and core services. Group audit Composition and expertise Audit planning Quality of work Effective relationships Overall performance The assessment highlighted strong team expertise, high quality of work, effective relationships, and robust audit planning. Areas of improvement included further enhancing engagement and sharing insights more widely across the business. External audit Work of external audit Quality of reporting Relationship with the external auditor Structure of the external audit Overall performance The assessment highlighted high levels of independence, objectivity, and value provided through audit insights. Areas of improvement included further adoption of digital audit tools to drive efficiency and continue enhancing the conciseness and clarity of reporting through the audit process. Tesco PLC Annual Report and Financial Statements 2026 85 Strategic report Financial statements Additional informationGovernance ![]() Total auditor fees Audit fees Non-audit fees – average non-audit fee 2023/24 2024/25 £14.7m £1.2m 9% £15.9m Total fees 2025/26 £13.8m £1.4m 10% £15.2m Total fees £14. 9m £1.7m 12% £16.6m Total fees Audit Committee continued External audit The Audit Committee assesses the ongoing effectiveness and quality of the external auditor and audit process through a number of methods. At each meeting, the Committee considers reports from the external auditor which provides its views on the half and full year Financial statements. This includes a view on management’s key accounting judgements, updates on its audit plan and fees. The auditor’s independence and an overview of non-audit services. Through these updates, the Committee receives an early warning of any matters arising, management letter observations, updates on ongoing progress and scope of the external auditor’s work. Audit Committee members attended a deep dive hosted by Deloitte into the evolving use of technology through the audit process. The Committee regularly reviews the independence and role of the external auditor and the scope of its audit. The Committee also considers the effectiveness of the external compliance with reporting requirements. In addition, the FRC’s quality review team undertook a routine review of Deloitte’s audit work of the Group’s financial reporting for the FY 24/25, with the result being good with limited improvements required. A copy of the AQR report was provided by the FRC to the Committee Chair and was subsequently noted at an Audit Committee meeting. Deloitte has been the external auditor since 2015. Following the tender process undertaken in 2023, Deloitte was reappointed as external auditor including its independence, objectivity, appropriate mindset and professional scepticism. The Committee’s conclusions are based on its own observations and interactions with the external auditor and having regard to the Minimum Standard for Audit Committees. Richard Muschamp replaced John Adam as the lead audit partner in April 2025, following the completion of John’s five-year tenure in that role. Richard shadowed John during FY 24/25, observing all Audit Committee meetings, so was in a good position to take on the role of lead audit partner. The Committee review any actions undertaken to address the FRC’s annual report on the external auditor and the inspection results of the external auditor’s quality control processes, providing additional comfort to the Committee on the quality and effectiveness of the external auditor. The Committee acknowledged the FRC’s review of the Annual Report and Financial Statements 2025, noting that the FRC had no questions or queries to raise in relation to the auditor, which was approved by shareholders at the 2024 and 2025 Annual General Meeting. Following a review of the external auditor’s effectiveness the Committee recommended to the Board the reappointment of Deloitte as external auditor, for the FY 26/27. The reappointment is subject to approval at the forthcoming Annual General Meeting. Frequency of reporting April 2025 July 2025 September 2025 November 2025 February 2026 External auditor External auditor report Engagement letter and fees External audit plan External audit effectiveness review Tesco PLC Annual Report and Financial Statements 2026 86 ![]() Non-audit services The Committee oversees the process for approving all non-audit work provided by the external auditor to safeguard the objectivity and independence of the auditor and comply with regulatory and ethical guidance. Where Deloitte has been chosen, it has demonstrated the relevant skills and experience to make it an appropriate supplier to undertake the work in a cost-effective and time-efficient manner with appropriate safeguards in place. Our policy for non-audit services is compliant with the FRC’s Revised Ethical Standard 2019. In line with regulation, the Group is required to cap the level of non-audit fees paid to its external auditor at 70% of the average audit fees paid in the previous three consecutive financial years. The non-audit fees represented 10% of audit fees. Fees paid to the external auditor are set out in Note 4 to the Financial statements. Ethics, compliance, fraud and whistleblowing The Committee supports the Board in discharging its responsibilities in relation to serious reportable incidents, privacy, fraud, anti-bribery, people safety, whistleblowing, annual and Group compliance statements, failure to prevent fraud and received and reviewed biannual ethics and compliance data covering the aforementioned items. Frequency of reporting April 2025 July 2025 September 2025 November 2025 February 2026 Governance Ethics and compliance (including fraud) Terms of reference and committee effectiveness review Annual Report, half-year and full-year results: fair, balanced and understandable The Committee discussed the controls and mitigating actions deployed to identify compliance breaches in support of the Group’s overall compliance strategy and Business Code of Conduct. In addition the Committee received updates on the systems in place to assess fraud risk and the controls in place to manage and mitigate identified risks. The Committee received updates on the effectiveness of the Group’s internal and independent external whistleblowing arrangements and reviewed compliance with GSCOP. The Committee monitors the relationship with the Groceries Code Adjudicator and receives reports on supplier engagement and the internal auditing of ethical business processes. As part of its annual engagement, the Committee Chair met with the Groceries Code Adjudicator during the year. For more information on GSCOP compliance see page 226. Karen Whitworth Committee Chair 15 April 2026 External audit fees: non-audit and audit-related services Increase No change Decrease Nature of service Level of fees in 2025/26 (£m) Level of fees in 2024/25 (£m) Change Safeguards to preserve independence and objectivity Interim review: performance under International Standards of Review Engagements (UK and Ireland) 2410 0.6 0.6 Considered a non-audit service under the FRC Revised Ethical Standard 2019 although the objectives of the review are aligned with those of the audit. Other non-audit services: various audit, assurance and compliance- related services 0.3 0.5 Scope of work sets out Deloitte’s and management’s responsibilities ensuring management takes all management roles. Application of engagement quality control review process. ESG Limited Assurance services including services performance under International Standards of Review Engagements 3000 (Revised) and 3410 0.5 0.6 Scope of work sets out Deloitte’s and management’s responsibilities ensuring management take all management roles. Deloitte do not take any management roles or responsibilities. Application of engagement quality control review process. Total 1.4 (a) 1.7 (b) (a) £213,380 of the 2025/26 fees are not subject to the cap (all within other non-audit services). The remaining fees are all subject to the cap. (b) £269,650 of the 2024/25 fees are not subject to the cap (all within other non-audit services). The remaining fees are all subject to the cap. Tesco PLC Annual Report and Financial Statements 2026 87 Strategic report Financial statements Additional informationGovernance ![]() Remuneration Committee Chair’s statement Dear Shareholder, On behalf of the Remuneration Committee, I am pleased to present my first Directors’ remuneration report, having taken over from Alison Platt as Chair of the Committee on 12 June 2025. I would like to take this opportunity to thank Alison for her excellent work as Chair and her support to me personally during the transition of roles. Having reviewed the Directors’ Remuneration Policy last year, the Committee’s conclusion was that the existing policy is working effectively and no changes were required. We are grateful for the strong shareholder support at the 2025 AGM, with 97% approval of both the remuneration policy and the remuneration report. Delivering our strategic priorities Under the leadership of Ken Murphy and his team, Tesco continues to offer great value, reward customer loyalty and provide outstanding service, all while identifying opportunities to operate more efficiently and invest in our colleagues. The resultant growth in sales, profit and market share has delivered financial performance above the challenging targets set for both annual bonus and the long-term Performance Share Plan (PSP). Living our purpose We are proud that strategic progress and financial success have been achieved while delivering on our purpose of serving our colleagues, customers, communities and planet a little better every day. Importantly, all of our stakeholders are benefiting from Tesco’s success. This is an important lens for the Committee when we consider remuneration outcomes. Executive Director remuneration outcomes The remuneration for our Executive Directors is closely tied to the strong performance of the business. Our policy is comparable to other FTSE 50 companies and reflects the complexities of managing a large-scale operation. A significant portion of the total package has been achieved due to Ken Murphy and Imran Nawaz meeting or exceeding challenging targets in a competitive sector, creating value for all stakeholders. When setting targets for the 2025/26 performance year, the Committee took into account increased competition in the UK market, whilst also ensuring that targets remain appropriately challenging. Maintaining our market share is essential for Tesco’s long-term performance and the Board was fully supportive of management’s proposals to invest significantly in its pricing strategy. In addition, the business faced exceptional operating cost increases, including a material increase in UK National Insurance. As a result of these headwinds, the annual profit target for bonus was set at a slightly lower level than the prior year and this was also reflected in setting the 2025 PSP targets. The Committee monitored performance throughout the year and, in determining variable pay outcomes, verified that the expected headwinds had materialised and price investment completed as expected. Whilst the environment has been challenging, total revenue increased and the Group delivered a profit in excess of the prior year, underpinned Committee Chair Melissa Bethell Committee membership and tenure Director Member since Melissa Bethell June 2024 Carolyn Fairbairn September 2023 Stewart Gilliland June 2023 Karen Whitworth June 2024 Alison Platt was Chair of the Remuneration Committee until her departure in June 2025. Focus during 2025/26 – Executive Director and senior executive market benchmarks. – Wider workforce reward, including hourly rates and impact of Employment Rights Act 2025. – Review of strategic measures for variable reward, including joint meeting with Sustainability Committee. Committee priorities for 2026/27 – Maintain dialogue with major shareholders and other stakeholders. – Conduct external market reviews of remuneration for Executive Directors and senior executives. – Monitor strategy progress to keep pay policies aligned to long-term goals and stakeholder interests. – Apply a sustainability lens to remuneration decisions. – Gather and consider colleague views and oversee wider workforce reward to ensure fairness, transparency and consistency across the Group. Directors’ remuneration report Directors’ remuneration report index Chair’s statement 88 At a Glance 90 Approach to remuneration 91 Remuneration for 2025/26 94 Implementation of remuneration policy for 2026/27 97 Wider remuneration at Tesco 98 Committee governance 102 Further remuneration disclosures 103 88 Tesco PLC Annual Report and Financial Statements 2026 ![]() by strong performances from all our subsidiaries. Despite the increase in competitive intensity, the Group was able to grow volumes and our UK market share position throughout FY25/26 with a series of targeted price investments and a commitment to quality. Tesco was able to offset a significant portion of the increased price investment and fund an above-inflation increase in colleague pay through disciplined cost control and our save to invest programme. Tesco’s strong performance is reflected in the variable pay outcomes. The overall formulaic vesting level for the 2025/26 annual bonus is 91.7% of maximum for Ken Murphy and 93.7% for Imran Nawaz. Based on the strong performance colleagues not in a bonus plan in May 2026. This will be made to colleagues supporting our UK and ROI businesses, equivalent to 1.25% of pay (£347 on average for a full-time colleague). This is in addition to an hourly rate pay increase above inflation in March 2026. Despite the economic challenges, Tesco has continued to lead the way, being recognised as Britain’s Favourite Supermarket for the eleventh consecutive year at the Grocer Gold Awards and delivering on its commitments to shareholders. Therefore no discretion was applied to adjust the formulaic outcomes. Further details of the performance outcomes versus targets and the vesting of these awards can be found in the Remuneration for 2025/26 section on page 94. Ken Murphy and Imran Nawaz’s total remuneration for 2025/26 was £10.842m and £5.714m respectively. The increase in total remuneration is due to a combination of share price growth and higher bonus levels, which reflect strong performance against stretching targets over a challenging period. Of Ken Murphy’s total remuneration, £2.756m/ 25% represents growth from share price appreciation and dividend equivalents. Looking ahead to 2026/27 Our pay philosophy for all colleagues is to set salaries around the relevant market midpoint and provide variable pay opportunities that deliver upper quartile outcomes when we outperform against our challenging targets. When considering base salary increases for our senior executives, the Committee remains mindful of the wider colleague experience and our fairness principles. Effective 24 May 2026, Ken Murphy and Imran Nawaz will receive base salary increases of 3.0% and 8.2% respectively. The overall increase in Executive Director pay of 4.9% is below the 5.1% increase for UK hourly- paid colleagues. Benefits packages and pension allowance remain unchanged. In determining the salary increase for Imran Nawaz, the Committee noted that FTSE 50 companies continue to increase variable pay to compete globally. The Committee also noted high salary levels in the FMCG (fast-moving consumer goods) sector. outcomes over the three-year period, the formulaic level of vesting for the 2023 PSP is 74.4% of maximum for both Executive Directors. The PSP awards are subject to a further two-year holding period. The Committee considered the annual bonus and PSP formulaic outcomes and concluded that the remuneration policy operated as intended. The Committee is satisfied that the measures and targets set were robust and challenging, reflecting the business performance and wider stakeholder experience. As in previous years when our business performance has been strong, a special performance award will be awarded to When consulting with shareholders on the Remuneration Policy through 2024/25, we noted an emerging trend for increases in variable pay opportunities at FTSE 100 companies. The annual update from the Committee’s independent remuneration adviser highlighted a continuation of this trend and we have therefore considered carefully whether the current opportunities for the CEO and CFO are competitive. Following this review we have concluded that changes are not required for either the bonus or PSP opportunities, but we will continue to monitor market practice. The Committee undertakes a review of incentive measures and weightings at least annually to ensure that our variable pay plans use the most effective measures to support our strategic priorities. Our review this year concluded that the addition of a market share measure in the PSP (10% weighting) would make the incentive more aligned to our strategy to drive long-term growth in both our core operations and emerging revenue streams. To accommodate this new measure, and keep the PSP design simple, the Committee has removed food waste reduction from the 2026 PSP and marginally reduced the combined weighting of the remaining PSP measures from 16.7% to 15%. While food waste continues to be an important part of our strategy, we feel confident that we will achieve our targeted 50% reduction (vs a 2017 baseline) by the completion of the 2025 PSP cycle. This gives us the opportunity to evolve the 2026 PSP scheme to align to future strategic priorities, which will run to 2029. Together with my Committee members, I would like to thank our shareholders for their ongoing support and our colleagues for their continued commitment to our customers and our communities. Melissa Bethell Committee Chair 15 April 2026 Tripled the products on Everyday Low Prices to 3,000 £404 average annual customer savings through Clubcard Prices More than 123 million meals donated throughout the Group this year 15.7 million portions of fruit and vegetables provided to schools since October 2024 82% of colleagues regard Tesco as a Great Place to Work 15% and 20% colleague discount events over the year 14.5p full year dividend per ordinary share £1,450m share buy-back in 2025/26 1st place in the Advantage supplier survey for the 10th consecutive year 89% supplier satisfaction 68% reduction in emissions of own operations since 2015/16 1,249 electric vans in operation – on course for all UK home delivery fleet to be electric by 2030 Key stakeholders and wider factors considered Customers Communities Colleagues Shareholders Suppliers Planet Tesco PLC Annual Report and Financial Statements 2026 89 Strategic report Financial statements Additional informationGovernance ![]() Directors’ remuneration report continued At a glance Single total figure of remuneration Salary Benefits Pension Annual bonus PSP (a) PSP performance growth (b) 2024/25 2025/26 0 £1m £2m £3m £4m £5m £6m £7m £8m £9m £10m £11m 2024/25 2025/26 Ken Murphy Imran Nawaz £5.71m £5.07m £10.84m £9.76m (a) The PSP figures for 2025/26 relate to the 2023 PSP award and are estimates based on the average share price over the three months to 28 February 2026 of 447.91p. These will be restated in next year’s Directors’ remuneration report to show the actual value upon vesting. (b) Growth due to share price appreciation and dividend equivalents. (c) Fixed pay, benefit and pension figures reflect a 53-week period in 2025/26 vs a 52-week period in 2024/25. Elements of our Executive RemunerationRemuneration outcomes for 2025/26 Base pay Annual bonus Pension and benefits PSP Total remuneration Implementation in 2026/27 Increase for UK hourly paid colleagues’ pay Up 5.1% Annual bonus Maximum opportunity 250% of base salary Base pay from 24 May 2026 Ken Murphy £1.539m +3.0% Imran Nawaz £0.900m +8.2% PSP Maximum opportunity 275% of base salary No change in performance measures Profit 50% Sales 30% Individual 20% 93.7% 100.0 % 91.7% 100.0 % 20.0% 18.0% 20.0% 23.7% 30.0% 50.0% 74.4% 100.0% 1.0% 8.3% 0% 8.3% 8.3% 37.2% 37.5 % 27.9% 37.5% Annual bonus 2023 PSP Measure Outcome Max Measure Outcome Max Profit EPS Sales FCF Individual – Ken Murphy Carbon reduction Individual – Imran Nawaz Food waste reduction Total – Ken Murphy Diversity, equity and inclusion Total – Imran Nawaz Total Total pay over five years Fixed pay Year 1 Year 2 Year 3 Year 4 Year 5 Annual bonus 50% in cash One-year performance period 50% in shares Three-year deferral period Base salary, benefits and pension PSP Two-year holding periodThree-year performance period Market share measure added and ESG weighting reduced EPS 37.5% FCF 37.5% Market share 10% ESG 15% Under malus, deferred share awards and unvested PSP awards can be reduced (including down to zero) or be made subject to additional conditions. Clawback allows for the repayment of previously paid-up cash bonuses for a period of three years and PSP awards for a period of two years after the vesting date. Key performance highlights Market share based on Worldpanel by Numerator Total Grocers Total Till Roll for 12 weeks ended 22 February 2026. Sales and profit growth refers to the Group’s Sales (exc. VAT, exc. fuel) and adjusted operating profit respectively. Growth is shown on a comparable 52-week basis and is calculated at constant rates. TSR is from 22 February 2025 to 28 February 2026. Total shareholder return (TSR) 33.1% UK market share up to 28.5% Sales up 4.3% Profit up 0.6% Tesco PLC Annual Report and Financial Statements 2026 90 ![]() Wider colleague engagement Engaging with colleagues and understanding their views is vital to the Committee and its decision making. One of the ways we do this is via our Colleague Contribution Panels (CCPs) where we also engage with colleagues on executive remuneration policy changes. This year, four CCPs took place, enabling Non-executive Directors to hear the views from colleagues across the Group. Melissa Bethell, as Chair of the Committee, and Carolyn Fairbairn, a Committee member, host the CCPs on behalf of the Board, ensuring direct Committee access to colleagues’ insights. Further details on this year’s CCPs can be found on page 66. In addition, our Directors regularly visit stores, distribution centres, customer engagement centres and offices to meet with colleagues and listen to their views on life at Tesco. The findings from the Every Voice Matters survey are another important source of information to guide our remuneration approach. The Committee considers a range of factors to drive pay for performance: Approach to remuneration Reward principles There are four key principles which guide our approach to reward for all our colleagues, including Executive Directors: Positioning of remuneration versus the FTSE 50 Lower quartile to median Median to upper quartile Tesco Total remuneration (£’000) Target Ken Murphy Imran Nawaz Maximum Target Maximum 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1. Simple Helping all colleagues to understand how they are rewarded 2. Fair Achieving consistent outcomes through flexible and transparent policies Benchmarking philosophy When setting the remuneration of Executive Directors, the Committee considers their pay position versus Executive Directors of other FTSE 50 companies. The chart on the right sets out the market positioning of the Group Chief Executive and Chief Financial Officer for 2025/26, based on target and maximum remuneration compared to the FTSE 50. This information is one of the inputs used by the Committee when setting executives’ remuneration, to ensure remuneration levels are consistent with the approved Remuneration Policy. The Committee is comfortable that the market position between median and upper quartile is reflective of the performance and experience of the Executive Directors at Tesco. 3. Competitive Setting pay with reference to internal relativity and external market practices 4. Sustainable A responsible and flexible approach, aligned to business strategy and performance At each Remuneration Committee meeting, members also review a workforce dashboard which sets out key demographic information, including turnover rates, average pay position at each work level and a comparison of the hourly rate with other retailers. The Committee is therefore well-informed to take into account colleagues’ views and pay when setting the pay of Executive Directors and senior executives. Pay for performance Reward principles Benchmarking philosophy Wider colleague engagement Strategic alignment Shareholder alignment Tesco PLC Annual Report and Financial Statements 2026 91 Strategic report Financial statements Additional informationGovernance ![]() Strategic alignment The tables below set out the performance measures we use within our incentive plans and how these align to our strategy and purpose to deliver the Group’s financial, operational and sustainability plans. Bonus measures Alignment to strategy Alignment to purpose Group sales (30% for 2025/26 and 2026/27) If delivered successfully, our winning in food ambition will help us meet more everyday customer needs and drive sales growth. We will also use our unique data and insights to build new revenue opportunities and partnerships, which can flow back into enhancing our core customer offer. We aim to provide customers with brilliant, helpful service in every corner of our business, with products and services that are sustainable and accessible to all. Group adjusted operating profit (50% for 2025/26 and 2026/27) Our strategic ambitions support profit growth with a wider range of products and services. By delivering across stores, online grocery and rapid delivery, as well as other business areas, we help customers with many of their daily needs and deepen relationships. Individual performance (20% for 2025/26 and 2026/27) Individual objectives are aligned to our strategic ambitions. Further details are set out on page 14. Individual objectives are aligned to each part of our purpose: customers, communities and planet. PSP measures Alignment to strategy Alignment to purpose Financial measures (75%) Cumulative free cash flow (37.5% for 2025/26 and 2026/27) Profitable growth and free cash flow are key elements of our multi-year performance framework. They are aligned to the delivery and success of our strategic ambitions over the medium and long term. We aim to continue to be a champion for customers, providing great value, high-quality products wherever, whenever and however customers want them. Adjusted diluted EPS (37.5% for 2025/26 and 2026/27) Strategic measures (25%) Market share (0% for 2025/26, 10% for 2026/27) By meeting more everyday customer needs and creating a connected and personalised experience loved by our customers, we aim to make shopping with us easier and increasingly rewarding. When we serve customers well – understanding, anticipating and responding to their needs and expectations – they will choose to shop with us. Carbon reduction (8.3% for 2025/26, 7.5% for 2026/27) Aligns to our commitment to be net zero across our own operations by 2035 against a 2015/16 baseline. This is a critical time for our planet. As a responsible company we are finding new ways to reduce our impact on the environment and collaborate with our supplier partners and customers to help them do the same. These measures bring to life our purpose to serve our planet a little better every day. Food waste reduction (8.3% for 2025/26, 0% for 2026/27) Aligns to our commitment to deliver a 50% reduction in food waste in our own operations, compared with a baseline of 2016/17. For further details, please refer to the Sustainability Report. While this measure has been removed for the 2026 PSP, it remains a strategic priority, and we expect to meet our target (vs 2017) by the end of the 2025 PSP cycle in 2028. Diversity, equity and inclusion (8.3% for 2025/26, 7.5% for 2026/27) Aligns to our commitment to be an inclusive and equitable business, with diverse representation at all levels and a gender equal workforce, with the PSP measure based on percentage of women and ethnically diverse colleagues in senior roles. Embedding diversity and building inclusion into everything we do is key to our business success and helps us connect to our colleagues, customers and communities. In doing so, the measure brings to life our purpose to serve our customers and communities a little better every day. We regularly review our sustainability-linked performance measures to ensure they reflect material elements of our sustainability strategy which can be directly influenced and reliably measured. Further details of our approach to sustainability are detailed on pages 30 to 33. Our purpose Serving our customers , communities and planet a little better every day. Directors’ remuneration report continued Tesco PLC Annual Report and Financial Statements 2026 92 ![]() Shareholder alignment Annual bonus measures are selected to provide direct alignment with the Group’s short-term operational targets and are supportive of the strategic priorities and long-term objectives. To align executives with shareholders, 50% of bonus is paid in shares, deferred for at least three years. The PSP performance measures are selected to ensure that Executive Directors are incentivised, and appropriately awarded, to deliver the Group’s purpose and strategy. There is a requirement to acquire a significant shareholding and to hold vested awards in a corporate- sponsored nominee account. This encourages alignment of interests between executives and shareholders and long-term sustainable returns. We have maintained a weighting of 75% for key long-term financial measures. The remaining 25% is based on strategic measures. For the 2026 PSP, we are introducing a market share measure. This will incentivise Executive Directors to drive long-term growth across both core operations and emerging revenue streams. Annual bonus and PSP performance measures are monitored every six months by the Committee. At the end of the performance period, we assess the formulaic outcome of each performance measure. The Committee then considers whether the formulaic outcomes are fair in the context of the Group’s performance and the wider stakeholder experience (which can be found on page 96) and can use its discretion to adjust the formulaic outcomes. Pay for performance An overarching aim of our remuneration approach is to align Executive Director remuneration with business performance. To ensure targets for the annual bonus and PSP are challenging, a variety of factors are considered, including the Board-approved budget and Long Term Plan (LTP), external consensus, prior-year achievement and the Board’s assessment of how achievable the budget is. The graph below compares the Company’s TSR against the FTSE 100 index, of which the Company has been a constituent member throughout the period. The table below the graph shows the Group Chief Executive’s annual remuneration over the same period. The strong returns, particularly over the past three years, demonstrate that our remuneration approach has led to alignment between remuneration levels and Tesco performance. Historical total shareholder return performance Value of hypothetical £100 invested FTSE 100 Tesco Source: Workspace by LSEG 0 50 100 150 200 250 300 350 400 103 112 124 128 134 155 161 172 200 350 100 100 129 124 133 130 129 178 169 189 263 261 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 (b) 2025/26 Group Chief Executive single total figure of remuneration (£’000) Ken Murphy – – – – 992 4,745 4,443 10,243 9,763 10,842 Sir Dave Lewis (a) 4,147 5,113 4,600 6,328 1,650 – – – – – Annual bonus outturn (% of maximum award) 76.0% 73.0% 52.5% 75.9% 0% 95.0% 79.1% 95.0% 78.8% 91.7% PSP vest (% of maximum award) – 30.0% 28.8% 48.8% 23.1% – – 85.0% 75.6% 74.4% (a) Sir Dave Lewis stepped down as Group Chief Executive on 30 September 2020 and was succeeded by Ken Murphy on 1 October 2020. (b) 2024/25 PSP estimated values have been restated based on share price of 402.50p at the time of the PSP vesting. Tesco PLC Annual Report and Financial Statements 2026 93 Strategic report Financial statements Additional informationGovernance ![]() Remuneration for 2025/26 Single total figure of remuneration – Executive Directors (audited) The following table sets out the single total figure of remuneration (STFR) for 2025/26 and 2024/25 for the Executive Directors. The single figure of remuneration has increased in 2025/26. This has been driven by higher bonus/PSP levels. Ken Murphy Imran Nawaz 2025/26 (£’000) 2024/25 (£’000) 2025/26 (£’000) 2024/25 (£’000) Fixed pay (a) Salary 1,515 1,454 840 790 Benefits 124 88 112 92 Pension 114 109 63 59 Total fixed pay 1,753 1,651 1,015 941 Variable pay Annual bonus (cash and deferred shares) 3,424 2,885 1,949 1,616 PSP (b) 5,665 5,227 2,750 2,513 Total variable pay 9,089 8,112 4,699 4,129 Total remuneration 10,842 9,763 5,714 5,070 (a) Fixed pay, benefit and pension figures reflect a 53-week period in 2025/26 vs a 52-week period in 2024/25. (b) The PSP figures for 2025/26 relating to the 2023 PSP award are an estimated value based on the average share price over the three months to 28 February 2026 of 447.91p. These will be restated in next year’s Directors’ remuneration report to show the actual value upon vesting. The estimated PSP figures for Ken Murphy and Imran Nawaz for 2024/25 have been restated, using the actual share price at the date of vesting of 402.50p and includes dividend equivalents in respect of vested shares. Executive Directors are subject to a two year post-vesting holding period after the shares are released. The Committee is satisfied that the STFR for each Executive Director is appropriate. The total aggregate remuneration paid to all Directors in 2025/26 was £18.6m (2024/25: £16.7m). Base salary (audited) Executive Directors’ salaries were increased on 25 May 2025 by 2.0% from £1,464,440 to £1,493,729 for Ken Murphy and by 4.0% from £800,000 to £832,000 for Imran Nawaz. These figures are for a 52-week period. Details of increases to be applied in 2026 are set out on page 97. Benefits (audited) Car and driver (£’000) Health benefits (£’000) Life assurance (£’000) Other benefits (a) (£’000) Total (£’000) Ken Murphy 90 3 11 20 124 Imran Nawaz 104 2 6 0 112 (a) Includes one-off installation of security equipment for Ken Murphy at Tesco’s request. Directors’ remuneration report continued Did you know: More than two-thirds of the CEO’s remuneration is delivered in shares, helping to align his pay with shareholder interests. Illustrative total remuneration scenarios 2026/27 Fixed pay Annual bonus Long-term incentive Share price increase Minimum MinimumOn target (a) Maximum Maximum (with 50% share price growth) On target (a) Maximum Maximum (with 50% share price growth) 100% 28% 18% 15% 100% 29% 19% 15% 30% 39% 32% 42% 43% 35% 18% 30% 39% 32% 41% 42% 35% 18% Ken Murphy Group Chief Executive Imran Nawaz Chief Financial Officer £1.78m £6.35m £9.86m £11.97m £1.08m £3.75m £5.80m £7.04m (a) ‘On target’ scenario assumes annual bonus outturn of 50% and long-term incentive vesting at 62.5% of maximum opportunity. Tesco PLC Annual Report and Financial Statements 2026 94 ![]() Achievement of individual objectives (20% of annual bonus) Ken Murphy Objective Key performance indicators Summary of performance Assessment Delivery of strategic growth drivers – Delivery of key milestones, including technology roadmap – Operating profit contribution from growth plans – Delivered milestones, as agreed within Long Term Plan – Operating profit contribution from growth plans, in line with plan Achieved Brand strategy development – Brand strategy and campaigns developed and launched – Growth in Customer NPS, year-on-year – Sustained colleague engagement levels – Brand platform and Need Anything from Tesco campaigns in place – UK Customer NPS +1 YOY, alongside YOY improvements across all sub-pillars ahead of market average – Colleague engagement at 82% versus a global retail benchmark of 71% Overachieved Progress plans for future shape of the organisation, aligned with strategy development – Organisational design priorities delivered – Associated talent and capability plans in place – Agreed organisational changes made across the year – Strategic workforce planning analysis completed, and built into forward plans including AI workforce considerations – Key appointments for strategic drivers made via talent acquisition and development plans – AI and digital skills plan in delivery for 2,000 priority colleagues, enabled by new learning infrastructure Overachieved Imran Nawaz Objective Key performance indicators Summary of performance Assessment Deliver Group-wide save to invest target – Deliver £500m savings target – Develop plan to deliver savings beyond 25/26 – Execute quarterly second line audits – Delivered savings of £535m (+7% vs target) – Long-term savings plan agreed, inclusive of capital allocation for initiatives – Quarterly second line audits completed with green outcomes Overachieved Funding of strategic growth drivers – Capital and resource allocation plans in place to deliver strategic growth drivers – Plan for capital and resource allocation set out within Long Term Plan – Capital review principles and strategy governance forum in place to support prioritisation Overachieved Finance strategy development and delivery of associated plans – Define 3+ year finance strategy, inclusive of operating model and AI enablement plans – Enhancement of financial planning and analytical capability – Long-term finance strategy defined with AI for finance plans in place; focus areas include forecasting and cash controls – Successful implementation of new planning tool; initial capabilities live Overachieved The percentage awarded for individual performance is based on an overall assessment of the achievement of objectives and demonstration of leadership behaviours. On that basis, Ken Murphy achieved a rating of 18% and Imran Nawaz 20%, both out of a maximum of 20%. Tesco PLC Annual Report and Financial Statements 2026 95 Strategic report Financial statements Additional informationGovernance ![]() 2025/26 annual bonus outcomes (audited) The annual bonus is determined by financial measures and individual performance, including objectives which are designed to support the achievement of certain strategic outcomes. As set out below, the 2025/26 annual bonus outcome is 91.7% of maximum for Ken Murphy and 93.7% for Imran Nawaz. The annual bonus is paid 50% in cash and 50% in shares deferred for three years subject to continued employment. As set out in the Chair’s letter on page 88, the Committee is satisfied that the formulaic annual bonus outcomes are appropriate and reflect Tesco’s performance over the performance period. 2025/26 base salary (£’000) Bonus opportunity (% base salary) Bonus outcome\* (% maximum) Actual bonus (% base salary) Actual total bonus (cash and deferred shares) (£’000) Actual bonus deferred into shares (£’000) Ken Murphy 1,494 250 91.7 229.3 3,424 1,712 Imran Nawaz 832 250 93.7 234.3 1,949 974 \* Bonus outcome was determined as follows: Weighting Threshold (25% payout) Target (50% payout) Stretch (100% payout) Actual\* (at constant rates) Outcome Ken Murphy Imran Nawaz Group adjusted operating profit 50% £2.6bn £2.9bn £3.1bn £3.2bn 50.0% 50.0% Group sales 30% £63.2bn £65.2bn £67.2bn £66.4bn 23.7% 23.7% Individual objectives 20% Details of performance are set out on page 95 18.0% 20.0% Total (% of maximum) 91.7% 93.7% \* Actuals are on a 52-week basis. 2023 PSP vesting in 2025/26 (audited) The 2023 PSP award outcomes are set out in the table below, with the overall outcome 74.4% of maximum. As set out in the Chair’s letter, the Committee is satisfied that the formulaic PSP outcomes are appropriate and reflect performance over the performance period, with no windfall gains. Shares granted Outcome achieved\* Value of shares due to vest PSP total (£’000) Vesting date Holding period Face value at time of grant (a) (£’000) Value due to share price appreciation (b) (£’000) Dividend equivalents accrued over performance period (£’000) Ken Murphy 1,557,113 74.4% 2,909 2,280 476 5,665 03/07/2026 03/07/2028 Imran Nawaz 755,874 74.4% 1,412 1,107 231 2,750 03/07/2026 03/07/2028 (a) Calculated using the grant price of 251.1p. (b) Calculated using the difference between the grant price of 251.1p and the average closing share price over the three months to 28 February 2026 of 447.91p. \* PSP outcome was determined as follows, with both targets and performance on a 52-week basis: Weighting Threshold (25% payout) Stretch (100% payout) Actual Outcome Cumulative free cash flow 37.5% £3,854m £5,788m £5,770m 37.2% Adjusted diluted EPS 37.5% 21.7p 32.8p 29.0p 27.9% Sustainability measures (a) : – Carbon reduction 8.3% 58% 62% 68% 8.3% – Food waste reduction 8.3% 51% 57% 24% 0.0% – Diversity, equity and inclusion (gender/ethnicity) 8.3% 35%/16% 42%/18% 35%/13% 1.0% Total 74.4% (a) Actual performance against the Sustainability measures are rounded to the nearest whole percentage number, in line with our published methodologies. Shareholding requirement (audited) Share ownership is a key means by which the interests of Executive Directors are aligned with those of shareholders. Ken Murphy and Imran Nawaz have both reached their shareholding requirements of 400% and 300% of base salary respectively. Directors’ remuneration report continued Executive Director shareholdings (% of base salary) (audited) Shares owned outright Deferred share awards Vested PSP shares subject to two-year holding period 400% Total 778% 390%126% 262% Ken Murphy Target 300% Total 889% 323%323% 243% Imran Nawaz Target Further details of Executive Directors’ shareholdings and share interests are shown on page 106. Tesco PLC Annual Report and Financial Statements 2026 96 ![]() Implementation of remuneration policy for 2026/27 Summary of policy for Executive Directors approved by shareholders at the AGM on 12 June 2025 can be found at tescoplc.com/media/ky0bfwpo/tesco\_ar25\_interactive.pdf. Payment and strategic link Operation Implementation in 2026/27 Base salary Supports the attraction and retention of the best talent with the capability to develop and deliver Tesco’s strategy Salaries are normally reviewed annually by the Committee, with changes effective on or around 1 June, based on: – individual performance; – role, skills and experience; – pay and conditions elsewhere across the Group, including the wider workforce; and – salary levels at leading FTSE companies and other large consumer businesses in the UK and internationally. Any increases will normally be no higher than the typical level of increase awarded to other colleagues. Higher increases may be awarded in certain circumstances such as where there is a change in responsibility. Increases of 3.0% and 8.2% will be applied to the salaries of Ken Murphy and Imran Nawaz, respectively. Salaries from 24 May 2026 are: Ken Murphy: £1,538,541 Imran Nawaz: £900,000 The overall Executive Director increase of 4.9% is below the 5.1% increase awarded to the wider workforce. Benefits Supports attraction and retention Core benefits include a car or cash allowance and a driver, incapacity benefits, private medical insurance and life assurance. Other benefits (e.g. relocation, security and commuting support) may be offered as required. There is no pre-determined maximum limit. Normal Company benefit provision. See page 100 for further details of benefits provided in 2025/26. Pension Supports attraction and retention A defined contribution scheme or a cash allowance in lieu of pension. The maximum company contribution for Executive Directors of 7.5% of base salary is aligned to the wider workforce. Cash allowance of 7.5% of base salary. Annual bonus Encourages improved operational and financial performance and aligns interests of Executive Directors with shareholders through partial deferral of the award into Tesco shares Maximum opportunity: The maximum award is 250% of base salary. Performance measures: Bonuses are based on financial, operational and individual performance. Performance metrics and targets are set by the Committee at the beginning of the performance period and at least 70% of bonus is based on financial performance. Up to 25% is paid for threshold performance and 100% paid for achieving stretch targets, with straight-line vesting between threshold and target, and target and stretch. Compulsory deferral of bonus: Half of the bonus payout is deferred into Tesco shares for three years, subject to continued employment. Dividend equivalents in the form of additional shares are payable on deferred annual bonus awards that vest. Malus and clawback provisions apply. Maximum bonus opportunity for Ken Murphy and Imran Nawaz is 250% of base salary, with performance measures of 50% Group adjusted operating profit, 30% Group sales, 20% individual performance. The Board considers bonus targets to be commercially sensitive. Full disclosure will be made in next year’s annual report. See page 96 for details of annual bonus outturns for 2025/26 and page 102 for details of malus and clawback provisions. PSP Encourages the achievement of Tesco’s strategic, financial and sustainability targets and provides a focus on long-term value creation and alignment with the interests of shareholders and other stakeholders Maximum opportunity: The maximum award is 350% of base salary. Performance measures: Awards are subject to the achievement of financial and non-financial performance conditions over three years. Performance metrics and targets are set by the Committee at the beginning of the performance period. Up to 25% of an award vests for threshold performance and 100% vests for achieving stretch targets, with straight-line vesting between them unless stated otherwise. Dividend equivalents in the form of additional Tesco shares are paid on PSP awards that vest. Malus and clawback provisions apply. Additional holding period: Following the vesting of the PSP award, Executive Directors are required to hold the shares for an additional two-year period. The holding period continues to operate post-cessation of employment, with shares held in a corporate sponsored nominee account. The maximum award opportunity for Ken Murphy and Imran Nawaz has been set as 275% of base salary for 2026/27. Performance measures (as a percentage of maximum) are 37.5% adjusted diluted EPS, 37.5% cumulative free cash flow, 10% market share and 15% sustainability measures. See pages 96 and 104 for details of 2023 PSP outturn and the PSP awards to be granted in 2026. Details of malus and clawback provisions can be found on page 102. All-colleague share plans Builds colleague share ownership, aligning their interests with shareholders Executive Directors are eligible to participate in applicable all-colleague share plans on the same basis as other eligible colleagues in the UK. These currently comprise the Company’s Save As You Earn (SAYE) and Buy As You Earn (BAYE) plans. SAYE and BAYE plans will continue to be operated in 2026/27. Shareholding requirement Ensures alignment between the interests of the Executive Directors and shareholders both during and after employment In-post shareholding requirement: The Group Chief Executive is required to build and maintain a holding of shares to the value of 400% of base salary, and the Chief Financial Officer to 300% of base salary. Executive Directors are required to retain all shares that vest to them, net of any tax liability, whether from the annual bonus, PSP or buyout awards, until the relevant shareholding requirement is satisfied. Post-cessation shareholding requirement: After leaving the Company, Executive Directors are required to hold the lower of their shareholding requirement or their actual shareholding for two years. Shareholding requirement will continue to be operated in 2026/27. See page 106 for further details of Executive Directors shareholdings and interests in share awards. Tesco PLC Annual Report and Financial Statements 2026 97 Strategic report Financial statements Additional informationGovernance ![]() Wider remuneration at Tesco Our pay and reward framework Remuneration for most colleagues is principally fixed pay to support a good standard of living which aligns with discussions with our trade unions. For more senior colleagues, who have greater influence on overall Tesco performance, remuneration is weighted more towards variable pay, which can increase or decrease based on business and individual performance against our challenging goals. While the balance of the elements of remuneration may differ, our consistent overall principle is that all colleagues should be paid competitively against the relevant pay benchmark. We regularly ask colleagues across the Group how they feel about pay and benefits at Tesco. In our 2026 Every Voice Matters colleague survey, 65% of colleagues agreed that the total reward package at Tesco is competitive, which is well ahead of relevant external benchmarks. In addition, 82% of colleagues said they are able to work flexibly and 85% feel they can be themselves at Tesco, without fear of judgement. 71% of colleagues feel Tesco supports them with their mental and physical wellbeing. Our colleagues are the heart of our business and Tesco remains committed to building an inclusive workplace where everyone can get on. The survey showed that 82% of colleagues regard Tesco as a Great Place to Work (11% ahead of the global retail benchmark). Fair pay We have a strong track record of making substantial investments in pay. In 2025/26 we announced an above-inflation pay increase of 5.1% for Tesco UK store colleagues, an investment of over £200m. This will increase the UK national hourly rate to £13.28 and represents a pay increase of 43% over the last five years for hourly-paid store colleagues. The London Location Allowance will also increase from £1.21 to £1.27, equating to an hourly rate of £14.55 for colleagues within the M25. We feel a duty of care to provide our colleagues with a balanced reward package that supports their different needs. We believe that we are positioned competitively for both basic pay and total reward across all our markets. Tesco is one of the few supermarkets in the UK to have full recognition and collective bargaining agreements with an independent trade union for all its hourly-paid colleagues. First signed in 1998, our partnership agreement with USDAW was renewed in 2022 and ensures we continue to work together to secure the best possible level of support and voice for our store colleagues. This agreement is the largest in the UK and one of the largest in Europe. £12.02 2024 £12.45 from the end of March 2025 £12.64 from the end of August 2025 +5.1% between August 2025 and March 2026 £13.28 from the end of March 2026 Spotlight on: Directors’ remuneration report continued Key EVM scores Great Place to Work Great Place to Work global retail benchmark Total reward package is competitive Total reward global retail benchmark 70% 80% 60% 50% 40% 2022 2023 2024 2025 2026 90% Hourly rate increase Tesco PLC Annual Report and Financial Statements 2026 98 ![]() Share schemes ownership As the business delivers, our all-colleague share schemes deliver too, which helps build financial resilience. We have two all-colleague share schemes: – The Share Incentive Plan (SIP) – Buy As You Earn (BAYE) – enables colleagues to purchase shares monthly, out of pre-tax pay, meaning a tax/national insurance saving. The benefits of share ownership occur immediately, for example rights to receive dividends (which in turn, if reinvested in shares, are tax-free after three years). If a colleague chooses to sell their shares, any gain is free of capital gains tax. – Save As You Earn (SAYE) creates a regular savings habit. Colleagues enter into an ‘option agreement’ to put aside a set amount of money each month for three or five years. In return, at the end of this period,they can either take their savings back or exercise their option and convert savings into shares. For the third consecutive year, we have set the option price at a 20% discount, the maximum allowed under HMRC rules. If a colleague chooses to sell their shares, any gain above the annual capital gains tax allowance may be subject to capital gains tax. However, we offer the choice to transfer shares into an ISA, where any sale is free of capital gains tax and dividends received do not count towards the dividend allowance. Over 22,000 colleagues are shareholders via the BAYE and over 58,000 colleagues participate in the SAYE. Last year, more than 17,000 colleagues shared in a profit of around £30m. This year, more than 22,000 colleagues shared in a profit of £134m. Spotlight on: More than 22,000 colleagues shared in a profit of £134m Gender pay Our 2025 Gender Pay report shows the median gender pay gap for Tesco UK colleagues has fallen to 4.7% (versus 5.1% in 2024), significantly below the 2025 UK national average of 12.8% – consistent progress, reducing from 6.7% in 2021. The key factor behind the gap is that a greater proportion of male colleagues work in roles which carry a premium and increase pay. If we remove premium payments from our calculation, our median pay gap reduces to 2.4%. The mean gender bonus gap for Tesco UK Retail has increased from 36.7% to 53.9%. We report our gender bonus gap based on actual bonuses paid, without considering prorating for part-time working. If we use a full time equivalent for part-time colleagues, our median bonus gap reduces to 6.7%. In the 2025 reporting period, we made a 1.5% ‘Thank You’ payment to all hourly-paid colleagues working across our stores, distribution and CECs. Therefore, if the bonus gap is compared to 2023, when a ‘Thank You’ payment was last awarded, the mean gap decreased by 4.4% in 2025, and the median gap reduced by 2.3%. The main factor behind the gap is a greater proportion of male colleagues in senior roles which attract higher bonus levels. We have introduced a number of initiatives to improve the proportion of women at leadership levels. These include support for flexible working, making it easier for everyone to work at Tesco. Ethnicity pay We are also making progress in ethnic representation. For the third year, we have chosen to publish our ethnicity pay gap which shows that the median gap for Tesco Stores Limited is −5% (i.e. the median pay for ethnically diverse colleagues is higher than for white colleagues). The primary factor is a greater tendency for ethnically diverse colleagues to work on shifts that attract a premium payment or work in a store that attracts a location allowance. The ethnicity bonus gap mean is 22.9% reflecting a lower proportion of ethnically diverse colleagues in senior roles. Comparing the bonus gap to 2023, when ‘Thank You’ payments were last made to all hourly paid colleagues working across stores, the mean bonus gap has reduced by 8.9% and the median has reduced by 2.9%. As with gender, we have introduced initiatives to improve representation at senior levels, including the inclusion of diversity measures in our PSP. See our everyone’s welcome report for more information: https://www.tescoplc.com/ media/0qqhoomq/tesco-everyones-welcome-report-2025\_final-270326.pdf Gender pay gap Tesco UK Median gender pay gap Excluding premiums UK median 0.0% 20.0% 15.0% 10.0% 5.0% 2021 2022 2023 2024 2025 99 Strategic report Financial statements Additional informationGovernance ![]() Cascade of remuneration The table below summarises the reward and benefits package of UK colleagues and how it compares to Executive Directors’ remuneration. Element of pay Policy Comparison with Executive Directors’ remuneration Colleagues at all levels Base salary We want to attract and retain colleagues of the calibre, capability and experience needed to deliver the strategy. Salaries are reviewed annually. The approach is the same for Executive Directors, with any increase normally no higher than the level awarded to other colleagues. Wellbeing benefits We want to help colleagues live a healthier and more sustainable lifestyle and ensure they have access to early and effective treatment, advice and information so they can be their best at work and home. Colleagues at all levels have access to an Employee Assistance Programme which provides access to a wide range of experts and resources to support colleagues’ mental and physical wellbeing. In addition, a 24/7 virtual GP service is available as well as a hub providing access to mental, physical and financial resources. Executive Directors have access to the same level of wellbeing support and resources. Other benefits A market-competitive level of benefits is available for all colleagues, enhancing the reward package and providing other reasons to work at Tesco, such as our Colleague Clubcard discount and colleague deals and offers. In 2024, we launched a flexible benefits platform for our salaried colleagues in the UK. Executive Directors also receive market-competitive benefits, including the same discount in store as other colleagues. Further details are set out on page 97. Pension A defined contribution pension scheme is available to all colleagues, with colleague contributions being matched by Tesco. When colleagues get closer to retirement, Tesco provides education and support to plan for the next stage in their lives. The maximum contribution into the defined contribution scheme of 7.5% for Executive Directors is aligned to the UK wider workforce. Executive Directors can elect to receive a cash allowance of 7.5% of base salary in lieu of pension contribution. Share plans Buy As You Earn (BAYE) and Save As You Earn (SAYE) plans are available to all colleagues and provide an opportunity to become a shareholder in Tesco and share in its success. Executive Directors participate on the same terms as other UK colleagues in the BAYE and SAYE plans. All salaried colleagues Annual bonus The annual bonus incentivises eligible colleagues to deliver Tesco’s short-term financial and strategic objectives and share in our success. A consistent design is operated throughout Tesco for delivering against business and individual goals. Specific weightings and award levels vary by work level. For senior leaders, a proportion of any bonus is deferred into shares. Bonuses are normally paid to eligible colleagues in May or June. The annual bonus plan for Executive Directors is linked to the same financial performance measures as all salaried colleagues. Half of the bonus payout for Executive Directors is deferred into Tesco shares for three years. Executive Directors, Executive Committee and senior leaders Performance Share Plan (PSP) The PSP incentivises the delivery of long-term value creation and aligns with our purpose and strategic objectives. Award levels vary by work level. Measures and targets for long-term incentive plans are consistent for all participants and measured over a three-year period. The same measures and targets are applied to Executive Directors’ awards as other participants. Executive Directors’ PSP awards are subject to an additional two-year holding period post-vesting. Directors’ remuneration report continued Tesco PLC Annual Report and Financial Statements 2026 100 ![]() Relationship between the pay of the Group Chief Executive and UK colleagues Tesco is a retail business with one of the UK’s largest workforces. We employ around 240,000 UK-based colleagues in our major subsidiary, Tesco Stores Limited. These are mostly customer-facing roles in-store or in our distribution network. Given the workforce profile, all three of the Group Chief Executive pay ratio reference points compare our Group Chief Executive’s remuneration with that of colleagues in mainly customer-facing roles. The following table shows the ratio between the consolidated single total figure of remuneration (STFR) of the Group Chief Executive for 2025/26 and the lower, median and upper quartile pay of our UK colleagues. We also show for comparison the pay ratios for the six preceding years. Total pay ratio 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 Ratio of CEO’s STFR 25th percentile 355:1 136:1 251:1 231:1 447:1 411:1 436:1 50th percentile 305:1 118:1 224:1 197:1 431:1 373:1 420:1 75th percentile 279:1 116:1 216:1 182:1 388:1 325:1 385:1 The table below sets out the base salary, total pay and benefit details of the Group Chief Executive and UK colleagues who are at the 25th, 50th and 75th percentile. 2025/26 Group Chief Executive’s base salary (53 weeks) £1,515,132 Group Chief Executive’s total pay and benefits £10,842,069 UK colleagues’ salary Colleague at 25th percentile £23,720 Colleague at 50th percentile £24,581 Colleague at 75th percentile £27,096 UK colleagues’ total pay and benefits Colleague at 25th percentile £24,879 Colleague at 50th percentile £25,830 Colleague at 75th percentile £28,180 The total full-time equivalent (FTE) pay and benefits for the relevant colleagues are based on the period from Sunday, 2 February 2025 to Saturday, 31 January 2026. The reporting regulations offer three calculation approaches for determining the pay ratio – Options A, B and C. We have chosen Option C for all years, which we deem the most appropriate methodology for Tesco. As more than half of Tesco’s colleagues work part-time, the exercise required to determine FTE is extensive and complex. Tesco decided to use Option C as we had completed comprehensive data collation and analysis of all relevant colleagues for the purpose of gender pay gap (GPG) reporting. This enabled us to use additional pay data (including overtime, salary sacrifice values and employer pension contributions) to ensure the STFR reflects total pay made throughout the financial year. This approach minimised the differing definitions of pay for STFR and GPG to enable us to select the ‘best equivalents’ of P25, P50 and P75. The only adjustments made to determine the pay and benefits of the colleagues identified as P25, P50 and P75 related to working hours, basing amounts on a 36.5-hour working week. We believe the ‘best equivalent’ colleagues identified are reasonably representative of the 25th, 50th and 75th percentiles as Tesco has compiled pay on an FTE basis. We reviewed pay across a sample of colleagues at each percentile before selecting the colleague who was most representative. In the case of the Group Chief Executive, his total remuneration includes a significant proportion of variable pay. The STFR therefore varies considerably depending on the level of performance against the measures driving the annual bonus and PSP, as well as share price and dividend performance over the PSP vesting period. The Group Chief Executive’s PSP award will vest at 74.4% of maximum in 2026 and the annual bonus paid out at 91.7% of maximum, which have resulted in an increase in the Group Chief Executive’s pay ratio numbers this year. As we set out on page 91, we base our reward framework across the Group on a consistent set of principles for all: that overall remuneration should be competitive when compared to similar roles in other organisations with which we compete for talent. We therefore determine colleague pay using the same principles as the pay for our Executive Directors. On this basis, we believe the median ratio is consistent with the Company’s wider policies on employee reward, pay and progression. Tesco PLC Annual Report and Financial Statements 2026 101 Strategic report Financial statements Additional informationGovernance ![]() Key responsibilities The role of the Committee is to determine the remuneration policy and packages for Executive Directors and senior executives. When setting and operating the policy, the Committee aligns reward to performance to promote the long-term success of the Group. It considers policies and practices relating to workforce remuneration, the experiences of other stakeholders and alignment with purpose, strategy and culture. This means we can recruit, retain and motivate our executives as part of an integrated overall approach to remuneration. 2025/26 effectiveness review of the Remuneration Committee The effectiveness of the Committee was assessed as part of the Board performance review. The review found that the Committee was performing effectively, noting discussions were of high quality and that members were encouraged to contribute and engage in respectful debate. Meetings were well chaired, with high-quality papers provided for consideration. The Committee is supported well by the internal reward team and PwC as external advisors. The Board is assured by the quality of the work performed by the Committee. Discretion, malus and clawback The Committee has discretion to scale back deferred share and PSP awards under certain conditions, such as if results are materially misstated, reputational damage, misconduct or errors. Under malus, deferred share and unvested PSP awards can be reduced or made subject to additional conditions. Clawback allows for repayment of previously paid-up cash bonuses for three years and PSP awards for two years after the vesting date. The clawback periods purposefully align with the bonus deferral period and PSP holding period. Further details can be found in the Remuneration Policy here: www.tescoplc.com. Malus and clawback provisions were not used in 2025/26. Remuneration advisor The Committee has appointed PwC as an independent external advisor to ensure that the Committee continues to operate in line with best practice. It is a member of the Remuneration Consultants Group and operates under the code of conduct of executive remuneration consulting. PwC was initially appointed in 2015 and reappointed in 2020 following a competitive tender. Total fees for advice provided to the Committee were £80,500 excluding VAT, based partly on a fixed fee and partly on a time and materials basis. The wider PwC firm provided Tesco with other services during the year relating to corporate and other tax compliance, governance, assurance, risk management and consulting projects. However, the Committee is satisfied that the remuneration advisor does not have connections with any individual directors which might compromise their independence or objectivity. Regular attendees to meetings include the Non-executive Chair, Group Chief Executive, Chief People Officer, remuneration experts from the People function and the remuneration advisor. No Directors or executives are present when their own remuneration is discussed. For items where financial performance is assessed, the Chief Financial Officer and members of his management team also attend. The Group Company Secretary is Secretary to the Committee. High performance culture A key part of our reward design is driving a high-performance culture, focused on great customer outcomes, with business and individual goals rewarded. Our colleague performance management approach, Your Contribution, aims to ensure all colleagues are nurtured, developed and motivated to do their best in service of our customers, community and planet. Every colleague can play their part wherever they are in the business. We take a rounded view of each colleague’s contribution, looking at what we do and how we do it. Demonstrating how we live our values, purpose and win together behaviours is at the heart of our performance management approach. We also apply a line manager standard for managers. When the business performs strongly, all share in this success. For most colleagues, therefore, the majority of their bonus is linked to business performance. To check our culture is delivering for customers, we ask colleagues how they feel about our customer focus. 78% agreed that we put customers at the heart of every decision we make and 77% agreed that where they work, people act on feedback from customers. Spotlight on: 78% of colleagues agree that we put customers at the heart of every decision we make Committee governance Directors’ remuneration report continued 102 ![]() Further remuneration disclosures 2025 deferred bonus award grant (audited) The following table summarises the deferred bonus awards made to Executive Directors on 12 May 2025 in respect of 50% of the 2024/25 bonus outcome. Awards were made in the form of conditional awards which will vest and be released on 12 May 2028, subject to continuous employment. Executive Director Number of shares granted Value at award date Vesting date Market price on grant (a) Ken Murphy 383,228 £1,442,470 12/05/2028 376.4p Imran Nawaz 214,665 £807,999 12/05/2028 376.4p (a) Based on five-day average share price. 2025 PSP grant (audited) The following table summarises the PSP awards made to Executive Directors on 23 June 2025. Executive Director Type of award % of base salary awarded Number of shares granted Value of award at grant End of performance period Vesting date Market price on grant (a) Ken Murphy Conditional award 275% 1,029,357 £4,107,752 26/02/2028 23/06/2028 399.1p Imran Nawaz Conditional award 275% 573,347 £2,287,999 26/02/2028 23/06/2028 399.1p The performance measures (b) and targets for the 2025 PSP are: Weighting Threshold (c) Stretch Adjusted diluted EPS 37.5% 26.5p 39.7p Cumulative free cash flow 37.5% £3,600m £5,400m Sustainability measures (d) : – Carbon reduction 8.3% 68% 74% – Food waste reduction 8.3% 47% 54% – Diversity, equity and inclusion (gender/ethnicity) 8.3% 40%/18% 44%/20% (a) Based on five-day average share price. (b) All measures have linear vesting between threshold and stretch, except food waste reduction for which the target is 50% with linear vesting between threshold and target, and target and stretch. (c) Achievement of threshold will result in the vesting of 25% of the award granted. (d) The basis for sustainability measures is set out on page 92, in line with our strategic priorities. Tesco PLC Annual Report and Financial Statements 2026 103 Strategic report Financial statements Additional informationGovernance ![]() 2026 PSP grant The table below sets out the performance measures (a) and targets for the PSP award grant to be made in June 2026. Weighting Threshold Stretch Adjusted diluted EPS 37.5% 28.3p 42.4p Cumulative free cash flow 37.5% £3,807m £5,711m Market share 10% Targets not disclosed (b) Sustainability measures (c) : – Carbon reduction 7.5% 72% 78% – Diversity, equity and inclusion (gender/ethnicity) 7.5% 42%/18% 46%/20% (a) All measures have linear vesting between threshold and stretch. (b) Targets are commercially sensitive and will be disclosed after the end of the performance period. (c) The basis for sustainability measures is set out on page 92, in line with our strategic priorities. The award will incorporate the right to receive the value of dividends between grant and vesting in respect of the number of shares that vest. The calculation of dividend equivalents will assume the reinvestment of those dividends in Tesco shares on a cumulative basis. Adjustments to targets The Committee considered adjustments to targets resulting from material events that were not anticipated at the time the targets were set. Adjustments were made to ensure PSP targets and outcomes are assessed on a like-for-like basis and events do not make the targets any easier or harder to achieve. The table below summarises the adjustments made, rationale, affected awards and the impact on the measure. Performance measure Difference Rationale Awards Impact Adjusted diluted EPS Neutralise impact of sale of Banking operations Targets were set including discontinued Banking operations 2023 PSP (0.5)p Cumulative free cash flow Neutralise impact of tax relief for Tesco Bank Impact relates to an event not anticipated at the time the targets were set 2023 PSP 2024 PSP £72.0m £72.0m Neutralise impact of sale of Banking operations Targets were set including discontinued Banking operations 2023 PSP 2024 PSP (£87.0)m (£112.0)m Relative importance of spend on pay The table below indicates how the pay of Executive Directors compares with other financial dispersals. You can find further information in the Notes to the Group financial statements starting on page 127. 2024/25 £m 52 weeks 2025/26 £m 53 weeks % change Executive Directors’ remuneration (a) 15 17 11.6% Dividends and share buybacks 1,881 2,380 26.5% Total income tax charge from continuing operations 611 616 0.8% Colleague costs 8,726 9,461 8.4% (a) The Executive Directors’ remuneration figure for 2024/25 has been restated using the actual PSP value on vesting. For every £1 we spent on Executive Directors’ remuneration in 2025/26, £37 was payable in tax and £571 was spent on colleague costs. In addition, £57 was made in dividend payments to shareholders for every £1 spent on Executive Directors’ remuneration. Directors’ remuneration report continued Tesco PLC Annual Report and Financial Statements 2026 104 ![]() Change in remuneration of colleagues and Directors The table below shows the percentage change in the annual remuneration of Directors and the average UK colleague over the past five years. The reporting regulations require disclosure of the change in remuneration of employees of the parent company. As the only employees of this company are the Executive Directors, the Committee decided to use the average UK colleague as the appropriate comparator group. This is because they represent the majority of Tesco colleagues and the Executive Directors are predominantly based in the UK. Salary/fees (% change) Benefits (% change) (d) Bonus (% change) (d) 2021/22 2022/23 2023/24 2024/25 2025/26 (e) 2021/22 2022/23 2023/24 2024/25 2025/26 (e) 2021/22 2022/23 2023/24 2024/25 2025/26 Executive Directors Ken Murphy 0% 1.7% 2.8% 3.0% 2.2% 18.9% 170.5% (50.0)% (26.1)% 36.4% (f) 100% (14.8)% 23.7% (14.6)% 18.7% Imran Nawaz – 3.7% 4.0% 5.4% 4.3% – 162.2% (24.8)% (6.1)% 19.6% – (8.3)% 25.1% (5.4)% 20.6% Chair Gerry Murphy – – – 4.4% 3.2% – – – (32.8)% 12.8% – – – – – Colleagues Average UK colleague (a) 3.3% 8.6% 9.1% 9.1% 5.2% 0% 0% 0% 0% 0% N/A N/A N/A N/A N/A Non-executive Directors Melissa Bethell (b) 2.2% 3.2% 3.1% 27.0% 23.6% – – – – – – – – – – Bertrand Bodson – 2.5% 3.1% 15.0% 7.0% – – – – – – – – – – Carolyn Fairbairn – – – 50.0% 15.8% – – – – – – – – – – Thierry Garnier – 2.3% 3.1% 15.0% 7.0% – – – – – – – – – – Stewart Gilliland 2.8% 2.8% 25.0% 10.7% 3.2% – – – – – – – – – – Chris Kennedy – – – – 7.0% – – – – – – – – – – Caroline Silver – – 4.2% 15.0% 7.0% – – – – – – – – – – Karen Whitworth – 3.0% 3.6% 40.2% 12.7% – – – – – – – – – – Former Directors (c) Alison Platt 2.8% 13.8% 8.1% 4.5% 2.9% – – – – – – – – – – (a) We agreed jointly with our unions in 2019 that hourly-paid colleagues in stores would no longer receive an annual bonus, replacing it with a higher rate of base pay. (b) On 12 June 2025 Melissa Bethell was appointed Chair of the Remuneration Committee. (c) Alison Platt stepped down from the Board on 12 June 2025. To enable a meaningful year-on-year comparison her fees have been pro-rated for the purposes of comparison. (d) Other than the Chair, Non-executive Directors receive fees only and do not receive any additional benefits or annual bonus payments. Gerry Murphy has the benefit of healthcare and a wellness programme for himself and his partner. (e) Calculations for the salary and benefits are based on a 52-week like-for-like comparison to previous years. Calculation for the bonus is like-for-like based on year-end salary. (f) Increase in benefits due to one-off installation of security equipment and take up of green car scheme. Please see page 106 of last year’s Directors’ remuneration report for historic details of events that impact the changes in remuneration, such as role changes, joiners and leavers. Payments for loss of office (audited) There were no payments made for loss of office during the year. Payments to former Directors (audited) There were no payments made to former directors during the year. Executive Directors’ service agreements The Committee carefully considers Executive Directors’ service agreements, including arrangements for early termination, which are designed to recruit, retain and motivate Executive Directors of the calibre required to lead the Company. The details of existing Executive Directors’ service contracts are summarised in the table on the right. Executive Director Date of service agreement Date joined the Board Notice period from Company Notice period from Executive Director Ken Murphy 1 October 2019 1 October 2020 12 months 12 months Imran Nawaz 6 October 2020 1 May 2021 12 months 12 months Neither Ken Murphy nor Imran Nawaz held an external directorship during the year. Both Ken Murphy and Imran Nawaz will stand for re-election at the 2026 AGM. Tesco PLC Annual Report and Financial Statements 2026 105 Strategic report Financial statements Additional informationGovernance ![]() Executive Directors’ interests in share awards (audited) The table below sets out the Executive Directors’ interests in share awards. Details of Executive Director shareholding requirements and achievement against these are set out on page 96. Unvested PSP awards (a) Deferred annual bonus awards (b) Buyout awards Vested but unexercised share options SAYE options Total Ken Murphy At 23/02/2025 4,635,933 1,759,292 – – 9,890 6,405,115 Granted 1,029,357 383,228 – – – 1,412,585 Dividend equivalents 151,345 53,999 – – – 205,344 Vested/released (1,298,582) (662,539) – – – (1,961,121) Lapsed (408,715) – – – – (408,715) Exercised – – – – – – At 28/02/2026 4,109,338 1,533,980 – – 9,890 5,653,208 Imran Nawaz At 23/02/2025 2,322,984 808,269 – – – 3,131,253 Granted 573,347 214,665 – – – 788,012 Dividend equivalents 77,041 27,962 – – – 105,003 Vested/released (624,311) (256,520) – – – (880,831) Lapsed (196,496) – – – – (196,496) Exercised – – – – – – At 28/02/2026 2,152,565 794,376 – – – 2,946,941 (a) Awards will only vest to the extent that relevant performance conditions are met. (b) No performance conditions apply to these awards but are subject to service. Executive Director shareholdings counting towards shareholding requirement (audited) Shareholding requirement (% of salary) Shareholding requirement value £ Current shareholding (% of salary) (a) Number of shares owned outright Deferred share awards (b) Vested PSP shares subject to holding period Total shares counting towards shareholding requirement 23/02/25 28/02/26 23/02/25 28/02/26 23/02/25 28/02/26 23/02/25 28/02/26 Ken Murphy 400% £5,974,916 778% 80,982 547,597 932,425 813,009 925,184 1,663,947 1,938,591 3,024,553 Imran Nawaz 300% £2,496,000 889% 854,974 1,035,331 428,383 421,019 439,746 770,630 1,723,103 2,226,980 (a) Share price used is the acquisition price of the shares owned outright or in a holding period and the closing share price on 28 February 2026 for deferred share awards. (b) Net number of shares after deemed statutory deductions of 47% count towards the shareholding requirement. Between 28 February and 15 April 2026 Ken Murphy acquired 57 partnership shares under the BAYE plan. No other changes in Executive Director share interests occurred in the period. Funding of equity awards Awards granted under Tesco employee share plans are satisfied primarily through shares purchased in the market. The Company monitors the number of shares issued and their impact on dilution limits against the Investment Association’s guidelines (10% in any 10-year period under all plans) and our own internal limitation (5% for executive plans). Dilution up to 28 February 2026 was 1.45% and 0.02% for all colleague share plans and executive share plans respectively. Directors’ remuneration report continued Tesco PLC Annual Report and Financial Statements 2026 106 ![]() Board Chair and Non-executive Director fees The fees for the Board Chair and the Non-executive Directors are reviewed each year. The Board Chair’s fee is reviewed by the Committee (without the Board Chair being present) and the Non-executive Director fees by a committee comprising the Board Chair, Group Chief Executive and Chief Financial Officer. In July 2025, following a review of independently sourced data, increases awarded to the wider workforce and the time commitments of the Board Chair and Non-executive Directors, it was agreed to increase the Board Chair’s fee to £750,000 and increase the average total fees paid to Non-executive Directors from 17 August 2025 by 3.00%, lower than for the wider workforce. Details of the remuneration arrangements for the Board Chair and Non-executive Directors are set out overleaf. 18/08/2024 to 16/08/2025 From 17/08/2025 Increase Board Chair fee £727,000 £750,000 3.16% Non-executive Director fee £87.500 £90,250 3.14% Additional fees: Senior Independent Director £36,000 £37,000 2.78% Chairs of the Audit, Remuneration and Sustainability Committees £36,000 £37,000 2.78% Membership of Audit, Nominations and Governance, Remuneration and Sustainability Committees £17,000 £17,500 2.94% Colleague Contribution Panel £3,500 £3,500 0.00% Single total figure of remuneration – Non-executive Directors (audited) The table below sets out the fees paid to the Non-executive Directors during the year. Non-executive Directors are not paid a pension and do not participate in any of the Company’s variable incentive schemes. Under the Company’s Articles of Association, the total fees paid to Non-executive Directors are capped at £3m per annum. Taxable expenses include expense reimbursements relating to travel, accommodation and subsistence in connection with attendance at Board and Committee meetings during the year. Each Non-executive Director was eligible for the Colleague Clubcard discount. Gerry Murphy also received healthcare benefits. The amounts in the table below include the grossed-up cost of UK tax paid by the Company on behalf of the Non-executive Directors. 2025/26 2024/25 Committee memberships Date of appointment Fees (£’000) Taxable expenses and benefits (£’000) Total (£’000) Fees (£’000) Taxable expenses and benefits (£’000) Total (£’000) Melissa Bethell A N R 24 September 2018 160 4 164 127 1 128 Bertrand Bodson N S 1 June 2021 126 1 127 115 – 115 Carolyn Fairbairn A N R S 1 September 2023 202 2 204 171 1 172 Thierry Garnier N S 30 April 2021 126 5 131 115 4 119 Stewart Gilliland N R S 5 March 2018 163 2 165 155 1 156 Chris Kennedy A N 20 February 2025 126 2 128 1 – – Gerry Murphy N 1 September 2023 753 4 757 716 4 720 Caroline Silver A N 1 October 2022 126 2 128 115 2 117 Karen Whitworth A N R S 18 June 2021 181 2 183 157 1 158 Former Directors Alison Platt N R 1 April 2016 44 1 45 140 1 141 Non-executive Directors do not have service contracts. Instead, they are engaged by letters of appointment that are terminable by either party with no notice period. There is no compensation in the event of such termination, other than accrued fees and expenses. All Non-executive Directors will stand for re-election at the 2026 AGM. Alison Platt stepped down from the Board on 12 June 2025. Fees, expenses and benefits reflect a 53-week period in 2025/26 compared to a 52-week period in 2024/25. Tesco PLC Annual Report and Financial Statements 2026 107 Strategic report Financial statements Additional informationGovernance ![]() Beneficial share ownership – Non-executive Directors (audited) The table below outlines interests in the Company’s securities of the Non-executive Directors. There were no changes to Non-executive Director share interests between 28 February and 15 April 2026. Non-executive Directors are expected to build up and maintain a personal holding in the securities of the Company equal to the value of their base fee over a period of five years following appointment. Non-executive Director (a) Shares held at 22/02/2025 Shares held at 28/02/2026 Value of shareholding (% of base fee) (b) Melissa Bethell 37,447 37,447 186% Bertrand Bodson 63,581 65,705 326% Carolyn Fairbairn 35,000 35,000 174% Thierry Garnier 15,000 15,000 74% Stewart Gilliland (c) 55,248 56,867 282% Chris Kennedy – 31,144 155% Gerry Murphy 90,000 90,000 54% Caroline Silver 15,000 15,000 74% Karen Whitworth 52,300 52,300 260% (a) Alison Platt held 39,527 shares from 22 February 2025 until she retired from the Board on 12 June 2025. (b) The value of Non-executive Directors’ shareholdings is based on the average share price over the three months to 28 February 2026 of 447.91p. The range of the Company’s share price for the year was 314.6p to 501.2p. The year-end share price was 480.6p (2024/25: 374.1p). (c) Shares held in the joint names of Stewart Gilliland and his wife, Michelle Gilliland. Voting at AGM The table below sets out the voting outcome on the remuneration report at the 2025 AGM. Votes for (millions) Votes against (millions) Votes withheld (millions) Remuneration report 4,637 145 3 96.97% 3.03% The remuneration policy received strong shareholder support at the 2025 AGM. Votes for (millions) Votes against (millions) Votes withheld (millions) Remuneration policy 4,632 144 10 96.99% 3.01% The Committee engages in regular dialogue with shareholders and annually invites major investors to discuss its remuneration practices and governance matters. The Committee finds such meetings with major investors a valuable opportunity to receive feedback on its work and the key issues it is considering. It also finds the feedback received extremely helpful in informing its decisions. In addition, the Committee monitors the views of other stakeholders and broader developments in executive remuneration generally. Statutory requirements The Committee’s composition, responsibilities and operation comply with the principles of good governance, as set out in the UK Corporate Governance Code, the UK Listing Rules of the Financial Conduct Authority and the Companies Act 2006. The Directors’ remuneration report has been prepared on the basis prescribed in the Large and Medium sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Approved by the Board on 15 April 2026. Melissa Bethell Committee Chair Directors’ remuneration report continued Tesco PLC Annual Report and Financial Statements 2026 108 ![]() Statement of Directors’ responsibilities The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable UK law. The financial statements also comply with International Financial Reporting Standards (IFRSs) as issued by the IASB. The Directors have also chosen to prepare the Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting Standard (FRS) 101 Reduced Disclosure Framework. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the Parent Company financial statements, the Directors are required to: – Select suitable accounting policies and then apply them consistently; – Make judgements and accounting estimates that are reasonable and prudent; – State whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and – Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. In preparing the Group financial statements, International Accounting Standard 1 requires that Directors: – Properly select and apply accounting policies; – Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; – Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and – Make an assessment of the Company’s ability to continue as a going concern. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company, and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Each of the serving Directors, whose names and functions are set out on pages 54 to 57, confirms that, to the best of their knowledge: – The Financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; – The Strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and – The Annual Report and Financial Statements 2026, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. By order of the Board, Chris Taylor Group Company Secretary 15 April 2026 Tesco PLC Annual Report and Financial Statements 2026 109 Strategic report Financial statements Additional informationGovernance ![]() Independent auditor’s report to the members of Tesco PLC 2. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the Group and Parent Company for the year are disclosed in Note 4 (Operating expenses) to the financial statements. We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Parent Company. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 3. Summary of our audit approach Key audit matters The key audit matters that we identified in the current year were: – store impairment review; – recognition of commercial income; – pension valuation; and – retail technology environment. Within this report, key audit matters are identified as follows: Newly identified Increased level of risk Similar level of risk Decreased level of risk Materiality The materiality that we used for the Group financial statements was £125m (2024/25: £125m). It is 4.74% (2024/25: 4.67%) of the primary benchmark used to determine the materiality, total adjusted profit before tax including net pension finance income/(cost), as described further on page 115. Scoping Our scoping provides audit coverage of 97% (2024/25: 97%) of revenue from continuing operations, 92% (2024/25: 94%) of profit before tax from continuing operations and 96% (2024/25: 94%) of total assets. Significant changes in our approach There are no significant changes in our approach in comparison to the prior year. Report on the audit of the financial statements 1. Opinion In our opinion: – the financial statements of Tesco PLC (the Parent Company) and its subsidiaries (the Group) give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 28 February 2026 and of the Group’s profit for the 53-week period then ended; – the Group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting standards; – the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’; and – the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements which comprise: – the Group income statement; – the Group statement of comprehensive income/(loss); – the Group and Parent Company balance sheets; – the Group and Parent Company statements of changes in equity; – the Group cash flow statement; and – the related Notes 1 to 34 of the Group financial statements and Notes 1 to 16 of the Parent Company financial statements. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and United Kingdom adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice). Independent auditor’s report Tesco PLC Annual Report and Financial Statements 2026 110 ![]() 4. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis of accounting included: – obtaining confirmation for the financing facilities including nature of facilities and repayment terms to assess that these facilities remain available at year end; – assessing the reasonableness of the assumptions used in the Group’s funding plan approved by the Board; – testing the mechanical accuracy used to prepare the forecasts including obtaining an understanding of relevant controls over the Group’s model; – reviewing the liquidity forecast and undertaking sensitivities to assess whether there is sufficient headroom; – challenging the assumptions used within the Group’s going concern model by obtaining third-party and market data and evaluating any differences between this data and the judgement and assumptions used; – evaluating the historical accuracy of forecasts prepared by the Group; – considering the mitigating factors identified by the Group in relation to their going concern analysis; – assessing the compliance with capital and liquidity requirements for the insurance and money services (“IMS”) business; and – assessing the appropriateness of the Group’s disclosure concerning the going concern basis. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern for a period of at least 12 months from when the financial statements are authorised for issue. In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. 5. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 5.1. Store impairment review Key audit matter description As described in Note 1 (Accounting policies, judgements and estimates), Note 12 (Property, plant and equipment), and Note 13 (Leases of the financial statements), the Group held £17,728m (2024/25: £17,262m) of property, plant, and equipment and £5,777m (2024/25: £5,569m) of right-of-use assets at 28 February 2026. Under IAS 36 Impairment of Assets, the Group must complete an impairment review of its store portfolio where there are indicators of impairment or reversal. As a result of the Group’s store impairment review completed during the year, a net impairment loss of £53m (2024/25: £298m) was recognised. This includes an impairment charge of £478m (2024/25: £671m) and an impairment reversal of £425m (2024/25: £373m). The impairment review involves judgement in identifying indicators of impairment and estimating the recoverable amount based on the higher of ‘value in use’ or ‘fair value less costs of disposal’. Value in use is calculated using probability-weighted cash flows reflecting the Group’s best estimate of future trading performance. Significant judgement is required to forecast cash flows for the next three years which are derived from the Board-approved Long Term Plan (LTP) before being allocated to stores using a top-down approach, and also in relation to capital and restructuring adjustments made to the LTP cash flows so that the impairment model cash flows comply with IAS 36. The impairment model is particularly sensitive to changes to the Year 3 cash flows, which are discounted into the long term in the value in use calculation. Other key assumptions include the probability weighting between the cash flow scenarios, the discount rate and the long term growth rate. Fair value less costs of disposal are estimated with the assistance of independent professional valuers. External valuations are obtained for a sample of stores, the results of which are then used by the Group’s in-house experts to determine the fair value of the other properties. In making its assessment of value in use and fair value less costs of disposal, the Group has considered the impact of the macroeconomic trading environment (including the impact of government policies, changes to prices of goods for resale and fluctuations in inflation, as well as competitors actions and strategies that impact the retail market) on forecast cash flows and property fair values where conditions existed at the balance sheet date. Further details of the basis for value in use and fair value less costs of disposal, and associated sensitivities, are set out in Note 15. The Audit Committee’s discussion of this key audit matter is set out on page 81. Tesco PLC Annual Report and Financial Statements 2026 111 GovernanceStrategic report Additional informationFinancial statements ![]() How the scope of our audit responded to the key audit matter Our audit procedures included: – obtaining an understanding of the relevant controls around the impairment review process; – challenging the key assumptions utilised in the value in use cash flow forecasts with reference to historical trading performance, current market conditions (including the impacts of government policies, changes to prices of goods for resale and fluctuations in inflation, as well as competitor actions, consumer behaviour, climate change impact and our wider industry knowledge) and the impacts of the Group’s strategic initiatives. As part of our assessment, we considered external data sources to challenge the key assumptions, including collating and analysing a wider set of external data such as analyst reports, relevant news articles, and reliable independent reports on ongoing retail market trends; – assessing the methodology applied in determining the value in use compared with the requirements of IAS 36, including challenging the appropriateness of excluding certain cash flows contained within the LTP which were determined as not permissible under IAS 36; – assessing and challenging the reasonableness and weighting of probability scenarios applied to adjust the Group’s cash flows; – evaluating the Group’s inputs to, and the appropriateness of, its discount rate and the validity of its long-term growth rate, supported by our valuation specialists; – assessing the mechanical accuracy and integrity of the value in use model prepared by the Group, with involvement of our specialist modelling team; – challenging the assumptions used by the Group in determining the fair market value of properties, supported by our property valuation specialists, and assessing whether appropriate valuation methodologies have been applied. For properties valued by an external valuer, we have evaluated the competence, capabilities and objectivity of the Group’s valuers; – performing a stand-back assessment to identify unusual trends and understand the factors driving the impairment charge to identify any indicators of management bias. Where stores are supported by their fair values less costs of disposal but the Group plan to continue to trade in the store, we have challenged the Group as to whether the fair value is appropriate in these circumstances; and – assessing and challenging the adequacy of the Group’s sensitivity analysis in relation to key assumptions (including cash flows, discount rates, growth rates and property fair values) and evaluating the sufficiency of sensitivity disclosures. Key observations Based on our audit procedures we are satisfied that the assumptions in the impairment models are within an acceptable range, and that the estimate of the Group’s net impairment loss is reasonable. We also consider the disclosures, including the sensitivity disclosure, in Note 15 to be appropriate. 5.2. Recognition of commercial income Key audit matter description As described in Note 1 (Accounting policies, judgements and estimates) and Note 21 (Commercial income) of the financial statements, the Group has agreements with suppliers whereby volume- related allowances, promotional and marketing allowances and various other fees and discounts are received in connection with the purchase of goods for resale from those suppliers. As such, the Group recognises a reduction in cost of sales as a result of amounts received from those suppliers. Commercial income should only be recognised as income within the income statement when the performance conditions associated with it have been met, for example when the underlying product promotions have gone live in stores. The variety and number of the buying arrangements with suppliers means there can be complexity in determining if the performance obligations associated with the income have been satisfied. For certain arrangements this gives rise to a requirement for management judgement. As such we have identified this as a key audit matter and considered that there was a potential for fraud pinpointed to the possible manipulation of the income for feature space deal types within the Tesco UK retail business. The Audit Committee’s discussion of this key audit matter is set out on page 81. Independent auditor’s report continued Tesco PLC Annual Report and Financial Statements 2026 112 ![]() How the scope of our audit responded to the key audit matter Our audit procedures included: – obtaining an understanding of relevant controls that the Group has established in relation to commercial income recognition; – using data analytics to identify commercial income deals with particular characteristics, such as those related to feature space, and carried out further procedures on these, including arranging one-on-one meetings with individual Tesco buyers and third party supplier representatives; – using data matching analytics on a subset of the deals population, with reliance on the relevant controls associated with the supplier approvals within our matching analytic population, to validate the key deal attributes and determine whether the amounts recognised were accurate, recorded in the correct period and the relevant performance obligations were met; – for those deals and promotions not covered by the data matching analytic, circularising a sample of suppliers to determine whether the arrangements recorded were in accordance with the terms agreed in advance with the suppliers with regard to the nature, timing and amount of the promotions and deals, to confirm these were recognised accurately and the performance obligation had been met. We evaluated all supplier confirmation responses and investigated all exceptions reported to us, if any, to determine the effect on reported commercial income or on our confirmation sampling plan. We obtained a 100% response rate from the suppliers in our sample, and therefore we did not need to consider alternative procedures; – evaluating the occurrence of feature space deals by physically inspecting the placement of the sampled products for a sample of deals; – evaluating the year-end accrual for promotional deals to assess whether performance obligations have been fulfilled where they have been invoiced subsequent to year end; – holding discussions with certain suppliers and members of the Group’s buying personnel in order to: further understand relevant arrangements; gain further insights on the impact of economic trends on specific product categories and associated cost prices; discussing the IT applications used to administer and process commercial income deals; and identifying if there are any disputes or other issues that we should be aware of for further investigation; – testing the completeness of commercial income by circularising a sample of suppliers to obtain details of a commercial income transaction entered into during the year and confirmed it was recorded by the Group; – evaluating the Group’s review and conclusions related to any commercial income deals that were unrecorded and performing analytical procedures to identify deals where performance obligations have been fulfilled but invoicing could not occur due to pending final administrative procedures; – testing commercial income balances included within inventories and trade and other receivables, or netted against trade and other payables (as set out in Note 21) via balance sheet reconciliation procedures; and – assessing the appropriateness of the disclosures made in relation to commercial income in the Group’s financial statements. Key observations Based on our audit procedures we are satisfied that the recognition of commercial income is reasonable. We consider the disclosure given in the financial statements around commercial income provides an appropriate understanding of the types of rebate income received and the impact on the Group’s balance sheet. 5.3. Pension valuation Key audit matter description As described in Note 1 (Accounting policies, judgements and estimates) and Note 28 (Post- employment benefits) of the financial statements, the Group has a defined benefit pension plan in the UK retail business. At 28 February 2026, the Group recorded a net retirement benefit surplus before deferred tax of £197m (2024/25 deficit: £251m), comprising plan assets of £12,217m (2024/25: £11,715m) and plan liabilities of £11,936m (2024/25: £11,963m). The net retirement surplus of £197m (2024/25 deficit: £251m) before deferred tax comprises schemes in surplus of £324m (2024/25: £56m) and schemes in deficit of £127m (2024/25: £307m). The valuation of the Group’s pension obligations is sensitive to changes in key assumptions and is dependent on market conditions. The key audit matter specifically relates to the key financial and demographic assumptions linked to the valuation of the UK retail pension plan obligations: discount rate, inflation expectations, and mortality assumptions. The setting of these assumptions is complex and requires the exercise of significant management judgement with the support of the Group’s actuaries. The Audit Committee’s discussion of this key audit matter is set out on page 81. How the scope of our audit responded to the key audit matter Our audit procedures included: – obtaining an understanding of relevant controls in relation to the pension obligation valuation process; – involving our actuarial specialists to assess the key actuarial assumptions used, both financial and demographic, and considered the methodology utilised to derive these assumptions. In order to assess and challenge the reasonableness of the Group’s discount rate, we independently calculated an appropriate range from available market data and compared this to the Group’s rate; – working with our actuarial specialists, we benchmarked and challenged assumptions used by the Group in determining the value of pension liabilities, particularly focusing on the discount rate, inflation and mortality assumptions. This included comparing the inputs and assumptions used in determining the valuation of the UK retail pension plan to those used in comparable pension plans and our independently assessed benchmarks. As part of our procedures, we considered the incorporation of, and weighting factors applied to, the Continuous Mortality Investigation (CMI) 2024 mortality tables which include the updated 2024 actual mortality experience, with reference to advice the Group has received from its actuaries; and – assessing the competence, capabilities and objectivity of the actuaries engaged by the Group to perform valuations of the relevant plans. Key observations Based on our audit procedures we are satisfied that the overall methodology is appropriate, and the key assumptions applied in relation to determining the pension valuation are reasonable. Tesco PLC Annual Report and Financial Statements 2026 113 GovernanceStrategic report Additional informationFinancial statements ![]() 5.4. Retail technology environment Key audit matter description The Group’s retail technology environment is complex, and a significant element of its financial processes and business operations are dependent on automated processes and controls. In the previous years, we have reported certain IT control deficiencies within the retail IT system applications which could have an adverse impact on the Group’s controls and financial reporting systems. During the current year, a significant number of these have been remediated. The risk associated with the deficiencies in the remaining retail in scope IT systems applications has been assessed as low. IT controls remediation is a complex multi-year project which includes the remediation of IT deficiencies across a range of internally and externally hosted systems. The Group has continued to implement its remediation plan related to Application User Access Management and Privileged Access Management, with further progress made in restricting user access, using a multi-layered access and control model. In addition, the Group has assessed there is limited risk in the remaining in scope application systems where deficiencies have not yet been remediated. Areas of the Group’s remediation programme to which the key audit matter has been pinpointed include: – appropriateness of remediated access controls across in-scope applications and their supporting infrastructure; and – whether the remediated controls address previously identified deficiencies. The Audit Committee’s discussion of this key audit matter is set out on page 81. How the scope of our audit responded to the key audit matter Consistent with previous years, we did not plan to take a control-reliant audit approach in the retail business for the majority of systems. Our planned approach considered the previously identified deficiencies in the IT environment and the level of integration and inter-dependencies across the systems. Certain systems are further progressed along the remediation path, with IT controls reliance achieved over an additional number of systems this year, allowing us to rely on the relevant automated controls within these systems for part of the year. During the year, our procedures included: – obtaining an understanding of relevant controls over the information systems that are important to financial reporting. This included understanding the changes made as part of the Group’s IT remediation programme; – obtaining an understanding of relevant controls which the Group has remediated, including those areas related to longstanding issues referenced above. We used our automated controls testing tool (ACTT) to support our IT controls testing across a number of relevant systems, including the testing of key security configurations and user access; and – considering management’s own risk assessment and development in the internal control environment, we continued to perform substantive audit procedures where needed in response to the unremediated deficiencies affecting the systems within the scope of our audit. Key observations We consider the overall level of risk associated with this key audit matter to have reduced compared to the prior year. The Group has continued to implement its remediation plan and has completed the remediation over the majority of the systems in scope for our audit. As noted above we achieved controls reliance over an additional number of systems this year. The substantive audit procedures performed in order to mitigate the risk of material misstatement due to deficiencies in the IT systems within the scope of our audit were completed satisfactorily. Independent auditor’s report continued Tesco PLC Annual Report and Financial Statements 2026 114 ![]() 6. Our application of materiality 6.1. Materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Group financial statements Parent Company financial statements Materiality £125m (2024/25: £125m) £86m (2024/25: £96m) Basis for determining materiality 4.74% (2024/25: 4.67%) of total adjusted profit before tax, including net pension finance income/(cost) of £2,638m (2024/25: £2,678m). Materiality represents less than 1% of net assets (2024/25: less than 1%). Rationale for the benchmark applied The primary benchmark used to determine the materiality is total adjusted profit before tax including net pension finance income/(cost). Adjusting items are defined in Note 1 and include net pension finance income/(cost). For the purpose of our materiality determination, we have excluded net pension finance income/ (cost) from adjusting items and therefore increased/(reduced) adjusted profit before tax accordingly. Our determined materiality represents 0.17% (2024/25: 0.18%) of the Group’s revenue from continuing operations and 1.1% (2024/25: 1.1%) of net assets. Refer to Note 5 (Adjusting items) for further details of adjusting items and the Group’s reconciliation of this alternative performance measure to the Group’s statutory measure. As this is the Parent Company of the Group, it does not generate significant revenues other than investment returns, but incurs costs. Net assets are of most relevance to users of the financial statements. Adjusted profit before tax from continuing and discontinued operations (including net pension finance income/(cost)) £2,638m Component performance materiality range £25.0m to £56.5m Audit Committee reporting threshold £6.25m Group materiality £125m 6.2. Performance materiality We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group financial statements Parent Company financial statements Performance materiality 65% (2024/25: 65%) of Group materiality 65% (2024/25: 65%) of Parent Company materiality Basis and rationale for determining performance materiality We have retained a lower percentage of materiality to determine our performance materiality in 2025/26, consistent with previous years, as the retail IT environment deficiencies noted in section 5.4 remained unremediated or mitigated for at least part of the financial year. In determining our performance materiality, we have also considered the nature, quantum and volume of corrected and uncorrected misstatements in prior periods, including prior period errors, and our expectation that misstatements from prior periods would not likely recur in the current period. 6.3. Error reporting threshold We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £6.25m (2024/25: £6.25m), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. Tesco PLC Annual Report and Financial Statements 2026 115 GovernanceStrategic report Additional informationFinancial statements ![]() 7. An overview of the scope of our audit 7.1. Identification and scoping of components Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls, and assessing the risks of material misstatement at the Group level. The Group operates through over 200 legal entities and has subsidiary grocery retail operations in five countries, together with interests in a number of other businesses both in the UK and internationally. The Group’s accounting process is structured around business units managed by local finance functions and further supported by business service centres in Bengaluru, India and Budapest, Hungary which provide accounting and administrative support for the Group’s core retail operations. Each local finance function reports through to the central Group finance function based at the Group’s head office. We performed a detailed scoping exercise of each individual account balance, class of transaction and disclosure at a Group level to determine the individual legal entities’ contribution to each significant account in the Group financial statements. This has resulted in certain individual legal entities being subject to audit procedures through either an audit of the entire financial information, audit procedures on specified account balances or being subject to specified procedures (“the components subject to audit procedures”). The work performed on the components subject to audit procedures (excluding the Parent Company) was completed to component performance materiality levels between £25m and £56.5m (2024/25: £23.4m and £62.4m). Based on our assessment, our audit scope focuses on component entities within five retail locations (UK, Republic of Ireland, Czech Republic, Hungary and Slovakia), Booker and certain material balances within Insurance Money Services (IMS). The components which were subject to audit procedures in the current year represent 97% (2024/25: 97%) of revenue from continuing operations, 92% (2024/25: 94%) of profit before tax from continuing operations and 96% (2024/25: 94%) of total assets. As each of the local finance functions maintains separate financial records, we engaged component auditors from the Deloitte member firms in the UK, Republic of Ireland and Central Europe to perform procedures at all the wholly-owned components under our direction and supervision. This approach also allowed us to engage local auditors who have appropriate knowledge of local regulations to perform the audit work, under a common Deloitte audit approach. The components subject to audit procedures contribute the proportions of Group totals shown opposite. Total assets Audit of the entire financial information 78% Specified audit procedures 18% Review at group level 4% Revenue from continuing operations Audit of the entire financial information 96% Specified audit procedures 1% Review at group level 3% Profit before tax from continuing operations Audit of the entire financial information 92% Review at group level 8% Independent auditor’s report continued Tesco PLC Annual Report and Financial Statements 2026 116 ![]() At the Group level we tested the consolidation process, performed analytical procedures that confirmed no significant risk of material misstatement in the aggregated financial information of components not subject to audit procedures, and carried out audit procedures on centrally held balances (treasury, post-employment benefit obligations, head office costs and litigation and claims). The components that contribute the largest proportion of the significant accounts of the Group are within its retail business in the UK. As such, there is extensive interaction between the Group and the UK audit team to allow appropriate level of direction, supervision and review in this audit work. 7.2. Our consideration of the control environment In the current year our controls approach was principally designed to inform our risk assessment, to allow us to test certain relevant controls, to test controls that address risks of material misstatement for which substantive procedures alone would not provide sufficient appropriate audit evidence and to test certain relevant controls within processes where a controls reliance approach was taken. The Group’s operations utilise a range of information systems which underpin the financial reporting process. These are largely consistent across the retail business. In previous years we reported deficiencies in certain IT controls. As described in the Audit Committee Report on page 83, the Group remediated deficiencies in certain application systems whilst also assessing the risks within those systems that have not yet been remediated, with progress being monitored. Accordingly, consistent with the prior year, we extended the scope of our substantive audit procedures in response to the identified deficiencies. As noted on page 114, considering the deficiencies and the level of integration and inter-dependencies across the systems we did not plan to take a controls reliant audit approach for the majority of systems in scope for our audit, except for the IMS business where there are separate information systems where the same IT deficiencies do not exist and therefore a controls reliant audit approach was taken across certain account balances including insurance revenue, insurance service expense and liability for incurred claims. For all of the components that were subject to audit procedures, we obtained an understanding of the relevant IT systems for the purpose of our audit work. Further details are set out in the ‘Retail technology environment’ key audit matter in section 5.4 above. 7.3. Use of audit technology We embed technology and analytics throughout our audit to improve quality and effectiveness, including in the areas of audit planning and risk assessment, controls testing, substantive testing, and reporting. At the planning stage, we use advanced data analytics to identify unusual trends, characteristics and outliers to support our identification of audit risks. For example, we analysed the commercial income data by identifying particular characteristics relating to feature space deals (see Section 5.2). We have continued to leverage advanced data analytics to perform substantive procedures on revenue for certain components, including the UK retail business, by reconciling reported revenue to cash receipts obtained independently through Open Banking data flows. In addition, we used a three-way match for certain components of commercial income in the UK retail business. 7.4. Our consideration of climate-related risks The Group is exposed to the impacts of climate change on its business and operations as highlighted in the Task Force on Climate-Related Financial Disclosures (TCFD) report on page 34, the viability statement on page 48, the principal risks on page 40, and in Note 15 of the financial statements. The Group has set out their key commitments to: – Achieve net zero across their own operations by 2035. This commitment is supported by targets to: reduce absolute Scope 1 and 2 emissions by 85% by 2030; procure 60% of electricity by PPAs and owned onsite generation assets by 2030. – Achieve net zero across their value chain (Scope 3) by 2050. This commitment is supported by targets to: reduce absolute Scope 3 emissions from energy and industrial sources by 55% by 2032, and 90% by 2050; reduce absolute Scope 3 emissions from forests, land and agriculture by 39% by 2032 and 72% by 2050. We engaged with both the central finance and sustainability functions to gain an understanding of the assessment of, and the process undertaken to both identify and quantify, the Group’s climate-related risks. We engaged our climate specialists in our assessment to consider broader industry and market-wide practice. We completed an independent climate-based risk assessment in order to consider the potential impact of climate change on the Group’s financial statements, incorporating both business specific knowledge and wider industry awareness, including the extent to which the impact has been included in the Group’s forecast financial information. We used this to assess the completeness of the Group’s identified risks and to develop audit procedures to respond to these risks, in particular as part of our work in relation to store impairment and long-term viability, as well as considering climate-related risks throughout our risk assessments on each financial statement account balance. Further details of our work in relation to store impairment are set out in the ‘Store impairment review’ key audit matter in section 5.1 above. In considering the disclosures presented as part of the Strategic Report, we engaged our climate specialists to assess compliance with the TCFD requirements and the recommendations made by both the Task Force and FRC as set out in their thematic reviews. We also assessed whether these disclosures reflect our understanding of the Group’s approach to climate and did not identify any material inconsistencies as a result of these procedures. 7.5. Working with other auditors The Group audit team issued detailed instructions to the component auditors and visited the component auditors set out above, in addition to the Group’s business service centre in Bengaluru where the work performed was overseen by the UK audit team. We undertook group level account balance risk assessments to determine the identification of significant risks and directed and supervised the components as required. The audit visits by the Group audit team were timed to enable us to be involved during the planning and risk assessment process in addition to the execution of detailed audit procedures. During our visits we attended key meetings with component management and auditors, directed and supervised the underlying component risk assessments, which we then took ownership of at a group level, and reviewed and challenged detailed component auditor working papers in the underlying audit files and component reporting. In addition, we attended component audit closing calls and held regular remote communication to interact on any related audit and accounting matters which arose. Additionally, the component audit teams attended two all-day planning meetings in October 2025 led by the Group audit team. The purpose of these planning meetings was to establish a good level of understanding of the Group’s businesses, its core strategy and hold a discussion of the significant risks and workshops on our planned audit approach. Group management also attended part of the meeting to support these planning activities. Tesco PLC Annual Report and Financial Statements 2026 117 GovernanceStrategic report Additional informationFinancial statements ![]() 8. Other information The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 9. Responsibilities of directors As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. 10. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 11. Extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. 11.1. Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, we considered the following: – the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets; – the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error; – the results of our enquiries of management, the internal audit function, the Directors, the Group’s Security function and the Group’s Compliance Officer, the Group’s General Counsel and the Audit Committee about their own identification and assessment of the risks of irregularities, including those that are specific to the sector; – any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to: – identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance; – detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; – the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations including the Group’s controls relating to the Group’s ongoing compliance with the Groceries Supply Code of Practice (GSCOP) requirements and the requirements of the United Kingdom’s Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) in relation to the IMS business; and – the matters discussed among the audit engagement team including component audit teams and relevant internal specialists, including IT, tax, valuations, pensions actuarial specialists, and industry specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following area: recognition of commercial income. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the Group’s ongoing compliance with the GSCOP, UK Companies Act, UK Listing Rules, pensions legislation and tax legislation. In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. These included the Group’s requirements of the United Kingdom’s PRA, FCA and Solvency II regulations in relation to the IMS business, employment law, health and safety and food safety laws and regulations. Independent auditor’s report continued Tesco PLC Annual Report and Financial Statements 2026 118 ![]() 11.2. Audit response to risks identified As a result of performing the above, we identified recognition of commercial income as a key audit matter related to the potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response to the key audit matter. In addition to the above, our procedures to respond to risks identified included the following: – reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; – enquiring of management, the Audit Committee and in-house and external legal counsel concerning actual and potential litigation and claims; – performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; – reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence, if any, with HMRC and other relevant regulatory bodies; and – in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Report on other legal and regulatory requirements 12. Opinions on other matters prescribed by the Companies Act 2006 In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: – the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and – the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic report or the Directors’ report. 13. Corporate governance statement The UK Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate governance statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate governance statement is materially consistent with the financial statements and our knowledge obtained during the audit: – the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified as set out on page 227; – the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate as set out on page 48; – the Directors’ statement on fair, balanced and understandable as set out on page 80; – the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 38; – the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on page 84; and – the section describing the work of the Audit Committee set out on page 78. Tesco PLC Annual Report and Financial Statements 2026 119 GovernanceStrategic report Additional informationFinancial statements ![]() 14. Matters on which we are required to report by exception 14.1. Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion: – we have not received all the information and explanations we require for our audit; or – adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or – the Parent Company financial statements are not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. 14.2. Directors’ remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not been made or the part of the Directors’ remuneration report to be audited is not in agreement with the accounting records and returns. We have nothing to report in respect of these matters. 15. Other matters which we are required to address 15.1. Auditor tenure Following the recommendation of the Audit Committee, we were appointed by the Group’s shareholders on 25 June 2015 to audit the financial statements for the year ending 27 February 2016 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 11 years, covering the years ending 27 February 2016 to 28 February 2026. 15.2. Consistency of the audit report with the additional report to the Audit Committee Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK). Independent auditor’s report continued 16. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. As required by the FCA Disclosure Guidance and Transparency Rule (DTR) 4.1.15R – DTR 4.1.18R, these financial statements will form part of the Electronic Format Annual Financial Report filed on the National Storage Mechanism of the FCA in accordance with DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over whether the Electronic Format Annual Financial Report has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R. We have been engaged to provide assurance on whether the Electronic Format Annual Financial Report has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R and will publicly report separately to the members on this. Richard Muschamp (Senior statutory auditor) For and on behalf of Deloitte LLP Statutory Auditor London, United Kingdom 15 April 2026 Tesco PLC Annual Report and Financial Statements 2026 120 ![]() Group income statement The notes on pages 127 to 199 form part of these financial statements. | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 53 weeks ended | | | 52 weeks ended | | | | | | 28 February 2026 | | | 22 February 2025 | | | | | Before adjusting | Adjusting items | | Before adjusting | Adjusting items | | | | | items | (Note 5) | Total | items | (Note 5) | Total | | | Notes | £m | £m | £m | £m | £m | £m | | Continuing operations | | | | | | | | | Revenue from sale of goods and services | | 72,8 8 6 | - | 72,8 8 6 | 6 9,1 9 1 | - | 6 9 ,1 9 1 | | Insurance revenue | 24 | 8 26 | - | 826 | 725 | - | 725 | | Revenue | 2,3 | 73, 712 | - | 73,712 | 69, 91 6 | - | 69, 91 6 | | Cost of sales | | (6 7, 2 8 4) | (91) | (67 ,375) | (63 ,886) | (31 9) | (6 4,205) | | Insurance service expenses | 24 | (7 52) | - | (752) | (598) | - | (598) | | Net expenses from reinsurance contracts held | 24 | (47) | - | (47) | (62) | - | (62) | | Gross profit/(loss) | | 5,629 | (91) | 5,538 | 5, 370 | (31 9) | 5, 051 | | Administrative expenses | | (2,4 3 5) | (1 18) | (2, 55 3) | (2,242) | (9 8) | (2, 3 40) | | Operating profit/(loss) | 2 | 3 ,1 94 | (209) | 2,985 | 3 ,12 8 | (417) | 2 ,7 11 | | Share of post-tax profit/(loss) of joint ventures and associates | 14 | (1) | - | (1) | (4) | - | (4) | | Finance income | 6 | 233 | - | 233 | 254 | - | 25 4 | | Finance costs | 6 | (7 74) | (40) | (814) | (790) | 44 | (7 46) | | Profit/(loss) before tax from continuing operations | | 2, 6 52 | (249) | 2,403 | 2,588 | (373) | 2 ,21 5 | | Taxation | 7 | (7 12) | 96 | (616) | (69 0) | 79 | (611) | | Profit/(loss) for the year from continuing operations | | 1,940 | (1 5 3) | 1 ,787 | 1,898 | (294) | 1,604 | | Discontinued operations | | | | | | | | | Profit/(loss) for the year from discontinued operations | 8 | - | - | - | 91 | (65) | 26 | | Profit/(loss) for the year | | 1,940 | (1 5 3) | 1 ,787 | 1,989 | (359) | 1 ,630 | | Attributable to: | | | | | | | | | Owners of the parent | | 1,94 0 | (15 3) | 1,787 | 1 ,98 5 | (35 9) | 1, 626 | | Non-controlling interests | | - | - | - | 4 | - | 4 | | | | 1,940 | (1 5 3) | 1 ,787 | 1,989 | (359) | 1 ,630 | | Earnings per share from continuing and discontinued operations | | | | | | | | | Basic | 10 | | | 2 7. 5p | | | 23 . 8p | | Diluted | 10 | | | 2 7.1p | | | 23. 5p | | Earnings per share from continuing operations | | | | | | | | | Basic | 10 | | | 2 7. 5p | | | 23.4p | | Diluted | 10 | | | 2 7.1p | | | 23 .1p | Tesco PLC Annual Report and Financial Statements 2026 121 GovernanceStrategic report Additional informationFinancial statements ![]() Group statement of comprehensive income/(loss) | | | | | | --- | --- | --- | --- | | | | 53 weeks ended | 52 weeks ended | | | | 28 February 2026 | 22 February 2025 | | | Notes | £m | £m | | Items that will not be reclassified to the Group income statement | | | | | Change in fair value of financial assets at fair value through other comprehensive income | | - | 4 | | Remeasurements of defined benefit pension schemes | 28 | 4 37 | 387 | | Net fair value gains/(losses) on inventory cash flow hedges | | (77) | 7 | | Tax on items that will not be reclassified | 7 | (46) | (95) | | | | 314 | 303 | | Items that may subsequently be reclassified to the Group income statement | | | | | Change in fair value of financial assets at fair value through other comprehensive income | | 20 | 14 | | Currency translation differences: | | | | | Retranslation of net assets of overseas subsidiaries, joint ventures and associates | | 166 | (89) | | Impact of net investment hedges | | (73) | 33 | | Gains/(losses) on cash flow hedges: | | | | | Net fair value gains/(losses) | | (7) | 33 | | Reclassified and reported in the Group income statement | | (16) | (71) | | Finance income/(expenses) from insurance contracts issued | 24 | (4) | - | | Finance income/(expenses) from reinsurance contracts held | 24 | 1 | 1 | | Tax on items that may be reclassified | 7 | (3) | 6 | | | | 84 | (73) | | Total other comprehensive income/(loss) for the year | | 398 | 230 | | Profit/(loss) for the year | | 1,787 | 1 ,6 30 | | Total comprehensive income/(loss) for the year | | 2 ,1 85 | 1,860 | | Attributable to: | | | | | Owners of the parent | | 2,187 | 1,858 | | Non-controlling interests | | (2) | 2 | | Total comprehensive income/(loss) for the year | | 2 ,1 85 | 1,860 | | Total comprehensive income/(loss) attributable to owners of the parent arising from: | | | | | Continuing operations | | 2,187 | 1,832 | | Discontinued operations | 8 | - | 26 | | | | 2 ,1 87 | 1,858 | The notes on pages 127 to 199 form part of these financial statements. Tesco PLC Annual Report and Financial Statements 2026 122 ![]() | | | | | | --- | --- | --- | --- | | | | 28 February 2026 | 22 February 2025 | | | Notes | £m | £m | | Non-current liabilities | | | | | Trade and other payables | 20 | (42) | (4 0) | | Borrowings | 22 | (5,372) | (5,08 9) | | Lease liabilities | 13 | (7, 2 2 5) | (7, 09 8) | | Provisions | 23 | (1 6 4) | (1 66) | | Derivative financial instruments | 25 | (123) | (205) | | Post-employment benefit deficit | 28 | (127) | (3 07) | | Deferred tax liabilities | 7 | (6 35) | (503) | | | | (13 ,6 8 8) | (13,408) | | Net assets | | 11, 457 | 11,662 | | Equity | | | | | Share capital | 29 | 404 | 42 6 | | Share premium | | 5 ,16 6 | 5 ,1 6 5 | | Other reserves | 29 | 3 ,1 6 7 | 3 ,1 4 0 | | Retained earnings | | 2,726 | 2,9 35 | | Equity attributable to owners of the parent | | 11,4 6 3 | 11,666 | | Non-controlling interests | | (6) | (4) | | Total equity | | 11, 457 | 11,662 | The notes on pages 127 to 199 form part of these financial statements. Ken Murphy Imran Nawaz Directors The financial statements on pages 121 to 199 were approved and authorised for issue by the Directors on 15 April 2026. Group balance sheet | | | | | | --- | --- | --- | --- | | | | 28 February 2026 | 22 February 2025 | | | Notes | £m | £m | | Non-current assets | | | | | Goodwill and other intangible assets | 11 | 5 ,0 92 | 5 ,0 87 | | Property, plant and equipment | 12 | 1 7, 7 2 8 | 17 ,262 | | Right of use assets | 13 | 5, 777 | 5,569 | | Investment property | | 20 | 24 | | Investments in joint ventures and associates | 14 | 121 | 110 | | Other investments | 16 | 983 | 934 | | Trade and other receivables | 18 | 16 1 | 158 | | Reinsurance contract assets | 24 | 123 | 124 | | Derivative financial instruments | 25 | 6 13 | 663 | | Post-employment benefit surplus | 28 | 324 | 56 | | Deferred tax assets | 7 | 49 | 47 | | | | 30,991 | 3 0,03 4 | | Current assets | | | | | Other investments | 16 | 220 | 1 51 | | Inventories | 17 | 2,8 40 | 2,76 8 | | Trade and other receivables | 18 | 1,31 8 | 1,21 0 | | Derivative financial instruments | 25 | 15 | 172 | | Current tax assets | | 32 | 27 | | Short-term investments | 19 | 1,42 9 | 2, 223 | | Cash and cash equivalents | 19 | 2,51 5 | 2, 25 5 | | | | 8,369 | 8,8 06 | | Non-current assets classified as held for sale | 8 | 114 | 50 | | | | 8,483 | 8,856 | | Current liabilities | | | | | Trade and other payables | 20 | (10 , 7 46) | (1 0,3 6 4) | | Borrowings | 22 | (1,8 24) | (1,861) | | Lease liabilities | 13 | (659) | (61 8) | | Provisions | 23 | (273) | (3 0 0) | | Insurance contract liabilities | 24 | (7 72) | (6 52) | | Derivative financial instruments | 25 | (4 8) | (12) | | Current tax liabilities | | (7) | (13) | | | | (14 ,32 9) | (13 ,82 0) | | Net current liabilities | | (5,846) | (4, 9 64) | Tesco PLC Annual Report and Financial Statements 2026 123 GovernanceStrategic report Additional informationFinancial statements ![]() Group statement of changes in equity | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Other reserves | | | Non-controlling | | | | | Share capital | Share premium | (Note 29) | Retained earnings | Total | interests | Total equity | | | Notes | £m | £m | £m | £m | £m | £m | £m | | At 22 February 2025 | | 426 | 5 ,1 6 5 | 3 ,1 4 0 | 2,935 | 11, 666 | (4) | 11,6 62 | | Profit/(loss) for the year | | - | - | - | 1,787 | 1,787 | - | 1,787 | | Other comprehensive income/(loss) | | | | | | | | | | Retranslation of net assets of overseas subsidiaries, joint ventures and associates | | - | - | 166 | - | 166 | - | 166 | | Impact of net investment hedges | | - | - | (73) | - | (73) | - | (73) | | Change in fair value of financial assets at fair value through other comprehensive income | | - | - | - | 20 | 20 | - | 20 | | Remeasurements of defined benefit pension schemes | 28 | - | - | - | 4 37 | 437 | - | 4 37 | | Gains/(losses) on cash flow hedges | | - | - | (84) | - | (84) | - | (84) | | Cash flow hedges reclassified and reported in the Group income statement | | - | - | (14) | - | (14) | (2) | (16) | | Finance income/(expenses) from insurance contracts issued | | - | - | (4) | - | (4) | - | (4) | | Finance income/(expenses) from reinsurance contracts held | | - | - | 1 | - | 1 | - | 1 | | Tax relating to components of other comprehensive income | 7 | - | - | 6 | (55) | (4 9) | - | (49) | | Total other comprehensive income/(loss) | | - | - | (2) | 4 02 | 400 | (2) | 398 | | Total comprehensive income/(loss) | | - | - | (2) | 2 ,1 8 9 | 2 ,18 7 | (2) | 2 ,1 85 | | Inventory cash flow hedge movements | | | | | | | | | | (Gains)/losses transferred to the cost of inventory | | - | - | 61 | - | 61 | - | 61 | | Total inventory cash flow hedge movements | | - | - | 61 | - | 61 | - | 61 | | Transactions with owners | | | | | | | | | | Own shares purchased for cancellation | 29 | - | - | (1,4 4 3) | - | (1,4 4 3) | - | (1,4 4 3) | | Own shares cancelled | 29 | (22) | - | 1,46 5 | (1 ,4 4 3) | - | - | - | | Own shares purchased for share schemes | 29 | - | - | (279) | - | (279) | - | (279) | | Share-based payments | 27 | - | - | 181 | (23) | 158 | - | 158 | | Share forfeiture | 29 | - | 1 | - | - | 1 | - | 1 | | Dividends | 9 | - | - | - | (936) | (936) | - | (936) | | Transfer from own shares held to retained earnings | 29 | - | - | 44 | (4 4) | - | - | - | | Tax on items (charged)/credited to equity | 7 | - | - | - | 48 | 48 | - | 48 | | Total transactions with owners | | (22) | 1 | (32) | (2,39 8) | (2 ,451) | - | (2,451) | | At 28 February 2026 | | 404 | 5 ,1 6 6 | 3 ,1 67 | 2 ,726 | 11 ,46 3 | (6) | 11 , 457 | Tesco PLC Annual Report and Financial Statements 2026 124 ![]() | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Other reserves | | | Non-controlling | | | | | Share capital | Share premium | (Note 29) | Retained earnings | Total | interests | Total equity | | | Notes | £m | £m | £m | £m | £m | £m | £m | | At 24 February 2024 | | 445 | 5 ,1 6 5 | 3 ,1 3 1 | 2,930 | 11 ,671 | (6) | 11,6 6 5 | | Profit/(loss) for the year | | - | - | - | 1,626 | 1,626 | 4 | 1 ,630 | | Other comprehensive income/(loss) | | | | | | | | | | Retranslation of net assets of overseas subsidiaries, joint ventures and associates | | - | - | (89) | - | (89) | - | (89) | | Impact of net investment hedges | | - | - | 33 | - | 33 | - | 33 | | Change in fair value of financial assets at fair value through other comprehensive income | | - | - | - | 18 | 18 | - | 18 | | Remeasurements of defined benefit pension schemes | 28 | - | - | - | 387 | 387 | - | 3 87 | | Gains/(losses) on cash flow hedges | | - | - | 40 | - | 40 | - | 40 | | Cash flow hedges reclassified and reported in the Group income statement | | - | - | (69) | - | (69) | (2) | (7 1) | | Finance income/(expenses) from reinsurance contracts held | | - | - | 1 | - | 1 | - | 1 | | Tax relating to components of other comprehensive income | 7 | - | - | 7 | (9 6) | (89) | - | (89) | | Total other comprehensive income/(loss) | | - | - | (77) | 309 | 232 | (2) | 23 0 | | Total comprehensive income/(loss) | | - | - | (77) | 1,935 | 1,858 | 2 | 1,860 | | Transfer from translation reserve to retained earnings | | - | - | 36 | (36) | - | - | - | | Inventory cash flow hedge movements | | | | | | | | | | (Gains)/losses transferred to the cost of inventory | | - | - | (4) | - | (4) | - | (4) | | Total inventory cash flow hedge movements | | - | - | (4) | - | (4) | - | (4) | | Transactions with owners | | | | | | | | | | Own shares purchased for cancellation | 29 | - | - | (1 ,01 6) | - | (1 ,01 6) | - | (1 ,01 6) | | Own shares cancelled | 29 | (19) | - | 1 ,03 5 | (1,0 1 6) | - | - | - | | Own shares purchased for share schemes | 29 | - | - | (204) | - | (204) | - | (204) | | Share-based payments | 27 | - | - | 23 9 | (49) | 190 | - | 190 | | Dividends | 9 | - | - | - | (86 5) | (865) | - | (865) | | Tax on items (charged)/credited to equity | 7 | - | - | - | 36 | 36 | - | 36 | | Total transactions with owners | | (19) | - | 54 | (1, 8 94) | (1,859) | - | (1,859) | | At 22 February 2025 | | 426 | 5 ,1 6 5 | 3 ,1 4 0 | 2,935 | 11, 666 | (4) | 11,6 62 | The notes on pages 127 to 199 form part of these financial statements. Tesco PLC Annual Report and Financial Statements 2026 125 GovernanceStrategic report Additional informationFinancial statements ![]() | | | | | | --- | --- | --- | --- | | | | 53 weeks | 52 weeks | | | | ended | ended | | | | 28 February | 22 February | | | | 2026 | 2025 | | | Notes | £m | £m | | Cash flows generated from/(used in) operating activities | | | | | Operating profit/(loss) of continuing operations | | 2,985 | 2,711 | | Operating profit/(loss) of discontinued operations | 8 | - | 35 | | Depreciation and amortisation | | 1,89 5 | 1 ,7 75 | | (Profit)/loss arising on sale of property, plant and equipment, investment | | - | 1 | | property, intangible assets and assets classified as held for sale | | | | | Net impairment loss/(reversal) on property, plant and equipment, right of use | 15 | 53 | 29 8 | | assets, intangible assets and investment property | | | | | Impairment loss on other investments | | - | 10 | | Net remeasurement loss of non-current assets held for sale | 8 | 1 | 64 | | Adjustment for non-cash element of pensions charge | | 8 | - | | Defined benefit pension scheme payments | 28 | (3 1) | (30) | | Share-based payments | 27 | 55 | 37 | | Fair value movements included in operating profit/(loss) | | - | 9 | | (Increase)/decrease in inventories | | (4 0) | (141) | | (Increase)/decrease in trade and other receivables and reinsurance assets | | (72) | (5) | | Increase/(decrease) in trade and other payables and insurance liabilities | | 350 | 158 | | Increase/(decrease) in provisions | | (36) | (1 0) | | Increase/(decrease) in deposits from central bank | | - | (90 8) | | (Increase)/decrease in working capital of the Banking operations disposal | | - | 53 | | group | | | | | (Increase)/decrease in working capital | | 202 | (853) | | Cash generated from/(used in) operations | | 5 ,16 8 | 4,057 | | Interest paid\* | | (759) | (7 72) | | Corporation tax paid | | (503) | (3 6 6) | | Net cash generated from/(used in) operating activities | | 3,9 06 | 2,919 | | Cash flows generated from/(used in) investing activities | | | | | Proceeds from sale of property, plant and equipment, investment property, intangible assets and assets classified as held for sale | | 47 | 137 | | Purchase of property, plant and equipment and investment property | | (1,3 4 4) | (1 , 247) | | Purchase of intangible assets | | (322) | (292) | | Disposal of subsidiaries, net of cash disposed | | 2 | - | | Disposal of Banking operations, net of cash disposed | 8 | - | 157 | | Acquisition of subsidiaries, net of cash acquired | | (9) | (46) | | Proceeds from sale of joint ventures and associates | | 1 | - | | Increase in loans to joint ventures and associates | | (1) | (1) | | Investments in joint ventures and associates | | (12) | (15) | | Dividends received from joint ventures and associates | | 2 | 2 | | Cash inflows from maturing short-term investments – deposits | | 1, 375 | 1,9 10 | Group cash flow statement | | | | | | --- | --- | --- | --- | | | | 53 weeks | 52 weeks | | | | ended | ended | | | | 28 February | 22 February | | | | 2026 | 2025 | | | Notes | £m | £m | | Cash outflows on investing in short-term investments – deposits | | (1, 275) | (1,7 71) | | (Investments in)/proceeds from other short-term investments | | 6 93 | (23 4) | | Proceeds from sale of other investments\* | | 16 3 | 994 | | Purchase of other investments | | (26 1) | (29 0) | | Interest received | | 235 | 25 5 | | Net cash generated from/(used in) investing activities | | (70 6) | (4 41) | | Cash flows generated from/(used in) financing activities | | | | | Proceeds from sale of untraced shares | 29 | 1 | - | | Own shares purchased for cancellation | 29 | (1, 4 43) | (1,01 6) | | Own shares purchased for share schemes, net of cash received from employees | 27 | (10 0) | (54) | | Repayment of capital element of obligations under leases\* | | (66 8) | (599) | | Cash outflows exceeding the incremental increase in assets in a property | | (62) | (92) | | buyback | | | | | Increase in borrowings | | 919 | 4 62 | | Repayment of borrowings\* | | (8 03) | (76 4) | | Cash inflows from derivative financial instruments\* | | 78 | 61 | | Cash outflows from derivative financial instruments\* | | (7 1) | (74) | | Dividends paid to equity owners | 9 | (937) | (864) | | Net cash generated from/(used in) financing activities | | (3,086) | (2,940) | | Net increase/(decrease) in cash and cash equivalents | | 114 | (4 62) | | Cash and cash equivalents at the beginning of the year | | 1,399 | 1,8 7 4 | | Effect of foreign exchange rate changes | | (2) | (1 3) | | Cash and cash equivalents at the end of the year | 19 | 1, 511 | 1,399 | \* Comparatives have been re-presented following the Group’s change in accounting policy for economic hedges. There is no impact on Net increase/(decrease) in cash and cash equivalents, and no impact on any APMs. See Note 32 for more details. The notes on pages 127 to 199 form part of these financial statements. Tesco PLC Annual Report and Financial Statements 2026 126 ![]() Notes to the Group financial statements Note 1 Accounting policies, judgements and estimates General information Tesco PLC (the Company) is a public limited company incorporated and domiciled in England and Wales under the Companies Act 2006 (registration number 00445790). The address of the registered office is Tesco House, Shire Park, Kestrel Way, Welwyn Garden City, AL7 1GA, UK. The main activities of the Company and its subsidiaries (together, the Group) are those of retailing and related services. Basis of preparation The consolidated Group financial statements have been prepared in accordance with UK-adopted IFRS. The consolidated Group financial statements are presented in Pounds Sterling, generally rounded to the nearest million. They are prepared on the historical cost basis, except for certain financial instruments, share-based payments and pension assets that have been measured at fair value. The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, which reflects a period of 18 months from the date of approval of the financial statements, and have concluded that there are no material uncertainties relating to going concern. Thus, they continue to adopt the going concern basis of accounting in preparing the consolidated Group financial statements. The scenarios considered as part of the going concern assessment are consistent with those used in the Longer term viability statement. Further information on the Group’s liquidity position is given in the Summary of Net debt section of the Financial review, and information on committed facilities is provided in Note 26. Unless otherwise stated, the accounting policies set out below have been applied consistently to all periods presented in these consolidated Group financial statements. Standards, interpretations and amendments that became effective in the current financial year have not had a material impact on the consolidated Group financial statements. The Group has not applied any standards, interpretations or amendments that have been issued but are not yet effective. The impact of the following is under assessment: – IFRS 18 ‘Presentation and disclosure in financial statements’, which will become effective in the consolidated Group financial statements for the financial year ending 26 February 2028. The Group will adopt the standard retrospectively, with comparatives restated from a transition date of 1 March 2026. IFRS 18 will affect how the Group presents and discloses its financial performance; it will not impact the recognition or measurement of any items in the financial statements. Income and expenses will be classified into five categories on the face of the income statement: operating, investing, financing, taxation and discontinued operations. The Group’s profit before tax will not change. Disclosures relating to ‘management-defined performance measures’, a subset of the Group’s alternative performance measures (APMs), will be included in the audited notes to the financial statements. The Group is well progressed with its impact assessment and its project to implement finance system change to enable reporting in accordance with IFRS 18. During the next financial year, the Group will finalise those system changes, commence a parallel reporting process for the comparative period, and quantify the impact of the new standard on the comparative period primary financial statements and the Group’s APMs. Until this work is completed, it is not practical to quantify the financial effects of IFRS 18. Other standards, interpretations and amendments issued but not yet effective are not expected to have a material impact on the consolidated Group financial statements. Segmental reporting Following changes to the Group Executive Committee and management reporting to the Chief Operating Decision Maker (CODM) within the year, Booker is now a separate operating and reportable segment (refer to Note 2). Segmental comparatives have been restated accordingly. Presentation of economic hedges in the Group cash flow statement The Group now classifies economic hedges in the same cash flow statement category as the underlying risk or hedged item and presents the related derivative cash flow movements net with the cash flows from the underlying risk being hedged (refer to Note 32). Comparatives have been restated accordingly. Basis of consolidation The consolidated Group financial statements consist of the financial statements of the ultimate Parent Company (Tesco PLC), all entities controlled by the Company (its subsidiaries) and the Group’s share of its interests in joint ventures and associates, accounted for using the equity method. The financial year represents the 53 weeks ended 28 February 2026 (prior financial year 52 weeks ended 22 February 2025). For the UK and the Republic of Ireland (UK & ROI) and Booker, the results are for the 53 weeks ended 28 February 2026 (prior financial year 52 weeks ended 22 February 2025), with the exception of Insurance and Money Services. For all other operations (including Insurance and Money Services), the results are for the calendar year ended 28 February 2026 (prior calendar year ended 28 February 2025). Revenue Revenue is income arising from the sale of goods and services in the ordinary course of the Group’s activities, net of value added taxes. Revenue is recognised when performance obligations are satisfied and control has transferred to the customer. For the majority of revenue streams, there is a low level of judgement applied in determining the transaction price or the timing of transfer of control. Revenue from sale of goods and services Sale of goods The sale of goods represents the vast majority of the Group’s revenue. For goods sold in store and fuel, revenue is recognised at the point of sale. For online or wholesale sales of goods, revenue is recognised on collection by, or delivery to, the customer. Revenue is reduced by a provision for expected returns (refund liability). An asset and corresponding adjustment to cost of sales is recognised for the Group’s right to recover goods from customers. Clubcard (customer loyalty programme) Clubcard points issued by Tesco when a customer purchases goods are a separate performance obligation providing a material right to a future discount. The total transaction price (sales price of goods) is allocated to the Clubcard points and the goods sold based on their relative standalone selling prices, with the Clubcard points’ standalone price based on the value of the points to the customer, adjusted for expected redemption rates (breakage). The amount allocated to Clubcard points is deferred as a contract liability within trade and other payables. Revenue is recognised as the points are redeemed by the customer. Revenue related to breakage is recognised in line with redemptions, subject to the variable consideration constraint (i.e. provided it is highly probable not to result in a significant reversal of the cumulative revenue recognised), with the remainder recognised on expiry of the points. Tesco PLC Annual Report and Financial Statements 2026 127 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 1 Accounting policies, judgements and estimates continued Data science services The Group generates revenue from the provision of consultancy services (customer data science and analytics), software access and media services through its data science business dunnhumby. Revenue is recognised either over time or at a point in time, with a low level of judgement typically required to determine the transaction price or timing of transfer of benefit to the customer. The Group recognises revenue over time if the customer simultaneously receives and consumes the benefits provided as the service is performed, or performance of the service does not create an asset with an alternative use and the Group has an enforceable right to payment for work to date. For services performed over time, revenue is recognised based on progress in fulfilling the service unless it is provided on a ‘stand-ready’ basis, in which case revenue is recognised over the period the service is expected to be utilised. Revenue recognised at a point in time is recognised when the relevant performance obligation is satisfied. Money services The majority of the fees in respect of money services (including ATMs, travel money and gift cards) are recognised at the point in time at which the transaction with the customer takes place and the service is performed. For services performed over time, payment is generally due and revenue is generally recognised monthly in line with the satisfaction of performance obligations. Insurance brokerage commission The Group generates commission income from the sale of white label life, pet and travel insurance products underwritten by third-party providers, which is recognised on a net basis as such policies are sold, in line with the satisfaction of performance obligations to customers. This is based on commission rates which are independent of the profitability of underlying insurance policies. The Group also recognises commission income from certain policy renewals at the point the original policies are sold. This is when the Group has satisfied all of its performance obligations in relation to the policy sold and it is considered highly probable that a significant reversal in the amount of revenue recognised will not occur in future periods. This calculation takes into account both estimates of future renewal volumes and renewal commission rates. A contract asset is recognised in relation to this revenue. This is unwound over the remainder of the contract with the customer, in this case being the third-party insurance provider. The end policyholders have the right to cancel an insurance policy at any time. Therefore, a contract liability is recognised for the amount of any expected refunds due and the revenue recognised in relation to these sales is reduced accordingly. This contract refund liability is estimated using prior experience of customer refunds. The appropriateness of the assumptions used in this calculation is reassessed at each reporting date. Insurance revenue Insurance revenue relates to motor and home insurance policies underwritten by the Group’s subsidiary, Tesco Underwriting Limited. Refer to the Insurance section on page 132. Commercial income Consistent with standard industry practice, the Group has agreements with suppliers whereby volume-related allowances, promotional and marketing allowances and various other fees and discounts are received in connection with the purchase of goods for resale from those suppliers. Most of the income received from suppliers relates to adjustments to a core cost price of a product, and as such is considered part of the purchase price for that product. Sometimes receipt of the income is conditional on the Group performing specified actions or satisfying certain performance conditions associated with the purchase of the product. These include achieving agreed purchases or sales volume targets and providing promotional or marketing materials and activities or promotional product positioning. While there is no standard industry definition, these amounts receivable from suppliers in connection with the purchase of goods for resale are generally termed commercial income. Commercial income is recognised when earned by the Group, which occurs when all obligations conditional for earning income have been discharged, and the income can be measured reliably based on the terms of the contract. The income is recognised as a credit within cost of sales. Where the income earned relates to inventories which are held by the Group at the reporting date, the income is included within the cost of those inventories and recognised in cost of sales upon sale of those inventories. Finance income Finance income is recognised in the Group income statement in the period to which it relates using the effective interest rate method. Finance costs Borrowing costs are recognised in the Group income statement in the period in which they occur using the effective interest rate method. Business combinations and goodwill The Group accounts for all business combinations by applying the acquisition method. All acquisition- related costs are expensed. On acquisition, the assets (including intangible assets), liabilities and contingent liabilities of an acquired business are measured at their fair values. Non-controlling interests are stated at the non-controlling interests’ proportion of the fair values of the assets and liabilities recognised. Goodwill arising on consolidation represents the excess of the consideration transferred, plus the amount of any non-controlling interest in the acquiree and the fair value of any previously held equity interest in the acquiree, over the fair value of the net identifiable assets acquired and liabilities assumed. If the consideration is less than the fair value of the Group’s share of the net assets and liabilities acquired (i.e. a bargain purchase), the difference is credited to the Group income statement in the period of acquisition. At the acquisition date, goodwill is recognised as an asset and is allocated to each of the cash-generating units or groups of cash-generating units expected to benefit from the business combination’s synergies and to the lowest level at which management monitors the goodwill. Goodwill arising on the acquisition of joint ventures and associates is included within the carrying value of the investment. When disposing of or reorganising part of a cash-generating unit or group of cash-generating units to which goodwill has been allocated, the goodwill is reallocated between the affected operations on the basis of their relative values. On disposal of a business, subsidiary, joint venture or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Cloud software licence agreements Licence agreements to use cloud software are treated as service contracts and expensed in the Group income statement, unless the Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. In such cases the licence agreement is capitalised as software within intangible assets. Costs to configure or customise a cloud software licence are expensed alongside the related service contract in the Group income statement, unless they create a separately identifiable resource controlled by the Group, in which case they are capitalised. Intangible assets Intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. They are amortised on a straight-line basis over their estimated Tesco PLC Annual Report and Financial Statements 2026 128 ![]() useful lives of three to 10 years for software and up to 10 years for customer relationships. Intangible assets with indefinite useful lives, such as pharmacy licences, are not amortised. Research costs are expensed as incurred. Development expenditure incurred on an individual project is capitalised only if specific criteria are met. Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. Property, plant and equipment is depreciated on a straight-line basis to its residual value over its anticipated useful economic life: – freehold buildings – 10 to 40 years; and – fixtures and fittings, office equipment and motor vehicles – three to 20 years. Impairment of non-financial assets Goodwill is reviewed for impairment at least annually by assessing the recoverable amount of each cash-generating unit, or group of cash-generating units, to which the goodwill relates. For all other non-financial assets, the Group performs impairment testing where there are indicators of impairment. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When the recoverable amount is less than the carrying amount, an impairment loss is recognised immediately in the Group income statement. Goodwill impairments are not subsequently reversed. Where an impairment loss on other non-financial assets subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of the recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately as a credit to the Group income statement. Inventories Inventories comprise goods and development properties held for resale. Inventories are valued at the lower of cost and net realisable value using the weighted average cost basis. Cash and cash equivalents Cash and cash equivalents in the Group balance sheet consist of cash at bank and on hand, credit and debit card receivables, demand deposits with banks and short-term highly liquid investments with an original maturity of three months or less, for example short-term deposits, loans and advances to banks, commercial paper and certificates of deposit. Overdrafts are presented in borrowings as they are held under notional pooling arrangements and do not meet the offsetting criteria to be presented net of cash on the balance sheet. Cash and cash equivalents in the Group cash flow statement include overdrafts repayable on demand as they form an integral part of the Group’s cash management. Non-current assets held for sale and discontinued operations Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are measured at the lower of carrying amount and fair value less costs to sell, with the exception of assets which are scoped out of the measurement requirements of IFRS 5 ‘Non-current assets held for sale and discontinued operations’, for example financial assets, which continue to be measured in accordance with IFRS 9 ‘Financial instruments’. Where the carrying amount of a non-current asset or disposal group held for sale exceeds its fair value less costs to sell, a loss is recognised. This is allocated firstly against any goodwill attributable to the disposal group, and then to other non-current assets in the disposal group that are in scope of IFRS 5’s measurement requirements. Any excess loss remaining is recognised against the remaining assets of the disposal group as a whole. A component of the Group that is held for sale or disposed of is presented as a discontinued operation either when it is a subsidiary acquired exclusively with a view to resale; or it represents, or is part of a coordinated plan to dispose of, a separate major line of business or geographical area of operations. The net results of discontinued operations are presented separately in the Group income statement (and the comparatives restated). Leases The Group assesses whether a contract is, or contains, a lease at inception of the contract. The Group as a lessee A right of use asset and corresponding lease liability are recognised at commencement of the lease. The lease liability is measured at the present value of the lease payments, discounted at the rate implicit in the lease, or if that cannot be readily determined, at the lessee’s incremental borrowing rate specific to the term, country, currency and start date of the lease. The lease liability is subsequently measured at amortised cost using the effective interest rate method. It is remeasured, with a corresponding adjustment to the right of use asset, when there is a change in future lease payments resulting from a rent review, change in an index or rate such as inflation, or change in the Group’s assessment of whether it is reasonably certain to exercise a purchase, extension or break option. The right of use asset is initially measured at cost, comprising: the initial lease liability; any lease payments already made less any lease incentives received; initial direct costs; and any dilapidation or restoration costs. The right of use asset is subsequently depreciated on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset, and tested for impairment. Leases of low value assets (value when new less than £5,000) and short-term leases of 12 months or less are expensed to the Group income statement, as are variable payments dependent on performance or usage not arising on a sale and leaseback transaction, ‘out of contract’ payments and non-lease service components. The Group as a lessor Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases, for which rental income is recognised on a straight-line basis over the term of the lease. Sale and leaseback Where the Group sells an asset and immediately reacquires use of it by entering into a lease with the buyer, a lease liability is recognised, the associated property, plant and equipment asset is derecognised, and a right of use asset is recognised at the proportion of the carrying value relating to the right retained. Any gain or loss arising relates to the rights transferred to the buyer. In the cash flow statement, sale and leaseback proceeds received are classified as investing cash flows, unless the proceeds exceed the fair value of the asset sold, in which case the excess proceeds are classified as financing cash flows. Property buybacks A property buyback is where a property that is currently leased is bought back from the landlord. Property buybacks that are a direct purchase of the underlying asset, outside of a corporate wrapper, are viewed as the modification of the lease to include a purchase option, followed by the immediate exercise of that purchase option. The lease liability is settled and the right of use asset forms part of the cost of the property, plant and equipment acquired, and no gain or loss is recognised in the income statement from the property buyback. Tesco PLC Annual Report and Financial Statements 2026 129 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 1 Accounting policies, judgements and estimates continued Property buybacks inside a corporate wrapper (such as a special purpose vehicle or joint venture structure) that do not meet the definition of a business combination are asset acquisitions. The cost of the asset acquisition includes the cash consideration paid and the carrying values of pre-existing lease contracts and any previously held interests. No gain or loss is recognised in the income statement from the property buyback. In the cash flow statement, property buyback net proceeds paid are classified as investing cash flows, unless the proceeds exceed the incremental asset purchased (difference between property, plant and equipment recognised and right of use asset derecognised), in which case the excess proceeds are classified as financing cash flows. Post-employment benefit obligations For defined benefit plans, obligations are measured at discounted present value and plan assets are recorded at fair value. The operating and financing costs of such plans are recognised separately in the Group income statement. Service costs are spread systematically over the expected service lives of employees and financing costs are recognised in the periods in which they arise. Actuarial gains and losses are recognised immediately in the Group statement of comprehensive income/(loss). Payments to defined contribution schemes are recognised as an expense as they fall due. Taxation The tax expense included in the Group income statement consists of current and deferred tax. Current tax is the expected tax payable on the taxable income for the financial year, using tax rates enacted or substantively enacted by the balance sheet date. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on the tax rates that have been enacted or substantively enacted by the balance sheet date. The tax expense is recognised in the Group income statement, except when it relates to items recognised directly in the Group statement of changes in equity or the Group statement of comprehensive income/(loss), in which case the tax follows the same treatment. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax assets and liabilities are offset against each other when there is a legally enforceable right to set off current tax assets against current tax liabilities and they relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend to settle current tax assets and liabilities on a net basis. The Group has applied the Pillar Two income taxes exception in IAS 12, so neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two income taxes. Tax provisions are recognised for uncertain tax positions where a risk of an additional tax liability has been identified and it is probable that the Group will be required to settle that tax. Measurement is dependent on management’s expectation of the outcome of decisions by tax authorities in the various tax jurisdictions in which the Group operates. This is assessed on a case-by-case basis using in-house tax experts, professional firms, and previous experience. Refer to Note 7. Foreign currencies At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated to the functional currency at the rates prevailing at the balance sheet date. Exchange differences are recognised in the Group income statement in the period in which they arise, apart from exchange differences on transactions entered into to hedge certain foreign currency risks, and exchange differences on monetary items forming part of the net investment in a foreign operation. The assets and liabilities of the Group’s foreign operations are translated into Pounds Sterling at exchange rates prevailing at the balance sheet date. Profits and losses are translated at average exchange rates for the relevant accounting periods. Exchange differences arising are recognised in the Group statement of comprehensive income/(loss) and are included in the Group’s translation reserve. Such translation differences are recognised as income or expenses in the period in which the operation is disposed of. Financial instruments Financial assets and financial liabilities are recognised in the Group balance sheet when the Group becomes party to the contractual provisions of the instrument. Classification and subsequent remeasurement depends on the Group’s business model for managing the financial asset and its cash flow characteristics. Financial assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost, and all other financial assets are measured either at fair value through profit or loss or fair value through other comprehensive income. Trade receivables Trade receivables are non interest-bearing and are recognised initially at fair value, or at transaction price if there is not a significant financing component. They are subsequently held at amortised cost using the effective interest rate method, less allowance for expected credit losses (ECLs). Investments Investments in debt instruments at amortised cost are measured at amortised cost, using the effective interest rate method less allowance for ECLs. Gains and losses on investments in debt instruments held at fair value through other comprehensive income are recognised directly in other comprehensive income, except for impairment gains and losses, interest income, and foreign exchange gains and losses, which are recognised in the Group income statement. When the debt instrument is derecognised, cumulative amounts in other comprehensive income are reclassified to the Group income statement. Investments in equity instruments have been irrevocably designated at fair value through other comprehensive income. Property fund and other investments held at fair value through profit or loss are measured at fair value, with changes in fair value recognised in the Group income statement. Short-term investments Short-term investments are liquid financial assets which have an original maturity of 12 months or less. Short-term investments are typically readily available for conversion to cash, but do not meet the criteria for classification as cash equivalents because either their maturity is greater than three months, for example short-term deposits, reverse repurchase agreements, commercial paper, and certificates of deposit, or the risk of changes in value is more than insignificant, for example money market funds. Impairment of financial assets The Group assesses on a forward-looking basis the ECLs associated with its financial assets carried at amortised cost and debt instruments carried at fair value through other comprehensive income. The ECLs are updated at each reporting date to reflect changes in credit risk. Tesco PLC Annual Report and Financial Statements 2026 130 ![]() The three-stage model for impairment has been applied to investments in debt instruments at amortised cost, investments in debt instruments at fair value through other comprehensive income, short-term investments, and loan receivables from joint ventures and associates. The credit risk is determined through modelling a range of possible outcomes for different loss scenarios, using reasonable and supportable information about past events, current conditions and forecasts of future events and economic conditions and taking into account the time value of money. A 12-month ECL is recognised, unless the credit risk on the financial asset increases significantly after initial recognition, when the lifetime ECL is recognised. The expected lifetime of a financial asset is generally the contractual term. For trade receivables, contract assets, and lease receivables, the Group applies the simplified approach permitted by IFRS 9, with lifetime ECLs recognised from initial recognition of the receivable. These assets are grouped, based on shared credit risk characteristics and days past due, with ECLs for each grouping determined based on the Group’s historical credit loss experience, adjusted for factors specific to each receivable, general economic conditions and expected changes in forecast conditions. Borrowings Borrowings and overdrafts are initially recorded at fair value, net of attributable transaction costs. Subsequent to initial recognition, borrowings are held at amortised cost with any difference between proceeds and redemption value being recognised in the Group income statement over the period of the borrowings on an effective interest basis. Trade payables Trade payables are non interest-bearing and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Equity instruments Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Derivative financial instruments and hedge accounting The Group uses derivative financial instruments to hedge its exposure to foreign exchange, inflation, interest rate, and commodity price risks arising from operating, financing and investing activities. Derivative financial instruments are recognised and stated at fair value. Where derivatives do not qualify for hedge accounting, any gains or losses on remeasurement are immediately recognised in the Group income statement. Where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedge relationship and the item being hedged. Fair value hedging Derivative financial instruments are classified as fair value hedges when they hedge the Group’s exposure to changes in the fair value of a recognised asset or liability. Changes in the fair value of derivatives that are designated as fair value hedges are recognised in the Group income statement within finance income or costs, together with any changes in the fair value of the hedged item that is attributable to the hedged risk. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item is amortised to the Group income statement over the remaining period to maturity. Cash flow hedging Derivative financial instruments are classified as cash flow hedges when they hedge the Group’s exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction. The effective element of any gain or loss from remeasuring the derivative designated as the hedging instrument is recognised directly in other comprehensive income and accumulated in the hedging reserve. The ineffective element is recognised immediately in the Group income statement. Where the hedged item subsequently results in the recognition of a non-financial asset such as inventory, the amounts accumulated in the hedging reserve are included in the initial cost of the asset. For all other cash flow hedges, the amounts accumulated are recognised in the Group income statement when the hedged item or transaction affects the Group income statement. The classification of the effective portion when recognised in the Group income statement is the same as the classification of the hedged transaction. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer meets the Group’s risk management objective. The cumulative gain or loss in the hedging reserve remains until the forecast transaction occurs or the original hedged item affects the Group income statement. If a forecast hedged transaction is no longer expected to occur, the cumulative gain or loss in the hedging reserve is reclassified to the Group income statement. Net investment hedging Financial instruments are classified as net investment hedges when they hedge the Group’s net investment in an overseas operation. The effective element of any foreign exchange gain or loss from remeasuring the instrument is recognised directly in other comprehensive income and accumulated in the translation reserve in equity. Any ineffective element is recognised immediately in the Group income statement. Gains and losses accumulated in the translation reserve are reclassified to the Group income statement when the foreign operation is disposed of. Presentation of derivatives in the Group cash flow statement The Group classifies derivatives in the same cash flow statement category as the underlying risk or hedged item and presents the related derivative cash flow movements net with the cash flows from the underlying risk being hedged. This applies regardless of whether the derivatives are in a formal hedge accounting relationship or not. To the extent that any derivative cash flows do not have an associated risk cash flow, such as for financing activities across the Group related to the management of foreign exchange on intercompany loans or foreign currency funding needs, those derivative cash flows are presented gross. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Group balance sheet when there is a current legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Power purchase agreements (PPAs) Tesco purchases renewable electricity for own use through physical PPAs in the UK, where Tesco purchases some or all of the physical output of an offsite renewable solar or wind electricity generation facility as it is produced. These PPAs were entered into and continue to be held for the purpose of the receipt of electricity for use in the Group’s businesses. The PPA supply does not exceed Tesco’s demand in any one delivery interval. Electricity purchased under such PPAs qualifies for the ‘own use’ exception and is treated as an executory contract and expensed as incurred. Provisions Provisions are measured at the present value of the risk-adjusted expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money. Tesco PLC Annual Report and Financial Statements 2026 131 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 1 Accounting policies, judgements and estimates continued Supplier financing arrangements Management reviews supplier financing arrangements to determine the appropriate presentation of balances outstanding as trade payables or borrowings, dependent on the nature of each arrangement. Factors considered in determining the appropriate presentation include the commercial rationale for the arrangement, impact on the Group’s working capital positions, credit enhancements or other benefits provided to the bank and recourse exposures. Balances outstanding under the Group’s supplier financing arrangements are classified as trade payables, and cash flows are included in operating cash flows, since the financing arrangements are agreed between the supplier and the banks, and the Group does not provide additional credit enhancement nor obtain any working capital benefit from the arrangements. Refer to Note 20. Insurance Classification of insurance contracts Contracts under which the Group accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain future event (the insured event) adversely affects the policyholder or other beneficiary are classified as insurance contracts. These contracts remain insurance contracts until all rights and obligations are extinguished or expire. Insurance contracts may also transfer some financial risk. Level of aggregation The level of aggregation for the Group is determined firstly by dividing the business written into motor and home portfolios. Portfolios comprise groups of contracts with similar risks which are managed together. At initial recognition the Group assesses whether the motor and home portfolios are divided further into groups of contracts that are onerous, have no significant possibility of becoming onerous, or are neither. In determining the level of aggregation, the Group identifies a contract as the smallest ‘unit’, i.e. the lowest common denominator. No group for level of aggregation purposes shall contain contracts issued more than one year apart. The Group divides portfolios of reinsurance contracts held applying the same principles. Insurance contracts issued Insurance contract liabilities include both a liability for incurred claims (LIC), which represents outstanding claims and incurred but not reported claims and other incurred insurance expenses; and a liability for remaining coverage (LRC), which represents the Group’s obligation for insured events related to the unexpired portion of the coverage period. The LRC is measured either using the general measurement model (GMM) or a simplified premium allocation approach (PAA). The Group applies the PAA to all insurance contracts issued since the acquisition of Tesco Underwriting (TU) in May 2021. The Group qualifies to use this approach as the coverage period of each contract in the group is one year or less. There is no allowance for the time value of money as the premiums are due within one year of the coverage period. The Group applies the GMM to all issued insurance contracts acquired on the acquisition of TU, as the settlement of these claims and their associated insurance risk will spread over multiple years. The Group has recognised an acquired claims liability as part of the LRC, which is measured at the probability-weighted average of discounted cash flows plus a risk adjustment for non-financial risk, plus any contractual service margin (CSM) if the fulfilment cash flows result in a net inflow. If the fulfilment cash flows result in a net outflow, an onerous loss is recognised in the Group income statement. The risk adjustment reflects the compensation that the Group requires for bearing uncertainty in respect of the amount and timing of the cash flows from non-financial risk, whilst the CSM represents the unearned profit in the contracts relating to services that will be provided under the contracts in the future. Commission payable to agents and other acquisition costs, which are incurred for acquiring new and renewal insurance business that is primarily related to the production of that business, are deferred and presented as part of the LRC. Such deferred acquisition costs are amortised over the period of insurance contract services on the basis of the passage of time. The carrying amount of the LRC measured under the GMM is updated at the end of each reporting period to reflect current estimates of the amounts, timing and uncertainty of future cash flows, as well as discount rates and other financial variables. The Group estimates the LIC as the discounted value of expected fulfilment cash flows related to incurred claims and other incurred insurance expenses, plus an explicit adjustment for non-financial risk. The fulfilment cash flows incorporate, in an unbiased way, all reasonable and supportable information available about the amount, timing and uncertainty of those future cash flows. Estimates of the present value of future cash flows reflect current expectations as at the end of the reporting period and are adjusted for events which have occurred since actuarial valuation. Future cash flows are assessed by reviewing individual claims data and making an allowance for claims incurred but not yet reported, adjusted for the effect on the claims incurred of both internal and external foreseeable events, such as changes in claims handling procedures, inflation, judicial trends, substantively enacted legislative changes and past experience and trends. Reinsurance The Group cedes reinsurance in the normal course of business for the purpose of limiting its net loss potential through the diversification of its risks. Reinsurance ceded includes quota share and excess of loss contracts. Reinsurance arrangements do not relieve the Group from its direct obligations to its policyholders. Only contracts that give rise to a significant transfer of insurance risk are accounted for as reinsurance contracts. Reinsurance assets include balances due from reinsurance companies for reinsurance claims. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsured policy. Reinsurance assets include both an asset for remaining coverage (ARC), which represents the reinsurer’s share of the unexpired portion of the coverage period, and an asset for incurred claims (AIC), which includes amounts due from the reinsurers for their share of outstanding claims, incurred but not reported claims, and other insurance-related expenses. As coverage is provided during the reporting period, the portion classified as ARC coverage is reclassified to AIC. The Group applies the PAA to all reinsurance contracts that it holds, except for contracts held prior to the acquisition of TU. The PAA is applicable for all reinsurance contracts purchased since the acquisition of TU as the contracts either qualify automatically in having a coverage period of one year or less, or because there is no material difference in their measurement between the PAA and the GMM. Modification and derecognition of insurance and reinsurance contracts The Group derecognises insurance and reinsurance contracts when the rights and obligations relating to the contract are extinguished (i.e. discharged, cancelled or expired). When a modification is not treated as a derecognition, the Group recognises amounts paid or received for the modification with the contract as an adjustment to the relevant LRC or ARC. Presentation of insurance contracts issued and reinsurance contracts held The Group classifies all insurance contract liabilities as current as it does not have the right to defer Tesco PLC Annual Report and Financial Statements 2026 132 ![]() settlement beyond 12 months after the reporting date. The Group classifies its reinsurance portfolio as non-current as it does not reasonably expect to realise its reinsurance assets within 12 months of the reporting date. Presentation of quota share reinsurance funds withheld The Group has quota share reinsurance contracts with a funds withheld feature, whereby the ceded premiums are deposited into the fund and related recoveries are netted off in the same fund. The fund is settled on a net basis on commutation. The only initial cashflows during the coverage period are the payment of the reinsurer margin. Under IFRS 17, the reinsurance assets related to these funds withheld and the fund itself are presented on a net basis within asset for incurred claims (included in reinsurance contract assets). Insurance revenue The insurance revenue recognised is the amount of expected premium receipts allocated to the period. For insurance contracts issued after the acquisition of TU in May 2021, the Group allocates the expected premium receipts to each period of insurance contract services based on the passage of time. The insurance revenue recognised for insurance contracts acquired as part of the acquisition of TU comprises: – claims costs incurred in the period measured at the amounts expected at the beginning of the period; – changes in the risk adjustment for non-financial risk; and – the amount of the CSM recognised for services provided in the period. Insurance service expenses Insurance service expenses include total claims cost for the period, as well as all directly attributable insurance expenses. There are no acquisition costs for acquired claims. Insurance acquisition cash flows arising from the costs of selling, underwriting and starting a group of insurance contracts are allocated to insurance service expenses based on the passage of time. Net income or expenses from reinsurance contracts held The Group separately presents income or expenses from reinsurance contracts held from the expenses or income from insurance contracts issued. The Group presents the income or expenses from a group of reinsurance contracts held as a single amount. Insurance finance income and expenses Insurance finance income and expenses comprise the change in the carrying amount of the group of insurance contracts arising from the effect of the time value of money, financial risk and changes in financial risk. The impact of changes in market interest rates on the carrying value of insurance assets and liabilities is reflected in the Group statement of other comprehensive income in order to minimise accounting mismatches between the accounting for financial assets and insurance assets and liabilities. The Group’s financial assets backing both the motor and home insurance portfolios are predominantly measured at fair value through other comprehensive income. The amount of insurance finance income and expenses recognised in the Group income statement is calculated using the discount rate curve determined at the date of the incurred claim. Alternative performance measures (APMs) In the reporting of financial information, the Directors have adopted various APMs. Refer to the Glossary for a full list of the Group’s APMs, including comprehensive definitions, their purpose, reconciliations to IFRS measures and details of any changes to APMs. Judgements and sources of estimation uncertainty The preparation of the consolidated Group financial statements requires management to make judgements, estimates and assumptions in applying the Group’s accounting policies to determine the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis, with revisions to accounting estimates applied prospectively. Critical accounting judgements Critical judgements, apart from those involving estimations, which are applied in the preparation of the consolidated Group financial statements are discussed below: Leases Management exercises judgement in determining the likelihood of exercising break or extension options in determining the lease term. Break and extension options are included to provide operational flexibility should the economic outlook for an asset be different to expectations, and hence at commencement of the lease, break or extension options are not typically considered reasonably certain to be exercised, unless there is a valid business reason otherwise. The discount rate used to calculate the lease liability is the rate implicit in the lease, if it can be readily determined, or the lessee’s incremental borrowing rate if not. Management uses the rate implicit in the lease where the lessor is a related party (such as leases from joint ventures) and the lessee’s incremental borrowing rate for all other leases. Incremental borrowing rates are determined monthly and depend on the term, country, currency and start date of the lease. The incremental borrowing rate is determined based on a series of inputs including: the risk-free rate based on government bond rates; a country-specific risk adjustment; a credit risk adjustment based on Tesco bond yields; and an entity-specific adjustment where the entity risk profile is different to that of the Group. Refer to Note 13 for additional disclosures relating to leases. Joint ventures and associates The Group has assessed the nature of its joint arrangements under IFRS 11 ‘Joint arrangements’ and determined them to be joint ventures. These assessments required the exercise of judgement as set out in Note 14. APMs – Adjusting items Adjusting items relate to certain costs or incomes that derive from events or transactions that fall within the normal activities of the Group but which, individually or, if of a similar type, in aggregate, are excluded from the Group’s APMs by virtue of their size and nature in order to provide a helpful alternative perspective of the year-on-year trends, performance and position of the Group’s trading business that is more comparable over time. This alternative view is consistent with how management views the business, and how it is reported internally to the Board and Executive Committee for performance analysis, planning, reporting, decision-making and incentive-setting purposes. Management exercises judgement in determining the adjustments to apply to IFRS measurements, and this assessment covers the nature of the item, cause of occurrence and the scale of impact of that item on reported performance and individual financial statement line items, as well as consistency with prior periods. Reversals of previous adjusting items are assessed based on the same criteria to ensure an even-handed treatment of gains and losses. The amount and timing of adjusting items can be unpredictable and subject to a higher level of scrutiny by users of the accounts. Adjusting items can include, but are not limited to: litigation costs; certain impairment charges and reversals; property transactions such as disposals; amortisation of acquired intangibles; changes in uncertain tax Tesco PLC Annual Report and Financial Statements 2026 133 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 1 Accounting policies, judgements and estimates continued positions; restructuring and redundancy costs; profits or losses on disposal of businesses; net pension finance costs; and fair value remeasurements of financial instruments. The tax effect of such items is also classified as adjusting. The Group income statement is presented in a columnar format to enable users of the accounts to see the Group’s performance before adjusting items, the adjusting items, and the statutory total on a line-by-line basis. An analysis of the adjusting items included in the Group income statement, together with the impact of these items on the Group cash flow statement, is disclosed in Note 5. Refer to pages 216 to 222 for further details on the Group’s APMs. Key sources of estimation uncertainty The key assumptions about the future, and other key sources of estimation uncertainty at the reporting period end, that may have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below: Post-employment benefit obligations The present value of post-employment benefit obligations is determined on an actuarial basis using various assumptions, including the discount rate, inflation rate and mortality assumptions. Any changes in these assumptions will impact the carrying amount as well as the net pension cost/income. Key assumptions and sensitivities for post-employment benefit obligations are disclosed in Note 28. Impairment of non-financial assets The Group evaluates non-current assets for impairment as set out in Note 15. The key assumptions and estimates to which the recoverable amounts are most sensitive, the methodology for calculating them and sensitivities are also disclosed in Note 15. Other significant estimates Other estimates for which management believes there is a limited risk of a material change in the amounts recognised or disclosed in the next financial year are discussed below: Commercial income Management is required to make estimates in determining the amount and timing of recognition of commercial income for some transactions with suppliers. In determining the amount of volume- related allowances recognised in any period, management estimates the probability that the Group will meet contractual target volumes, based on historical and forecast performance. There is limited estimation involved in recognising income for promotional and other allowances. Management assesses its performance against the obligations conditional on earning the income, with the income recognised either over time as the obligations are met, or recognised at the point when all obligations are met, dependent on the contractual requirements. Management views that the cost of inventories sold (which is inclusive of commercial income) provides a consistent and complete measure of the Group income statement impact of the overall supplier relationships. Management considers the best indicator of the estimation undertaken is by reference to commercial income balances not settled at the balance sheet date, and has therefore provided additional disclosures of commercial income amounts reflected in the Group balance sheet. Refer to Note 21. Impact of the conflict in the Middle East In light of the escalation of the conflict in the Middle East on 28 February 2026 (the Group balance sheet date), the Group has considered whether any adjustments are required to reported amounts in the financial statements. The Group considers there to be no observable indicators at the balance sheet date requiring adjustment in the Group financial statements. The Group also reviewed non-adjusting macroeconomic movements after the balance sheet date (for example discount rates, asset values, inflation and future cash flow expectations) and concluded that, where relevant, those movements were within the range of the Group’s existing sensitivities, hence no additional disclosures were required. Sensitivities of reasonably possible changes in key inputs to impairment testing of goodwill and non-current assets and pension obligations are given in Notes 15 and 28, respectively. Note 2 Segmental reporting The Group’s operating segments are determined based on the Group’s organisational structure and internal reporting to the Chief Operating Decision Maker (CODM). The CODM has been determined to be the Group Chief Executive, with support from the Executive Committee, as the function primarily responsible for the allocation of resources to segments and assessment of performance of the segments. The Group’s operating segments are the same as its reportable segments listed below. Following changes to the Group Executive Committee and management reporting to the CODM during the year, Booker is now a separate operating and reportable segment. Comparatives have been restated accordingly. The principal activities of the Group are presented in the following reportable segments: – UK & ROI – The United Kingdom and Republic of Ireland. Revenues are derived from the sale of goods (in store, fuel and online), Clubcard, data science services, insurance brokerage commission, insurance revenue and money services. – Booker – Revenues are derived from the sale of wholesale goods. – Central Europe – Czech Republic, Hungary and Slovakia. Revenues are derived from the sale of goods (in store, fuel and online) and Clubcard. The CODM uses Adjusted operating profit, as reviewed at periodic Executive Committee meetings, as the key measure of the segments’ results as it reflects the segments’ trading performance and aids comparability over time. Adjusted operating profit is a consistent measure within the Group as defined within the Glossary. Refer to Note 5 for adjusting items. Income statement The segment results (which are on a 52-week basis) and the reconciliation of the segment measures to the respective statutory items included in the Group income statement are as follows: | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | Total 52 | | | Total 53 | | | | | | | weeks at | | | weeks at | | 53 weeks ended 28 | | | | Central | constant | Foreign | Include | actual | | February 2026 | | UK & ROI | Booker | Europe | exchange | exchange | 53rd week\* | exchange | | At constant exchange rates | Notes | £m | £m | £m | £m | £m | £m | £m | | Revenue | 3 | 58,731 | 9,040 | 4,474 | 72,245 | 219 | 1,248 | 73,712 | | Less: Fuel sales | | (5,737) | - | (134) | (5,871) | (5) | (111) | (5,987) | | Sales | | 52,994 | 9,040 | 4,340 | 66,374 | 214 | 1,137 | 67,725 | | Adjusted operating profit | | 2,745 | 292 | 111 | 3,148 | 4 | 42 | 3,194 | | Adjusting items | 5 | (84) | (81) | (31) | (196) | (1) | (12) | (209) | | Operating profit | | 2,661 | 211 | 80 | 2,952 | 3 | 30 | 2,985 | | Adjusted operating margin | | 4.7% | 3.2% | 2.5% | 4.4% | | | 4.3% | \* Refer to page 216 for details of week 53 adjustments for the Group’s APMs. Tesco PLC Annual Report and Financial Statements 2026 134 ![]() | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Central | Total 52 | Include | Total 53 | | 53 weeks ended 28 February 2026 | | UK & ROI | Booker | Europe | weeks | 53rd week\* | weeks | | At actual exchange rates | Notes | £m | £m | £m | £m | £m | £m | | Revenue | 3 | 58,795 | 9,040 | 4,629 | 72,464 | 1,248 | 73,712 | | Less: Fuel sales | | (5,737) | - | (139) | (5,876) | (111) | (5,987) | | Sales | | 53,058 | 9,040 | 4,490 | 66,588 | 1,137 | 67,725 | | Adjusted operating profit | | 2,745 | 292 | 115 | 3,152 | 42 | 3,194 | | Adjusting items | 5 | (84) | (81) | (32) | (197) | (12) | (209) | | Operating profit | | 2,661 | 211 | 83 | 2,955 | 30 | 2,985 | | Adjusted operating margin | | 4.7% | 3.2% | 2.5% | 4.3% | | 4.3% | | Share of post-tax profit/ | 14 | | | | | | (1) | | (loss) of joint ventures and associates | | | | | | | | | Finance income | 6 | | | | | | 233 | | Finance costs | 6 | | | | | | (814) | | Profit/(loss) before tax | | | | | | | 2,403 | \* Refer to page 216 for details of week 53 adjustments for the Group’s APMs. | | | | | | | | --- | --- | --- | --- | --- | --- | | | | UK & ROI | | Central | | | 52 weeks ended 22 February 2025 | | (restated\*) | Booker | Europe | Total | | At actual exchange rates | Notes | £m | £m | £m | £m | | Revenue | 3 | 56,593 | 8,990 | 4,333 | 69,916 | | Less: Fuel sales | | (6,133) | - | (147) | (6,280) | | Sales | | 50,460 | 8,990 | 4,186 | 63,636 | | Adjusted operating profit | | 2,726 | 290 | 112 | 3,128 | | Adjusting items | 5 | (209) | (78) | (130) | (417) | | Operating profit | | 2,517 | 212 | (18) | 2,711 | | Adjusted operating margin | | 4.8% | 3.2% | 2.6% | 4.5% | | Share of post-tax profit/(loss) of joint ventures | 14 | | | | (4) | | and associates | | | | | | | Finance income | 6 | | | | 254 | | Finance costs | 6 | | | | (746) | | Profit/(loss) before tax | | | | | 2,215 | \* Comparatives have been restated to reflect the reclassification of the Booker business to its own segment. Included within the UK & ROI segment is £1,123m of revenue and sales (2025: £1,043m), £167m of adjusted operating profit (2025: £155m), £(28)m of adjusting items (2025: £(14)m) and £139m of operating profit (2025: £141m) related to the Insurance and Money Services business. Other segment information The tables below show the Group’s total capital expenditure, depreciation and amortisation for continuing operations: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | Central | Total 52 | Include 53rd | Total 53 | | | UK & ROI | Booker | Europe | weeks | week (a) | weeks | | 53 weeks ended 28 February 2026 | £m | £m | £m | £m | £m | £m | | Capital expenditure (including | | | | | | | | acquisitions through business | | | | | | | | combinations): | | | | | | | | Property, plant and equipment (b) | 1,182 | 75 | 97 | 1,354 | 15 | 1,369 | | Goodwill and other intangible assets (c) | 310 | - | 10 | 320 | 6 | 326 | | Depreciation and amortisation: | | | | | | | | Property, plant and equipment | (841) | (51) | (88) | (980) | (16) | (996) | | Right of use assets | (441) | (90) | (50) | (581) | (10) | (591) | | Other intangible assets | (212) | (78) | (11) | (301) | (6) | (307) | (a) Refer to page 216 for details of week 53 adjustments for the Group’s APMs. (b) Includes £nil (2025: £1m) of property, plant and equipment acquired through business combinations. (c) Includes £3m (2025: £56m) of goodwill and other intangible assets acquired through business combinations. | | | | | | | --- | --- | --- | --- | --- | | | UK & ROI | | Central | Total | | | (restated (a) ) | Booker | Europe | segments | | 52 weeks ended 22 February 2025 | £m | £m | £m | £m | | Capital expenditure (including acquisitions through business combinations): | | | | | | Property, plant and equipment (b) | 1,182 | 82 | 98 | 1,362 | | Goodwill and other intangible assets (c) | 276 | 56 | 10 | 342 | | Depreciation and amortisation: | | | | | | Property, plant and equipment | (800) | (50) | (87) | (937) | | Right of use assets | (419) | (82) | (49) | (550) | | Other intangible assets | (199) | (77) | (11) | (287) | (a) Comparatives have been restated to reflect the reclassification of the Booker business to its own segment. (b)–(c) Refer to previous table for footnotes. Tesco PLC Annual Report and Financial Statements 2026 135 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 3 Revenue | | | | | | --- | --- | --- | --- | | | | 53 weeks | 52 weeks | | | | 2026 | 2025 | | Continuing operations | Notes | £m | £m | | UK | | 56,590 | 53,619 | | ROI | | 3,299 | 2,974 | | UK & ROI\* | | 59,889 | 56,593 | | Booker | | 9,194 | 8,990 | | Hungary | | 1,616 | 1,445 | | Czech Republic | | 1,562 | 1,471 | | Slovakia | | 1,451 | 1,417 | | Central Europe | 2 | 4,629 | 4,333 | | Total Group | 2 | 73,712 | 69,916 | \* Comparatives have been restated to reflect the reclassification of the Booker business to its own segment. Refer to Note 2. Note 4 Operating expenses Auditor’s remuneration | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | | £m | £m | | Fees payable to the Company’s auditor and its associates for the audit of the Company and Group financial statements | 4.1 | 4.1 | | The audit of the accounts of the Company’s subsidiaries | 9.7 | 10.8 | | Total audit services | 13.8 | 14.9 | | Audit-related assurance services | 0.8 | 0.9 | | Non-audit services | 0.6 | 0.8 | | Total non-audit services | 1.4 | 1.7 | | Total auditor’s remuneration | 15.2 | 16.6 | Audit-related assurance services of £0.8m (2025: £0.9m) comprise: review of the Group’s interim report £0.6m (2025: £0.6m) and other services £0.2m (2025: £0.3m). In addition to the amounts shown above, the auditor received fees of £0.3m (2025: £0.2m) for the audit of the main Group pension schemes, and fees of £0.6m (2025: £0.5m) for the audit of joint ventures. Non-audit services are subject to approval by the Chief Audit and Risk Officer and the Audit Committee. Additional information on the non-audit services provided by the auditor is provided in the Audit Committee report on page 87, including how objectivity and independence are safeguarded. Employment costs, including Directors’ remuneration | | | | | | --- | --- | --- | --- | | | | 53 weeks | 52 weeks | | | | 2026 | 2025 | | | Notes | £m | £m | | Wages and salaries | | 7,922 | 7,473 | | Social security costs | | 837 | 609 | | Post-employment defined benefit charges | 28 | 20 | 17 | | Post-employment defined contribution charges | 28 | 486 | 454 | | Share-based payments expense | 27 | 140 | 136 | | Termination benefits | | 56 | 37 | | Total | | 9,461 | 8,726 | | Less: Discontinued operations | | - | (110) | | Total continuing operations | | 9,461 | 8,616 | Post-employment defined contribution charges include £172m (2025: £181m) of salaries paid as pension contributions. The table below shows the average number of employees by segment during the financial year. | | | | | | | --- | --- | --- | --- | --- | | | Average number of | | | Average number of full-time | | | employees | | equivalents | | | | 2026 | 2025 | 2026 | 2025 | | UK & ROI (a) | 298,794 | 303,775 | 193,002 | 194,893 | | Booker | 15,195 | 14,981 | 13,926 | 13,757 | | Central Europe | 22,134 | 22,352 | 20,260 | 20,490 | | Total continuing operations | 336,123 | 341,108 | 227,188 | 229,140 | | Discontinued operations (b) | - | 2,363 | - | 2,253 | (a) Comparatives have been restated to reflect the reclassification of the Booker business to its own segment. Refer to Note 2. (b) Discontinued operations for the prior year represents the average for eight months to the date of disposal of the Group’s Banking operations. Tesco PLC Annual Report and Financial Statements 2026 136 ![]() Note 5 Adjusting items Group income statement Refer to Note 1 for further details regarding the assessment of items as adjusting. 53 weeks ended 28 February 2026 Profit/(loss) for the year included the following adjusting items: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | Total adjusting | | | | | | | | items included | | | | | | | Administrative | within operating | Finance income/ | | Total adjusting | | | Cost of sales | expenses | profit | (costs) | Taxation | items | | | £m | £m | £m | £m | £m | £m | | Property transactions (a) | 3 | - | 3 | - | (2) | 1 | | Net impairment (loss)/reversal of non-current assets (b) | (48) | (5) | (53) | - | 39 | (14) | | Restructuring (c) | (31) | (22) | (53) | - | 11 | (42) | | Amortisation of acquired intangible assets (d) | - | (78) | (78) | - | 20 | (58) | | Separation programme costs related to disposal of Banking operations (e) | (15) | (13) | (28) | - | 16 | (12) | | Net pension finance income/(costs) (f) | - | - | - | (14) | 4 | (10) | | Fair value remeasurements of financial instruments (f) | - | - | - | (26) | 8 | (18) | | Total adjusting items (g) | (91) | (118) | (209) | (40) | 96 | (153) | (a) Includes profits and losses related to the disposal of surplus properties. (b) Refer to Note 15 for further details on net impairment (loss)/reversal of non-current assets. (c) Provisions relating to operational restructuring changes announced as part of save to invest, a multi-year programme which commenced in June 2022, and a multi-year programme to restructure the UK distribution network, which commenced in the current year. The total cost of the save to invest programme recognised as adjusting since its start date is £(316)m (2025: £(275)m). Future cost savings will not be reported within adjusting items. (d) Amortisation of acquired intangibles relates to assets acquired through business combinations and does not reflect the Group’s ongoing trading performance. (e) Separation programme costs incurred in the continuing Group in relation to the disposal of the Group’s Banking operations in the prior year. (f) Net pension finance costs and fair value remeasurements of financial instruments are included within adjusting items, as they can fluctuate significantly due to external market factors that are outside management’s control. Refer to Note 6 for details of finance income and costs. Refer to Note 28 for details of pension schemes. (g) For the 53 weeks ended 28 February 2026 (prior year 52 weeks ended 22 February 2025). The impact of adjusting items in the 53rd week is not material. See page 219. 52 weeks ended 22 February 2025 Profit/(loss) for the year included the following adjusting items: | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Total adjusting | | | Adjusting items | | | | | | items included | | | included within | | | | | Administrative | within operating | Finance income/ | | discontinued | Total adjusting | | | Cost of sales | expenses | profit | (costs) | Taxation | operations | items | | | £m | £m | £m | £m | £m | £m | £m | | Property transactions | 1 | 1 | 2 | - | - | - | 2 | | Net impairment (loss)/reversal of non-current assets | (274) | (12) | (286) | - | 57 | - | (229) | | Restructuring | (38) | (5) | (43) | - | 11 | - | (32) | | Amortisation of acquired intangible assets | - | (76) | (76) | - | 19 | - | (57) | | Separation programme costs related to disposal of Banking operations | (8) | (6) | (14) | - | 4 | - | (10) | | Net pension finance income/(costs) | - | - | - | (32) | 8 | - | (24) | | Fair value remeasurements of financial instruments | - | - | - | 76 | (20) | - | 56 | | Total adjusting items from continuing operations | (319) | (98) | (417) | 44 | 79 | - | (294) | | Adjusting items relating to discontinued operations | - | - | - | - | - | (65) | (65) | | Total adjusting items | (319) | (98) | (417) | 44 | 79 | (65) | (359) | Tesco PLC Annual Report and Financial Statements 2026 137 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 5 Adjusting items continued Group cash flow statement The table below shows the impact of adjusting items on the Group cash flow statement: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | Cash flows from | | Cash flows from | Cash flows from | | | | operating activities | | | investing activities | financing activities | | | | 53 weeks | 52 weeks | 53 weeks | 52 weeks | 53 weeks | 52 weeks | | | 2026 | 2025 | 2026 | 2025 | 2026 | 2025 | | | £m | £m | £m | £m | £m | £m | | Property transactions (a) | (1) | - | 39 | 130 | (31) | - | | Restructuring (b) | (53) | (55) | - | - | - | - | | Separation (costs)/ | (26) | (26) | - | 586 | - | - | | proceeds related to disposal of Banking | | | | | | | | operations (c) | | | | | | | | Disposal of subsidiaries (d) | - | - | 2 | - | - | - | | Total | (80) | (81) | 41 | 716 | (31) | - | | Adjusting items relating to discontinued operations (e) | - | - | - | (429) | - | - | | Total | (80) | (81) | 41 | 287 | (31) | - | (a) Property transactions include £37m proceeds from the sale of 28 sites and the leaseback of 10 associated stores in the UK and a £(31)m premium related to a significant transaction in the UK, which due to their size and nature, are treated as adjusting. The prior year related to the sale of four malls and the leaseback of the four associated stores in Central Europe, previously classified as held for sale. (b) Cash outflows relating to operational restructuring changes as part of the multi-year save to invest programme, which commenced in June 2022, and a multi-year programme to restructure the UK distribution network, which commenced in the current year. (c) Separation programme costs incurred in the continuing Group in relation to the disposal of the Group’s Banking operations. The prior year related to net proceeds from the sale and costs incurred in the disposal. (d) Deferred proceeds received in the current year relating to the disposal of Booker subsidiary Ritter-Courivaud Limited in June 2023. (e) In the prior year, the Banking operations disposal group held £429m in cash and cash equivalents at the date of disposal. Refer to Note 8 in the Annual Report and Financial Statements 2025 for the net book value of assets disposed. Note 6 Finance income and costs | | | | | | --- | --- | --- | --- | | | | 53 weeks | 52 weeks | | | | 2026 | 2025 | | Continuing operations | Notes | £m | £m | | Finance income | | | | | Interest income on: | | | | | Bank balances | | 103 | 113 | | Short-term investments | | 99 | 119 | | Loans to joint ventures and associates | | 7 | 7 | | Other investments and receivables | | 20 | 12 | | Net investment in leases | | 2 | 1 | | Finance income on reinsurance contracts held | | 2 | 2 | | Total finance income | | 233 | 254 | | Finance costs | | | | | GBP MTNs and loans | | (172) | (204) | | EUR MTNs | | (83) | (82) | | USD bonds | | (14) | (16) | | Interest expense on lease liabilities \* | | (390) | (370) | | Finance expense on insurance contracts issued | | (13) | (11) | | Interest expense on bank overdrafts | | (91) | (97) | | Undrawn committed facility fee | | (5) | (5) | | Unwind of discount on provision | | (6) | (5) | | Total finance costs before adjusting items | | (774) | (790) | | Fair value remeasurements of financial instruments | | (26) | 76 | | Net pension finance income/(costs) | 28 | (14) | (32) | | Total finance costs | | (814) | (746) | | Net finance costs | | (581) | (492) | \* Interest expense on lease liabilities is presented net of £14m hedging impact (2025: £7m). Tesco PLC Annual Report and Financial Statements 2026 138 ![]() Note 7 Taxation Recognised in the Group income statement | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | Continuing operations | £m | £m | | Current tax (credit)/charge | | | | UK corporation tax | 456 | 394 | | Overseas tax | 85 | 88 | | Adjustments in respect of prior years | (35) | (18) | | | 506 | 464 | | Deferred tax (credit)/charge | | | | Origination and reversal of temporary differences | 84 | 137 | | Adjustments in respect of prior years | 26 | 6 | | Change in tax rate | - | 4 | | | 110 | 147 | | Total income tax (credit)/charge | 616 | 611 | Reconciliation of effective tax charge | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | Continuing operations | £m | £m | | Profit/(loss) before tax | 2,403 | 2,215 | | Tax credit/(charge) at the UK corporation tax rate of 25% (2025: 25%) | (601) | (554) | | Effect of: | | | | Non-qualifying depreciation | (41) | (41) | | Expenses not deductible | (24) | (20) | | Net impairment (loss)/reversal of non-current assets | 25 | (8) | | Unrecognised tax losses | (5) | (3) | | Differences in overseas taxation rates | 23 | 11 | | Adjustments in respect of prior years | 9 | 12 | | Share of profits/(losses) of joint ventures and associates | - | (1) | | Change in tax rate | - | (4) | | Irrecoverable withholding tax | (2) | (3) | | Total income tax credit/(charge) | (616) | (611) | | Effective tax rate (statutory) | 25.6% | 27.6% | Reconciliation of effective tax charge on adjusted profit before tax | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | Continuing operations | £m | £m | | Profit/(loss) before tax | 2,403 | 2,215 | | Exclude: Adjusting items | 249 | 373 | | Adjusted profit before tax | 2,652 | 2,588 | | Tax credit/(charge) at the UK corporation tax rate of 25% (2025: 25%) | (663) | (647) | | Effect of: | | | | Non-qualifying depreciation | (41) | (41) | | Expenses not deductible | (25) | (21) | | Unrecognised tax losses | (5) | (3) | | Differences in overseas taxation rates | 20 | 20 | | Adjustments in respect of prior years | 4 | 12 | | Share of profits/(losses) of joint ventures and associates | - | (1) | | Change in tax rate | - | (6) | | Irrecoverable withholding tax | (2) | (3) | | Total income tax credit/(charge) before adjusting items | (712) | (690) | | Adjusted effective tax rate | 26.8% | 26.7% | The tax credit/(charge) for week 53 is £(9)m. The Adjusted effective tax rate is the same on both a 53-week and 52-week basis. Tax on items credited directly to the Group statement of changes in equity | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | Continuing operations | £m | £m | | Current tax credit/(charge) on: | | | | Share-based payments | 13 | 14 | | Deferred tax credit/(charge) on: | | | | Share-based payments | 35 | 22 | | Total tax on items credited/(charged) to the Group statement of changes | 48 | 36 | | in equity | | | Tesco PLC Annual Report and Financial Statements 2026 139 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 7 Taxation continued Tax relating to components of the Group statement of comprehensive income/(loss) | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | Continuing operations | £m | £m | | Current tax credit/(charge) on: | | | | Pensions | 7 | - | | Fair value of movement on financial assets at fair value through other comprehensive income | (2) | - | | Deferred tax credit/(charge) on: | | | | Pensions | (54) | (93) | | Fair value of movement on financial assets at fair value through other comprehensive income | (6) | (3) | | Finance income/(expenses) on insurance contracts issued and reinsurance contracts held | 1 | - | | Fair value movements on cash flow hedges | 5 | 7 | | Total tax on items credited/(charged) to Group statement of comprehensive income/(loss) | (49) | (89) | Deferred tax The following are the major deferred tax (liabilities)/assets recognised by the Group and movements thereon during the current and prior financial years, measured using the tax rates that are expected to apply when the liability is settled or the asset realised, based on the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised when it is probable sufficient taxable profits will be available to utilise deductible temporary differences or unused tax losses. This assessment is based on the Group’s three-year long-term plan which is updated and approved annually by the Board and is consistent with the Group’s Longer term viability statement and impairment assessments. | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Property-related | Acquired | Post-employment | Share-based | Short-term timing | | Financial | | | | items (a) | intangibles | benefits (b) | payments | differences | Tax losses | instruments | Total | | Continuing operations | £m | £m | £m | £m | £m | £m | £m | £m | | At 24 February 2024 | (493) | (77) | 162 | 49 | 74 | 73 | (25) | (237) | | (Charge)/credit to the Group income statement | (100) | 19 | 2 | (5) | 8 | (68) | (3) | (147) | | (Charge)/credit to the Group statement of changes in equity | - | - | - | 22 | - | - | - | 22 | | (Charge)/credit to the Group statement of comprehensive income/(loss) | - | - | (93) | - | - | - | 4 | (89) | | Acquisition | - | (5) | - | - | - | - | - | (5) | | At 22 February 2025 | (593) | (63) | 71 | 66 | 82 | 5 | (24) | (456) | | (Charge)/credit to the Group income statement | (134) | 20 | 5 | 3 | 15 | (1) | (18) | (110) | | (Charge)/credit to the Group statement of changes in equity | - | - | - | 35 | - | - | - | 35 | | (Charge)/credit to the Group statement of comprehensive income/(loss) | - | - | (54) | - | - | - | - | (54) | | Foreign exchange and other movements | (1) | - | 1 | - | (1) | - | - | (1) | | At 28 February 2026 | (728) | (43) | 23 | 104 | 96 | 4 | (42) | (586) | (a) Property-related items are a deferred tax liability on accelerated tax depreciation of £(729)m (2025: £(610)m), deferred tax liability on rolled-over gains of £(421)m (2025: £(422)m), deferred tax asset on capital losses of £242m (2025: £239m) and deferred tax asset on IFRS 16 balances of £180m (2025: £200m). (b) Post-employment benefits include a tax (charge)/credit to the Group statement of comprehensive income/(loss) relating to remeasurement gain/(loss). The closing deferred tax relates to a deferred tax asset on pension schemes in deficit or a deferred tax liability on schemes in surplus if no withholding tax applies. Refer to Note 28 for further details. Tesco PLC Annual Report and Financial Statements 2026 140 ![]() The following is the analysis of the deferred tax balances after offset: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Deferred tax assets | 49 | 47 | | Deferred tax liabilities | (635) | (503) | | | (586) | (456) | Unrecognised deferred tax assets and liabilities Deferred tax assets in relation to continuing operations have not been recognised in respect of the following items because it is not probable that future taxable profits will be available against which the Group can utilise the benefits: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Deductible temporary differences | 41 | 40 | | Tax losses | 196 | 180 | | | 237 | 220 | As at 28 February 2026, the Group has unused trading tax losses from continuing operations of £729m (2025: £630m) available for offset against future profits. A deferred tax asset has been recognised in respect of £14m (2025: £19m) of such losses, with £10m (2025: £11m) in USA and £4m (2025: £8m) in other jurisdictions. No deferred tax asset has been recognised in respect of the remaining overseas trading tax losses of £715m (2025: £611m) due to the uncertainty of future taxable profits with £544m (2025: £514m) in the Netherlands, £33m (2025: £32m) in Germany, £132m (2025: £59m) in Hungary, £4m (2025: £6m) in Slovakia and £2m (2025: £nil) in Czech Republic. Capital losses of £94m (2025: £89m) in ROI have not been recognised as it is not expected they will be utilised. A deferred tax asset has not been recognised in respect of deductible temporary differences of £41m (2025: £40m) as it is not expected they will be utilised. Of these unrecognised tax losses and temporary differences, £136m (2025: £70m) will expire within five years and the remainder are available indefinitely. No deferred tax liability is recognised on taxable temporary differences relating to the unremitted earnings of overseas subsidiaries and joint ventures as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. The deferred tax on unremitted earnings at 28 February 2026 is estimated to be £8m (2025: £8m) which relates to taxes payable on repatriation and dividend withholding taxes levied by overseas tax jurisdictions. UK tax legislation relating to company distributions provides for exemption from tax for most repatriated profits, subject to certain exceptions. Note 8 Discontinued operations and assets classified as held for sale | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Non-current assets classified as held for sale | 114 | 50 | Non-current assets classified as held for sale consist of properties in the UK due to be sold within one year. Due to the individual nature of each property, fair values are classified as Level 3 within the fair value hierarchy. The movement in the year relates to a reclassification of £91m of properties from property, plant and equipment for a number of sites to be sold within one year, offset by £(26)m of disposals and £(1)m of net remeasurement. Disposal of Banking operations in the prior year In February 2024, the Group agreed to sell its Banking operations, comprising personal loans, credit cards, customer deposits, and associated operational capabilities (Banking operations). In October 2024, the Group received approval from the High Court of Justice of England and Wales for the disposal which subsequently completed on 1 November 2024. The net results of Banking operations and the profit/(loss) on disposal were presented in profit/(loss) for the year from discontinued operations in the prior year Group income statement. There were no other discontinued operations in the prior year. Income statement of discontinued operations | | | | --- | --- | | | 2025 | | | £m | | Revenue | 547 | | Operating costs | (448) | | Operating profit (a) | 99 | | Net finance costs | (1) | | Profit before tax | 98 | | Taxation | (24) | | Profit after tax | 74 | | Remeasurement of the disposal group to fair value less costs to sell (a)(b) | (64) | | Tax on remeasurement of the disposal group to fair value less costs to sell (c) | 16 | | Profit after tax of discontinued operations | 26 | (a) In the prior year, operating profit/(loss) of discontinued operations in the Group cash flow statement of £35m comprised the operating profit above of £99m and fair value remeasurement of assets of the disposal group of £(64)m. (b) In the prior year, remeasurement of the disposal group to fair value less costs to sell included £(7)m remeasurements on non-current assets and £(57)m loss in excess of the carrying amount of the non-current assets. This was treated as an adjusting item. In addition, separation costs incurred within the disposal Group in relation to the sale of Banking operations of £(23)m were treated as an adjusting item. Refer to Note 5. (c) Tax on remeasurement of the disposal group to fair value less costs to sell and £6m tax on separation costs incurred within the disposal Group were included within adjusting items in the prior year. Refer to Note 5. Tesco PLC Annual Report and Financial Statements 2026 141 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 8 Discontinued operations and assets classified as held for sale continued Cash flow statement of discontinued operations | | | | --- | --- | | | 2025 | | | £m | | Net cash flows from operating activities | 171 | | Net cash flows from investing activities | (436) | | Net cash flows from financing activities | (2) | | Net cash flows from discontinued operations | (267) | In the prior year, the total cash inflows of £157m presented in the investing category of the Group cash flow statement in the ‘Disposal of Banking operations, net of cash disposed’ line comprised gross proceeds of £614m, less costs incurred of £(28)m and cash and cash equivalents disposed of £(429)m. Note 9 Dividends | | | | | | | --- | --- | --- | --- | --- | | | 2026 | | 2025 | | | | Pence/share | £m | Pence/share | £m | | Paid prior financial year final dividend (a) | 9.45 | 626 | 8.25 | 576 | | Paid interim dividend (b) | 4.80 | 310 | 4.25 | 289 | | Amounts recognised through equity as distributions | 14.25 | 936 | 12.50 | 865 | | to owners | | | | | | (Increase)/decrease in unclaimed dividends | - | 1 | - | (1) | | Dividend paid in the financial year | | 937 | | 864 | | Proposed final dividend at financial year end | 9.70 | 619 | 9.45 | 637 | (a) Excludes £5m prior financial year final dividend waived (2025: £5m) and £4m (2025: £nil) relating to shares cancelled prior to the ex-dividend date. Presented net of £2m (2025: £nil) of unclaimed dividends credited to retained earnings. (b) Excludes £2m interim dividend waived (2025: £2m) and £2m (2025: £nil) relating to shares cancelled prior to the ex-dividend date. The proposed final dividend was approved by the Board of Directors on 15 April 2026 and is subject to the approval of shareholders at the AGM. The proposed dividend has not been included as a liability as at 28 February 2026. If approved by shareholders, it will be paid on 26 June 2026 to shareholders who are on the register of members at close of business on 15 May 2026. A dividend reinvestment plan (DRIP) is available to shareholders who would prefer to invest their dividends in the shares of the Company. For those shareholders electing to receive the DRIP, the last date for receipt of a new election is 5 June 2026. For all dividends, the Group has a share forfeiture programme following the completion of a tracing and notification exercise to any shareholders who have not had contact with Tesco PLC over the past 12 years, in accordance with the provisions set out in the Company’s Articles of Association. £2m (2025: £nil) of unclaimed dividends have been adjusted for in retained earnings. Refer to Note 29 for further details. Note 10 Earnings/(losses) per share and diluted earnings/(losses) per share For the 53 weeks ended 28 February 2026 there were 99 million (2025: 83 million) potentially dilutive share options and awards. As the Group has recognised a profit for the year from its continuing operations, dilutive effects have been considered in calculating diluted earnings per share. | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | 53 weeks ended 28 February 2026 | | | 52 weeks ended 22 February 2025 | | | | Dilutive share | | | Dilutive share | | | | | options and | | | options and | | | | Basic | awards | Diluted | Basic | awards | Diluted | | Profit/(loss) (£m) | | | | | | | | Continuing operations \* | 1,787 | - | 1,787 | 1,600 | - | 1,600 | | Discontinued operations | - | - | - | 26 | - | 26 | | Total | 1,787 | - | 1,787 | 1,626 | - | 1,626 | | Weighted average number | 6,507 | 99 | 6,606 | 6,835 | 83 | 6,918 | | of shares (millions) | | | | | | | | Earnings/(losses) per share | | | | | | | | (pence) | | | | | | | | Continuing operations | 27.5 | (0.4) | 27.1 | 23.4 | (0.3) | 23.1 | | Discontinued operations | - | - | - | 0.4 | - | 0.4 | | Total | 27.5 | (0.4) | 27.1 | 23.8 | (0.3) | 23.5 | \* Excludes profits/(losses) attributable to non-controlling interests of £nil (2025: £4m). APM: Adjusted diluted earnings/(losses) per share | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | 2026 | | 2025 | | | | As reported | | | | | | | on a 53-week | Exclude 53rd | On a 52-week | | | Continuing operations | Notes | basis | week (a) | basis | 52 weeks | | Profit before tax (£m) | | 2,403 | (25) | 2,378 | 2,215 | | Exclude: Adjusting items (£m) | 5 | 249 | (7) | 242 | 373 | | Adjusted profit before tax (£m) | | 2,652 | (32) | 2,620 | 2,588 | | Adjusted profit before tax attributable to the owners of the parent (£m) (b) | | 2,652 | (32) | 2,620 | 2,584 | | Taxation on adjusted profit before tax | 7 | (712) | 9 | (703) | (690) | | attributable to the owners of the parent (£m) | | | | | | | Adjusted profit after tax attributable to the owners of the parent (£m) | | 1,940 | (23) | 1,917 | 1,894 | | Basic weighted average number of shares | | 6,507 | 3 | 6,510 | 6,835 | | (millions) | | | | | | | Adjusted basic earnings per share (pence) | | | | 29.5 | 27.7 | | Diluted weighted average number of shares | | 6,606 | 2 | 6,608 | 6,918 | | (millions) | | | | | | | Adjusted diluted earnings per share APM | | | | 29.0 | 27.4 | | (pence) | | | | | | (a) Refer to page 216 for details of week 53 adjustments for the Group’s APMs. (b) Refer to previous table for footnote. Tesco PLC Annual Report and Financial Statements 2026 142 ![]() Note 11 Goodwill and other intangible assets | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2026 | | | | | 2025 | | | | | | | | Other | | | | | Other | | | | | | Customer | intangible | | | | Customer | intangible | | | | Goodwill | Software (a) | relationships | assets (b) | Total | Goodwill | Software (a) | relationships | assets (b) | Total | | | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | | Cost | | | | | | | | | | | | Opening balance | 4,549 | 1,719 | 736 | 373 | 7,377 | 4,515 | 1,837 | 718 | 383 | 7,453 | | Foreign currency translation | 7 | 19 | - | 1 | 27 | (4) | (5) | - | - | (9) | | Additions | - | 322 | - | 1 | 323 | - | 285 | - | 1 | 286 | | Acquired through business combinations | 3 | - | - | - | 3 | 38 | - | 18 | - | 56 | | Disposals | - | (157) | - | (3) | (160) | - | (398) | - | (11) | (409) | | Closing balance | 4,559 | 1,903 | 736 | 372 | 7,570 | 4,549 | 1,719 | 736 | 373 | 7,377 | | Accumulated amortisation and impairment losses | | | | | | | | | | | | Opening balance | 385 | 1,077 | 526 | 302 | 2,290 | 387 | 1,238 | 450 | 312 | 2,387 | | Foreign currency translation | 4 | 16 | - | 1 | 21 | (2) | (3) | - | - | (5) | | Amortisation charge for the year (c)(d) | - | 228 | 78 | 1 | 307 | - | 210 | 76 | 1 | 287 | | Impairment losses (e) | - | 26 | - | 1 | 27 | - | 35 | - | - | 35 | | Reversal of impairment losses (e) | - | (9) | - | - | (9) | - | (8) | - | - | (8) | | Disposals | - | (155) | - | (3) | (158) | - | (395) | - | (11) | (406) | | Closing balance | 389 | 1,183 | 604 | 302 | 2,478 | 385 | 1,077 | 526 | 302 | 2,290 | | Net carrying value | 4,170 | 720 | 132 | 70 | 5,092 | 4,164 | 642 | 210 | 71 | 5,087 | (a) Software includes £645m (2025: £576m) net carrying value of internally generated development costs. (b) Other intangible assets include pharmacy licences with a net carrying value of £27m (2025: £28m) and various other individually immaterial balances. (c) Amortisation of customer relationships of £78m (2025: £76m) has been included within adjusting items and primarily relates to customer relationships recognised on the Booker acquisition in March 2018. (d) Of the total charge for the year, £24m (2025: £25m) is presented in cost of sales and £283m (2025: £262m) in administrative expenses in the Group income statement. (e) Refer to Note 15. As a result of the separation of the UK & ROI and Booker operating segments, the £3,702m goodwill previously allocated to the UK group of cash-generating units including Booker has been allocated to the UK (£3,331m) and Booker (£371m) businesses based on their relative values, as required by IAS 36. The goodwill and associated other non-current asset balances have been reviewed for any indicators of impairment. No indicators were observed and both the UK and Booker had significant headroom. Tesco PLC Annual Report and Financial Statements 2026 143 GovernanceStrategic report Additional informationFinancial statements ![]() Note 12 Property, plant and equipment | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | 2025 | | | | Land and | | | Land and | | | | | buildings (a) | Other (b) | Total | buildings (a) | Other (b) | Total | | | £m | £m | £m | £m | £m | £m | | Cost | | | | | | | | Opening balance | 23,094 | 6,323 | 29,417 | 22,966 | 6,130 | 29,096 | | Foreign currency translation | 287 | 89 | 376 | (129) | (40) | (169) | | Additions (c) | 458 | 911 | 1,369 | 504 | 857 | 1,361 | | Acquired through business combinations | - | - | - | - | 1 | 1 | | Reclassification | 5 | - | 5 | (2) | 2 | - | | Transfers (to)/from assets classified as held for sale | (179) | (7) | (186) | (55) | - | (55) | | Disposals | (108) | (385) | (493) | (190) | (627) | (817) | | Closing balance | 23,557 | 6,931 | 30,488 | 23,094 | 6,323 | 29,417 | | Accumulated depreciation and impairment losses | | | | | | | | Opening balance | 8,335 | 3,820 | 12,155 | 7,969 | 3,906 | 11,875 | | Foreign currency translation | 121 | 57 | 178 | (52) | (26) | (78) | | Depreciation charge for the year | 477 | 519 | 996 | 464 | 473 | 937 | | Impairment losses (d) | 168 | 102 | 270 | 292 | 119 | 411 | | Reversal of impairment losses (d) | (245) | (41) | (286) | (197) | (37) | (234) | | Transfers (to)/from assets classified as held for sale | (91) | (4) | (95) | (21) | - | (21) | | Reclassification | 4 | - | 4 | - | - | - | | Disposals | (87) | (375) | (462) | (120) | (615) | (735) | | Closing balance | 8,682 | 4,078 | 12,760 | 8,335 | 3,820 | 12,155 | | Net carrying value (e) | 14,875 | 2,853 | 17,728 | 14,759 | 2,503 | 17,262 | | Construction in progress included above (f) | 115 | 383 | 498 | 155 | 361 | 516 | (a) The estimated fair value of land and buildings is £15.4bn (2025: £15.0bn). Refer to Note 15 for details of the methodology applied to determine fair value. (b) Other assets consist of fixtures and fittings with a net carrying value of £2,183m (2025: £1,874m), office equipment with a net carrying value of £301m (2025: £269m) and motor vehicles with a net carrying value of £369m (2025: £360m). Depreciation charge for the year is £(338)m (2025: £(306)m), £(82)m (2025: £(75)m) and £(99)m (2025: £(92)m), respectively. (c) Includes £163m (2025: £199m) relating to store buybacks, direct store purchases and refits associated with both direct store purchases and business combinations. (d) Refer to Note 15. (e) Includes £3,372m (2025: £3,128m) of assets pledged as security for secured bonds (refer to Note 22) and £817m (2025: £820m) of property held as security in favour of the Tesco PLC Pension Scheme (refer to Note 28). (f) Construction in progress does not include land. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 144 ![]() Note 13 Leases Group as lessee Lease liabilities represent rentals payable by the Group for certain retail, distribution and office properties and other assets such as motor vehicles. The leases have varying terms, purchase options, escalation clauses and renewal rights. Purchase options and renewal rights, where they occur, are at market value. Escalation clauses are in line with market practices and include inflation-linked, fixed rates, resets to market rents and hybrids of these. Right of use assets | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | 2025 | | | | Land and buildings | Other | Total | Land and buildings | Other | Total | | | £m | £m | £m | £m | £m | £m | | Net carrying value | | | | | | | | Opening balance | 5,431 | 138 | 5,569 | 5,365 | 113 | 5,478 | | Additions (including sale and leaseback transactions) | 296 | 98 | 394 | 476 | 66 | 542 | | Acquired through business combinations | - | - | - | 5 | - | 5 | | Depreciation charge for the year | (542) | (49) | (591) | (512) | (38) | (550) | | Impairment losses (a) | (178) | (1) | (179) | (223) | (2) | (225) | | Reversal of impairment losses (a) | 130 | - | 130 | 130 | - | 130 | | Other movements (b) | 455 | (1) | 454 | 190 | (1) | 189 | | Closing balance | 5,592 | 185 | 5,777 | 5,431 | 138 | 5,569 | (a) Refer to Note 15. (b) Other movements include lease terminations, modifications and reassessments, foreign exchange, reclassifications between asset classes and entering into finance subleases. Lease liabilities The following tables show the discounted lease liabilities included in the Group balance sheet and a maturity analysis of the contractual undiscounted lease payments. A reconciliation of the Group’s opening to closing lease liabilities balance is presented in Note 31. | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Current | 659 | 618 | | Non-current | 7,225 | 7,098 | | Total lease liabilities | 7,884 | 7,716 | | | | | | --- | --- | --- | | | 2026 | 2025 | | Maturity analysis – contractual undiscounted lease payments | £m | £m | | Within one year | 1,040 | 995 | | Greater than one year but less than two years | 1,014 | 973 | | Greater than two years but less than three years | 972 | 940 | | Greater than three years but less than four years | 926 | 896 | | Greater than four years but less than five years | 862 | 855 | | Greater than five years but less than 10 years | 3,552 | 3,489 | | Greater than 10 years but less than 15 years | 1,900 | 1,951 | | After 15 years | 805 | 777 | | Total undiscounted lease payments | 11,071 | 10,876 | Amounts recognised in the Group income statement | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | Continuing operations | £m | £m | | Interest expense on lease liabilities\* | 404 | 377 | | Expenses relating to short-term leases | 24 | 24 | | Expenses relating to leases of low value assets (excluding amounts | 1 | 1 | | already included in short-term leases above) | | | \* Interest expense on lease liabilities is presented gross of £14m hedging impact (2025: £7m). Tesco PLC Annual Report and Financial Statements 2026 145 GovernanceStrategic report Additional informationFinancial statements ![]() Note 13 Leases continued Amounts recognised in the Group cash flow statement | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | | £m | £m | | Total cash outflow for leases | 1,063 | 980 | Future possible cash outflows not included in the lease liability Some leases contain break clauses or extension options to provide operational flexibility. Potential future undiscounted lease payments not included in the reasonably certain lease term, and hence not included in lease liabilities, total £14.7bn. Future increases or decreases in rentals linked to an index or rate (not arising on a sale and leaseback transaction) are not included in the lease liability until the change in cash flows takes effect. Approximately 76% (2025: 76%) of the Group’s lease liabilities are subject to inflation-linked rentals, of which 91% (2025: 89%) have inflation caps, with a weighted average cap of 4.3% (2025: 4.3%). Of the inflation-linked leases with caps, 31% (2025: 33%) of the lease liability value was hedged through index-linked swaps. A further 17% (2025: 17%) of all leases are subject to rent reviews. Rental changes linked to inflation or rent reviews typically occur on an annual or five-yearly basis. Refer to Note 26. The Group is committed to payments totalling £535m (2025: £125m) in relation to leases that have been signed but have not yet commenced. Group as lessor The Group leases out owned properties and sublets leased properties under operating and finance leases. Such properties include malls, mall units, stores, units within stores, distribution centres and residential properties. Amounts recognised in the Group income statement | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | Continuing operations | £m | £m | | Finance lease – interest income (a) | 2 | 1 | | Operating lease – rental income (b) | 101 | 100 | (a) Comprises sublease interest income. (b) Includes £31m (2025: £28m) of sublease rental income. Finance lease payments receivable The finance lease receivable (net investment in the lease) included in the Group balance sheet is £27m (2025: £23m). Operating lease payments receivable maturity analysis | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Within one year | 60 | 61 | | Greater than one year but less than two years | 34 | 35 | | Greater than two years but less than three years | 33 | 28 | | Greater than three years but less than four years | 24 | 27 | | Greater than four years but less than five years | 23 | 18 | | Greater than five years but less than 10 years | 32 | 30 | | Greater than 10 years but less than 15 years | 9 | 9 | | After 15 years | 22 | 29 | | Total undiscounted operating lease payments receivable | 237 | 237 | Note 14 Group entities The Group consists of the ultimate Parent Company, Tesco PLC, and a number of subsidiaries, joint ventures and associates held directly or indirectly by Tesco PLC. See pages 208 to 213 for a complete list of Group entities. Subsidiaries The accounting year ends of the subsidiaries consolidated in these financial statements are on or around 28 February 2026. Joint ventures and associates The Group has interests in a number of individually immaterial joint ventures and associates: | | | | | | | --- | --- | --- | --- | --- | | | Joint ventures | | Associates | | | | 2026 | 2025 | 2026 | 2025 | | | £m | £m | £m | £m | | Aggregate carrying amount of individually immaterial joint ventures | 112 | 105 | 9 | 5 | | and associates | | | | | | Group’s share of losses for the year\* | (2) | (5) | - | - | \* The Share of post-tax profit/(loss) of joint ventures and associates in the Group income statement of £(1)m (2025: £(4)m) is stated net of £1m (2025: £1m) dividend received from joint ventures with a carrying value of £nil. Refer to page 147. The accounting period end dates of the joint ventures and associates consolidated in these financial statements range from 31 December 2025 to 31 March 2026. The accounting period end dates of joint ventures and associates differ from those of the Group for commercial reasons and depend upon the requirements of the joint venture or associate partner(s) as well as those of the Group. There are no significant restrictions on the ability of joint ventures and associates to transfer funds to the parents, other than those imposed by the Companies Act 2006 or equivalent local regulations. The Group holds investments in four UK property joint ventures: the Tesco Blue; Passaic; and Navona Limited Partnerships; and the Arena Unit Trust. These involve the Group partnering with third parties in carrying out some property investments in order to enhance returns from property and access funding, while reducing risks associated with sole ownership. These property investments generally cover shopping centres and standalone stores. The Group enters into leases for some or all of the properties held in the joint ventures. These leases provide the Group with some rights over alterations and adjacent land developments. In some cases, the Group has the ability to substitute properties in the joint ventures with alternative properties of similar value, subject to strict eligibility criteria. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 146 ![]() In other cases the Group carries out property management activities for third-party rentals of shopping centre units. The property investment activities are carried out in separate entities, usually partnerships or limited liability companies. The Group has assessed its ability to direct the relevant activities of these entities and any impact on Group returns and concluded that the entities qualify as joint ventures since decisions regarding them require the unanimous consent of both equity holders. This assessment included not only rights within the joint venture agreements, but also any rights within other contractual arrangements between the Group and the entities. The Group made a number of judgements in arriving at this determination, the key ones being: – since the provisions of the joint venture agreements require the relevant decisions impacting investor returns to be either unanimously agreed by both joint venturers at the same time, or in some cases to be agreed sequentially by each venturer at different stages, there is joint decision making within the joint venture; – since the Group’s leases are priced at fair value, and any rights embedded in the leases are consistent with market practice, they do not provide the Group with additional control over the joint ventures nor do they infer an obligation by the Group to fund the settlement of liabilities of the joint ventures; – any options to purchase the other joint venturers’ equity stakes are priced at market value, and only exercisable at future dates, hence they do not provide control to the Group at the current time; – where the Group has a right to substitute properties in the joint ventures, the rights are strictly limited and are at fair value, hence do not provide control to the Group; and – where the Group carries out property management activities for third-party rentals in shopping centres, these additional activities are controlled through joint venture agreements or lease agreements, and do not provide the Group with additional powers over the joint venture. Summarised financial information for UK property joint ventures The Group’s investments in UK property joint ventures are not considered material individually or in aggregate since the Group bought back a number of joint ventures in recent years. The summarised financial information below reflects the amounts presented in the financial statements of the relevant joint ventures, and not the Group’s share of those amounts. These amounts have been adjusted to conform to the Group’s accounting policies where required. The summarised financial information for UK property joint ventures has been aggregated in order to provide useful information to users without excessive detail, since these entities have similar characteristics and risk profiles largely based on their nature of activities and geographic market. | | | | | --- | --- | --- | | | UK property joint ventures | | | | 2026 | 2025 | | | £m | £m | | Summarised balance sheet | | | | Non-current assets (a) | 1,766 | 1,794 | | Current assets (excluding cash and cash equivalents) | 7 | 8 | | Cash and cash equivalents | 13 | 12 | | Current liabilities (b) | (73) | (68) | | Non-current liabilities (b) | (2,170) | (2,247) | | Net liabilities | (457) | (501) | | Group’s share in ownership | 50% | 50% | | Group’s share of net liabilities | (229) | (251) | | Deferred property profits offset against carrying amounts | (56) | (57) | | Cumulative unrecognised losses (c) | 131 | 134 | | Cumulative unrecognised hedge reserves (c) | 154 | 174 | | Carrying amount | - | - | | Summarised income statement | | | | Revenue | 151 | 184 | | Profit and total comprehensive income (d) | - | - | | Dividend received by the Group (e) | 1 | 1 | (a) The non-current asset balances of UK property joint ventures are reflected at historical depreciated cost to conform to the Group’s accounting policies. The aggregate of the fair values in the financial statements of the UK property joint ventures is £2,703m (2025: £2,670m). (b) The current and non-current liabilities of UK property joint ventures largely comprise loan balances of £(1,904)m (2025: £(1,939)m) and derivative swap balances of £(308)m (2025: £(347)m) entered into to hedge the cash flow variability exposures of the joint ventures. (c) £5m of profit (2025: £6m) and £(20)m of decrease (2025: £15m of increase) in the fair values of derivatives arising from these entities have been included in cumulative unrecognised losses and cumulative unrecognised hedge reserves respectively. (d) Profit and total comprehensive income includes £50m (2025: £62m) of interest cost. (e) As the carrying value of the joint ventures is £nil, the dividends received are recognised directly in the income statement and presented in the Share of post-tax profits of joint ventures and associates line. Tesco PLC Annual Report and Financial Statements 2026 147 GovernanceStrategic report Additional informationFinancial statements ![]() Note 14 Group entities continued As at 28 February 2026, the Group had £98m (2025: £97m) loans to UK property joint ventures. Unconsolidated structured entities In prior years, the Group sponsored a number of structured entities. The Group led the formation of the entities and its name appears in the name of the entities and/or on the debt issued by the entities. The structured entities were set up to finance property purchases by some of the UK property joint ventures in which the Group typically holds a 50% equity interest. The structured entities obtain debt financing from third-party investors and lend the funds to these joint ventures, who use the funds to purchase the properties. The liabilities of the UK property joint ventures include the loans due to these structured entities. The Group’s exposure to the structured entities is limited to the extent of the Group’s interests in the joint ventures. The liabilities of the structured entities are non-recourse to the Group. The Group concluded that it does not control, and therefore should not consolidate, these structured entities since it does not have power over the relevant activities of the structured entities, or exposure to variable returns from these entities. Consolidated structured entities The Group has a number of financing structured entities controlled as a result of the acquisition of former UK property joint ventures. Although none of the equity of these entities is owned by the Group, the Group has rights to variable returns from its involvement with these entities and has the ability to affect those returns through its power over them under contractual agreements. These entities are controlled by the Group, and are therefore accounted for as subsidiaries. The financial year ends of the financing structured entities align to the Group financial year end. Note 15 Impairment of non-current assets Impairment losses and reversals Goodwill There was no impairment of goodwill balances in the current year (2025: £nil). Refer to Note 11 for details on the changes to the allocation of goodwill following the recognition of Booker as a separate operating segment. Other non-current assets The tables below summarise the Group’s pre-tax impairment losses and reversals on other non-current assets, aggregated by segment due to the large number of individually immaterial cash-generating units. This includes any (losses)/reversals recognised immediately prior to classifying an asset or disposal group as held for sale but excludes any changes in fair value less costs to sell post classification as held for sale. There were no impairment losses or reversals in the year (2025: £nil) with respect to investments in joint ventures and associates and no impairments of other non-current assets in Booker (2025: £nil). Impairments are typically treated as adjusting where there is significant volatility arising from inputs outside the control of management. | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | UK & ROI | | Central Europe | | Total | | Net | | | Impairment | Impairment | Impairment | Impairment | Impairment | Impairment | Impairment | | | loss | reversal | loss | reversal | loss | reversal | (loss)/reversal | | 53 weeks ended 28 February 2026 | £m | £m | £m | £m | £m | £m | £m | | Group balance sheet | | | | | | | | | Other intangible assets | (27) | 9 | - | - | (27) | 9 | (18) | | Property, plant and equipment | (246) | 278 | (24) | 8 | (270) | 286 | 16 | | Right of use assets | (153) | 112 | (26) | 18 | (179) | 130 | (49) | | Investment property | (2) | - | - | - | (2) | - | (2) | | Total impairment (loss)/reversal of other non-current assets | (428) | 399 | (50) | 26 | (478) | 425 | (53) | | Group income statement | | | | | | | | | Cost of sales (a) | (409) | 389 | (50) | 22 | (459) | 411 | (48) | | Administrative expenses (b) | (19) | 10 | - | 4 | (19) | 14 | (5) | | Total impairment (loss)/reversal from continuing operations | (428) | 399 | (50) | 26 | (478) | 425 | (53) | (a) Of which £(48)m is adjusting (2025: £(274)m). (b) Of which £(5)m is adjusting (2025: £(12)m). Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 148 ![]() | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | UK & ROI | | Central Europe | | Total | | Net | | | Impairment | Impairment | Impairment | Impairment | Impairment | Impairment | Impairment | | | loss | reversal | loss | reversal | loss | reversal | (loss)/reversal | | 52 weeks ended 22 February 2025 | £m | £m | £m | £m | £m | £m | £m | | Group balance sheet | | | | | | | | | Other intangible assets | (35) | 8 | - | - | (35) | 8 | (27) | | Property, plant and equipment | (336) | 233 | (75) | 1 | (411) | 234 | (177) | | Right of use assets | (165) | 125 | (60) | 5 | (225) | 130 | (95) | | Investment property | - | 1 | - | - | - | 1 | 1 | | Total impairment (loss)/reversal of other non-current assets | (536) | 367 | (135) | 6 | (671) | 373 | (298) | | Group income statement | | | | | | | | | Cost of sales (a) | (517) | 360 | (134) | 5 | (651) | 365 | (286) | | Administrative expenses (b) | (19) | 7 | (1) | 1 | (20) | 8 | (12) | | Total impairment (loss)/reversal from continuing operations | (536) | 367 | (135) | 6 | (671) | 373 | (298) | Refer to previous table for footnotes. The net impairment loss is primarily due to market pressures in Central Europe, the reclassification of certain stores to assets held for sale in the UK and the normal fluctuations expected from store-level performance, which also drive the gross non-current asset impairment losses and reversals. Tesco PLC Annual Report and Financial Statements 2026 149 GovernanceStrategic report Additional informationFinancial statements ![]() Note 15 Impairment of non-current assets continued Net carrying value of non-current assets The net carrying values of other non-current assets and the recoverable amounts of impaired other non-current assets have been aggregated by segment due to the large number of individually immaterial cash-generating units. | | | | | | | --- | --- | --- | --- | --- | | | | | Central | | | | UK & ROI | Booker | Europe | Total | | At 28 February 2026 | £m | £m | £m | £m | | Net carrying value | | | | | | Other intangible assets | 726 | 164 | 32 | 922 | | Property, plant and equipment | 15,889 | 414 | 1,425 | 17,728 | | Right of use assets | 4,764 | 513 | 500 | 5,777 | | Investment property | 11 | - | 9 | 20 | | Other non-current assets | 21,390 | 1,091 | 1,966 | 24,447 | | Goodwill (a) | 3,799 | 371 | - | 4,170 | | Investments in joint ventures and associates (b) | 121 | - | - | 121 | | Net carrying value of non-current assets | 25,310 | 1,462 | 1,966 | 28,738 | | Recoverable amount of impaired other non-current | | | | | | assets for which an impairment loss has been recognised or reversed, supported by (c) : | | | | | | Value in use | 2,694 | n/a | 210 | 2,904 | | Fair value less costs of disposal (d) | 1,483 | n/a | 375 | 1,858 | | | 4,177 | n/a | 585 | 4,762 | (a) Goodwill of £4,170m (2025: £4,164m) consists of UK £3,331m (2025: £3,331m), Booker £371m (2025: £371m), dunnhumby £142m (2025: £141m), money services £171m (2025: £171m), insurance £118m (2025: £118m) and ROI £37m (2025: £32m). (b) The carrying value of the Group’s investments includes Trent Hypermarket Private Limited £67m (2025: £60m). (c) Booker does not hold any impairment against its non-current assets therefore there is no recoverable amount to disclose. (d) Due to the individual nature of each property, fair values are classified as Level 3 within the fair value hierarchy. Certain store cash-generating units are supported by fair value less costs of disposal where their current use is for trading. This use is consistent with the Group’s property strategy and expected future investment in these store cash-generating units. | | | | | | | --- | --- | --- | --- | --- | | | UK & ROI | | Central | | | | (restated (e) ) | Booker | Europe | Total | | At 22 February 2025 | £m | £m | £m | £m | | Net carrying value | | | | | | Other intangible assets | 650 | 242 | 31 | 923 | | Property, plant and equipment | 15,559 | 392 | 1,311 | 17,262 | | Right of use assets | 4,670 | 424 | 475 | 5,569 | | Investment property | 15 | - | 9 | 24 | | Other non-current assets | 20,894 | 1,058 | 1,826 | 23,778 | | Goodwill (a) | 3,793 | 371 | - | 4,164 | | Investments in joint ventures and associates (b) | 110 | - | - | 110 | | Net carrying value of non-current assets | 24,797 | 1,429 | 1,826 | 28,052 | | Recoverable amount of impaired other non-current | | | | | | assets for which an impairment loss has been recognised or reversed, supported by (c) : | | | | | | Value in use | 2,703 | n/a | 145 | 2,848 | | Fair value less costs of disposal (d) | 1,570 | n/a | 357 | 1,927 | | | 4,273 | n/a | 502 | 4,775 | (a)–(d) Refer to previous table for footnotes. (e) Comparatives have been restated to reflect the reclassification of the Booker business to its own segment. Refer to Note 2. Impairment methodology Cash-generating units For impairment testing of other intangible assets, property, plant and equipment, right of use assets and investment property, the Group treats each store as a separate cash-generating unit. dunnhumby, insurance, and money services each represent separate cash-generating units. The Group allocates goodwill to groups of cash-generating units based on the lowest level at which goodwill is monitored by management. Following the reclassification of Booker to its own segment, the groups of cash-generating units have changed. For the Group’s retail operations, each country represents a group of cash-generating units and Booker, dunnhumby, insurance, and money services each represent separate groups. The recoverable amount of each cash-generating unit is the higher of its value in use and its fair value less costs of disposal. The recoverable amount of a group of cash-generating units to which goodwill has been allocated is determined based on value in use calculations. Central assets such as distribution centres and associated costs are allocated to store cash-generating units based on level of use, estimated with reference to sales. Urban fulfilment centres and associated costs that are part of a store are included in the store cash–generating unit. Standalone customer fulfilment centres, which support the online business, and their costs are each treated as a separate cash-generating unit. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 150 ![]() Value in use Retail and Booker Estimates for value in use calculations include discount rates, long-term growth rates, expected changes to future cash flows, including volumes and prices, and the probabilities assigned to cash flow scenarios. Estimates are based on past experience and expectations of future changes in the market, including the prevailing economic climate and global economy, competitor activity, market dynamics, changing customer behaviours, structural challenges facing the business and the resilience afforded by the Group’s operational scale. Cash flow projections are based on the Group’s three-year internal forecasts, the results of which are reviewed by the Board. The forecasts include best estimate assumptions on inflation, which differ by both country and revenue and cost categories. These cash flows are then extrapolated to five years based on management’s expectations, and beyond five years based on estimated long-term average growth rates. Long-term growth rates are based on inflation forecasts by recognised bodies. Group-level cash flow forecasts are allocated to store-level cash-generating units based on their relative current year actual sales performance, after adjusting for one-off cash flows affecting particular stores. The Group applies an expected cash flow approach by probability-weighting different cash flow scenarios. The greatest probability weighting is applied to the cash flows derived from the three-year internal forecasts. One downside scenario takes account of the risks presented by ongoing geopolitical events triggering global supply chain challenges and resurgent inflation, leading to weak consumer confidence and further intensifying competition in the sector. A second downside scenario takes account of climate change impacts. These are consistent with the viability statement scenarios (see the Longer term viability statement in the Strategic report). The viability statement scenarios reflect ‘severe but plausible’ risks, to which management applies probability weightings in order to reflect management’s best estimate of future economic conditions. There is also an upside scenario which assumes a moderate outperformance of the three-year internal forecasts. In addition to the climate change scenario included within the probability-weighted cash flows, the Group incorporates other climate change related assumptions into the impairment modelling, including, but not limited to, investments in technology to aid the Group’s net zero commitments, the costs associated with replacing end-of-life assets with more environmentally-friendly alternatives, and assumptions over the cash flow profile of the Group’s fuel business. Pre-tax nominal discount rates that reflect the current market assessment of the time value of money are derived from the Group’s post-tax weighted average cost of capital, adjusted for specific risks relating to each geographical region or cash-generating unit for which the cash flows have not been adjusted. The Group engages independent valuation specialists to determine appropriate discount rates. Risk-free rates are based on government bond rates, applicable to each geographical region, and equity risk premia and equity betas are based on data from recognised bodies. The capital asset pricing model is used to calculate the cost of equity. Insurance and Money Services Value in use is calculated by discounting post-tax free cash flows. Cash flow projections are based on the three-year internal forecasts approved by the Board. The forecasts are extrapolated to five years based on management’s expectations and beyond five years based on estimated long-term average growth rates. The forecasts apply an expected cash flow approach by probability-weighting different cash flow scenarios, with the greatest probability weighting applied to cash flows derived from the three-year internal forecasts. The long-term growth rates are based on inflation and GDP growth forecasts by recognised bodies. The post-tax discount rate is the cost of equity, which is calculated using the capital asset pricing model. The Group engages independent valuation specialists to determine appropriate discount rates. Risk-free rates are based on government bond rates and equity risk premia and equity betas are based on data from recognised bodies. Fair value less costs of disposal Fair values of owned properties are determined with regard to the market rent for the stores or for alternative uses with investment yields appropriate to reflect the physical characteristics of the property, location, performance, infrastructure, energy efficiency rating, redevelopment potential and other factors. Fair values of leased properties are determined with regard to the discounted market rent for the property over the remaining period of the lease, reflecting the condition and location of the property and the local rental market, adjusted for a suitable void period. Fair values of the Group’s properties were determined with the assistance of independent professional valuers where appropriate. Costs of disposal are estimated based on past experience in each geographical region. Investments in joint ventures and associates The recoverable values of investments in joint ventures and associates are estimated taking into account forecast cash flows, equity valuations of comparable entities and/or recent transactions for comparable businesses. Tesco PLC Annual Report and Financial Statements 2026 151 GovernanceStrategic report Additional informationFinancial statements ![]() Note 15 Impairment of non-current assets continued Key assumptions and sensitivity Key assumptions For value in use calculations, the key assumptions to which the recoverable amounts are most sensitive are discount rates, long-term growth rates and future cash flows (incorporating sales volumes, prices and costs). For fair value less costs of disposal calculations, the key assumption is property fair values. Sensitivity The Group has carried out sensitivity analyses on the reasonably possible changes in key assumptions in the impairment tests for (a) the goodwill carrying values that are significant compared to the Group’s total goodwill and (b) for its portfolio of store cash-generating units. (a) Neither a reasonably possible increase of 1.0%pt in discount rates, a 5.0% decrease in future cash flows nor a 0.5%pt decrease in long-term growth rates would indicate impairment in the goodwill carrying values that are significant compared to the Group’s total goodwill. (b) While there is not a significant risk of an adjustment to the carrying amount of any one store cash-generating unit that would be material to the Group as a whole in the next financial year, the table below summarises the reasonably possible changes in key assumptions which most impact the impairment of the Group’s entire portfolio of store cash-generating units, presented in aggregate due to the large number of individually immaterial store cash-generating units. For the probability-weighted cash flow scenarios, the impairment is most sensitive to the downside scenario relating to geopolitical and global supply issues (weighting 6.5%). Impairment is not highly sensitive to the climate or upside scenarios. The reasonably possible change below applies the corresponding change to the base scenario. | | | | | | --- | --- | --- | --- | | | | | 2026 | | Key assumption | Reasonably possible change | Impact on impairment | £m | | Post-tax discount rates\* | Increase of 1.0%pt for each geographic region | Increase | (326) | | | Decrease of 1.0%pt for each geographic region | Decrease | 309 | | Future cash flows | Increase of 5.0% for each geographic region | Decrease | 136 | | | Decrease of 5.0% for each geographic region | Increase | (143) | | Long-term growth rates | Increase of 0.5%pt for each geographic region | Decrease | 96 | | | Decrease of 0.5%pt for each geographic region | Increase | (96) | | Property fair values | Increase of 10.0% for each geographic region | Decrease | 181 | | | Decrease of 10.0% for each geographic region | Increase | (188) | | Geopolitical and global supply downside scenario weighting | Increase of 5.0%pt for each geographic region | Increase | (108) | | | Decrease of 2.5%pt for each geographic region | Decrease | 53 | \* Sensitivities are applied to post-tax discount rates used to derive the pre-tax discount rates. Notes to the Group financial statements continued The discount rates and long-term growth rates relating to the goodwill carrying values that are significant to the Group’s total goodwill are: | | | | | | | --- | --- | --- | --- | --- | | | | UK | Booker | | | | 2026 | 2025 | 2026 | 2025 | | | % | % | % | % | | Pre-tax discount rates | 9.1 | 9.1 | 9.7 | 9.6 | | Post-tax discount rates | 6.8 | 6.8 | 7.3 | 7.2 | | Long-term growth rates | 2.0 | 2.0 | 2.0 | 2.0 | The discount rates and long-term growth rates for the Group’s portfolio of store cash-generating units, aggregated by segment due to the large number of individually immaterial store cash-generating units, are as follows. Booker is not presented as there were no indicators of possible impairment. | | | | | | | --- | --- | --- | --- | --- | | | UK & ROI | | Central Europe | | | | 2026 | 2025 | 2026 | 2025 | | | % | % | % | % | | Pre-tax discount rates | 7.8 - 9.1 | 8.2 - 9.1 | 8.7 - 10.9 | 8.9 - 12.9 | | Post-tax discount rates | 6.8 | 6.8 - 7.2 | 6.9 - 9.9 | 7.0 - 8.5 | | Long-term growth rates | 2.0 | 2.0 | 2.0 - 3.0 | 2.0 - 3.0 | Tesco PLC Annual Report and Financial Statements 2026 152 ![]() Note 16 Other investments | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | | 2025 | | | | | | | Fair value | | | | Fair value | | | | | Fair value through other | | | | Fair value through other | | | | | At amortised | through | comprehensive | | At amortised | through | comprehensive | | | | cost (a) | profit or loss | income | Total | cost (a) | profit or loss | income | Total | | | £m | £m | £m | £m | £m | £m | £m | £m | | Investments in debt instruments (b)(c) | 192 | - | 993 | 1,185 | 196 | - | 855 | 1,051 | | Investments in equity instruments | - | - | 18 | 18 | - | - | 19 | 19 | | Property fund investments (d) | - | - | - | - | - | 15 | - | 15 | | Other investments | 192 | - | 1,011 | 1,203 | 196 | 15 | 874 | 1,085 | | Of which: | | | | | | | | | | Current | 7 | - | 213 | 220 | 7 | 15 | 129 | 151 | | Non-current | 185 | - | 798 | 983 | 189 | - | 745 | 934 | | | 192 | - | 1,011 | 1,203 | 196 | 15 | 874 | 1,085 | (a) The ECLs in the year are immaterial (2025: immaterial). (b) Investments in debt instruments at amortised cost includes secured bond assets of £188m (2025: £192m) related to the purchase of debt held in UK property joint ventures. (c) Investments in debt instruments held at fair value through other comprehensive income primarily relate to £648m (2025: £679m) of fixed-interest corporate bonds and £336m (2025: £168m) of government-backed investment securities held in the Insurance business. (d) Included £15m of property fund investments in the Insurance business in the prior year, sold in the current year. Note 17 Inventories | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Goods held for resale | 2,834 | 2,765 | | Development properties | 6 | 3 | | | 2,840 | 2,768 | Goods held for resale are net of commercial income. Refer to Note 21. Cost of inventories from continuing operations recognised as an expense for the 53 weeks ended 28 February 2026 was £53,318m (52 weeks ended 22 February 2025: £50,920m). In addition, inventory losses and provisions from continuing operations recognised as an expense for the 53 weeks ended 28 February 2026 were £1,503m (52 weeks ended 22 February 2025: £1,440m). Tesco PLC Annual Report and Financial Statements 2026 153 GovernanceStrategic report Additional informationFinancial statements ![]() Note 18 Trade and other receivables | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Trade receivables | 636 | 652 | | Prepayments | 210 | 136 | | Accrued income (a) | 253 | 243 | | Other receivables (b) | 205 | 183 | | Amounts owed by joint ventures and associates (c) | 175 | 154 | | Total trade and other receivables | 1,479 | 1,368 | | Of which: | | | | Current | 1,318 | 1,210 | | Non-current | 161 | 158 | | | 1,479 | 1,368 | (a) Accrued income includes contract assets of £76m (2025: £67m) including items relating to commission income on certain insurance policies renewals managed and underwritten by a third party. The ECLs were immaterial as at 28 February 2026 (2025: immaterial). (b) Consists of individually immaterial balances. (c) ECLs on amounts owed by joint ventures and associates are immaterial (2025: immaterial). Refer to Note 30. Trade receivables and accrued income include commercial income. Refer to Note 21. Trade receivables are generally non interest-bearing. Credit terms vary by country and the nature of the debt, ranging from five to 120 days (2025: seven to 120 days). The tables below present the ageing of receivables and related allowances for expected credit losses: | | | | | | | | --- | --- | --- | --- | --- | --- | | | | Up to six | Six to 12 | Greater than | | | | | months past | months past | 12 months | | | | Not past due | due | due | past due | Total | | At 28 February 2026 | £m | £m | £m | £m | £m | | Trade receivables | 569 | 75 | 9 | 7 | 660 | | Other receivables | 180 | 12 | 9 | 31 | 232 | | Trade and other receivables | 749 | 87 | 18 | 38 | 892 | | Allowance for expected credit losses: | | | | | | | At the beginning of the year | (18) | (8) | (4) | (25) | (55) | | (Increase)/decrease in allowance, including | 1 | 1 | (1) | 2 | 3 | | recoveries, (charged)/released to the Group income statement | | | | | | | Amounts written off | 1 | - | - | - | 1 | | At the end of the year | (16) | (7) | (5) | (23) | (51) | | | | | | | | | --- | --- | --- | --- | --- | --- | | | | Up to six | Six to 12 | Greater than | | | | | months past | months past | 12 months | | | | Not past due | due | due | past due | Total | | At 22 February 2025 | £m | £m | £m | £m | £m | | Trade receivables | 623 | 49 | 6 | 8 | 686 | | Other receivables | 150 | 17 | 10 | 27 | 204 | | Trade and other receivables | 773 | 66 | 16 | 35 | 890 | | Allowance for expected credit losses: | | | | | | | At the beginning of the year | (22) | (5) | (5) | (27) | (59) | | (Increase)/decrease in allowance, including | 3 | (3) | 1 | 2 | 3 | | recoveries, (charged)/released to the Group income statement | | | | | | | Amounts written off | 1 | - | - | - | 1 | | At the end of the year | (18) | (8) | (4) | (25) | (55) | Note 19 Cash and cash equivalents and short-term investments Cash and cash equivalents | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Cash at bank and on hand | 2,463 | 2,190 | | Short-term deposits | 52 | 65 | | Cash and cash equivalents in the Group balance sheet | 2,515 | 2,255 | | Bank overdrafts | (1,004) | (856) | | Cash and cash equivalents in the Group cash flow statement | 1,511 | 1,399 | Short-term investments | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Money market funds, deposits and similar instruments | 1,429 | 2,223 | Cash and cash equivalents include £28m (2025: £26m) of restricted amounts mainly relating to unclaimed dividends, the Group’s pension schemes and employee benefit trusts. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 154 ![]() Note 20 Trade and other payables | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Trade payables | 6,862 | 6,692 | | Not subject to supplier financing arrangements | 5,829 | 5,608 | | Subject to supplier financing arrangements (a) | 1,033 | 1,084 | | Other taxation and social security | 529 | 504 | | Other payables (b) | 1,984 | 1,849 | | Not subject to supplier financing arrangements | 1,845 | 1,688 | | Subject to supplier financing arrangements (a) | 139 | 161 | | Amounts payable to joint ventures and associates (c) | 11 | 7 | | Accruals | 987 | 943 | | Contract liabilities | 415 | 409 | | Total trade and other payables | 10,788 | 10,404 | | Of which: | | | | Current | 10,746 | 10,364 | | Non-current | 42 | 40 | | | 10,788 | 10,404 | (a) Trade payables include £679m (2025: £740m) that suppliers have chosen to early-fund. Other payables include £79m (2025: £88m) that suppliers have chosen to early-fund. (b) Other payables include £1,159m of goods and services not for resale (2025: £943m) and £610m (2025: £757m) of staff payables. The remaining balances within other payables are individually immaterial. (c) Refer to Note 30. Trade and other payables are net of commercial income. Refer to Note 21. Contract liabilities represent the consideration received for performance obligations not yet satisfied, predominantly in relation to Clubcard points. The majority of the revenue deferred at the current financial year end will be recognised in the following financial year. Supplier financing Suppliers can choose whether to access supplier financing arrangements, which are provided by different third-party banks in different countries. Commercial requirements, including payment terms or the price paid for goods, do not depend on whether a supplier chooses to access such arrangements. The arrangements support the Group’s suppliers by giving them the option to receive early payment from the banks in advance of the Group’s normal payment terms, often at a lower cost than they could obtain themselves. The funding cost is set by the provider banks but based on Tesco’s credit risk and the appropriate country risk premium. If suppliers choose not to access early payment, the provider banks pay the suppliers on the Group’s normal payment terms. The Group pays the provider banks by no later than the Group’s normal payment terms, regardless of whether the supplier has chosen to access funding early. The Group currently offers supplier financing arrangements in the UK, ROI and Asia. The Group’s normal payment terms range from five–90 days (2025: five–90 days) and are dependent on the country, product category and volume of the Group’s annual purchases from the supplier. Shorter payment terms are provided for certain perishable goods and where the Group’s annual purchases from the supplier are lower than a set threshold in each country. Payment terms are the same regardless of whether a supplier participates in a supplier financing arrangement. There were no material business combinations or foreign exchange differences in the year relating to amounts owed under supplier financing arrangements (2025: none). Note 21 Commercial income Below are the commercial income balances included within inventories and trade and other receivables, or netted against trade and other payables. | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Current assets | | | | Inventories | (14) | (14) | | Trade and other receivables | | | | Trade receivables | 105 | 110 | | Accrued income | 130 | 142 | | Current liabilities | | | | Trade payables | 157 | 173 | Tesco PLC Annual Report and Financial Statements 2026 155 GovernanceStrategic report Additional informationFinancial statements ![]() Note 22 Borrowings Borrowings are classified as current and non-current based on their scheduled repayment date, and not their maturity date. Repayments of principal amounts are classified as current if the repayment is scheduled to be made within one year of the balance sheet date. | | | | | | | --- | --- | --- | --- | --- | | | | | 2026 | 2025 | | | Par value | Maturity | £m | £m | | Bank loans and overdrafts (a) | - | - | 1,026 | 882 | | Secured bonds (b) | | | | | | 5.5457% Secured Bond | £130m | Feb 2029 | 125 | 162 | | 6.067% Secured Bond | £200m | Feb 2029 | 200 | 197 | | SONIA + 1.3193% Secured Bond | £50m | Feb 2029 | 50 | 49 | | 6.0517% Secured Bond | £236m | Oct 2039 | 288 | 304 | | 5.6611% Secured Bond | £271m | Oct 2041 | 341 | 353 | | 5.4111% Secured Bond | £173m | Jul 2044 | 149 | 152 | | Unsecured bonds | | | | | | Fixed rate bonds | | | | | | 2.5% MTN | £400m | May 2025 | - | 405 | | 0.875% MTN (c) | €750m | May 2026 | 661 | 624 | | 6% MTN | £38m | Dec 2029 | 41 | 42 | | 2.75% MTN | £450m | Apr 2030 | 403 | 380 | | 4.25% MTN (c) | €500m | Feb 2031 | 453 | 447 | | 3.375% MTN (c) | €500m | May 2032 | 445 | - | | 5.5% MTN | £67m | Jan 2033 | 74 | 75 | | 3.5% MTN | €500m | Oct 2033 | 440 | - | | 5.13% MTN | £350m | May 2034 | 357 | 356 | | 5.5% MTN | £250m | Feb 2035 | 246 | 253 | | 6.15% USD Bond | $355m | Nov 2037 | 319 | 341 | | 4.875% MTN | £14m | Mar 2042 | 15 | 14 | | 5.125% MTN | €147m | Apr 2047 | 132 | 125 | | 5.2% MTN | £14m | Mar 2057 | 14 | 14 | | LPI and RPI-linked bonds (d) | | | | | | 3.322% LPI MTN | £210m | Nov 2025 | - | 429 | | 1.982% RPI MTN | £196m | Mar 2036 | 416 | 397 | | Sustainability-linked bonds (e) | | | | | | 1.875% MTN | £400m | Nov 2028 | 400 | 400 | | 0.375% MTN | €750m | Jul 2029 | 601 | 549 | | | | | 7,196 | 6,950 | | Of which: | | | | | | Current | | | 1,824 | 1,861 | | Non-current | | | 5,372 | 5,089 | | | | | 7,196 | 6,950 | (a) Bank loans and overdrafts includes £1,004m (2025: £856m) of bank overdrafts. £998m (2025: £851m) is held under a notional pooling arrangement which does not meet the criteria to be presented net of cash on the balance sheet. Refer to Note 19. (b) The bonds are secured by a charge over the property, plant and equipment held within The Tesco Property Limited Partnership, The Tesco Atrato Limited Partnership, The Tesco Sarum Limited Partnership and The Tesco Dorney Limited Partnership respectively, all of which are 100% owned subsidiaries of Tesco PLC. The carrying amounts of assets pledged as security for secured bonds are £804m, £1,325m, £972m and £271m (2025: £807m, £1,198m, £857m and £266m) respectively. £65m (2025: £60m) is the total principal repayment due within the next 12 months and the remainder is payable in quarterly instalments until the maturity date. (c) These bonds are designated as hedging instruments in a net investment hedge relationship. (d) These bonds are redeemable at par, indexed for increases in the RPI over the life of the MTN. (e) The sustainability-linked bonds are linked to the Group’s KPI for Group Greenhouse Gas (GHG) Emissions reduction (Scope 1 and 2, in tCO 2 e) to reduce these emissions by 60% by 2025/26 with respect to a 2015/16 baseline. These targets were met. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 156 ![]() Note 23 Provisions | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | Legal and | Operational | | | | | Property | Restructuring | regulatory | insurance | Other | | | | provisions | provisions | provisions | provisions | provisions | Total | | | £m | £m | £m | £m | £m | £m | | At 22 February 2025 | 200 | 42 | 79 | 140 | 5 | 466 | | Foreign currency translation | 2 | - | - | 1 | - | 3 | | Amount released in the year | (8) | (4) | (1) | (15) | (1) | (29) | | Amount provided in the year | 10 | 42 | 15 | 70 | 2 | 139 | | Amount utilised in the year | (19) | (44) | (23) | (62) | - | (148) | | Unwinding of discount | 6 | - | - | - | - | 6 | | At 28 February 2026 | 191 | 36 | 70 | 134 | 6 | 437 | | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Current | 273 | 300 | | Non-current | 164 | 166 | | | 437 | 466 | Provisions are discounted where material based on the relevant country-specific nominal risk-free rate and are risk-adjusted through adjusting the cash flow estimates. Refer to Note 15 for details of how risk-free rates are derived. The weighted average risk-free rate is 5.2% (2025: 5.1%). Property provisions Property provisions comprise onerous contracts related to vacant properties, and decommissioning, dilapidations and remediation works provisions. Dilapidations are recognised where there is a present obligation to repair and restore leased properties to their pre-occupancy state at the end of the lease term. The provision is based on best estimates for individual properties, with reference to previous experience and size of leased property, or specific agreements with the landlord where relevant. The term is measured in accordance with the outstanding length of leases or the expected timing of specific obligations. Onerous contract provisions are recognised where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The timing of provisions is determined by reference to the contract giving rise to the obligations. Decommissioning provisions reflect the Group’s long-term obligation for site-level environmental remediation works, arising from government regulations and changing consumer habits. The extent and cost of future environmental remediation represents a best estimate applied across the property portfolio based on past experience, the extent of remediation work required and the expected timing of activity, for which there is a high level of uncertainty. Amounts provided in the year primarily relate to charges for dilapidation and similar remediation provisions. Amounts released in the year primarily relate to releases of dilapidations provisions. The expected undiscounted ageing of property provisions as at 28 February 2026: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Current | 1 to 5 years | 6 to 10 years | 11 to 15 years | Over 15 years | Total | | | £m | £m | £m | £m | £m | £m | | Property provisions | 34 | 32 | 31 | 28 | 214 | 339 | Restructuring provisions Restructuring provisions primarily relate to expected employee costs and are expected to be fully utilised in the following financial year ending 27 February 2027. The provision is calculated in line with the expected settlement costs of impacted employees and excludes future operating costs. Legal and regulatory provisions Legal and regulatory provisions contain balances in relation to either ongoing or expected legal proceedings against the Group, or for costs associated with regulatory matters and/or breaches. Due to the nature of legal and regulatory matters, including unpredictable timings of legal cases or regulatory investigations, there is often uncertainty as to if or when provisions will be fully utilised. Operational insurance provisions Insurance provisions relate to outstanding liabilities from public and employer’s liability and third-party motor claims across the Group’s trading operations, separate to the Tesco Underwriting insurance balances in Note 24. Provisions relate to claims arising from incidents reported prior to the reporting date, including an allowance for those currently incurred but not reported. Amounts are measured considering claims history, including claims volume and average cost of claims, with assessment and projection by third-party actuaries. Releases in the year primarily relate to improved estimates of future outflows from revised actuarial valuations. The balance as at the financial year end is expected to be materially utilised within three years from the reporting date. Other provisions Other provisions balances relate to individually immaterial provisions that do not fall into any of the other categories. Tesco PLC Annual Report and Financial Statements 2026 157 GovernanceStrategic report Additional informationFinancial statements ![]() Note 24 Insurance Balances disclosed in this note relate to the Group’s subsidiary, Tesco Underwriting Limited (TU), part of the UK & ROI segment. Insurance revenue | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | | £m | £m | | Contracts measured under premium allocation approach (PAA) | 777 | 692 | | Expected incurred claims and other insurance service expenses | 29 | 19 | | Change in non-financial risk adjustment for risk expired | 2 | 1 | | Contractual service margin (CSM) recognised for services provided | 18 | 13 | | Contracts not measured under PAA\* | 49 | 33 | | Insurance revenue | 826 | 725 | \* For contracts not measured under PAA, the liability for remaining coverage is measured using the general measurement model (GMM). Insurance service expenses | | | | | --- | --- | --- | | | 53 weeks | 52 weeks | | | 2026 | 2025 | | | £m | £m | | Incurred claims and other directly attributable expenses | 748 | 595 | | Amortisation of insurance acquisition cash flows | 3 | (4) | | Losses on onerous acquired claims | 1 | 2 | | Changes to fulfilment cash flows relating to incurred claims | - | 5 | | Insurance service expenses | 752 | 598 | Insurance contract liabilities and reinsurance contract assets The breakdown of portfolios and groups of insurance contracts issued and reinsurance contracts held is set out in the table below: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | 2025 | | | | Insurance | Reinsurance | Net | Insurance | Reinsurance | Net | | | contract | contracts | (liabilities)/ | contract | contracts | (liabilities)/ | | | liabilities | held | assets | liabilities | held | assets | | | £m | £m | £m | £m | £m | £m | | (Liabilities)/assets for remaining coverage | (211) | 176 | (35) | (270) | 181 | (89) | | (Liabilities)/assets for incurred claims | (561) | (53) | (614) | (382) | (57) | (439) | | | (772) | 123 | (649) | (652) | 124 | (528) | | Contracts measured | (684) | 82 | (602) | (510) | 71 | (439) | | under PAA | | | | | | | | Contracts not measured | (88) | 41 | (47) | (142) | 53 | (89) | | under PAA\* | (772) | 123 | (649) | (652) | 124 | (528) | \* Contracts not measured under PAA are measured using the GMM. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 158 ![]() Insurance contract liabilities The following table provides a reconciliation of the movements in the total insurance contract liabilities in the current and prior year. This is split between liabilities for remaining coverage (LRC), representing the Group’s obligation for insured events related to the unexpired portion of the coverage period, and liabilities for incurred claims (LIC), representing outstanding claims and incurred but not reported claims and other incurred insurance expenses. | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2026 | | | | | 2025 | | | | | Liability for | | Liability for | | | Liability for | | Liability for | | | | | remaining coverage | | incurred claims | | | remaining coverage | | incurred claims | | | | | | | Estimates of | Risk | | | | Estimates of | Risk | | | | Excluding | | present value | adjustment | | Excluding | | present value | adjustment | | | | loss | Loss | of future cash | for non- | | loss | Loss | of future cash | for non- | | | | component | component | flows | financial risk | Total | component | component | flows | financial risk | Total | | | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | | Opening balance | 267 | 3 | 358 | 24 | 652 | 258 | 2 | 250 | 16 | 526 | | Insurance revenue | (826) | - | - | - | (826) | (725) | - | - | - | (725) | | Insurance service expenses | | | | | | | | | | | | Incurred claims and other directly attributable expenses\* | 22 | (1) | 709 | 18 | 748 | 16 | (1) | 572 | 8 | 595 | | Amortisation on insurance acquisition cash flows | 3 | - | - | - | 3 | (4) | - | - | - | (4) | | Losses on onerous acquired claims and reversals of those losses | - | 1 | - | - | 1 | - | 2 | - | - | 2 | | Changes to fulfilment cash flows relating to incurred claims | - | - | - | - | - | - | - | 5 | - | 5 | | Total insurance service expenses | 25 | - | 709 | 18 | 752 | 12 | 1 | 577 | 8 | 598 | | Total insurance service result | (801) | - | 709 | 18 | (74) | (713) | 1 | 577 | 8 | (127) | | Insurance finance (income)/expenses | | | | | | | | | | | | Insurance finance expenses recognised in the income statement | 1 | - | 12 | - | 13 | 1 | - | 10 | - | 11 | | Insurance finance (income)/expenses recognised in other comprehensive income | (8) | - | 12 | - | 4 | 7 | - | (7) | - | - | | Total insurance finance (income)/expenses | (7) | - | 24 | - | 17 | 8 | - | 3 | - | 11 | | Insurance cash flows | | | | | | | | | | | | Premiums received for insurance contracts issued | 773 | - | - | - | 773 | 721 | - | - | - | 721 | | Incurred claims and other expenses paid\* | (18) | - | (572) | - | (590) | (1) | - | (472) | - | (473) | | Insurance acquisition cash flows | (6) | - | - | - | (6) | (6) | - | - | - | (6) | | Total insurance cash flows | 749 | - | (572) | - | 177 | 714 | - | (472) | - | 242 | | Closing balance | 208 | 3 | 519 | 42 | 772 | 267 | 3 | 358 | 24 | 652 | \* Incurred claims and related cash flows presented within LRC relate to the settlement of the acquired claims. The time difference between settlement of the development of the claim and payment is not significant to present within LIC. Tesco PLC Annual Report and Financial Statements 2026 159 GovernanceStrategic report Additional informationFinancial statements ![]() Note 24 Insurance continued Insurance contract liabilities not measured under the PAA The following table provides a reconciliation of the movements in the insurance contract liabilities for contracts not measured under the PAA. These contracts relate to claims liabilities acquired on the acquisition of TU. The acquired claims liabilities are included in the LRC from the acquisition date and measured under the GMM as their coverage relates to the discovery of the ultimate cost of acquired claims, which will spread over multiple years. Refer to Note 1 for further details. | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | | 2025 | | | | | Estimates of | Risk adjustment | | | Estimates of | Risk adjustment | | | | | present value of | for non-financial | | | present value of | for non-financial | | | | | future cash flows | risk | CSM | Total | future cash flows | risk | CSM | Total | | | £m | £m | £m | £m | £m | £m | £m | £m | | Opening balance | 67 | 4 | 71 | 142 | 84 | 5 | 73 | 162 | | Changes that relate to current service | | | | | | | | | | CSM recognised for the year | - | - | (18) | (18) | - | - | (13) | (13) | | Change in risk adjustment for non-financial risk for risk expired | - | (2) | - | (2) | - | (1) | - | (1) | | Experience adjustments | (8) | - | - | (8) | (2) | - | - | (2) | | Changes that relate to future service | | | | | | | | | | Changes in estimates that adjust the CSM | 5 | - | (5) | - | (8) | - | 8 | - | | Changes in estimates that result in losses and reversals of losses on onerous | - | - | 1 | 1 | - | - | 3 | 3 | | acquired claims | | | | | | | | | | Total insurance service result | (3) | (2) | (22) | (27) | (10) | (1) | (2) | (13) | | Insurance finance (income)/expenses | | | | | | | | | | Insurance finance expenses recognised in the income statement | 1 | - | - | 1 | 1 | - | - | 1 | | Insurance finance expenses recognised in other comprehensive income | (8) | - | - | (8) | 7 | - | - | 7 | | Total insurance finance (income)/expenses | (7) | - | - | (7) | 8 | - | - | 8 | | Insurance cash flows | | | | | | | | | | Incurred claims and other expenses paid | (20) | - | - | (20) | (15) | - | - | (15) | | Total insurance cash flows | (20) | - | - | (20) | (15) | - | - | (15) | | Closing balance | 37 | 2 | 49 | 88 | 67 | 4 | 71 | 142 | Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 160 ![]() Reinsurance contract assets The following table provides a reconciliation of the movements in the total reinsurance contract assets in the current and prior year. This is split between movements in assets for remaining coverage (ARC) and assets for incurred claims (AIC) recoverable from reinsurance: | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2026 | | | | | 2025 | | | | | | Assets for remaining coverage | Assets for incurred claims | | | | Assets for remaining coverage | Assets for incurred claims | | | | | Excluding | | Estimates of | Risk | | Excluding | | Estimates of | Risk | | | | loss- | Loss- | present value | adjustment | | loss- | Loss- | present value | adjustment | | | | recovery | recovery | of future cash | for non- | | recovery | recovery | of future cash | for non- | | | | component | component | flows | financial risk | Total | component | component | flows | financial risk | Total | | | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | | Opening balance | 179 | 2 | (64) | 7 | 124 | 167 | 1 | (48) | 5 | 125 | | Allocation of reinsurance premiums | (277) | - | - | - | (277) | (282) | - | - | - | (282) | | Amounts recoverable from reinsurers | | | | | | | | | | | | Amounts recoverable for incurred claims and other incurred insurance service expenses | 6 | - | 217 | 7 | 230 | (4) | - | 236 | 2 | 234 | | Recoveries of losses on onerous acquired claims and reversal of those losses | - | (2) | - | - | (2) | - | 1 | - | - | 1 | | Changes to amounts recoverable for incurred claims | - | - | 2 | - | 2 | - | - | (15) | - | (15) | | Net expenses from reinsurance contracts held | (271) | (2) | 219 | 7 | (47) | (286) | 1 | 221 | 2 | (62) | | Reinsurance finance income/(expenses) | | | | | | | | | | | | Reinsurance finance income recognised in the income statement | 1 | - | 1 | - | 2 | - | - | 2 | - | 2 | | Reinsurance finance income/(expenses) recognised in other comprehensive income | (1) | - | 2 | - | 1 | (2) | - | 3 | - | 1 | | Total reinsurance finance income/(expenses) | - | - | 3 | - | 3 | (2) | - | 5 | - | 3 | | Reinsurance cash flows | | | | | | | | | | | | Premiums paid for reinsurance contracts held | 56 | - | - | - | 56 | 68 | - | - | - | 68 | | Amounts received from reinsurers relating to incurred claims | (5) | - | (6) | - | (11) | (1) | - | (9) | - | (10) | | Total reinsurance cash flows | 51 | - | (6) | - | 45 | 67 | - | (9) | - | 58 | | Other movements\* | 217 | - | (219) | - | (2) | 233 | - | (233) | - | - | | Closing balance | 176 | - | (67) | 14 | 123 | 179 | 2 | (64) | 7 | 124 | \* Other movements include the quota share premiums that are held against future reinsurance recoveries in a Funds Withheld account. Tesco PLC Annual Report and Financial Statements 2026 161 GovernanceStrategic report Additional informationFinancial statements ![]() Note 24 Insurance continued Reinsurance contract assets not measured under the PAA The following table provides a reconciliation of the movements in the reinsurance contract assets not measured under the PAA. These contracts relate to reinsurance claims acquired on the acquisition of TU. | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | | 2025 | | | | | Estimates of | Risk adjustment | | | Estimates of | Risk adjustment | | | | | present value of | for non-financial | | | present value of | for non-financial | | | | | future cash flow | risk | CSM | Total | future cash flow | risk | CSM | Total | | | £m | £m | £m | £m | £m | £m | £m | £m | | Opening balance | 18 | 1 | 34 | 53 | 36 | 3 | 24 | 63 | | Changes that relate to current service | | | | | | | | | | CSM recognised for the year | - | - | (2) | (2) | - | - | (1) | (1) | | Change in risk adjustment for non-financial risk for risk expired | - | - | - | - | - | - | - | - | | Experience adjustments | - | - | - | - | - | (1) | - | (1) | | Changes that relate to future service | | | | | | | | | | Changes in estimates that adjust the CSM | 3 | - | (3) | - | (9) | (1) | 10 | - | | Changes in estimates that result in losses and reversals of losses on onerous | - | - | (2) | (2) | - | - | 1 | 1 | | acquired claims | | | | | | | | | | Changes that relate to past service | | | | | | | | | | Changes to incurred claims component | (1) | - | - | (1) | (6) | - | - | (6) | | Total net expenses from reinsurance contracts held | 2 | - | (7) | (5) | (15) | (2) | 10 | (7) | | Reinsurance finance income/(expenses) | | | | | | | | | | Reinsurance finance income/(expenses) recognised in other comprehensive income | (1) | - | - | (1) | (2) | - | - | (2) | | Total reinsurance finance income/(expenses) | (1) | - | - | (1) | (2) | - | - | (2) | | Reinsurance cash flows | | | | | | | | | | Amounts received from reinsurers relating to incurred claims | (6) | - | - | (6) | (1) | - | - | (1) | | Total reinsurance cash flows | (6) | - | - | (6) | (1) | - | - | (1) | | Closing balance | 13 | 1 | 27 | 41 | 18 | 1 | 34 | 53 | Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 162 ![]() Analysis of CSM The following table shows an analysis of the expected recognition of the CSM remaining at the end of the reporting period in relation to acquired claims in the income statement: | | | | | | | --- | --- | --- | --- | --- | | | | 28 February 2026 | | 22 February 2025 | | | Insurance | Reinsurance | Insurance | Reinsurance | | | contract liabilities | contract assets | contract liabilities | contract assets | | Less than one year | (10) | 3 | (17) | 4 | | One to five years | (14) | 7 | (21) | 11 | | More than five years | (25) | 17 | (33) | 19 | | Total | (49) | 27 | (71) | 34 | Process used to determine assumptions The nature of insurance makes it very difficult to predict with certainty the likely outcome of any particular claim and the ultimate cost of notified claims. Each notified claim is assessed on a separate, case-by-case basis with due regard to the claim circumstances and historical evidence of the size of similar claims and provisions are based on information currently available. However, the ultimate liabilities may vary as a result of subsequent developments. Sources of data The sources of data used as inputs for the assumptions are both internal and external, using detailed studies that are carried out at least annually to ensure that the assumptions are consistent with observable market prices or other published information. When there is insufficient information to make a reliable best estimate of claims development, suitable benchmark assumptions are used. Methods The cost of outstanding claims and the incurred but not reported claims provisions are estimated using various statistical methods, which extrapolate the development of paid and incurred claims, average cost per claim and ultimate claim numbers for each accident period based upon observed development of earlier periods, with reference to suitable benchmarks. The key methods are: – development factor methods, which use historical data to estimate the paid and incurred to date as proportions of the ultimate claim cost; – individual claim assessment methods, which use claim-specific details for large individual claims to estimate the ultimate claim cost; and – benchmarking methods, which use the experience of comparable, more mature classes, or market data to estimate the cost of claims. To the extent that these methods use historical claims development information, they also assume that the historical claims development pattern will occur again in the future, after allowing (where possible) for instances where this might not be the case, such as changing economic or legal trends. Recoveries The provisions are initially estimated at a gross level and a separate calculation is carried out to estimate the size of reinsurance recoveries. The Group is covered by a variety of reinsurance programmes. The methods used by the Group take into account historical data, specific details for individual large claims and details of the reinsurance programme to assess the expected size of reinsurance recoveries. Recoveries through salvage and subrogation are estimated and recorded as part of the liability for incurred claims based on a combination of suitable benchmark assumptions and the observed development to date. Risk adjustment for non-financial risk The risk adjustment for non-financial risk is the compensation that the Group requires for bearing uncertainty around the amount and timing of the cash flows of groups of insurance contracts. The Group has used a confidence level (probability of sufficiency) approach at the 77.5th percentile. Discount rate Insurance contract liabilities are calculated by discounting expected future cash flows using a yield curve based on a replicating portfolio and utilising a top-down approach. The replicating portfolio is a reference portfolio of government and corporate bonds matching the expected maturity profile of claims liabilities with resulting yield curve adjusted to eliminate credit risk spread. The yield curves applied for discounting future cash flows of liabilities for incurred claims are listed below: | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | | Mean 11 - 100 | | | One year | Three years | Five years | 10 years | years | | | % | % | % | % | % | | As at 28 February 2026 | 3.5% | 3.9% | 4.2% | 4.5% | 4.7% | | As at 22 February 2025 | 4.1% | 4.4% | 4.5% | 4.6% | 4.7% | Tesco PLC Annual Report and Financial Statements 2026 163 GovernanceStrategic report Additional informationFinancial statements ![]() Note 24 Insurance continued The tables below compare actual claims payments with previous estimates of the undiscounted amounts of the claims on a gross and net of reinsurance basis. Claims development (gross) | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | 2022 | 2023 | 2024 | 2025 | 2026 | Total | | Estimate of gross undiscounted ultimate claims costs | £m | £m | £m | £m | £m | £m | | At end of the financial year | 233 | 280 | 365 | 442 | 580 | | | One year later | 233 | 289 | 356 | 442 | - | | | Two years later | 211 | 300 | 350 | - | - | | | Three years later | 215 | 307 | - | - | - | | | Four years later | 215 | - | - | - | - | | | Current estimate of cumulative claims | 215 | 307 | 350 | 442 | 580 | 1,894 | | Cumulative payments to date | (200) | (259) | (292) | (323) | (285) | (1,359) | | Gross undiscounted liabilities for incurred claims | 15 | 48 | 58 | 119 | 295 | 535 | | Value of Risk Adjustment | | | | | | 40 | | Effect of discounting | | | | | | (41) | | Gross claims liabilities | | | | | | 534 | | Ancillary claims and expense liabilities | | | | | | 27 | | Total gross liabilities for incurred claims | | | | | | 561 | Claims development (net) | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | 2022 | 2023 | 2024 | 2025 | 2026 | Total | | Estimate of net undiscounted ultimate claims costs | £m | £m | £m | £m | £m | £m | | At end of financial year | 150 | 169 | 220 | 258 | 422 | | | One year later | 151 | 176 | 209 | 184 | - | | | Two years later | 130 | 180 | 208 | - | - | | | Three years later | 138 | 186 | - | - | - | | | Four years later | 138 | - | - | - | - | | | Current estimate of cumulative claims | 138 | 186 | 208 | 184 | 422 | 1,138 | | Cumulative payments net of reinsurance recoveries to date | (125) | (157) | (177) | (124) | (203) | (786) | | Net undiscounted liabilities for incurred claims | 13 | 29 | 31 | 60 | 219 | 352 | | Value of Risk Adjustment | | | | | | 26 | | Effect of discounting | | | | | | (39) | | Net claims liabilities | | | | | | 339 | | Quota share funds withheld\* | | | | | | 248 | | Ancillary claims and expense liabilities | | | | | | 27 | | Total net liabilities for incurred claims | | | | | | 614 | \* Quota share funds withheld relate to reinsurance premiums, which will be utilised to offset recoveries receivable from reinsurers. The Group provides information on the gross and net claims development from the date of acquisition of TU in May 2021 to the current reporting period, as it was not party to claims made prior to the acquisition date. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 164 ![]() Note 25 Financial instruments The Group recognises the following financial instruments on its balance sheet. The Group’s exposure to the risks associated with its financial assets and liabilities is discussed in Note 26. | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2026 | | | | 2025 | | | | | | | | At fair value | | | | At fair value | | | | | | At fair value through other | | | | At fair value through other | | | | | | | through profit | comprehensive | | | through profit | comprehensive | | | | | At amortised cost | or loss | income | Total | At amortised cost | or loss | income | Total | | | Notes | £m | £m | £m | £m | £m | £m | £m | £m | | Financial assets | | | | | | | | | | | Cash and cash equivalents | 19 | 2,471 | 44 | - | 2,515 | 2,194 | 61 | - | 2,255 | | Short-term investments | 19 | 713 | 716 | - | 1,429 | 837 | 1,386 | - | 2,223 | | Trade receivables | 18 | 636 | - | - | 636 | 652 | - | - | 652 | | Other receivables | 18 | 205 | - | - | 205 | 183 | - | - | 183 | | Joint ventures and associates loan receivables | 30 | 98 | - | - | 98 | 97 | - | - | 97 | | Other investments | 16 | 192 | - | 1,011 | 1,203 | 196 | 15 | 874 | 1,085 | | Derivative financial instruments: | | | | | | | | | | | Interest rate swaps | | - | 14 | - | 14 | - | 24 | - | 24 | | Cross-currency swaps | | - | 129 | - | 129 | - | 138 | - | 138 | | Index-linked swaps | | - | 469 | - | 469 | - | 646 | - | 646 | | Forward foreign currency contracts | | - | 11 | - | 11 | - | 27 | - | 27 | | Commodity derivatives | | - | 5 | - | 5 | - | - | - | - | | | | 4,315 | 1,388 | 1,011 | 6,714 | 4,159 | 2,297 | 874 | 7,330 | | Financial liabilities | | | | | | | | | | | Trade payables | 20 | (6,862) | - | - | (6,862) | (6,692) | - | - | (6,692) | | Accruals | 20 | (987) | - | - | (987) | (943) | - | - | (943) | | Other payables | 20 | (1,984) | - | - | (1,984) | (1,849) | - | - | (1,849) | | Borrowings | 22 | (7,196) | - | - | (7,196) | (6,950) | - | - | (6,950) | | Lease liabilities | 13 | (7,884) | - | - | (7,884) | (7,716) | - | - | (7,716) | | Derivative financial instruments: | | | | | | | | | | | Interest rate swaps | | - | (56) | - | (56) | - | (74) | - | (74) | | Cross-currency swaps | | - | (81) | - | (81) | - | (130) | - | (130) | | Forward foreign currency contracts | | - | (34) | - | (34) | - | (11) | - | (11) | | Commodity derivatives | | - | - | - | - | - | (2) | - | (2) | | | | (24,913) | (171) | - | (25,084) | (24,150) | (217) | - | (24,367) | Tesco PLC Annual Report and Financial Statements 2026 165 GovernanceStrategic report Additional informationFinancial statements ![]() Note 25 Financial instruments continued The expected maturity of financial assets and liabilities is not considered to be materially different to their current and non-current classification. The fair value of assets and liabilities measured at amortised cost are shown below. Fair value of financial assets and liabilities measured at amortised cost The table excludes cash and cash equivalents, short-term investments, trade receivables/payables, other receivables/payables and accruals where the carrying values approximate fair value. The levels in the table refer to the fair value measurement hierarchy. | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | 28 February 2026 | 22 February 2025 | | | | | Carrying | Fair | Carrying | Fair | | | | value | value\* | value | value\* | | | Level | £m | £m | £m | £m | | Financial assets measured at amortised cost | | | | | | | Investments in debt instruments at amortised cost | 1 | 188 | 199 | 192 | 197 | | Investments in debt instruments at amortised cost | 2 | 4 | 4 | 4 | 4 | | Joint ventures and associates loan receivables | 2 | 98 | 107 | 97 | 105 | | Financial liabilities measured at amortised cost | | | | | | | Borrowings | | | | | | | Amortised cost | 1 | (5,406) | (5,263) | (4,916) | (4,651) | | Bonds in fair value hedge relationships | 1 | (1,790) | (1,849) | (2,034) | (2,088) | \* Refer to the fair value measurement by level of fair value hierarchy section for details on Level 2 methodology. Fair value measurement by level of fair value hierarchy The following tables present the Group’s financial assets and liabilities that are measured at fair value, by level of fair value hierarchy: – quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and – inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). Level 2 assets and liabilities are valued by discounting future cash flows using externally sourced market yield curves, including interest rate curves and foreign exchange rates from highly liquid markets. Level 2 inputs include forward rates and foreign exchange rates from available market data, with credit risk adjustments being incorporated in the derivative valuations, taking into account the default risk of either party, using market data such as credit default swaps. Refer to the Level 3 instruments section below for details on Level 3 valuation methodology. | | | | | | | --- | --- | --- | --- | --- | | | Level 1 | Level 2 | Level 3 | Total | | At 28 February 2026 | £m | £m | £m | £m | | Assets | | | | | | Investments at fair value through other comprehensive income | 993 | - | 18 | 1,011 | | Short-term investments at fair value through profit or loss | 716 | - | - | 716 | | Cash and cash equivalents at fair value through profit or loss | - | 44 | - | 44 | | Derivative financial instruments: | | | | | | Interest rate swaps | - | - | 14 | 14 | | Cross-currency swaps | - | - | 129 | 129 | | Index-linked swaps | - | - | 469 | 469 | | Foreign currency forward contracts | - | 11 | - | 11 | | Commodity derivatives | - | 5 | - | 5 | | Total assets | 1,709 | 60 | 630 | 2,399 | | Liabilities | | | | | | Derivative financial instruments: | | | | | | Interest rate swaps | - | - | (56) | (56) | | Cross-currency swaps | - | - | (81) | (81) | | Foreign currency forward contracts | - | (34) | - | (34) | | Total liabilities | - | (34) | (137) | (171) | | Net assets | 1,709 | 26 | 493 | 2,228 | Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 166 ![]() | | | | | | | --- | --- | --- | --- | --- | | | Level 1 | Level 2 | Level 3 | Total | | At 22 February 2025 | £m | £m | £m | £m | | Assets | | | | | | Investments at fair value through other comprehensive income | 855 | - | 19 | 874 | | Short-term investments at fair value through profit or loss | 1,386 | - | - | 1,386 | | Cash and cash equivalents at fair value through profit or loss | - | 61 | - | 61 | | Other investments at fair value through profit and loss | - | - | 15 | 15 | | Derivative financial instruments: | | | | | | Interest rate swaps | - | - | 24 | 24 | | Cross-currency swaps | - | - | 138 | 138 | | Index-linked swaps | - | - | 646 | 646 | | Foreign currency forward contracts | - | 27 | - | 27 | | Total assets | 2,241 | 88 | 842 | 3,171 | | Liabilities | | | | | | Derivative financial instruments: | | | | | | Interest rate swaps | - | - | (74) | (74) | | Cross-currency swaps | - | - | (130) | (130) | | Foreign currency forward contracts | - | (11) | - | (11) | | Commodity derivatives | - | (2) | - | (2) | | Total liabilities | - | (13) | (204) | (217) | | Net assets | 2,241 | 75 | 638 | 2,954 | During the financial year, there were no transfers (2025: no transfers) between Level 1 and Level 2 fair value measurements. Level 3 instruments Uncollateralised derivative financial instruments are held by the Group as part of financial risk management strategy. Uncollateralised derivatives are primarily Level 2, but those which also include certain data sources which are significantly less liquid (unobservable inputs) are Level 3. These unobservable inputs relate to the funding valuation adjustment (FVA), which is the estimate of the adjustment to the fair value that a market participant would make to account for funding costs. These are calculated on the future valuation of the derivative, based on the best estimate available to management of suitable relevant cost of funds. A 10 basis points increase in the cost of funds would increase the FVA by £9m (2025: £7m). Unlisted investments are valued based on less observable inputs such as recent funding rounds. The following table presents the changes in Level 3 instruments: | | | | | | | --- | --- | --- | --- | --- | | | 2026 | | 2025 | | | | Uncollateralised | Unlisted | Uncollateralised | Unlisted | | | derivatives | investments | derivatives | investments | | | £m | £m | £m | £m | | At the beginning of the year | 604 | 34 | 545 | 37 | | Gains/(losses) recognised in finance costs (a) | (15) | - | (14) | (1) | | Gains/(losses) recognised in other comprehensive income not reclassified to the income statement | - | - | - | 4 | | Gains/(losses) recognised in other comprehensive income that may | 11 | - | 35 | - | | subsequently be reclassified to the income statement | | | | | | Impairment recognised in cost | - | - | - | (10) | | of sales | | | | | | Additions | 2 | - | - | 5 | | Disposals | - | (16) | - | - | | Settlements | (127) | - | 38 | - | | Transfers of assets from Level 3 (b) | - | - | - | (1) | | At the end of the year | 475 | 18 | 604 | 34 | (a) Net unrealised gains/(losses) of £42m (2025: £105m) are attributable to those assets and liabilities held at the end of the year and have been recognised in finance costs in the Group income statement. (b) There were £nil transfers to Level 3 during the year (2025: £nil). There were £nil transfers from Level 3 to Level 2 (2025: £1m) and £nil transfers from Level 3 to Level 1 (2025: £nil). Tesco PLC Annual Report and Financial Statements 2026 167 GovernanceStrategic report Additional informationFinancial statements ![]() Note 25 Financial instruments continued Offsetting of financial assets and liabilities The following tables show those financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements. | | | | | | | | --- | --- | --- | --- | --- | --- | | | | Gross amounts of | | | | | | Gross amounts | financial assets/ | Net amounts | Related amounts | | | | of recognised | (liabilities) offset in | included | not offset in | | | | financial assets/ | the Group balance | in the Group | the Group balance | | | | (liabilities) | sheet | balance sheet | sheet | Net amount | | At 28 February 2026 | £m | £m | £m | £m | £m | | Financial assets | | | | | | | Derivative financial instruments | 628 | - | 628 | (87) | 541 | | Trade receivables | 748 | (112) | 636 | - | 636 | | Total assets | 1,376 | (112) | 1,264 | (87) | 1,177 | | Financial liabilities | | | | | | | Derivative financial instruments | (171) | - | (171) | 87 | (84) | | Trade payables | (6,974) | 112 | (6,862) | - | (6,862) | | Total liabilities | (7,145) | 112 | (7,033) | 87 | (6,946) | | | | | | | | | --- | --- | --- | --- | --- | --- | | | | Gross amounts of | | | | | | Gross amounts | financial assets/ | Net amounts | Related amounts | | | | of recognised | (liabilities) offset in | included | not offset in | | | | financial assets/ | the Group balance | in the Group | the Group balance | | | | (liabilities) | sheet | balance sheet | sheet | Net amount | | At 22 February 2025 | £m | £m | £m | £m | £m | | Financial assets | | | | | | | Derivative financial instruments | 835 | - | 835 | (115) | 720 | | Trade receivables | 758 | (106) | 652 | - | 652 | | Total assets | 1,593 | (106) | 1,487 | (115) | 1,372 | | Financial liabilities | | | | | | | Derivative financial instruments | (217) | - | (217) | 115 | (102) | | Trade payables | (6,798) | 106 | (6,692) | - | (6,692) | | Total liabilities | (7,015) | 106 | (6,909) | 115 | (6,794) | For the financial assets and liabilities subject to enforceable master netting arrangements above, each agreement between the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities will be settled on a gross basis. However, each party to the master netting agreement or similar agreement will have the option to settle all such amounts on a net basis in the event of default of the other party. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 168 ![]() Note 26 Financial risk management The main financial risks faced by the Group and the management of these risks are set out below, and include market risk (foreign exchange, interest rate, inflation and commodity prices), credit risk, liquidity risk, insurance risk and other risks. a) Market risk Foreign exchange risk management | | | | | --- | --- | --- | | Description of risks | Management policy | Hedging strategy | | Transactional exposure that arises from the cost of | The Group’s policy is to hedge currency exposure that could significantly | Foreign currency forward contracts which are designated as cash flow | | future purchases of goods, where those purchases | impact the Group income statement. Minimum and maximum hedge limits | hedges. These are denominated in the same currency as the highly probable | | are denominated in a currency other than the | are in place depending on whether forecast spend is committed or | future sales and purchases, which are expected to occur within a maximum | | functional currency of the purchasing company. | uncommitted but highly probable. | 24-month period, and the hedge ratio is determined to be 1:1. | | Translation exposure that arises from exchange rate | Translation risk related to foreign subsidiaries’ revenue and expenses is not | Euro-denominated borrowings are used to hedge the exposure of a portion | | movements in connection with translating the Group’s | actively hedged. However, to reduce this exposure in relation to the net assets of | of the Group’s net investments in overseas operations which have a Euro | | foreign subsidiaries’ revenue, expenses, assets and | foreign subsidiaries, net investment hedging is undertaken. | functional currency, against changes in value due to changes in foreign exchange | | liabilities into Pounds Sterling. | | rates. The Group has established a hedge ratio of 1:1, as the underlying risk of the | | | | hedging instrument is identical to the hedged risk component. | | Loans to and from subsidiaries in currencies other | The Group's policy is that 100% of the foreign exchange risk is hedged. | Foreign currency derivatives and borrowings in matching currencies, which | | than in the entity’s functional currency. | | are not formally designated as accounting hedges as gains and losses will | | | | naturally offset in the income statement. | | Debt issued in a currency other than Pounds Sterling. | The Group’s policy is to swap 100% of the foreign currency debt back to Pounds | Cross-currency swaps, which are designated as fair value hedges or economic | | | Sterling, unless there are appropriate matching foreign currency assets. | hedges. | Residual exposure is present, arising largely from cash and cash equivalents balances that are not in the functional currency of the entity holding these balances. The Group income statement impact of foreign currency exchange rate movements on these residual balances is disclosed in the sensitivity table on page 171. Interest rate risk management | | | | | --- | --- | --- | | Description of risks | Management policy | Hedging strategy | | Debt issued at variable interest rates as well as cash | The Group's policy is to manage its cash flow and fair value risk on a net debt | Interest rate swap contracts are used to fix interest rates on senior unsecured | | deposits and short-term investments, giving rise to | basis (senior unsecured debt, lease liabilities, cash and cash equivalents and | debt or investments issued at floating rates, creating a cash flow hedge; and for | | cash flow risk, and debt issued at fixed interest rates | short-term investments). | senior unsecured debt or investments issued at fixed rates to generate variable | | giving rise to fair value risk. | | interest exposure, creating a fair value hedge. The terms of the swap contracts | | | | match the terms of the borrowings or investments including notional amounts | | | | and maturity, interest settlement and interest rate reset dates, and the Group | | | | has established a hedge ratio of 1:1 for the hedging relationships as the underlying | | | | risk of the derivative contract is identical to that of the hedged item. | Tesco PLC Annual Report and Financial Statements 2026 169 GovernanceStrategic report Additional informationFinancial statements ![]() Note 26 Financial risk management continued The table below shows the interest rate risk profile for the Group’s financial instruments: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | 2025 | | | | Fixed | Floating | Total | Fixed | Floating | Total | | | £m | £m | £m | £m | £m | £m | | Cash and cash equivalents | - | 2,515 | 2,515 | - | 2,255 | 2,255 | | Short-term investments | - | 1,429 | 1,429 | - | 2,223 | 2,223 | | Investments in debt instruments at amortised cost | 192 | - | 192 | 196 | - | 196 | | Investments at fair value through other comprehensive income | 1,003 | 8 | 1,011 | 866 | 8 | 874 | | Investments at fair value through profit or loss | - | - | - | 15 | - | 15 | | Joint ventures and associates loan receivables | 98 | - | 98 | 97 | - | 97 | | Lease liabilities | (7,884) | - | (7,884) | (7,716) | - | (7,716) | | Borrowings | (6,142) | (1,054) | (7,196) | (6,043) | (907) | (6,950) | | Derivative effect: | | | | | | | | Interest rate swaps | 1,088 | (1,088) | - | 1,464 | (1,464) | - | | Cross-currency swaps | 1,008 | (1,008) | - | 902 | (902) | - | | Total | (10,637) | 802 | (9,835) | (10,219) | 1,213 | (9,006) | | Percentage of interest-bearing debt at fixed rate | | | 85% | | | 83% | | Weighted average rate of interest paid on senior unsecured debt | | | 4.0% | | | 4.8% | Inflation risk management | | | | | --- | --- | --- | | Description of risks | Management policy | Hedging strategy | | Index-linked debt, where the principal is indexed to | The Group’s policy is to hedge inflation in total balance sheet debt (including index-linked bonds and RPI- | LPI debt (where principal is indexed to RPI, with an | | increase/decrease in line with either RPI or LPI. | linked lease liabilities) on a portfolio basis alongside its interest rate risk management. | annual maximum increase of 5% and a minimum of | | | | 0%) and RPI debt are hedged back to fixed rate using | | | | derivative contracts designated as cash flow hedges. | | Index-linked lease liabilities, where the liability is indexed | | Indexed liabilities arising from property joint ventures | | to increase/decrease in line with either RPI or LPI. | | are fully hedged using derivative contracts which | | | | economically hedge the lease liability inflation uplift. | Refer to Note 13 for information on the Group’s exposure to inflation-linked leases. Commodity prices risk management | | | | | --- | --- | --- | | Description of risks | Management policy | Hedging strategy | | Changes in commodity prices largely relating to diesel | The Group policy is to hedge a minimum percentage of the forecast uncommited exposure (diesel: 50%, | Forward derivative contracts which are designated as | | for own use and various other commodity price risks | other commodities: 20%) within the next 12 months. Hedging can be achieved by either creating a fixed | cash flow hedges are used to hedge future purchases. | | affecting goods purchased for resale, including but not | price commitment with suppliers or through derivatives. | These are denominated in the same currency and | | limited to: wheat, soybean meal, sugar, power, coffee | | volume as the forecast purchases and the hedge ratio | | and cocoa. | | is determined to be 1:1. | Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 170 ![]() Financial instruments not qualifying for hedge accounting The Group’s policy does not permit the use of derivatives for trading purposes. However, some derivatives do not qualify for hedge accounting, or are specifically not designated as a hedge where gains and losses on the hedging instrument and the hedged item naturally offset in the Group income statement. These instruments include index-linked swaps, interest rate swaps, cross-currency swaps, commodity swaps and foreign currency forward contracts. Sensitivity analysis The impact on the financial statements of the Group from foreign currency, inflation, interest rate and commodity price volatility is discussed below. The analysis excludes the impact of movements in market variables on the carrying value of pension and other post-employment benefit obligations and on the retranslation of overseas net assets. However, it does include the foreign exchange sensitivity resulting from local entity non-functional currency financial instruments. The sensitivity analysis has been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and derivatives portfolio, and the proportion of financial instruments in foreign currencies are all constant and on the basis of the hedge designations in place at 28 February 2026. It should be noted that the sensitivity analysis reflects the impact on income and equity due to financial instruments held at the balance sheet date. It does not reflect any change in sales or costs that may result from changing interest or exchange rates. The following assumptions were made in calculating the sensitivity analysis: – the sensitivity of interest payable to movements in interest rates is calculated on net floating rate exposures on debt, deposits and derivative instruments with no sensitivity assumed for RPI-linked borrowings, which have been swapped to fixed rates; – changes in the carrying value of derivative financial instruments designated as fair value hedges against movements in interest rates or foreign exchange rates have an immaterial effect on the Group income statement and equity due to compensating adjustments in the carrying value of debt; – changes in the carrying value of financial instruments designated as net investment hedges against movements in foreign exchange rates are recorded directly in the Group statement of comprehensive income/(loss); – all other changes in the carrying value of derivative financial instruments designated as hedging instruments are fully effective with no impact on the Group income statement; and – the floating leg of any swap or any floating rate debt is treated as not having any interest rate already set, therefore a change in interest rates affects a full 12-month period for the interest payable portion of the sensitivity calculations. Using the above assumptions, the following table shows the quantitative effect on the Group income statement and the Group statement of changes in equity that would result, at the balance sheet date, from changes in interest rates, inflation rates, currency exchange rates and commodity prices that are reasonably possible for major currencies where there have recently been significant movements: | | | | | | | --- | --- | --- | --- | --- | | | 2026 | | 2025 | | | | Income gain/ | Equity gain/ | Income gain/ | Equity gain/ | | | (loss) | (loss) | (loss) | (loss) | | | £m | £m | £m | £m | | 1% increase in interest rates | (23) | 1 | (21) | 2 | | 5% appreciation of the Euro | (7) | (69) | (9) | (47) | | 5% appreciation of the US Dollar | (8) | 50 | (10) | 38 | | 50 basis points parallel upward shift in the forward | 73 | 19 | 82 | 20 | | inflation curve | | | | | | 10% increase in commodity prices | - | 5 | - | 6 | A decrease in interest rates and commodity prices, depreciation of foreign currencies and downward shift in the forward inflation curve would have the opposite effect to the impact in the table above. The impact on the Group income statement resulting from changes in foreign exchange rates against GBP in relation to financial instruments (excluding those arising on consolidation) is minimal as Group policy dictates that all material income statement foreign exchange exposures are hedged. In prior years, the Group entered into a number of derivative index-linked contracts with external counterparties to economically hedge a proportion of the Group’s exposure to index-linked lease liabilities with its joint ventures. These are specifically not designated as accounting hedges but are economic hedges. However, the gains and losses on the hedging instrument and hedged item do not naturally offset in the Group income statement. This mismatch arises due to different accounting outcomes of IFRS 9 and IFRS 16, which results in a timing difference. The impact on the Group statement of comprehensive income/(loss) from changing exchange rates results from the revaluation of financial liabilities used as net investment hedges. The impact on the Group statement of comprehensive income/(loss) will largely be offset by the revaluation in equity of the hedged assets in the Group statement of changes in equity. Derivatives and hedging exposures Derivatives are used to hedge exposure to market risks, some of which are economic hedges and others are formally designated hedging instruments with hedge accounting applied. The main sources of hedge ineffectiveness are the effects of the counterparties’ and the Group’s own credit risk on the fair value of derivatives. Tesco PLC Annual Report and Financial Statements 2026 171 GovernanceStrategic report Additional informationFinancial statements ![]() Note 26 Financial risk management continued The fair value and notional amounts of derivatives analysed by hedge type are as follows: | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2026 | | | | 2025 | | | | Asset | | Liability | | Asset | | Liability | | | | Fair value | Notional | Fair value | Notional | Fair value | Notional | Fair value | Notional | | | £m | £m | £m | £m | £m | £m | £m | £m | | Fair value hedges | | | | | | | | | | Interest rate swaps | 14 | 438 | (54) | 700 | 24 | 414 | (72) | 1,100 | | Cross-currency swaps | 1 | 88 | (66) | 657 | - | - | (118) | 621 | | Cash flow hedges | | | | | | | | | | Interest rate swaps | - | - | (2) | 50 | - | - | (2) | 50 | | Index-linked swaps | 157 | 196 | - | - | 299 | 406 | - | - | | Foreign currency forward contracts | 7 | 1,053 | (32) | 1,605 | 25 | 1,094 | (8) | 601 | | Commodity derivatives | 5 | 40 | - | 7 | - | 20 | (2) | 41 | | Derivatives not in a formal hedge relationship | | | | | | | | | | Cross-currency swaps | 128 | 303 | (15) | 89 | 138 | 308 | (12) | 95 | | Index-linked swaps | 312 | 2,074 | - | - | 347 | 2,074 | - | - | | Foreign currency forward contracts | 4 | 1,036 | (2) | 456 | 2 | 285 | (3) | 545 | | Total | 628 | 5,228 | (171) | 3,564 | 835 | 4,601 | (217) | 3,053 | Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 172 ![]() The following table sets out the maturity profile, average interest rates and foreign currency exchange rates of the hedging instruments used in the Group’s hedging strategies. | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | 2025 | | | | | | More than five | | | More than five | | Maturity profile | Up to one year | One to five years | years | Up to one year | One to five years | years | | Notional amount (£m) | | | | | | | | Fair value hedges | | | | | | | | Interest rate swaps – GBP | - | 450 | 250 | 400 | - | 700 | | Interest rate swaps – EUR | - | 438 | - | - | - | 414 | | Cross-currency swaps (GBP: EUR)\* | - | 657 | 88 | - | 621 | - | | Cash flow hedges | | | | | | | | Index-linked swaps | - | - | 196 | 210 | - | 196 | | Interest rate swaps | - | 50 | - | - | 50 | - | | Average net interest rate (pay)/receive | | | | | | | | Fair value hedges | | | | | | | | Interest rate swaps – GBP | - | (3.47)% | (0.22)% | (3.41)% | - | (3.04)% | | Interest rate swaps – EUR | - | 0.91% | - | - | - | 0.59% | | Cross-currency swaps (GBP: EUR)\* | - | (4.46)% | (1.50)% | - | (5.19)% | - | | Cash flow hedges | | | | | | | | Index-linked swaps | - | - | (4.21)% | (4.23)% | - | (4.21)% | | Interest rate swaps | - | (1.17)% | - | - | (0.45)% | - | \* Average exchange rate for cross-currency swaps (GBP: EUR) is 1.131 (2025: 1.128). At 28 February 2026, foreign currency forward contracts, designated as cash flow hedges, equivalent to £2.7bn were outstanding (2025: £1.7bn). These forward contracts are largely in relation to purchases of Euros (notional €0.4bn) (2025: notional €0.7bn) and US Dollars (notional $1.2bn) (2025: notional $0.9bn) with varying maturities up to July 2027. For the above currencies the rates ranged from EUR/GBP 1.117 to 1.168 (2025: 1.149 to 1.206) and USD/GBP from 1.324 to 1.380 (2025: 1.219 to 1.336). Forward commodity contracts designated as cash flow hedges relate to a range of underlying hedged risks with varying maturities up to February 2027. The notional and fair values of these contracts are shown in the table on page 172. Tesco PLC Annual Report and Financial Statements 2026 173 GovernanceStrategic report Additional informationFinancial statements ![]() Note 26 Financial risk management continued The following table sets out the details of the hedged exposures covered by the Group’s fair value hedges, and the effectiveness of those hedging relationships: | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 2026 | | | | | 2025 | | | | | | | | Changes in fair | Change in fair | Hedge | | | Changes in fair | | Hedge | | | | | Accumulated | value of hedging | value of hedged | ineffectiveness | | Accumulated | value of hedging | Change in fair value | ineffectiveness | | | | | amounts of fair | instrument used | item used | recognised in the | | amounts of fair | instrument used | of hedged item | recognised in the | | | | | value adjustments | to calculate | to calculate | income statement | | value adjustments | to calculate | used to calculate | income statement | | | | Carrying amount | on hedged item | ineffectiveness | ineffectiveness | through finance | Carrying amount | on hedged item | ineffectiveness | ineffectiveness | through finance | | | Balance sheet classification | assets/(liabilities) | assets/(liabilities) | gains/(losses) | gains/(losses) | costs | assets/(liabilities) | assets/(liabilities) | gains/(losses) | gains/(losses) | costs | | | | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | | Interest rate risk | | | | | | | | | | | | | Fixed-rate bonds\* | Borrowings | (2,225) | 39 | 80 | (81) | (1) | (2,492) | 114 | 36 | (37) | (1) | \* The accumulated amount of fair value adjustments remaining in the Group balance sheet for hedged items that have ceased to be adjusted for hedging gains and losses was £(64)m for fixed-rate bonds (2025: £(70)m). The following table sets out information regarding the change in value of the hedged item used in calculating hedge ineffectiveness as well as the impacts on the hedging reserve for cash flow hedge designations: | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2026 | | | 2025 | | | | | Change in | | | Change in | | | | | | value of hedging | Change in value of | | value of hedging | Change in value of | | | | | instrument for | hedged item for | Cumulative | instrument for | hedged item for | Cumulative | | | | calculating hedge | calculating hedge | impact on hedging | calculating hedge | calculating hedge | impact on hedging | | | | ineffectiveness | ineffectiveness | reserve (a) | ineffectiveness | ineffectiveness | reserve (a) | | | Hedging instrument | £m | £m | £m | £m | £m | £m | | Interest rate/inflation risk | | | | | | | | | Index-linked bonds | Index-linked swaps | 11 | (11) | 1 | 32 | (20) | 10 | | Borrowings | Interest rate swaps | (1) | 1 | 3 | 1 | (1) | 5 | | Foreign currency risk | | | | | | | | | Forecast purchases | Foreign currency forward contracts | (98) | 98 | (23) | 10 | (10) | 8 | | Commodity risk | | | | | | | | | Forecast purchases | Commodity derivatives | 2 | (2) | 4 | (3) | 3 | (1) | | Interest rate/foreign currency risk | | | | | | | | | MTNs (b) | Cross-currency swaps | - | - | 44 | - | - | 46 | (a) Excludes deferred tax. (b) This is a discontinued hedge. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 174 ![]() The following table presents a reconciliation by risk category of the cash flow hedge reserve and an analysis of other comprehensive income in relation to hedge accounting: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | Interest rate/ | | | | | | | | foreign currency | | | | | | Interest rate/inflation risk | | risk | | Foreign currency/commodity risk | | | | | | | Foreign currency | | | | | Index-linked | Interest rate | Cross-currency | forward | Commodity | | | | swaps | swaps | swaps | contracts (a) | derivatives (a) | Hedging reserve (b) | | | £m | £m | £m | £m | £m | £m | | At 24 February 2024 | 13 | 3 | 57 | 8 | - | 81 | | Net fair value gains/(losses) | 32 | 1 | - | 10 | (3) | 40 | | Amount reclassified to finance income/(cost) in Group income statement | (38) | (1) | (30) | (2) | - | (71) | | Amount reclassified to inventories | - | - | - | (7) | 3 | (4) | | Tax | 1 | - | 8 | (2) | - | 7 | | At 22 February 2025 | 8 | 3 | 35 | 7 | - | 53 | | Net fair value gains/(losses) | 13 | (1) | - | (98) | 2 | (84) | | Amount reclassified to finance income/(cost) in Group income statement | (22) | (2) | (2) | 9 | 1 | (16) | | Amount reclassified to inventories | - | - | - | 57 | 4 | 61 | | Tax | 3 | 1 | - | 3 | (2) | 5 | | At 28 February 2026 | 2 | 1 | 33 | (22) | 5 | 19 | (a) Net fair value gains/(losses) relates to inventory cash flow hedges of £(96)m (2025: £7m). (b) Includes £2m (2025: £4m) relating to non-controlling interests. Net investment hedges Refer to Note 22 for details of the hedging instruments. Movements in the cumulative impact on net investment hedges in other comprehensive income are set out below: | | | | | | --- | --- | --- | --- | | | Nominal amount | | Cumulative impact | | | of hedging | Nominal amount of | on net investment | | | instrument | hedged item | hedges | | | £m | £m | £m | | At 24 February 2024 | (1,068) | 1,068 | (754) | | Change in value for calculating ineffectiveness | 33 | (33) | 33 | | At 22 February 2025 | (1,035) | 1,035 | (721) | | Change in value for calculating ineffectiveness | (73) | 73 | (60) | | New hedges designated in the year\* | (425) | 425 | (13) | | At 28 February 2026 | (1,533) | 1,533 | (794) | \* During the year, €500m 3.375% MTN May 2032 was designated in a net investment hedge. In the prior year, there were no discontinuations and no new designations of MTNs in a net investment hedge. Net investment hedge ineffectiveness was £nil (2025: £nil) during the year. As at 28 February 2026, the discontinued hedge balance is £(760)m (2025: £(760)m). During the current financial year, currency movements increased the net value, after the effects of hedging, of the Group’s overseas assets by £93m (2025: decrease by £(56)m). The Group also ensures that each subsidiary is appropriately hedged in respect of its non-functional currency assets. Tesco PLC Annual Report and Financial Statements 2026 175 GovernanceStrategic report Additional informationFinancial statements ![]() Note 26 Financial risk management continued (b) Credit risk | | | | | --- | --- | --- | | Description of risk | Management policy | Measurement | | A counterparty will not meet its obligations leading to | For cash and cash equivalents, short-term investments, other investments, and derivative financial | The Group monitors the exposure, credit rating, | | a financial loss for the Group. This arises from cash | instruments: | outlook, and credit default swap levels of these | | and cash equivalents, short-term investments, trade | – the Group holds positions with an approved list of investment-grade rated counterparties. | counterparties on a regular basis. | | receivables, other receivables, joint venture and | – counterparty credit limits are set to minimise the concentration of risk and are set taking into account | Counterparty credit limits are reviewed every | | associate loan receivables, reinsurance contract assets, | the type and value of the specific financial asset. | six months and may be updated throughout the | | other investments, and derivative financial instruments. | For trade receivables, other receivables, joint venture and associate loan receivables, and reinsurance | financial year. | | | contract assets: | Refer to page 177 for information on the Group’s ECLs. | | | – the Group’s credit risk is managed with various mitigating controls including credit checks, credit | | | | insurance, and master netting agreements. Due to the nature of the business, there is little concentration | | | | of risk due to the large number of customers which are spread across wide geographical areas. | | Maximum exposure to credit risk The maximum exposure to credit risk at the end of the reporting period reflects the carrying amount of each class of financial assets. The net counterparty exposure under derivative contracts is £0.5bn (2025: £0.6bn). The Group’s maximum gross exposure to credit risk is analysed below by class of financial instrument, including for financial instruments that are not subject to ECLs i.e. derivative financial instruments: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Cash and cash equivalents | 2,515 | 2,255 | | Short-term investments | 1,429 | 2,223 | | Trade receivables | 636 | 652 | | Other receivables | 205 | 183 | | Joint venture and associates loan receivables | 98 | 97 | | Other investments | 1,203 | 1,085 | | Derivative financial assets: | | | | Interest rate swaps | 14 | 24 | | Cross-currency swaps | 129 | 138 | | Index-linked swaps | 469 | 646 | | Foreign currency forward contracts | 11 | 27 | | Commodity derivatives | 5 | - | | Maximum exposure to credit risk | 6,714 | 7,330 | Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 176 ![]() Counterparty credit rating The table below provides detail of financial assets by long-term credit rating of investment-grade rated counterparties: | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2026 | | | | | 2025 | | | | Rating | AAA | AA | A | BBB | Total | AAA | AA | A | BBB | Total | | Cash and cash equivalents (a) | - | - | 1,149 | 4 | 1,153 | - | - | 1,355 | 35 | 1,390 | | Short-term investments | 716 | 9 | 704 | - | 1,429 | 1,389 | 3 | 731 | 100 | 2,223 | | Investments in debt securities at amortised cost (b) | - | - | - | 188 | 188 | - | - | - | 192 | 192 | | Investments at fair value through other comprehensive income (c) | 173 | 255 | 360 | 205 | 993 | 156 | 123 | 341 | 235 | 855 | | Investments at fair value through profit or loss (d) | - | - | - | - | - | - | - | - | - | - | | Derivative financial assets: | | | | | | | | | | | | Interest rate swaps | - | 7 | 7 | - | 14 | - | 12 | 12 | - | 24 | | Cross-currency swaps | - | - | 129 | - | 129 | - | - | 138 | - | 138 | | Index-linked swaps | - | - | 158 | 311 | 469 | - | - | 299 | 347 | 646 | | Foreign currency forward contracts | - | 2 | 9 | - | 11 | - | 5 | 22 | - | 27 | | Commodity derivatives | - | 1 | 4 | - | 5 | - | - | - | - | - | (a) Excludes £1,362m (2025: £865m) of cash and cash equivalents which do not have a credit rating. (b) Excludes £4m (2025: £4m) of investments in debt instruments which do not have a credit rating. (c) Excludes £18m (2025: £19m) of investments in equity instruments which do not have a credit rating. (d) Excludes £nil (2025: £15m) of property fund investments which do not have a credit rating. Expected credit losses (ECLs) The Group applies either the simplified approach or the three-stage model for ECLs, depending on the nature of the financial asset. The ECL is determined by multiplying together the probability of default, exposure at default and the loss given default for the relevant time period and for each specific loan and by discounting back to the balance sheet date. The Group’s financial assets are written off when the balance is known not to be recoverable or the Group is time-barred from recovering a balance under local legislation. The ECLs are immaterial. Gross loans to related parties of £98m (2025: £97m) are presented net of loss allowances of £nil (2025: £nil) on the Group balance sheet. For reinsurance contract assets the maximum exposure to credit risk is their carrying amount, refer to Note 24. Refer to page 180 for the credit rating of the reinsurers. The low credit risk exemption has been applied to cash and cash equivalents, money market funds, deposits and similar investments, investments in debt instruments at fair value through other comprehensive income, investments at fair value through profit or loss and investments in debt instruments at amortised cost. (c) Liquidity risk | | | | | --- | --- | --- | | Description of risk | Management policy | Measurement | | Difficulty in meeting the obligations associated with the | The Group finances its liquidity position and its operations by a combination of retained profits, disposals of | Liquidity risk is continuously monitored by short-term | | Group’s financial liabilities. | assets, debt capital market issuance, bank borrowings, and leases. The policy is to maintain a prudent level | and long-term cash flow forecasts. | | | of cash together with sufficient committed bank facilities to meet liquidity needs as they arise, to maintain | | | | a smooth debt profile and to ensure maturing senior unsecured debt will not exceed £1.5bn in any 12-month | | | | period. | | | The Group is exposed to liquidity risk from daily calls on | The Group manages its liquidity risk by having an investment guideline that it maintains sufficient liquidity, | | | its cash resources, including from claims arising on its | or its financial assets can be realised at short notice in the event of a major adverse event. The Group may | | | insurance contracts. There is a risk that cash will not be available to settle liabilities when they fall due. | also make use of borrowing facilities if required. | | Tesco PLC Annual Report and Financial Statements 2026 177 GovernanceStrategic report Additional informationFinancial statements ![]() Note 26 Financial risk management continued The Group is investment-grade rated with all three major credit rating agencies and retains access to capital markets so that maturing debt may be refinanced as it falls due. | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | 2025 | | | | Short-term | Long-term | | Short-term | Long-term | | | | rating | rating | Outlook | rating | rating | Outlook | | Rating agency | | | | | | | | Fitch | F2 | BBB | Stable | F3 | BBB - | Stable | | Moody’s | P - 3 | Baa3 | Positive | P - 3 | Baa3 | Stable | | Standard & Poor’s | A - 2 | BBB | Stable | A - 3 | BBB - | Positive | The Group has a £15.0bn Euro Medium Term Note programme, of which £2.0bn (2025: £2.8bn) is in issue in GBP and €3.1bn (2025: €2.2bn) is in issue in EUR, plus $0.4bn of USD-denominated notes issued under 144A documentation (2025: $0.4bn). The amount in issue includes £0.2bn (2025: £0.4bn) of accretion on the index-linked MTN which will be repayable at maturity. Borrowing facilities The Group has the following undrawn committed facilities available at 28 February 2026, in respect of which all conditions precedent had been met as at that date: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Expiring in less than one year | - | 38 | | Expiring between one and two years | 2,500 | - | | Expiring in more than two years | - | 2,500 | | Total | 2,500 | 2,538 | The Group has a £2.5bn syndicated revolving credit facility available at 28 February 2026 (22 February 2025: £2.5bn). The revolving credit facility was undrawn at these dates. All conditions precedent had been met at these dates. It incurs commitment fees at market rates and would provide funding at floating rates, both linked to three ESG targets. Maturities of financial liabilities The following is an analysis of the undiscounted contractual cash flows payable under financial liabilities and derivative liabilities, taking into account contractual terms that provide the counterparty a choice of when (the earliest date) an amount is repaid by the Group. The potential cash outflow is considered acceptable as it is offset by financial assets. The undiscounted cash flows will differ from both the carrying values and fair values. Floating-rate interest and inflation is estimated using the prevailing rate at the balance sheet date. Cash flows in foreign currencies are translated using spot rates at the balance sheet date. | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Due within | Due between 1 | Due between 2 | Due between 3 | Due between 4 | Due beyond 5 | | | 1 year | and 2 years | and 3 years | and 4 years | and 5 years | years | | At 28 February 2026 | £m | £m | £m | £m | £m | £m | | Non-derivative financial liabilities | | | | | | | | Borrowings | (1,729) | (71) | (718) | (723) | (918) | (3,070) | | Interest payments on borrowings | (174) | (230) | (193) | (169) | (162) | (707) | | Lease liabilities | (1,040) | (1,014) | (972) | (926) | (862) | (6,257) | | Trade payables | (6,862) | - | - | - | - | - | | Other payables | (1,949) | (13) | (8) | (2) | (1) | (11) | | Accruals | (987) | - | - | - | - | - | | Derivative financial liabilities | | | | | | | | Net settled derivative contracts – receipts | - | 18 | - | - | 5 | - | | Net settled derivative contracts – payments | (28) | (14) | (15) | (15) | (1) | (10) | | Gross settled derivative contracts – receipts | 1,903 | 159 | 2 | 654 | - | - | | Gross settled derivative contracts – payments | (1,983) | (186) | (30) | (670) | - | - | | Total | (12,849) | (1,351) | (1,934) | (1,851) | (1,939) | (10,055) | Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 178 ![]() | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Due within | Due between 1 | Due between 2 | Due between 3 | Due between 4 | Due beyond 5 | | | 1 year | and 2 years | and 3 years | and 4 years | and 5 years | years | | At 22 February 2025 | £m | £m | £m | £m | £m | £m | | Non-derivative financial liabilities | | | | | | | | Borrowings | (1,748) | (686) | (71) | (718) | (687) | (3,117) | | Interest payments on borrowings | (202) | (175) | (166) | (162) | (138) | (798) | | Lease liabilities | (995) | (973) | (940) | (896) | (855) | (6,217) | | Trade payables | (6,692) | - | - | - | - | - | | Other payables | (1,815) | (15) | (6) | (1) | (1) | (11) | | Accruals | (943) | - | - | - | - | - | | Derivative financial liabilities | | | | | | | | Net settled derivative contracts – receipts | - | - | - | - | - | 7 | | Net settled derivative contracts – payments | (22) | (18) | (18) | (18) | (17) | - | | Gross settled derivative contracts – receipts | 1,145 | 113 | 2 | 2 | 623 | - | | Gross settled derivative contracts – payments | (1,194) | (155) | (33) | (33) | (681) | - | | Total | (12,466) | (1,909) | (1,232) | (1,826) | (1,756) | (10,136) | The Group is not subject to covenants in relation to its facilities and borrowings. There is an element of seasonality in the Group’s operations, however the overall impact on liquidity is not considered significant. The table below shows information about the timing of total expected undiscounted cash outflows in relation to insurance contract liabilities, irrespective of the measurement basis, based on current best estimates. The phasing is based on current estimates and the actual timing of future settlement cash flows may differ from that disclosed below. | | | | | | | --- | --- | --- | --- | --- | | | 2026 | | 2025 | | | | £m | % | £m | % | | Due within one year | 200 | 31 | 166 | 31 | | Due within one and two years | 124 | 19 | 80 | 15 | | Due within two and three years | 85 | 13 | 56 | 11 | | Due within three and four years | 52 | 8 | 32 | 6 | | Due within four and five years | 32 | 5 | 23 | 4 | | Due beyond five years | 159 | 24 | 174 | 33 | | Total | 652 | 100 | 531 | 100 | Insurance contract liabilities issued and reinsurance contracts held have no amounts that are payable on demand. Tesco PLC Annual Report and Financial Statements 2026 179 GovernanceStrategic report Additional informationFinancial statements ![]() Note 26 Financial risk management continued d) Insurance risk | | | | --- | --- | | Description of risk | Management policy | | Risks accepted through the provision of insurance products in return for a premium, exposed through the | TU operates a separate risk framework with dedicated risk and compliance teams and a suite of TU risk | | wholly-owned subsidiary, Tesco Underwriting Limited (TU). These risks may or may not occur as expected and the amount and timing of these risks are uncertain and determined by events outside of the Group’s control | policies to ensure that the TU insurance portfolio is operating within the agreed risk appetite. | | (e.g. flood or vehicular accident). | | Types of insurance risk | | | | | --- | --- | --- | | Risks | Description of risks | Mitigation | | Underwriting | Policies not priced correctly due to underestimating the frequency and/or severity | The Group has large numbers of policyholders with homogeneous exposures such as motor and home | | | of the claims and/or that payments are required under conditions that were not | policies. Products are priced based on the Group’s knowledge using past exposures, historical losses | | | anticipated. | (plus an appropriate allowance for incurred but not reported losses) and external data sources, with the | | | | appropriate adjustments to reflect anticipated future market conditions and expenses. | | Claims reserving | Estimates of insurance liabilities prove to be insufficient through inaccurate | The aim of the reserving policy is to provide estimates of insurance liabilities that are accurate and reliable | | | forecasting, adverse random variation and additional expenses. | across each line of business and are consistent over the time period required to settle all the claims. | | | | Provisions are monitored on an ongoing basis by a reserving committee and the TU board audit committee, | | | | and an annual independent review is undertaken. | | Claims management | Claims management risk may arise in the event of inaccurate or incomplete case | The Group’s approach to claims management focuses upon creating a successful balance between | | | reserving or settlement, poor customer service, claims fraud, ineffective or | satisfying the needs of the customer against control of the overall cost of the provision of the service that | | | inefficient claim processes or excessive costs of handling claims. | meets those needs in agreement with its service provider. Customers include both the insured as well as | | | | others that believe the insured has breached a duty of care. | | Reinsurance | Reinsurance contracts, placed to reduce exposure to specific risks, events, and | The reinsurance programme is subject to considerable scenario planning and approved by the reinsurance | | | accumulations, fail to perform as planned and do not reduce the gross cost of | committee and the TU board. All reinsurers in the reinsurance programme have a minimum credit rating of A. | | | claims in terms of the limits purchased, by risks not being appropriately covered, | | | | by reinsurance bad debts or by there being gaps in the programme. | | Concentration of insurance risk Concentration of insurance risk may exist where a particular event or series of events could impact significantly upon the Group’s liabilities. Such concentrations may arise from a single insurance contract or through a small number of related contracts. The following are key categories of concentration risks that might result in significant impacts to the Group: | | | | | --- | --- | --- | | Category | Description | Mitigation | | High-severity, low | High-severity, low frequency events (e.g. natural disasters) represent a material risk | Making appropriate allowance within the price calculated by underwriters and by purchasing a reinsurance | | frequency event | as the occurrence of such an event would have a significant adverse impact on TU’s | programme that limits the impact of these events, using non-proportional reinsurance treaties to manage | | concentrations | cash flows and profitability. | retention levels and the limits of protection. | | Geographic and | Material geographical concentrations of risk exist in property portfolios such that | The Group only writes policies in the UK. TU models its exposure to this risk to estimate its probable | | demographic | natural disasters (e.g. floods) may give rise to a large number of material damage | maximum loss and purchases reinsurance to significantly reduce its exposure to such events. | | concentrations | claims. | | | Economic conditions | The insurance portfolio exposes a potential accumulation of different risks in | The Group aims to ensure it charges the right premium for the business underwritten and it focuses on | | | the event of difficult economic conditions or more challenging points in the | maintaining prices in such difficult market conditions. It also monitors claims closely to identify any that | | | underwriting cycle. | may be exaggerated or fraudulent. | | Total aggregate exposure | The total aggregate exposure that the Group is prepared to accept in relation to | The exposures are monitored on a regular basis by reviewing reports which show the key aggregations to | | | concentrations of risk. | which the Group is exposed and by using a number of modelling tools to monitor aggregation and simulate | | | | catastrophe losses in order to measure the effectiveness of the reinsurance programmes, and to quantify | | | | the net exposure. Additional stress and scenario tests are run using these models during the year. | TU has carried out sensitivity analyses on the reasonably possible changes in its key business drivers, including interest yields, expenses and gross loss ratio, as well as executing the stress and scenario testing programme on the insurance risk as part of contingency planning. These do not indicate a material impact to the Group’s overall financial position and performance. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 180 ![]() e) Other risks | | | | | | --- | --- | --- | --- | | Risk | Description of risk | Management policy | Measurement | | Capital risk | Ability to continue as a going concern in order to provide returns to shareholders | Group capital | Refer to Note 31 for the | | | and benefits for policyholders and other stakeholders, while protecting and | The Group manages its capital structure (net debt plus equity) and makes | value of Net debt, and | | | strengthening the Group balance sheet through the appropriate balance of | adjustments to it: | the Group statement | | | debt and equity funding, and ability to meet minimum capital requirements for | – in light of changes to economic conditions and the strategic objectives | of changes in equity for | | | regulated businesses. | of the Group; | the value of the Group’s | | | | – through dividend payment to shareholders, buying back shares and | equity. | | | | cancelling them or issuing new shares. During the current financial year, | | | | | the Group continued the share buyback programme and cancelled these | | | | | shares (refer to Note 29); and | | | | | – by raising finance in the public debt markets and borrowing centrally | | | | | and locally from financial institutions, using a variety of capital market | | | | | instruments and borrowing facilities to meet the requirements of each | | | | | local business. | | | | | Insurance capital | | | | | Solvency UK (SUK) provides a framework for managing and measuring the risks | | | | | and the solvency position for all insurance companies in the UK. TU assesses its | | | | | Solvency Capital Requirement (SCR) using Prudential Regulation Authority (PRA) | | | | | Standard Formula. TU also maintains a capital contingency plan supported by | | | | | its direct shareholder, Tesco Personal Finance Group Limited (TPFG). TPFG as | | | | | the parent entity of TU adheres to SUK requirements and has complied with the | | | | | supervisory requirements of the PRA. During the year, the Group was compliant | | | | | with the externally imposed capital requirements. | | | Operational insurance risk | The Group is inadequately protected from liabilities arising from unforeseen events | The Group purchased assets, earnings and combined liability protection from | Refer to Note 23 for | | | in its operations. | the open insurance market for higher value losses only. | details on operational | | | | The risk not transferred to the insurance market is retained within the Group | insurance provisions. | | | | with some cover being provided by the Group’s captive insurance company, | | | | | ELH Insurance Limited in Guernsey, which is consolidated in the Group financial | | | | | statements, covering assets, earnings and combined liability. | | Tesco PLC Annual Report and Financial Statements 2026 181 GovernanceStrategic report Additional informationFinancial statements ![]() Note 27 Share-based payments The table below shows amounts charged to the Group income statement in respect of share-based payments: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Income statement | | | | Equity-settled share-based payment charge (a) | 105 | 119 | | Cash-settled share-based payment charge | 19 | - | | Cash-settled National Insurance contributions (b) | 16 | 17 | | | 140 | 136 | (a) Includes £nil (2025: £4m) in relation to discontinued operations. (b) Includes £nil (2025: £1m) in relation to discontinued operations. The table below shows amounts included in the Group cash flow statement in relation to share-based payments and own shares purchased for share schemes: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Share-based payment charge included in operating profit/(loss) | (140) | (136) | | Share-based payments non-cash movement | 55 | 37 | | Increase/(decrease) in trade and other payables\* | 85 | 99 | | Included in Group operating cash flows | - | - | | Cash paid to purchase own shares including related fees and taxes | (152) | (123) | | Cash received from employees exercising SAYE options | 52 | 69 | | Included in Group financing cash flows | (100) | (54) | \* Comprises of shares withheld from employees in order to settle their tax liability, cash-settled share-based payments and National Insurance. The table below presents the components of share-based payments recognised in the Group statement of changes in equity: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | (Increase)/decrease in own shares held\* | 181 | 239 | | Shares delivered to employees | (181) | (239) | | Cash received from employees exercising SAYE options | 52 | 69 | | Share-based payments charge to the income statement | 105 | 119 | | Movements in shares withheld to settle employee tax | 1 | 2 | | Increase/(decrease) to retained earnings | (23) | (49) | | Included in the Group statement of changes in equity | 158 | 190 | \* Decrease in own shares held is the gross amount of shares that the employees are entitled to receive. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 182 ![]() Share option, share bonus and incentive schemes The Company had six share option schemes and two discretionary share award schemes in operation during the financial year as detailed in the table below. References to arrangements with fully released and lapsed awards have been removed from the table below. | | | | | | --- | --- | --- | --- | | Arrangement | Participants | Term | Vesting requirements | | Savings-related option schemes | | | | | The Savings-related Share Option Scheme (1981) | UK colleagues | | The options are capable of being exercised at the | | The Irish Savings-related Share Option Scheme (2000) | ROI colleagues | Three or five years. | end of the term at a subscription price of not less | | The Savings-related Share Option Scheme (2021) | UK colleagues | | than 80% of the average of the middle-market | | The International Savings-related Share Option Scheme (2021) | ROI colleagues | | quotations of an Ordinary share over the three | | | | | dealing days immediately preceding the offer date. | | The Global Save As You Earn Plan (2023) | India and CE colleagues | Three years. | | | Discretionary option schemes (a) | | | | | The Booker Group PLC Performance Share Plan (2008) | Selected Booker senior colleagues | Normally exercisable between the third anniversary | Conditional upon the achievement of specified | | (Booker PSP and CSOP) | | of the original date of grant and 10 years from | performance targets over a three-year period and | | | | the date of grant for nil consideration. No further | continuous employment. Company Share Option | | | | options will be granted under this scheme. The fair | Plan options (CSOP options) which are linked to the | | | | value of this scheme was estimated at the date of | Booker PSP options are exercisable at a subscription | | | | grant using the Monte Carlo option pricing model. | price equivalent to the market value of the Booker | | | | | Shares at the time of grant. | | Discretionary share award schemes (a) | | | | | The Long-Term Incentive Plan (2021) | Selected senior executives and senior | Awards made under this plan will normally vest on | Conditional on the achievement of specified | | | managers | the vesting date(s) set on the date of the award | performance targets over a three-year performance | | | | for nil consideration. The fair value of shares | period and/or continuous employment. | | | | awarded under this scheme is their market | | | | | value on the date of award. Expected dividends | | | | | are not incorporated into the fair value. Malus | | | | | and clawback provisions apply as described on | | | | | page 102. | | | The Deferred Bonus Plan (2019) (b) | Selected senior executives and senior | Granted based on a percentage of salary, which is | Conditional on completion of continuous | | | managers | determined by the achievement of corporate and | employment and achievement of corporate and | | | | individual performance targets. The fair value of | individual performance targets. | | | | shares awarded under this scheme is their market | | | | | value on the date of award. Expected dividends | | | | | are not incorporated into the fair value. Malus | | | | | and clawback provisions apply as described on | | | | | page 102. | | (a) The Executive Directors participate in short-term bonus and long-term incentive schemes designed to align their interests with those of shareholders. Full details of these schemes can be found in the Directors’ remuneration report. Refer to pages 88 to 108. (b) The Group provides certain employees with a choice of cash or equity settlement, therefore the scheme is treated as a compound financial instrument. All other schemes are equity-settled. Tesco PLC Annual Report and Financial Statements 2026 183 GovernanceStrategic report Additional informationFinancial statements ![]() Note 27 Share-based payments continued The following tables reconcile the number of share options outstanding and the weighted average exercise price (WAEP): For the 53 weeks ended 28 February 2026 | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Irish Savings and International | | | | | | Booker Group PLC | | | Savings-related | | | Savings-related | | Nil cost | Global Savings-related | | Performance | | | | Share Option Schemes | | | Share Option Schemes | | Share Option Schemes | Share Option Scheme | | Share Plan Scheme | | | | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP | | Outstanding at 22 February 2025 | 190,967,853 | 224.95 | 6,280,360 | 228.24 | - | - | 1,861,598 | 239.70 | 218,408 | - | | Granted | 42,121,394 | 353.00 | 1,191,069 | 353.00 | - | - | 1,027,927 | 329.69 | - | - | | Forfeited | (14,048,264) | 251.51 | (625,354) | 245.44 | - | - | (69,619) | 252.06 | (106,308) | - | | Exercised | (21,248,204) | 231.82 | (894,347) | 245.87 | - | - | (1,984) | 220.00 | (80,113) | - | | Outstanding at 28 February 2026 | 197,792,779 | 249.59 | 5,951,728 | 248.75 | - | - | 2,817,922 | 272.24 | 31,987 | - | | Exercise price range (pence) | 182.00 to 353.00 | | 182.00 | to 353.00 | | - | 220.00 to 353.00 | | | - | | Weighted average remaining contractual life (years)\* | | 2.37 | | 2.16 | | - | | 2.43 | | - | | Exercisable at 28 February 2026 | 35,203 | 226.43 | 346 | 260.00 | - | - | - | - | 31,987 | - | | Exercise price range (pence) | 219.00 to | 242.00 | 260.00 | to 260.00 | | - | | - | | - | | Weighted average remaining contractual life (years)\* | | - | | - | | - | | - | | - | \* Contractual life represents the period from award to the scheme end date. Certain schemes may be exercised later than vesting date at the discretion of the individual. Share options were exercised on a regular basis throughout the financial year. The weighted average share price at exercise during the 53 weeks ended 28 February 2026 was 378.80p (52 weeks ended 22 February 2025: 293.90p). The average share price during the 53 weeks ended 28 February 2026 was 414.32p (52 weeks ended 22 February 2025: 335.25p). For the 52 weeks ended 22 February 2025 | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Irish Savings and International | | | | | | Booker Group PLC | | | Savings-related | | | Savings-related | | Nil cost | Global Savings-related | | Performance | | | | Share Option Schemes | | | Share Option Schemes | | Share Option Schemes | Share Option Scheme | | Share Plan Scheme | | | | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP | Options | WAEP | | Outstanding at 24 February 2024 | 192,162,445 | 205.24 | 6,837,146 | 209.55 | 803,031 | - | 1,292,354 | 220.00 | 258,828 | - | | Granted | 48,584,817 | 279.00 | 1,480,934 | 279.00 | 21,358 | - | 622,815 | 279.00 | - | - | | Forfeited | (16,000,990) | 213.11 | (855,791) | 210.44 | - | - | (53,571) | 221.33 | (24,533) | - | | Exercised | (33,778,419) | 196.21 | (1,181,929) | 196.65 | (824,389) | - | - | - | (15,887) | - | | Outstanding at 22 February 2025 | 190,9 67,853 | 224.95 | 6,280,360 | 228.24 | - | - | 1,861,598 | 239.70 | 218,408 | - | | Exercise price range (pence) | 182.00 to 279.00 | | 182.00 | to 279.00 | | - | 220.00 to 279.00 | | | - | | Weighted average remaining contractual life (years)\* | | 2.71 | | 2.43 | | - | | 2.94 | | - | | Exercisable at 22 February 2025 | 39,903 | 193.60 | 1,316 | 198.00 | - | - | - | - | 218,408 | - | | Exercise price range (pence) | 188.00 to | 198.00 | 198.00 | to 198.00 | | - | | - | | - | | Weighted average remaining contractual life (years)\* | | - | | - | | - | | - | | - | Refer to previous table for footnote. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 184 ![]() The fair value of savings-related share options schemes is estimated at the date of grant using the Black-Scholes option pricing model. The following table gives the assumptions applied to the options granted in the respective periods shown. | | | | | --- | --- | --- | | | 2026 | 2025 | | | SAYE | SAYE | | Expected dividend yield (%) | 3.48 - 3.87 | 4.21 - 4.42 | | Expected volatility (%) | 19.1 - 22.2 | 19.2 - 20.8 | | Risk-free interest rate (%) | 3.77 - 3.99 | 4.41 - 4.49 | | Expected life of option (years) | 3 or 5 | 3 or 5 | | Weighted average fair value of options granted (pence) | 107.77 | 77.71 | | Probability of forfeiture (%) | 5.5 - 16.1 | 6 - 12 | | Share price (pence) | 449.80 | 349.10 | | Weighted average exercise price (pence) | 353.00 | 279.00 | Volatility is a measure of the amount by which a price is expected to fluctuate during a period. The measure of volatility used in the Group’s option pricing models is the annualised standard deviation of the continuously compounded rates of return on the share over a period of time. In estimating the future volatility of the Company’s share price, management considers the historical volatility of the share price over the most recent period that is generally commensurate with the expected term of the option, taking into account the remaining contractual life of the option. The number and weighted average fair value (WAFV) of share bonuses granted during the financial year were: | | | | | | | --- | --- | --- | --- | --- | | | 2026 | | 2025 | | | | Number | WAFV | Number | WAFV | | | of shares | pence | of shares | pence | | Deferred Bonus Plan | 10,250,233 | 376.40 | 17,554,675 | 306.48 | | Long-Term Incentive Plan | 16,650,283 | 400.86 | 21,370,918 | 309.88 | Note 28 Post-employment benefits Pensions The Group operates a variety of post-employment benefit arrangements, covering both funded and unfunded defined benefit schemes and defined contribution schemes. Defined contribution Defined contribution schemes are open to all Tesco employees in the UK and ROI. Under the Group’s defined contribution pension schemes, employees of the Group pay contributions to an independently administered fund, into which the Group also pays contributions based upon a fixed percentage of the employee’s contributions. The Group has no further payment obligations once its contributions have been paid. Contributions paid for defined contribution schemes in continuing operations of £486m (2025: £454m) have been recognised in the Group income statement. This includes £172m (2025: £181m) of salaries paid as pension contributions. Defined benefit schemes The Group has a defined benefit pension surplus of £324m (2025: £56m), and a defined benefit pension deficit of £127m (2025: £307m), comprising a number of schemes. The most significant schemes are for the Group’s employees in the UK and ROI, which are closed to future accrual. The defined benefit pension obligation in the UK represents 94% (2025: 94%) of the Group defined benefit obligation. United Kingdom The principal scheme within the Group is the Tesco PLC Pension Scheme (the Scheme), a UK scheme that has been closed to future accrual since 2015. The assets of the Scheme are held as a segregated fund and administered by the Trustee. The Scheme is established under trust law and has a corporate trustee (the Trustee) that is required to run the Scheme in accordance with the Scheme’s Trust Deed and Rules and to comply with all relevant legislation. Responsibility for the governance of the Scheme lies with the Trustee. The Trustee is a company whose directors comprise: 1. representatives of the Group; 2. independent trustees; and 3. representatives of the Scheme participants, in accordance with its articles of association and UK pension law. Schroders is appointed by the Trustee as the Scheme’s principal Outsourced Chief Investment Officer (OCIO), under an investment management agreement. Schroders works with the Trustee to implement the Scheme’s investment strategy and deliver security for the Scheme’s members. As set out in the Annual Report and Group financial statements for 2025, the Group has continued to monitor the Virgin Media vs NTL Pension Trustees and other related court cases. In June 2025 the UK Government announced that it intends to introduce legislation to deal with issues arising from the Virgin Media vs NTL Pension Trustees judgement. From the work performed to date, management’s view continues to be that no material adjustments to the financial statements are needed as a result of the judgement. Work is ongoing with regards to the smaller schemes within the UK (Booker & Budgens), however given their comparable size, the Group does not anticipate any material findings. Management will continue to monitor developments of the associated court cases and the legislation and will assess any change in risk and potential impact on the Group as required. Tesco PLC Annual Report and Financial Statements 2026 185 GovernanceStrategic report Additional informationFinancial statements ![]() Note 28 Post-employment benefits continued UK scheme funding The Group considers two measures of the pension surplus/deficit. The accounting position is shown on the Group balance sheet. The funding position, calculated at the triennial funding valuation, is used to agree contributions made to the schemes. The two measures will vary because they are for different purposes and are calculated at different dates and in different ways. The key calculation difference is that the funding position considers the expected returns of scheme assets when calculating the liability, whereas the accounting position calculated under IAS 19 discounts liabilities based on high quality corporate bond yields. The latest triennial actuarial pension funding valuation for the Scheme as at 31 March 2025 using the projected unit credit method showed a funding level under the Technical Provisions basis of 106% (31 March 2022: 104%). Following this triennial valuation, it was agreed with the Scheme Trustee that no pension deficit contributions would be required from the Company. The Group previously contributed £17m per annum to meet Scheme expenses, including the Pension Protection Fund (PPF) levy. In December 2025 a new Schedule of Contributions was signed, confirming that this contribution would reduce to £12m per annum including the PPF levy for the current financial year. Excluding the PPF levy, the contribution for the next financial year will be £9m, and £11m per annum thereafter. The most recent triennial funding valuation of the Booker Pension Scheme showed a deficit of £49m at 31 March 2024, with agreement for the current deficit contributions of £17m per annum to reduce to £5m per annum from April 2026. The most recent triennial funding valuation of the Budgens Pension Scheme showed a surplus of £2m at 31 March 2024. The Company and the Trustee have agreed that no deficit contributions are currently required. IFRIC 14 For schemes in an accounting surplus position, these surpluses are recognised on the balance sheet in line with IFRIC 14, as the Group has an unconditional legal right to any future economic benefits by way of future refunds following a gradual settlement. Maturity profile of the defined benefit obligation The estimated duration of the Scheme defined benefit obligation is an indicator of the weighted average term of benefit payments after discounting. For the Scheme, this is 15 years. Around 32% of the undiscounted benefits are due to be paid beyond 30 years’ time, with the last payments expected to be over 80 years from now. The table below sets out the estimated undiscounted benefit payments expected to be paid out over the life of the Scheme: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Within the next 12 months | 439 | 393 | | Between 1 and 15 years | 9,072 | 8,888 | | Between 15 and 30 years | 12,901 | 13,000 | | Between 30 and 45 years | 8,451 | 8,736 | | Over 45 years | 2,297 | 2,530 | | Total expected undiscounted benefit payments | 33,160 | 33,547 | The defined benefit obligation held by the Scheme is broken down as follows: | | | | --- | --- | | | % | | Deferred members | 68 | | Current pensioners | 32 | Risks The Group bears a number of risks in relation to the Scheme, which are described below: | | | | | --- | --- | --- | | Risk | Description of risk | Mitigation | | Investment The Scheme’s defined benefit | | The Trustee and the Group regularly monitor the funding | | | obligation is calculated using a | position and operate a diversified investment strategy. | | | discount rate set with reference | The Trustee and the Group take a balanced approach to | | | to corporate bond yields. If the | investment risk and have a long-term plan to reduce the | | | return on the Scheme’s assets | investment risk within the Scheme. | | | underperforms this rate, the | | | | accounting deficit will increase. | The Trustee considers climate risk as one of the key | | | If the Scheme’s assets | investment risks faced by the Scheme and set up a | | | underperform the expected | Responsible Investment Committee to consider climate- | | | return for the funding valuation, | related issues relating to the Scheme. | | | this may require additional | The Scheme has also made a commitment to aim for | | | contributions to be made by | investments to be net-zero by 2050. Further details on the | | | the Group. | metrics, targets and actions taken in relation to climate risk | | | | can be seen in the Scheme’s Climate Change Report. | | Inflation | The Scheme’s defined benefit | As part of the investment strategy, the Trustee aims to | | | obligation is linked to inflation. | mitigate most of this risk through investment in a | | | A higher rate of expected | liability-driven investment (LDI) portfolio. | | | long-term inflation will therefore | The portfolio invests in assets which increase in value as | | | lead to higher liabilities, both for | inflation expectations increase. This mitigates the impact of | | | the IAS 19 and funding liability. | any adverse movement in long-term inflation expectations. | | | If the Scheme’s funding liability | The Scheme’s holdings are designed to hedge against | | | increases, this may require | inflation risk for most of the funded liabilities. | | | additional contributions to be | | | | made by the Group. | | | Interest | A decrease in corporate bond | As part of the investment strategy, the Trustee aims to | | rate | yields in isolation would be | mitigate most of this risk through investment in an LDI | | | expected to increase the | portfolio. | | | accounting deficit. Similarly, a | The portfolio invests in assets which increase in value as | | | decrease in gilt yields in | interest rates decrease. The Scheme’s holdings are | | | isolation would be expected to | designed to hedge against interest rate risk for most of the | | | have an adverse impact on the | funded liabilities. | | | funding position of the | | | | Scheme. This may lead to | Because the aim of the portfolio is to mitigate risk for the | | | additional contributions being | funding position, ineffectiveness in hedging for the | | | made by the Group. | accounting deficit can arise where corporate bond and gilt | | | | yields diverge. This is partially offset by the Scheme’s | | | | holdings in corporate bonds. | | | | Using an LDI portfolio means a rise in interest rates can | | | | lead to collateral calls. The Trustee and the Group regularly | | | | monitor and manage the level of liquidity to ensure it | | | | remains appropriate. | | Life | The Scheme’s obligations are | To reduce this risk, changes to future benefits were | | expectancy to provide benefits for the life | | introduced in June 2012 to increase the age at which | | | of the member and so | members can take their full pension by around two years. | | | increases in life expectancy | The Trustee and the Group regularly monitor the impact of | | | will lead to a higher defined | changes in longevity on the Scheme defined benefit | | | benefit obligation. | | | | | obligation. | Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 186 ![]() The Group operates an operations and audit pensions committee to further strengthen the Scheme’s Trustee governance and provide greater oversight and stronger internal control over the Group’s risks. A second committee, the Group Pensions Committee, provides an additional layer of governance and risk management. Further mitigation of the risks is provided by external advisors and the Trustee who consider the funding position, fund performance and impacts of any regulatory changes. Scheme principal assumptions Financial assumptions The principal assumptions, on a weighted average basis, used by external actuaries to value the defined benefit obligation of the Scheme were as follows: | | | | | --- | --- | --- | | | 2026 | 2025 | | | % | % | | Discount rate | 5.7 | 5.7 | | Price inflation | 2.8 | 3.0 | | Rate of increase in deferred pensions\* | 2.5 | 2.6 | | Rate of increase in pensions in payment\* | | | | Benefits accrued before 1 June 2012 | 2.7 | 2.9 | | Benefits accrued after 1 June 2012 | 2.5 | 2.6 | \* In excess of any guaranteed minimum pension element. Discount rate The discount rate for the Scheme is determined by reference to market yields of high-quality corporate bonds of suitable currency and term to the Scheme cash flows and extrapolated based on the trend observable in corporate bond yields. Inflation The inflation assumption is used to determine increases in pensions linked to RPI and CPI inflation within sections of the Scheme, subject to relevant maximum and minimum increases. RPI inflation is derived by reference to the difference between fixed-interest and index-linked long-term government bonds. To account for the premium that investors are willing to pay to mitigate the risk that inflation is higher than expected, the inflation assumption incorporates an inflation risk premium. CPI inflation is set by reference to RPI. The Group uses a bifurcated approach to pre- and post-2030 assumptions, reflecting the impact of the RPI reforms from 2030 onwards. In consultation with external actuaries, the inflation risk premium has been set at 0.3% p.a. pre-2030 and 0.5% p.a. post-2030, which is a weighted average of 0.45% (2025: 0.44%). The CPI differential has been set as 1.0% p.a. pre-2030 and 0.1% p.a. post-2030, which is a weighted average of 0.37% lower than RPI (2025: 0.43%). Scheme mortality assumptions The Trustee’s actuary conducted a mortality analysis of the Scheme as part of the triennial funding valuation process. Subsequent to this analysis, the Group adopted the best estimate assumptions for the calculation of the defined benefit obligation for the Scheme. The mortality assumptions used are based on tables that have been projected to 2018 with CMI 2020 improvements. In addition, the allowance for future mortality improvements from 2018 has been updated to be in line with CMI 2024, with a long-term improvement rate of 1.0% p.a. The base tables used in calculating the mortality assumptions are different for various categories of members, as shown below: | | | | | | --- | --- | --- | --- | | | | Pensioner | Non-Pensioner | | Male | Staff | 103% of SAPS S4 normal heavy | 105% of SAPS S4 normal heavy | | | Senior Manager | 106% of SAPS S4 normal light | 107% of SAPS S4 normal light | | Female | Staff | 107% of SAPS S4 all heavy | 110% of SAPS S4 all heavy | | | Senior Manager | 90% of SAPS S4 all middle | 90% of SAPS S4 all middle | The following table illustrates the life expectancy of an average member retiring at age 65 at the balance sheet date and a member reaching age 65 at the balance sheet date +25 years. A comparison between the two retiree dates illustrates the expected improvements in mortality over the next 25 years. | | | | | | --- | --- | --- | --- | | | | 2026 | 2025 | | | | Years | Years | | Retiring at the balance sheet date at age 65: | Male | 19.5 | 19.6 | | | Female | 22.4 | 22.2 | | Retiring at the balance sheet date +25 years at age 65: | Male | 20.6 | 20.6 | | | Female | 23.7 | 23.4 | Sensitivity analysis of significant actuarial assumptions The sensitivity of significant assumptions upon the Scheme defined benefit obligation are detailed below: | | | | | | | --- | --- | --- | --- | --- | | | | 2026 | | 2025 | | Financial assumptions – Increase/(decrease) in UK defined | Discount rate | Inflation rate\* | Discount rate | Inflation rate\* | | benefit obligation | £m | £m | £m | £m | | Impact of 0.1% increase of the assumption | (157) | 134 | (157) | 146 | | Impact of 0.1% decrease of the assumption | 157 | (134) | 168 | (135) | | Impact of 1.0% increase of the assumption | (1,400) | 1,412 | (1,459) | 1,492 | | Impact of 1.0% decrease of the assumption | 1,736 | (1,221) | 1,829 | (1,279) | \* Inflation sensitivities reflect changes in inflation rate and associated changes in the inflation-related assumptions. | | | | | --- | --- | --- | | | 2026 | 2025 | | Mortality assumptions – Increase/(decrease) in UK defined benefit obligation | £m | £m | | Impact of 1 year increase in longevity | 314 | 292 | | Impact of 1 year decrease in longevity | (325) | (325) | The sensitivities reflect the range of recent assumption movements and illustrate that the financial assumption sensitivities do not move in a linear fashion. Movements in the defined benefit obligation from discount rate and inflation rate changes may be partially offset by movements in assets. Overseas The Group operates defined benefit schemes in ROI, which are closed to future accrual. An external actuary, using the projected unit credit method, carried out the latest assessment of the ROI schemes as at 28 February 2026. At the financial year end, the accounting surplus relating to ROI was £72m (2025: £46m). Tesco PLC Annual Report and Financial Statements 2026 187 GovernanceStrategic report Additional informationFinancial statements ![]() Note 28 Post-employment benefits continued Post-employment benefits other than pensions The Group has a statutory gratuity arrangement in India. The cost of providing these benefits has been accounted for on a similar basis to that used for defined benefit pension schemes. The accounting deficit as at 28 February 2026 of £10m (22 February 2025: £nil) was determined in accordance with the advice of external actuaries. The charge to the Group income statement in the year was £11m (2025: £nil), of which £10m (2025: £nil) relates to past service cost. £1m (2025: £nil) was credited to the Group statement of comprehensive income/(loss) and no (2025: £nil) benefits were paid. Plan assets The Group’s pension schemes hold assets that both provide returns and mitigate risk, including the volatility of future pension payments. The table below shows a breakdown of the combined investments held by the Group’s schemes: | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | | 2025 | | | | | Quoted | Unquoted | Total | | Quoted | Unquoted | Total | | | | £m | £m | £m | % | £m | £m | £m | % | | Equities | | | | | | | | | | UK | 91 | - | 91 | 1 | 47 | - | 47 | - | | Europe | 266 | - | 266 | 2 | 190 | - | 190 | 2 | | Rest of the world | 1,590 | - | 1,590 | 13 | 1,421 | - | 1,421 | 12 | | | 1,947 | - | 1,947 | 16 | 1,658 | - | 1,658 | 14 | | Bonds | | | | | | | | | | Government | 310 | - | 310 | 3 | 259 | - | 259 | 2 | | Corporates – investment grade | 640 | - | 640 | 5 | 888 | - | 888 | 8 | | Corporates – non-investment grade | 595 | - | 595 | 5 | 433 | - | 433 | 4 | | | 1,545 | - | 1,545 | 13 | 1,580 | - | 1,580 | 14 | | Property | | | | | | | | | | UK | - | 647 | 647 | 5 | - | 666 | 666 | 6 | | Rest of the world | - | 310 | 310 | 3 | - | 392 | 392 | 3 | | | - | 957 | 957 | 8 | - | 1,058 | 1,058 | 9 | | Alternative assets | | | | | | | | | | Hedge funds | - | - | - | - | - | - | - | - | | Private equity | - | 792 | 792 | 6 | - | 864 | 864 | 7 | | Other | 71 | 1,501 | 1,572 | 13 | 119 | 1,679 | 1,798 | 15 | | | 71 | 2,293 | 2,364 | 19 | 119 | 2,543 | 2,662 | 22 | | LDI portfolio | 8,420 | (4,040) | 4,380 | 36 | 6,327 | (2,509) | 3,818 | 33 | | Cash | 1,024 | - | 1,024 | 8 | 939 | - | 939 | 8 | | Total fair value of plan assets | 13,007 | (790) | 12,217 | 100 | 10,623 | 1,092 | 11,715 | 100 | Quoted assets are those with a quoted price in an active market. Unquoted assets are valued in accordance with IFRS 13 ‘Fair value measurement’, using the most appropriate level within the fair value hierarchy based on the specifics of the asset class, and in line with industry standard guidelines, including the RICS methodology for property and the IPEV guidelines for private equity. The LDI portfolio consists of assets, including gilts and index-linked gilts and money market funds, of the value of £8,935m (2025: £7,102m) and associated repurchase agreements and swaps of £(4,555)m (2025: £(3,284)m). Other alternative assets include infrastructure and private credit investments. Other derivatives are included in the asset category to which they relate, reflecting the underlying nature and exposure of the derivative. The plan assets include £204m (2025: £185m) relating to property used by the Group. Group property with net carrying value of £817m (2025: £820m) (refer to Note 12) and a value to the Scheme of at least £775m (2025: £775m) is held as security in favour of the Scheme. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 188 ![]() Movement in the Group pension surplus/(deficit) during the year | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2026 | | | 2025 | | | | Fair value of | Defined benefit | | Fair value of | Defined benefit | | | | plan assets | obligation | Net | plan assets | obligation | Net | | | £m | £m | £m | £m | £m | £m | | Opening balance | 11,715 | (11,963) | (248) | 12,156 | (12,787) | (631) | | Past service cost on plan amendments | - | (10) | (10) | - | - | - | | Current service and administration costs | - | (10) | (10) | - | (17) | (17) | | Finance income/(cost) | 657 | (671) | (14) | 601 | (633) | (32) | | Included in the Group income statement | 657 | (691) | (34) | 601 | (650) | (49) | | Remeasurement gain/(loss): | | | | | | | | Financial assumptions gain/(loss) | - | 68 | 68 | - | 981 | 981 | | Demographic assumptions gain/(loss) | - | 77 | 77 | - | 17 | 17 | | Experience gain/(loss) | - | 59 | 59 | - | (62) | (62) | | Return on plan assets excluding finance income | 314 | - | 314 | (550) | - | (550) | | Foreign currency translation | 16 | (14) | 2 | (9) | 8 | (1) | | Included in the Group statement of comprehensive income/(loss) | 330 | 190 | 520 | (559) | 944 | 385 | | Employer contributions | 12 | - | 12 | 17 | - | 17 | | Additional employer contributions | 23 | - | 23 | 23 | - | 23 | | Benefits paid | (520) | 528 | 8 | (523) | 530 | 7 | | Other movements | (485) | 528 | 43 | (483) | 530 | 47 | | Closing balance | 12,217 | (11,936) | 281 | 11,715 | (11,963) | (248) | | Withholding tax on surplus (a) | | | (84) | | | (3) | | Closing balance, net of withholding tax | | | 197 | | | (251) | | Consisting of: | | | | | | | | Schemes in deficit | | | (127) | | | (307) | | Schemes in surplus (b) | | | 324 | | | 56 | | Deferred tax asset/(liability) (c) | | | 23 | | | 71 | | Surplus/(deficit) in schemes at the end of the year, net of deferred tax | | | 220 | | | (180) | (a) The movement in the year is recognised through other comprehensive income in remeasurements of defined benefit pension schemes. (b) Schemes in surplus in the UK are presented on the balance sheet net of a 25% (2025: 25%) withholding tax. (c) Including £(9)m deferred tax liability relating to the ROI scheme in surplus where no withholding tax is applicable (2025: £(6)m). Tesco PLC Annual Report and Financial Statements 2026 189 GovernanceStrategic report Additional informationFinancial statements ![]() Note 29 Share capital and other reserves Share capital | | | | | | | --- | --- | --- | --- | --- | | | 2026 | | 2025 | | | | Ordinary shares of 6 1/3p each | | Ordinary shares of 6 1/3p each | | | | Number | £m | Number | £m | | Allotted, called-up and fully paid: | | | | | | At the beginning of the year | 6,736,841,762 | 426 | 7,038,930,440 | 445 | | Shares cancelled | (351,658,966) | (22) | (302,088,678) | (19) | | At the end of the year | 6,385,182,796 | 404 | 6,736,841,762 | 426 | No shares were issued during the current or prior financial year in relation to share options or bonus awards. The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. The Group has a share forfeiture programme, following the completion of a tracing and notification exercise to any shareholders who have not had contact with the Company over the past 12 years, in accordance with the provisions set out in the Company’s Articles of Association. Under the share forfeiture programme, the shares and dividends associated with shares of untraced members are forfeited, with the resulting proceeds transferred to the Group to use for good causes in line with the Group’s Sustainability strategy. During the current financial year, the Group received £1m (2025: £nil) proceeds from the sale of untraced shares and £2m (2025: £nil) write-back of unclaimed dividends, which are reflected in share premium and retained earnings respectively. As at 28 February 2026, the Directors were authorised, on behalf of the Company, to purchase up to a maximum in aggregate of 671 million (2025: 704 million) Ordinary shares until the conclusion of the 2026 AGM. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 190 ![]() Other reserves The tables below set out the movements in other reserves: | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Capital | | | | | | | | | | redemption | | | | | Insurance finance | | | | | reserve | Hedging reserve | Translation reserve | Own shares held\* | Merger reserve | reserve | Total | | | Notes | £m | £m | £m | £m | £m | £m | £m | | At 22 February 2025 | | 80 | 49 | 186 | (280) | 3,090 | 15 | 3,140 | | Other comprehensive income/(loss) | | | | | | | | | | Retranslation of net assets of overseas subsidiaries, joint ventures and associates | | - | - | 166 | - | - | - | 166 | | Impact of net investment hedges | | - | - | (73) | - | - | - | (73) | | Gains/(losses) on cash flow hedges | | - | (84) | - | - | - | - | (84) | | Cash flow hedges reclassified and reported in the Group income statement | | - | (14) | - | - | - | - | (14) | | Finance income/(expenses) on insurance contracts issued | | - | - | - | - | - | (4) | (4) | | Finance income/(expenses) from reinsurance contracts held | | - | - | - | - | - | 1 | 1 | | Tax relating to components of other comprehensive income | 7 | - | 5 | - | - | - | 1 | 6 | | Total other comprehensive income/(loss) | | - | (93) | 93 | - | - | (2) | (2) | | Inventory cash flow hedge movements | | | | | | | | | | (Gains)/losses transferred to the cost of inventory | | - | 61 | - | - | - | - | 61 | | Total inventory cash flow hedge movements | | - | 61 | - | - | - | - | 61 | | Transactions with owners | | | | | | | | | | Own shares purchased for cancellation | | - | - | - | (1,443) | - | - | (1,443) | | Own shares cancelled | | 22 | - | - | 1,443 | - | - | 1,465 | | Own shares purchased for share schemes | | - | - | - | (279) | - | - | (279) | | Share-based payments | 27 | - | - | - | 181 | - | - | 181 | | Transfer from own shares held to retained earnings | | - | - | - | 44 | - | - | 44 | | Total transactions with owners | | 22 | - | - | (54) | - | - | (32) | | At 28 February 2026 | | 102 | 17 | 279 | (334) | 3,090 | 13 | 3,167 | \* Includes 36.4 million shares held by employee benefit trusts (2025: 37.1 million), which represents 0.57% of called-up share capital at the end of the year (2025: 0.55%). Tesco PLC Annual Report and Financial Statements 2026 191 GovernanceStrategic report Additional informationFinancial statements ![]() | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Capital | | | | | | | | | | redemption | | | | | Insurance finance | | | | | reserve | Hedging reserve | Translation reserve | Own shares held\* | Merger reserve | reserve | Total | | | Notes | £m | £m | £m | £m | £m | £m | £m | | At 24 February 2024 | | 61 | 75 | 206 | (315) | 3,090 | 14 | 3,131 | | Other comprehensive income/(loss) | | | | | | | | | | Retranslation of net assets of overseas subsidiaries, joint ventures and associates | | - | - | (89) | - | - | - | (89) | | Impact of net investment hedges | | - | - | 33 | - | - | - | 33 | | Gains/(losses) on cash flow hedges | | - | 40 | - | - | - | - | 40 | | Cash flow hedges reclassified and reported in the Group income statement | | - | (69) | - | - | - | - | (69) | | Finance income/(expenses) from reinsurance contracts held | | - | - | - | - | - | 1 | 1 | | Tax relating to components of other comprehensive income | 7 | - | 7 | - | - | - | - | 7 | | Total other comprehensive income/(loss) | | - | (22) | (56) | - | - | 1 | (77) | | Transfer from translation reserve to retained earnings | | - | - | 36 | - | - | - | 36 | | Inventory cash flow hedge movements | | | | | | | | | | (Gains)/losses transferred to the cost of inventory | | - | (4) | - | - | - | - | (4) | | Total inventory cash flow hedge movements | | - | (4) | - | - | - | - | (4) | | Transactions with owners | | | | | | | | | | Own shares purchased for cancellation | | - | - | - | (1,016) | - | - | (1,016) | | Own shares cancelled | | 19 | - | - | 1,016 | - | - | 1,035 | | Own shares purchased for share schemes | | - | - | - | (204) | - | - | (204) | | Share-based payments | 27 | - | - | - | 239 | - | - | 239 | | Total transactions with owners | | 19 | - | - | 35 | - | - | 54 | | At 22 February 2025 | | 80 | 49 | 186 | (280) | 3,090 | 15 | 3,140 | Refer to previous table for footnote. Own shares held Own shares held represents shares in Tesco PLC purchased from the market and held by the employee benefit trusts to satisfy share awards under the Group’s share scheme plans (refer to Note 27), and shares purchased for cancellation as part of the share buyback programme. Shares purchased for cancellation are included in own shares held until cancellation, at which point the consideration is transferred to retained earnings, and the nominal value of the shares is transferred from share capital to the capital redemption reserve. Own shares held can include equity elements of forward and other binding contracts where the Group has an obligation to purchase its own shares. Notes to the Group financial statements continued Note 29 Share capital and other reserves continued Tesco PLC Annual Report and Financial Statements 2026 192 ![]() Own shares held continued 351.7 million (2025: 302.1 million) shares were purchased for cancellation at an average price of £4.08 per share (2025: £3.36). This represented 5.5% of the called-up share capital as at 28 February 2026 (22 February 2025: 4.5%). The total consideration was £1,443m (2025: £1,016m) including a discount and stamp duty of a net £7m (2025: net expenses of £16m). The table below presents the reconciliation of own shares purchased for share schemes between the Group statement of changes in equity and the Group cash flow statement: | | | | | --- | --- | --- | | | 2026 | 2025 | | Own shares purchased for share schemes | £m | £m | | Included in the Group statement of changes in equity | (279) | (204) | | Shares withheld to settle employee tax | 50 | 81 | | Cash received from employees exercising SAYE options | 52 | 69 | | Outstanding amount recognised as financial liabilities\* | 77 | - | | Included in the Group cash flow statement | (100) | (54) | \* A financial liability of £77m (2025: £nil) in respect of shares to be delivered under an agreement with an external bank is included in other payables. Capital redemption reserve The capital redemption reserve relates to the repurchase and cancellation of shares of the Company. During the financial year, the aggregate nominal value of shares cancelled and transferred to the capital redemption reserve was £22m (2025: £19m). Merger reserve The merger reserve represents the difference between the market value and nominal value of shares issued for the acquisition of Booker on 2 March 2018. Insurance finance reserve Insurance finance reserve includes the impact of changes in market discount rates on insurance and reinsurance contract assets and liabilities. Note 30 Related party transactions Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint ventures and associates are disclosed below: Transactions | | | | | | | --- | --- | --- | --- | --- | | | Joint ventures | | Associates | | | | 2026 | 2025 | 2026 | 2025 | | | £m | £m | £m | £m | | Sales to related parties | 847 | 645 | - | - | | Purchases from related parties | 128 | 109 | - | - | | Dividends received | 2 | 2 | - | - | | Injection of equity funding | 8 | 10 | 4 | 5 | Sales to related parties consist of service/management fees and loan interest. Transactions between the Group and the Group’s pension plans are disclosed in Note 28. Balances | | | | | | | --- | --- | --- | --- | --- | | | Joint ventures | | Associates | | | | 2026 | 2025 | 2026 | 2025 | | | £m | £m | £m | £m | | Amounts owed to related parties | (11) | (7) | - | - | | Amounts owed by related parties | 77 | 57 | - | - | | Lease liabilities payable to related parties (a) | (1,824) | (1,840) | - | - | | Loans to related parties (b) | 98 | 97 | - | - | (a) Lease liabilities payable to related parties represent leases entered into by the Group for properties held by joint ventures. Refer to Note 14 for further details. (b) A 12-month ECL allowance is recorded on initial recognition. In the current and prior financial years, the ECL allowance was immaterial. Amounts owed to and owed by related parties are measured at amortised cost and the carrying values approximate fair value. The undiscounted cash flow amounts owed to related parties are due within one year and do not differ from the amounts included in the table above. A number of the Group’s subsidiaries are members of one or more partnerships to whom the provisions of the Partnerships (Accounts) Regulations 2008 apply. The financial statements for those partnerships have been consolidated into these financial statements pursuant to Regulation 7 of the Regulations. Tesco PLC Annual Report and Financial Statements 2026 193 GovernanceStrategic report Additional informationFinancial statements ![]() Note 30 Related party transactions continued Transactions with key management personnel Members of the Board of Directors and Executive Committee of Tesco PLC are deemed to be key management personnel. Cost of key management personnel compensation for the financial year was as follows: | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Salaries and short-term benefits | 30 | 28 | | Pensions and cash in lieu of pensions | 1 | 1 | | Share-based payments | 18 | 21 | | Joining costs and loss of office costs | 1 | 1 | | | 50 | 51 | | Attributable to: | | | | The Board of Directors (including Non-executive Directors) | 19 | 18 | | Executive Committee (members not on the Board of Directors) | 31 | 33 | | | 50 | 51 | During the year, 4,314,292 (2025: 5,840,408) performance shares and 1,595,796 (2025: 1,990,366) bonus shares were granted to key management personnel under the Long-Term Incentive Plan and Deferred Bonus Plan, respectively. Vesting will be conditional on the achievement of specified performance targets over a three-year performance period and/or continuous employment. The cost of these awards will be spread over the vesting period. Note 31 Analysis of changes in net debt The Group’s Net debt APM is defined in the Glossary. | | | | | --- | --- | --- | | | 2026 | 2025 | | | £m | £m | | Borrowings, excluding overdrafts | (6,192) | (6,094) | | Lease liabilities | (7,884) | (7,716) | | Net financing derivatives | 476 | 602 | | Share purchase obligations | (77) | - | | Liabilities from financing activities | (13,677) | (13,208) | | Cash and cash equivalents in the balance sheet | 2,515 | 2,255 | | Overdrafts\* | (1,004) | (856) | | Cash and cash equivalents (including overdrafts) in the cash flow statement | 1,511 | 1,399 | | Short-term investments | 1,429 | 2,223 | | Joint venture loans | 98 | 97 | | Interest and other receivables | 18 | 19 | | Net operating and investing derivatives | (19) | 16 | | Exclude: Share purchase obligations | 77 | - | | Net debt APM | (10,563) | (9,454) | \* Overdraft balances are included within borrowings in the Group balance sheet, and within cash and cash equivalents in the Group cash flow statement. Refer to Note 19. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 194 ![]() The tables below set out the movements in liabilities from financing activities: | | | | | | | | --- | --- | --- | --- | --- | --- | | | Borrowings, | | Net financing | | Liabilities from | | | excluding | | derivative financial | Share purchase | Group financing | | | overdrafts | Lease liabilities | instruments (a) | obligations (b) | activities (a) | | | £m | £m | £m | £m | £m | | At 22 February 2025 | (6,094) | (7,716) | 602 | - | (13,208) | | Cash flows arising from financing activities (c) | 40 | 668 | (163) | 1,595 | 2,140 | | Cash flows arising from operating activities: | | | | | | | Interest paid | 239 | 395 | 29 | - | 663 | | Non-cash movements: | | | | | | | Fair value gains/(losses) | (59) | - | 53 | - | (6) | | Foreign exchange | (103) | (60) | - | - | (163) | | Interest income/(charge) | (215) | (404) | (45) | - | (664) | | Lease additions, terminations, modifications and reassessments | - | (767) | - | - | (767) | | Share purchase agreements | - | - | - | (1,672) | (1,672) | | At 28 February 2026 | (6,192) | (7,884) | 476 | (77) | (13,677) | (a) Net financing derivatives comprise those derivatives which hedge the Group’s exposures in respect of lease liabilities and borrowings. Net operating and investing derivatives of £(19)m (2025: £16m), which form part of the Group’s Net debt APM, are not included in liabilities from financing activities. (b) Share purchase obligations form part of the liabilities arising from the Group’s financing activities, but do not form part of Net debt. Cash flows arising from financing activities exclude £nil (2025: £(91)m) cash outflows relating to other cancellable arrangements and prepayments, and £52m (2025: £69m) cash received from employees exercising SAYE options. (c) Cash flows arising from financing activities for Borrowings, excluding overdrafts and Net financing derivative financial instruments are presented gross. In the Group cash flow statement, these amounts are presented net. | | | | | | | | --- | --- | --- | --- | --- | --- | | | Borrowings, | | Net financing | | Liabilities from | | | excluding | | derivative financial | Share purchase | Group financing | | | overdrafts | Lease liabilities | instruments (a) | obligations (b) | activities (a) | | | £m | £m | £m | £m | £m | | At 24 February 2024 | (6,407) | (7,622) | 544 | - | (13,485) | | Cash flows arising from financing activities (c)(d) | 347 | 597 | (32) | 1,016 | 1,928 | | Cash flows arising from operating activities: | | | | | | | Interest paid (d) | 210 | 380 | 85 | - | 675 | | Non-cash movements: | | | | | | | Fair value gains/(losses) | (92) | - | 96 | - | 4 | | Foreign exchange | 58 | 25 | - | - | 83 | | Interest income/(charge) | (210) | (377) | (91) | - | (678) | | Acquisitions and disposals | - | (5) | - | - | (5) | | Lease additions, terminations, modifications and reassessments | - | (714) | - | - | (714) | | Share purchase agreements | - | - | - | (1,016) | (1,016) | | At 22 February 2025 | (6,094) | (7,716) | 602 | - | (13,208) | (a)-(c) Refer to previous table for footnotes. (d) Following the Group’s change in presentation of economic hedges in the Group cash flow statement, Cash flows arising from financing activities and Interest paid within Lease liabilities have been re-presented by £3m each. See Note 32 for full details. Tesco PLC Annual Report and Financial Statements 2026 195 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Group financial statements continued Note 32 Change in accounting policy Presentation of economic hedges in the Group cash flow statement As set out in the Group’s interim results 2025/26, the Group now classifies economic hedges in the same cash flow statement category as the underlying risk or hedged item and presents the related derivative cash flow movements net with the cash flows from the underlying risk being hedged. This simplification in presentation is consistent with the existing presentation of derivatives in formal hedge accounting relationships and is considered reliable and more relevant because the Group manages its risk exposure in cash flow terms on a net, after-hedging basis, regardless of whether the derivatives are in a formal hedge accounting relationship or not. The Group previously presented such economic hedges on a gross basis in the investing and financing sections, separately to the cash flows from the underlying risk being hedged. To the extent that any derivative cash flows do not have an associated risk cash flow, such as for financing activities across the Group related to the management of foreign exchange on intercompany loans or foreign currency funding needs, these derivative cash flows will continue to be presented on a gross basis in the financing section. The comparatives for the year ended 22 February 2025 have been re-presented as follows: | | | | | | --- | --- | --- | --- | | | As reported | Adjustment | Re-presented | | | £m | £m | £m | | Interest paid | (769) | (3) | (772) | | Cash flows generated from/(used in) operating activities | 2,922 | (3) | 2,919 | | Proceeds from sale of other investments | 966 | 28 | 994 | | Investing cash inflows from derivative financial instruments | 29 | (29) | - | | Investing cash outflows from derivative financial instruments | (1) | 1 | - | | Net cash generated from/(used in) investing activities | (441) | - | (441) | | Repayment of capital element of obligations under leases | (602) | 3 | (599) | | Repayment of borrowings | (809) | 45 | (764) | | Financing cash inflows from derivative financial instruments | 485 | (424) | 61 | | Financing cash outflows from derivative financial instruments | (453) | 379 | (74) | | Net cash generated from/(used in) financing activities | (2,943) | 3 | (2,940) | | Net increase/(decrease) in cash and cash equivalents | (462) | - | (462) | | Free cash flow | 1,750 | - | 1,750 | Tesco PLC Annual Report and Financial Statements 2026 196 ![]() Note 33 Commitments and contingencies Capital commitments At 28 February 2026, there were commitments for capital expenditure contracted for, but not incurred, of £501m (2025: £191m), principally relating to store development and multi-year distribution investment. Subsidiary audit exemptions The following UK subsidiary undertakings are exempt from the requirements of the Companies Act 2006 (the Act) relating to the audit of individual accounts by virtue of section 479A of the Act. | | | | | | | | --- | --- | --- | --- | --- | --- | | Name | Company number | Name | Company number | Name | Company number | | Booker Group Limited | 5145685 | T & S Stores Limited | 1228935 | Tesco Mobile Communications Limited | 4780729 | | Booker Wholesale Holdings Limited | 5137980 | Tapesilver Limited | 5205362 | Tesco Mobile Services Limited | 4780734 | | Buttoncase Limited | 5298861 | Tesco Atrato (1LP) Limited | 6969529 | Tesco Navona (1LP) Limited | 7459436 | | Dillons Newsagents Limited | 140624 | Tesco Atrato (GP) Limited | 6969536 | Tesco Newmarket Limited | 12605279 | | dunnhumby Overseas Limited | 6601821 | Tesco Blue (3LP) Limited | 10127682 | Tesco Passaic (1LP) Limited | 7121667 | | dunnhumby Trustees Limited | 3565371 | Tesco Coral (GP) Limited | 6640968 | Tesco Property Holdings (No. 2) Limited | 5888922 | | Giant Booker Limited | 65519 | Tesco Coral (Nominee) Limited | 6640901 | Tesco Property Holdings Limited | 2353133 | | Launchgrain Limited | 5260856 | Tesco Coral Limited Partnership | LP013072 | Tesco Property Nominees (No. 5) Limited | 5888952 | | Makro Holding Limited | 4310463 | Tesco Distribution Holdings Limited | 3193655 | Tesco Property Nominees (No. 6) Limited | 5902418 | | Makro Properties Limited | 1273672 | Tesco Dorney (1LP) Limited | 8255488 | Tesco Property Partner (GP) Limited | 4945955 | | Newross Property Limited\* | 11185610 | Tesco Dorney (GP) Limited | 8255493 | Tesco Property Partner (No. 1) Limited | 4945945 | | Oakwood Distribution Limited | 5721635 | Tesco Family Dining Limited | 8514605 | Tesco Sarum (1LP) Limited | 7849948 | | Reskammel Property Company Limited | 13264276 | Tesco Freetime Limited | 4345023 | Tesco Sarum (GP) Limited | 7849882 | | Spen Hill Developments Limited | 4827219 | Tesco Fuchsia (3LP) Limited | 10127851 | Transcend Retail Solutions Limited | 14772291 | | Spen Hill Management Limited | 2460426 | Tesco Gateshead Property Limited | 8312532 | TSFM Limited | 14263834 | | Spen Hill Properties (Holdings) PLC | 2412674 | Tesco International Services Limited | 3176368 | | | | Spen Hill Regeneration Limited | 6418300 | Tesco Maintenance Limited | 6003554 | | | \* Newross Property Limited changed name to Tesco Newry Limited on 18 March 2026. Tesco PLC will guarantee all outstanding liabilities that these subsidiaries are subject to as at the financial year ended 28 February 2026 in accordance with section 479C of the Act, as amended by the Companies and Limited Liability Partnerships (Accounts and Audit Exemptions and Change of Accounting Framework) Regulations 2012. In addition, Tesco PLC will guarantee any contingent and prospective liabilities that these subsidiaries are subject to. Tesco PLC Annual Report and Financial Statements 2026 197 GovernanceStrategic report Additional informationFinancial statements ![]() Note 33 Commitments and contingencies continued Dormant companies preparation and filing exemptions The following dormant UK subsidiary undertakings are exempt from the requirements of the Companies Act 2006 (the Act) relating to preparation of individual financial statements by virtue of section 394A of the Act and from filing individual accounts under section 448A of the Act. | | | | | | | | --- | --- | --- | --- | --- | --- | | Name | Company number | Name | Company number | Name | Company number | | Armitage Finance Unlimited | 5966324 | Murdoch Norton Limited | 548490 | Tesco Dorney (Nominee Holdco) Limited | 8255503 | | BF Limited | 4340809 | One Stop Community Stores Limited | 198980 | Tesco Employees' Share Scheme Trustees Limited | 2846605 | | Bishop's Group Limited | 103407 | One Stop Convenience Stores Limited | 2467178 | Tesco Navona (Nominee 1) Limited | 7459762 | | Booker Cash & Carry Limited | 5355306 | One Stop Stores Trustee Services Limited | 2477253 | Tesco Navona (Nominee 2) Limited | 7459765 | | Booker Retail Limited | 221722 | Orpington (Station Road) Limited | 5980835 | Tesco Navona (Nominee Holdco) Limited | 7459662 | | Bourne End Residential Management Company Limited | 12380854 | PTLL Limited | 8926930 | Tesco Navona PL Propco Limited | 7458609 | | Broughton Retail Park Nominee 1 Limited | 4319626 | Seacroft Green Nominee 1 Ltd | 4253497 | Tesco Passaic (Nominee 1) Limited | 7121666 | | Broughton Retail Park Nominee 2 Limited | 4319639 | Seacroft Green Nominee 2 Ltd | 4253572 | Tesco Passaic (Nominee 2) Limited | 7121664 | | Broughton Retail Park Nominee 3 Limited | 4319645 | Spen Hill Residential No 1 Limited | 6641084 | Tesco Passaic (Nominee Holdco) Limited | 7121480 | | Broughton Retail Park Nominee 4 Limited | 4319669 | Spen Hill Residential No 2 Limited | 6184538 | Tesco Passaic PL Propco Limited | 7121506 | | Budgen Holdings Limited | 161619 | Statusfloat Limited | 4661717 | Tesco Property (Nominees) (No.1) Limited | 4966637 | | Budgens Property Investments Limited | 3964478 | Tesco Atrato (Nominee 1) Limited | 6969531 | Tesco Property (Nominees) (No.2) Limited | 4966635 | | Budgens Stores Limited | 725281 | Tesco Atrato (Nominee 2) Limited | 6969540 | Tesco Property (Nominees) Limited | 4945975 | | Giant Bidco Limited | 5310162 | Tesco Atrato (Nominee Holdco) Limited | 6969528 | Tesco Property Finance 1 Holdco Limited | 5721633 | | Giant Midco Limited | 5310147 | Tesco Atrato Depot Propco Limited | 6969533 | Tesco Sarum (Nominee 1) Limited | 7851854 | | Highams Green Management Company Limited | 8114643 | Tesco Blue (Nominee 1) Limited | 5888920 | Tesco Sarum (Nominee 2) Limited | 7851858 | | IRTH (15) Limited | 652021 | Tesco Blue (Nominee 2) Limited | 5888921 | Tesco Sarum (Nominee Holdco) Limited | 7851190 | | IRTH (19) Limited | 4621007 | Tesco Blue (Nominee Holdco) Limited | 5888990 | Tesco Seacroft Ltd | 4253605 | | Linnco Limited | 1731059 | Tesco Depot Propco Limited | 6769537 | Tesco Secretaries Limited | 8730224 | | Londis (Holdings) Limited | 639798 | Tesco Dorney (Nominee 1) Limited | 8255640 | Tesco Services Limited | 7600956 | | Maldon Finance Limited | 12534413 | Tesco Dorney (Nominee 2) Limited | 8255645 | Weymouth Avenue (Dorchester) Limited | 2614345 | Tesco PLC will guarantee all outstanding liabilities that these subsidiaries are subject to as at the financial year ended 28 February 2026 in accordance with section 448C of the Act. In addition, Tesco PLC will guarantee any contingent and prospective liabilities that these subsidiaries are subject to. Contingent liabilities As previously reported, Tesco Stores Limited (TSL) (along with all the major supermarkets) has received claims from current and former hourly-paid store colleagues alleging that they do equal work to that of colleagues working in its distribution centres and that differences in terms and conditions relating to pay are not objectively justifiable (the Equal Pay Claims). The claimants are seeking the differential between the pay terms looking back, and equivalence of pay terms moving forward. As at the date of this disclosure, there are approximately 62,000 claims against TSL, with the number of claims expected to continue to increase as the litigation progresses. UK equal pay law provides that an employee is entitled to the same terms in relation to pay as those of a comparator of the opposite sex in the same employment if they are employed to do equal work. The legislation achieves this by implying a clause into the contract of employment, which has the effect of importing into the employee’s contract the more favourable term(s) of the comparator. Equal pay claims are typically heard in three stages and the claimants have to win at every stage in order to succeed. The first stage is comparability, which is effectively a technical gateway to the claims proceeding. The claimants have to show that there is a valid basis in law for comparing their pay and the pay of any comparator. One of the legal bases here is that pay terms are set by the same body. Following a European court ruling on this, TSL has made a concession on comparability. The subsequent stages comprise an equal work assessment and the consideration of TSL’s material factor defences (non-discriminatory reasons for differentials in pay terms). The employment tribunal hearing of TSL’s material factor defences is due to commence on 1 May 2026. The employment tribunal hearing for the equal value assessment is currently due to commence on 1 February 2027 (although it is likely to move to a later date). The Equal Pay Claims have been split into three tranches (with tranche 1 being heard first) and the stages apply to each tranche. Although the claims that have been heard to date involve female claimants, male store workers (being close to 50% of the current store worker population) may also bring claims by comparing themselves against any successful female claimants. Male claimants who have pre-emptively brought such claims currently make up approximately 47% of the Equal Pay Claims against TSL in the employment tribunal. The ultimate determination of all claims is likely to take many years, including as a result of appeals. Notes to the Group financial statements continued Tesco PLC Annual Report and Financial Statements 2026 198 ![]() At present, the total number of Equal Pay Claims that may be received, the merits, and likely outcome of those claims and of TSL’s defences to them, and the potential impact on the Group, are subject to various and substantial uncertainties. There are multiple factual and legal defences to these claims and the Group intends to defend them vigorously, while at the same time taking appropriate steps to mitigate the risks. The Group therefore cannot make an assessment of the likely outcome of the litigation, or the potential quantum of its liability or the potential impact on the Group at this stage. Depending on the outcome at the various stages of the Equal Pay Claims, and dependent on the number of any ultimately successful claims, the potential quantum of its liability could be material. There are a number of other contingent liabilities that arise in the normal course of business, which if realised, are not expected to result in a material liability to the Group. Note 34 Events after the reporting period See Note 1 for details on the Group’s assessment of the impact of the conflict in the Middle East. There were no other material events after the reporting period requiring disclosure. Tesco PLC Annual Report and Financial Statements 2026 199 GovernanceStrategic report Additional informationFinancial statements ![]() Tesco PLC – Parent Company balance sheet Notes 28 February 2026 22 February 2025 £m £m Non–current assets Investments 6 16,276 16,538 Derivative financial instruments 8 812 869 17,088 17,407 Current assets Receivables 7 296 542 Cash and cash equivalents 191 271 Derivative financial instruments 8 - 145 487 958 Current liabilities Payables 9 (240) (488) Borrowings 10 (41) (534) Derivative financial instruments 8 (15) - (296) (1,022) Net current assets/(liabilities) 191 (64) Non–current liabilities Payables 9 (2,391) (1,941) Borrowings 10 (995) (993) Derivative financial instruments 8 - (12) Deferred tax liabilities 11 (11) (13) (3,397) (2,959) Net assets 13,882 14,384 Equity Share capital 14 404 426 Share premium 5,166 5,165 Other reserves 14 2,852 2,892 Retained earnings (including profit for the financial year of £2,002m (2025: £809m)) 5,460 5,901 Total equity 13,882 14,384 The notes on pages 202 to 207 form part of these financial statements. Ken Murphy Imran Nawaz Directors The Parent Company financial statements on pages 200 to 207 were approved and authorised for issue by the Directors on 15 April 2026. Tesco PLC Registered number 00445790 Tesco PLC Annual Report and Financial Statements 2026 200 ![]() Tesco PLC – Parent Company statement of changes in equity Notes Share capital Share premium Other reserves (Note 14) Retained earnings Total equity £m £m £m £m £m At 22 February 2025 426 5,165 2,892 5,901 14,384 Profit for the year - - - 2,002 2,002 Other comprehensive income/(loss) Gains on cash flow hedges - - 13 - 13 Cash flow hedges reclassified and reported in the Company income statement - - (24) - (24) Tax relating to components of other comprehensive income - - 3 - 3 Total other comprehensive income/(loss) - - (8) - (8) Total comprehensive income/(loss) - - (8) 2,002 1,994 Transactions with owners Own shares purchased for cancellation - - (1,443) - (1,443) Own shares cancelled 14 (22) - 1,465 (1,443) - Own shares purchased for share schemes - - (279) - (279) Share-based payments - - 181 (20) 161 Share forfeiture 14 - 1 - - 1 Dividends - - - (936) (936) Transfer from own shares held to retained earnings - - 44 (44) - Total transactions with owners (22) 1 (32) (2,443) (2,496) At 28 February 2026 404 5,166 2,852 5,460 13,882 Notes Share capital Share premium Other reserves (Note 14) Retained earnings Total equity £m £m £m £m £m At 24 February 2024 445 5,165 2,865 7,015 15,490 Profit for the year - - - 809 809 Other comprehensive income/(loss) Gains on cash flow hedges - - 34 - 34 Cash flow hedges reclassified and reported in the Company income statement - - (70) - (70) Tax relating to components of other comprehensive income - - 9 - 9 Total other comprehensive income/(loss) - - (27) - (27) Total comprehensive income/(loss) - - (27) 809 782 Transactions with owners Own shares purchased for cancellation - - (1,016) - (1,016) Own shares cancelled 14 (19) - 1,035 (1,016) - Own shares purchased for share schemes - - (204) - (204) Share-based payments - - 239 (42) 197 Dividends - - - (865) (865) Total transactions with owners (19) - 54 (1,923) (1,888) At 22 February 2025 426 5,165 2,892 5,901 14,384 The Company has considered the profits available for distribution to shareholders. At 28 February 2026, the Company had retained earnings of £5.5bn (2025: £5.9bn), of which £3.2bn is available for distribution (2025: £3.2bn). The notes on pages 202 to 207 form part of these financial statements. Tesco PLC Annual Report and Financial Statements 2026 201 GovernanceStrategic report Additional informationFinancial statements ![]() Notes to the Parent Company financial statements Note 1 Authorisation of financial statements and statement of compliance with FRS 101 The Parent Company financial statements for the 53 weeks ended 28 February 2026 were approved by the Board of Directors on 15 April 2026 and the Company balance sheet was signed on the Board’s behalf by Ken Murphy and Imran Nawaz. These financial statements were prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101). The Company meets the definition of a qualifying entity under FRS 100, ‘Application of Financial Reporting Requirements’ as issued by the Financial Reporting Council. The Company’s financial statements are presented in Pounds Sterling, its functional currency, generally rounded to the nearest million. The principal accounting policies adopted by the Company are set out in Note 2. The financial statements have been prepared under the historical cost convention, except for certain financial instruments and share-based payments that have been measured at fair value. Note 2 Accounting policies Basis of preparation of financial statements The Parent Company financial statements have been prepared in accordance with FRS 101 and the Companies Act 2006 (the Act). FRS 101 sets out a reduced disclosure framework for a ‘qualifying entity’ as defined in the standard, which addresses the financial reporting requirements and disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of adopted IFRS. The financial year represents the 53 weeks to 28 February 2026 (prior financial year: 52 weeks to 22 February 2025). As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to business combinations, financial instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash flow statement, impairment of assets, share-based payments, related party transactions and disclosure of the possible impact of the application of a new IFRS that has been issued but is not yet effective. Where required, equivalent disclosures are given in the consolidated financial statements of Tesco PLC. The Parent Company financial statements are prepared on a going concern basis as set out in Note 1 of the consolidated financial statements of Tesco PLC. The Directors have taken advantage of the exemption available under section 408 of the Companies Act 2006 and not presented an income statement or a statement of comprehensive income/(loss) for the Company alone. A summary of the Company’s material accounting policies is set out below. Investments in subsidiaries Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. The Company tests the investment balances for impairment annually or when there are indicators of impairment. Foreign currencies Transactions in foreign currencies are translated to the functional currency at the exchange rate on the date of the transaction. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated to the functional currency at the rates prevailing on the balance sheet date. Share-based payments The fair value of employee share option plans is calculated at the grant date using the Black-Scholes model. The resulting cost is charged to the Company income statement over the vesting period. The value of the charge is adjusted to reflect expected and actual levels of vesting. Where the Company awards shares or options to employees of subsidiary entities, this is treated as a capital contribution. Own shares held Own shares represent the shares of Tesco PLC that are held by the employee benefit trusts, or which are purchased and held for cancellation as part of the share buyback programme. The Company adopts a ‘look-through’ approach which, in substance, accounts for the trusts as an extension of the Company. Shares purchased for cancellation are included in own shares held until cancellation, at which point they are transferred to retained earnings. Own shares held can include equity elements of forward and other binding contracts where the Group has an obligation to purchase its own shares. Financial instruments Financial assets and financial liabilities are recognised in the Company balance sheet when the Company becomes party to the contractual provisions of the instrument. Receivables Receivables are recognised initially at fair value, and subsequently at amortised cost using the effective interest rate method, less any expected credit losses. Financial liabilities and equity instruments Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs. Borrowings Borrowings and overdrafts are initially recognised at fair value and net of attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortised cost with any differences between proceeds and redemption value being recognised in the Company income statement over the period of the borrowings on an effective interest basis. Payables Payables are recognised initially at fair value and subsequently at amortised cost using the effective interest rate method. Tesco PLC Annual Report and Financial Statements 2026 202 ![]() Derivative financial instruments and hedge accounting The Company uses derivative financial instruments to hedge its exposure to foreign exchange, inflation and interest rate risks arising from operating, financing and investing activities. The Company does not hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are recognised and stated at fair value. Where derivatives do not qualify for hedge accounting, any gains or losses on remeasurement are immediately recognised in the Company income statement. Where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the hedge relationship and the item being hedged. Cash flow hedging Derivative financial instruments are classified as cash flow hedges when they hedge the Company’s exposure to variability in cash flows that are either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction. The effective element of any gain or loss from remeasuring the derivative designated as the hedging instrument is recognised directly in the Company statement of comprehensive income/(loss) and accumulated in the hedging reserve. The ineffective element is recognised immediately in the Company income statement. The associated cumulative gain or loss is reclassified from other comprehensive income and recognised in the Company income statement in the same period or periods during which the hedged transaction affects the Company income statement. The classification of the effective portion when recognised in the Company income statement is the same as the classification of the hedged transaction. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in the Company statement of changes in equity until the forecast transaction occurs or the original hedged item affects the Company income statement. If a forecast hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in the Company statement of changes in equity is reclassified to the Company income statement. Pensions The Company is the principal employer of a Group defined benefit pension scheme which is closed to future accrual. The net defined benefit cost and deficit/surplus for the scheme are borne and recognised by another Group company, Tesco Stores Limited, as per the stated policy of the Group. The Company also participates in a defined contribution scheme open to all UK employees. Payments to this scheme are recognised as an expense as they fall due. Taxation Current tax is the expected tax payable on the taxable income for the financial year, using tax rates enacted or substantively enacted by the balance sheet date. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates that have been enacted or substantively enacted by the balance sheet date. The tax expense is recognised in the Company income statement, except when it relates to items recognised directly in the Company statement of changes in equity or the Company statement of comprehensive income/(loss), in which case the tax follows the same treatment. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax assets and liabilities are offset against each other when there is a legally enforceable right to set off current tax assets against current tax liabilities and they relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend to settle current tax assets and liabilities on a net basis. The Company has applied the Pillar Two income taxes exception in IAS 12, so neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two income taxes. Judgements and sources of estimation uncertainty The preparation of the Company financial statements requires management to make judgements, estimates and assumptions in applying the Company’s accounting policies to determine the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis, with revisions to accounting estimates applied prospectively. The preparation of the Company financial statements for the financial year did not require the exercise of any critical accounting judgements. The Company’s evaluation of the recoverable amount of investments in subsidiaries involves significant estimation uncertainty. The key assumptions to which the recoverable amounts are most sensitive are disclosed in Note 6. New standards and amendments effective for the current financial year New standards, interpretations and amendments that became effective in the current financial year have not had a material impact on the Company. Note 3 Auditor remuneration Fees payable to the Company’s auditor for the audit of the Company and Group financial statements are disclosed in Note 4 to the Group financial statements. Note 4 Dividends For details of dividends see Note 9 to the Group financial statements. Tesco PLC Annual Report and Financial Statements 2026 203 GovernanceStrategic report Additional informationFinancial statements ![]() Note 5 Employment costs, including Directors’ remuneration Notes 2026 2025 £m £m Wages and salaries 12 13 Social security costs 2 2 Pension costs 13 1 1 Share-based payment expense 12 13 6 Total 28 22 The amounts above include recharges from other Group companies for Tesco PLC-related activities. The average number of employees (all Directors of the Company) during the financial year was 11 (2025: 11). The Schedule 5 requirements of SI 2008/410 for Directors’ remuneration are included within the Directors’ remuneration report on pages 88 to 108. Note 6 Investments 2026 £m Cost Opening balance 17,395 Capital contributions 98 Return of capital contributions (418) Closing balance 17,075 Accumulated impairment losses Opening balance (857) Impairment reversal 58 Closing balance (799) Net carrying value At 28 February 2026 16,276 At 22 February 2025 16,538 The Company has recognised capital contributions of £98m relating to share awards made to the employees of its directly and indirectly owned subsidiaries. Included in the return of capital contributions of £418m is the repayment of capital of £315m from Tesco Personal Finance Group Limited as part of the distribution of the Group’s Banking operations disposal proceeds. The remaining £103m relates to recharging subsidiaries for settled share awards. The Company has continued to monitor the recoverability of its investments in subsidiaries and recognised a net release of £58m on certain investments. The release is driven by improvements in forecast cash flows and a reduction in discount rates. The methodology applied is consistent with that disclosed in Note 15 of the Group financial statements. Sensitivity The key sources of estimation uncertainty in determining the recoverable amount of investments in trading subsidiaries are the discount rate, long-term growth rate and cashflows. Discount rates range from 6.8% to 10.1% and long-term growth rates range from 1.5% to 3.0%. If the discount rates were to increase by 1.0%pt, the carrying amount of investments would decrease by £666m. If the long-term growth rates were to decrease by 0.5%pt, the carrying amount of investments would decrease by £82m. If the future cashflows were to decrease by 5.0%, the carrying amount of investments would decrease by £59m. The Company’s subsidiary undertakings, joint ventures and associates are shown on pages 208 to 213. Note 7 Receivables 2026 2025 £m £m Amounts owed by Group undertakings\* 269 517 Other receivables 27 25 Total receivables 296 542 \* Amounts owed by Group undertakings are non interest-bearing and are repayable on demand. The expected credit loss on receivables is immaterial (2025: immaterial). Notes to the Parent Company financial statements continued Tesco PLC Annual Report and Financial Statements 2026 204 ![]() Note 8 Derivative financial instruments 2026 2025 Asset Liability Asset Liability Fair value Notional Fair value Notional Fair value Notional Fair value Notional £m £m £m £m £m £m £m £m Cash flow hedges Index-linked swaps 156 196 - - 296 406 - - Derivatives not in a formal hedge relationship Cross-currency swaps 127 303 (15) 89 138 308 (12) 95 Index-linked swaps 529 3,089 - - 580 3,089 - - Total 812 3,588 (15) 89 1,014 3,803 (12) 95 Note 9 Payables 2026 2025 £m £m Amounts owed to Group undertakings\* 2,530 2,405 Other payables 97 22 Taxation and social security 4 2 Total payables 2,631 2,429 Of which: Current 240 488 Non-current 2,391 1,941 2,631 2,429 \* Amounts owed to Group undertakings are either interest-bearing or non interest-bearing depending on the type and duration of the creditor relationship, with interest rates of 4.2% (2025: 5.1% to 5.2%) and with maturities up to and including February 2028. Under the policy choice permitted by IFRS 17 ‘Insurance contracts’, the Company has elected to recognise and measure financial guarantee contracts in accordance with IFRS 9 ‘Financial instruments’. These balances, included in other payables, are immaterial. The Company has entered into financial guarantee contracts to guarantee indebtedness held on the balance sheets of Group undertakings amounting to £4.0bn (2025: £3.4bn). The Company has also guaranteed derivative agreements of Group undertakings, of which those in a net liability position at the reporting date total £nil (2025: £0.1bn). In addition, the Company has guaranteed the rental payments of certain Group undertakings relating to a portfolio of retail stores, distribution centres and mixed-use retail developments amounting to £4.7bn (2025: £4.9bn). Note 10 Borrowings Par value Maturity 2026 2025 £m £m Bank loans and overdrafts 25 90 LPI and RPI-linked bonds\* 3.322% LPI MTN £210m Nov 2025 - 429 1.982% RPI MTN £196m Mar 2036 416 397 Other borrowings 6% MTN £38m Dec 2029 41 42 5.5% MTN £67m Jan 2033 74 75 6.15% USD Bond $355m Nov 2037 319 341 4.875% MTN £14m Mar 2042 15 14 5.125% MTN €147m Apr 2047 132 125 5.2% MTN £14m Mar 2057 14 14 Total 1,036 1,527 Of which: Current 41 534 Non-current 995 993 1,036 1,527 \* These bonds are redeemable at par, indexed for increases in the RPI over the life of the MTN. Refer to Note 26 to the Group financial statements. Tesco PLC Annual Report and Financial Statements 2026 205 GovernanceStrategic report Additional informationFinancial statements ![]() Note 11 Taxation The deferred tax liability recognised by the Company, and the movements thereon, during the current financial year are as follows: £m 22 February 2025 (13) Charge to the income statement (1) Movement in reserves for the year 3 28 February 2026 (11) Note 12 Share-based payments The Company’s equity-settled share-based payment schemes comprise various share schemes designed to reward Executive Directors. For further information on these schemes, including the valuation models and assumptions used, refer to Note 27 to the Group financial statements. Share option schemes At 28 February 2026, there were 9,890 options outstanding (2025: 9,890) with a weighted average exercise price (WAEP) of 182.00p (2025: 182.00p) and a weighted average remaining contractual life of 0.50 years (2025: 1.52 years). There were no options granted, exercised or forfeited in the 53 weeks ended 28 February 2026 (52 weeks ended 22 February 2025: nil). There were no options exercisable at 28 February 2026 (2025: nil). Share bonus and incentive schemes Executive Directors participate in the Deferred Bonus Plan, a performance-related bonus scheme. The amount paid is based on a percentage of salary and is paid partly in cash and partly in shares. Bonuses are awarded to the Executive Directors who have completed a required service period and depend on achievement of corporate and individual performance targets. For further information on these schemes, including the valuation models and assumptions used, refer to Note 27 to the Group financial statements. The number and weighted average fair value (WAFV) of share bonuses granted during the financial year were: 2026 2025 Number of shares WAFV pence Number of shares WAFV pence Deferred Bonus Plan 597,893 376.40 829,624 306.46 Long-Term Incentive Plan 1,602,704 399.10 2,018,282 308.40 Note 13 Pensions The total cost of participation in the Tesco Retirement Savings Plan (a defined contribution scheme) to the Company was £1m (2025: £1m). Further disclosure relating to all schemes can be found in Note 28 to the Group financial statements. Note 14 Called-up share capital and reserves Refer to Note 29 to the Group financial statements for details relating to called-up share capital and share forfeiture programme. Other reserves The tables below set out the movements in other reserves: Capital redemption reserve Hedging reserve Own shares held Merger reserve Total £m £m £m £m £m At 22 February 2025 80 42 (280) 3,050 2,892 Other comprehensive income/(loss) Gains on cash flow hedges - 13 - - 13 Cash flow hedges reclassified and reported in the Company income statement - (24) - - (24) Tax relating to components of other comprehensive income - 3 - - 3 Total other comprehensive income/(loss) - (8) - - (8) Transactions with owners Own shares purchased for cancellation - - (1,443) - (1,443) Own shares cancelled 22 - 1,443 - 1,465 Own shares purchased for share schemes - - (279) - (279) Share-based payments - - 181 - 181 Transfer from own shares held to retained earnings - - 44 - 44 Total transactions with owners 22 - (54) - (32) At 28 February 2026 102 34 (334) 3,050 2,852 Notes to the Parent Company financial statements continued Tesco PLC Annual Report and Financial Statements 2026 206 ![]() Capital redemption reserve Hedging reserve Own shares held Merger reserve Total £m £m £m £m £m At 24 February 2024 61 69 (315) 3,050 2,865 Other comprehensive income/(loss) Gains on cash flow hedges - 34 - - 34 Cash flow hedges reclassified and reported in the Company income statement - (70) - - (70) Tax relating to components of other comprehensive income - 9 - - 9 Total other comprehensive income - (27) - - (27) Transactions with owners Own shares purchased for cancellation - - (1,016) - (1,016) Own shares cancelled 19 - 1,016 - 1,035 Own shares purchased for share schemes - - (204) - (204) Share-based payments - - 239 - 239 Total transactions with owners 19 - 35 - 54 At 22 February 2025 80 42 (280) 3,050 2,892 Note 15 Contingent liabilities Contingent liabilities Refer to Note 33 to the Group financial statements. Note 16 Events after the reporting period There were no material events after the reporting period requiring disclosure. Tesco PLC Annual Report and Financial Statements 2026 207 GovernanceStrategic report Additional informationFinancial statements ![]() Related undertakings of the Tesco Group In accordance with section 409 of the Companies Act 2006 and Schedule 4 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, a full list of related undertakings, together with the registered office address, class of share held and the percentage of share class owned, as at 28 February 2026 is disclosed below. Changes to the list of related undertakings since the year end date are detailed in the footnotes below. All undertakings are indirectly owned by Tesco PLC unless otherwise stated. Subsidiary undertakings incorporated in the United Kingdom | | | | | | | --- | --- | --- | --- | --- | | | Registered | | | % held by | | Name of undertaking | address | | Class of share held | Group | | Armitage Finance Unlimited | 1 | | GBP0.90 Ordinary | 100 | | BF Limited | 8 | GBP0.000000011111111 | Ordinary | 100 | | Bishop’s Group Limited | 8 | GBP0.01 Ordinary | | 100 | | Booker Cash & Carry Limited | 8 | GBP1.00 Ordinary | | 100 | | Booker Direct Limited | 8 | GBP0.01 Ordinary | | 100 | | Booker Group Limited | 8 | GBP0.00000000055625 | Ordinary | 100 | | Booker Limited | 8 | | GBP1.00 Ordinary | 100 | | Booker Pension Trustees Limited | 8 | | Limited by Guarantee | – | | Booker Retail Partners (GB) Limited | 8 | | GBP1.00 Ordinary | 100 | | Booker Retail Limited | 8 | | GBP0.10 Ordinary | 100 | | Booker Wholesale Holdings Limited | 8 | | GBP0.01 A1 Ordinary | 100 | | Booker Unapproved Scheme Trustees Ltd | 8 | | Limited by Guarantee | – | | Bourne End Residential Management | 1 | | Limited by Guarantee | – | | Company Limited | | | | | | Broughton Retail Park Nominee 1 Limited | 1 | | GBP1.00 Ordinary | 100 | | Broughton Retail Park Nominee 2 Limited | 1 | | GBP1.00 Ordinary | 100 | | Broughton Retail Park Nominee 3 Limited | 1 | | GBP1.00 Ordinary | 100 | | Broughton Retail Park Nominee 4 Limited | 1 | | GBP1.00 Ordinary | 100 | | Budgen Holdings Limited | 8 | | GBP1.00 Ordinary | 100 | | Budgens Pension Trustees No.2 Limited | 8 | | GBP1.00 Ordinary | 100 | | Budgens Property Investments Limited | 8 | | GBP1.00 Ordinary | 100 | | Budgens Stores Limited | 8 | | GBP1.00 Ordinary | 100 | | Buttoncase Limited | 1 | | GBP1.00 2% Cumulative | 100 † | | | | | Redeemable Preference | | | | | | GBP1.00 Ordinary | 100 † | | Dillons Newsagents Limited\* | 2 | | GBP0.25 Non–Voting Ordinary | 100 | | dunnhumby International Limited | 4 | | GBP1.00 A Ordinary | 100 | | dunnhumby Limited | 4 | | GBP0.05 Ordinary | 100 | | | | | GBP0.10 A Ordinary | 100 | | | | | GBP0.10 Deferred | 100 | | dunnhumby Overseas Limited | 4 | | GBP1.00 Ordinary | 100 | | dunnhumby Trustees Limited | 4 | | GBP1.00 Ordinary | 100 | | Giant Bidco Limited | 8 | | GBP1.00 Ordinary | 100 | | | | | | | | --- | --- | --- | --- | --- | | | Registered | | | % held by | | Name of undertaking | address | | Class of share held | Group | | Giant Booker Limited | 8 | GBP0.0025 | Ordinary | 100 | | Giant Midco Limited | 8 | GBP1.00 Ordinary | | 100 | | Highams Green Management Company | 1 | Limited by Guarantee | | – | | Limited | | | | | | IRTH (15) Limited | 8 | GBP1.00 Ordinary | | 100 | | IRTH (19) Limited | 8 | USD0.000000052383172 | Ordinary | 100 | | Launchgrain Limited | 1 | GBP1.00 Ordinary | | 100 † | | Linnco Limited | 8 | GBP1.00 Ordinary | | 100 | | Londis (Holdings) Limited | 8 | GBP50.00 Ordinary | | 100 | | Londis Pension Trustees Limited | 8 | GBP1.00 Ordinary | | 100 | | Makro Holding Limited | 8 | GBP1.00 Ordinary | | 100 | | Makro Properties Limited | 8 | GBP1.00 Ordinary | | 100 | | Makro Self Service Wholesalers Limited | 8 | GBP1.00 A Ordinary | | 100 | | | | GBP1.00 B Ordinary | | 100 | | Maldon Finance Limited | 1 | GBP0.01 Ordinary | | 100 | | | | GBP0.000000000592 | A Preference | 100 | | | | GBP0.000000000222 | B Preference | 100 | | | | GBP0.000000000740 | C Preference | 100 | | Murdoch Norton Limited | 8 | GBP0.05 Ordinary | | 100 | | Newross Property Limited (a) | 1 | GBP1.00 Ordinary | | 100 | | Oakwood Distribution Limited | 1 | GBP1.00 Ordinary | | 100 | | One Stop Community Stores Limited | 2 | GBP0.00001200004 | Ordinary | 100 | | One Stop Convenience Stores Limited | 2 | | GBP1.00 Ordinary | 100 | | One Stop Stores Limited | 2 | | GBP1.00 Ordinary | 100 (b) | | One Stop Stores Trustee Services Limited | 2 | | GBP1.00 Ordinary | 100 | | Orpington (Station Road) Limited | 1 | | GBP1.00 Ordinary | 100 | | PTLL Limited | 1 | | GBP1.00 Ordinary | 100 | | Reskammel Property Company Limited | 1 | | GBP1.00 Ordinary | 100 | | Seacroft Green Nominee 1 Ltd | 1 | | GBP1.00 Ordinary | 100 | | Seacroft Green Nominee 2 Ltd | 1 | | GBP1.00 Ordinary | 100 | | Spen Hill Developments Limited | 1 | | GBP1.00 Ordinary | 100 | | Spen Hill Management Limited | 1 | | GBP1.00 Ordinary | 100 (c) | | Spen Hill Properties (Holdings) plc | 1 | | GBP1.00 Ordinary | 100 † | | Spen Hill Regeneration Limited | 1 | | GBP1.00 Ordinary | 100 | | Spen Hill Residential No 1 Limited | 1 | | GBP1.00 Ordinary | 100 | | Spen Hill Residential No 2 Limited | 1 | | GBP1.00 Ordinary | 100 | | Statusfloat Limited | 1 | | GBP1.00 Ordinary | 100 | | Tesco Newmarket Limited | 1 | | GBP1.00 Ordinary | 100 | | T&S Stores Limited | 2 | | GBP0.05 Ordinary | 100 † | | Tapesilver Limited | 1 | | GBP1.00 Ordinary | 100 † | Tesco PLC Annual Report and Financial Statements 2026 208 ![]() | | | | | | --- | --- | --- | --- | | | Registered | | % held by | | Name of undertaking | address | Class of share held | Group | | Teesport (GP) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Atrato (1LP) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Atrato (GP) Limited | 1 | GBP1.00 A Ordinary | 100 | | | | GBP1.00 B Ordinary | 100 | | Tesco Atrato (Nominee 1) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Atrato (Nominee 2) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Atrato (Nominee Holdco) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Atrato Depot Propco Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Blue (3LP) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Blue (GP) Limited | 1 | GBP1.00 A Ordinary | 100 (d) | | | | GBP1.00 B Ordinary | 100 (d) | | Tesco Blue (Nominee 1) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Blue (Nominee 2) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Blue (Nominee Holdco) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Coral (GP) Limited | 1 | GBP1.00 A Ordinary | 100 | | | | GBP1.00 B Ordinary | 100 | | Tesco Coral (Nominee) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Corporate Treasury Services PLC | 1 | GBP1.00 Ordinary | 100 † | | Tesco Depot Propco Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Distribution Holdings Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Distribution Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Dorney (1LP) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Dorney (GP) Limited | 1 | GBP1.00 A Ordinary | 100 | | | | GBP1.00 B Ordinary | 100 | | Tesco Dorney (Nominee 1) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Dorney (Nominee 2) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Dorney (Nominee Holdco) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Employees’ Share Scheme Trustees | 1 | GBP1.00 Ordinary | 100 (e) | | Limited | | | | | Tesco Family Dining Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Freetime Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Fuchsia (3LP) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Gateshead Property Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Holdings Limited | 1 | GBP0.10 Ordinary | 100 † | | | | GBP10.00 Preference | 100 † | | Tesco International Services Limited | 1 | GBP1.00 Ordinary | 100 † | | Tesco Maintenance Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Mobile Communications Limited | 1 | GBP1.00 Ordinary | 100 † | | Tesco Mobile Services Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Navona (1LP) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | | | | | | --- | --- | --- | --- | | | Registered | | % held by | | Name of undertaking | address | Class of share held | Group | | Tesco Navona (GP) Limited | 1 | GBP1.00 A Ordinary | 100 (d) | | | 1 | GBP1.00 B Ordinary | 100 (d) | | Tesco Navona (Nominee 1) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Navona (Nominee 2) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Navona (Nominee Holdco) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Navona PL Propco Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Overseas Investments Limited | 1 | GBP1.00 Ordinary | 100 † | | Tesco Passaic (1LP) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Passaic (GP) Limited | 1 | GBP1.00 A Ordinary | 100 (d) | | | | GBP1.00 B Ordinary | 100 (d) | | Tesco Passaic (Nominee 1) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Passaic (Nominee 2) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Passaic (Nominee Holdco) Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Passaic PL Propco Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Pension Investment Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Pension Trustees Limited | 1 | GBP1.00 Ordinary | 100 † | | Tesco Personal Finance Group Limited | 6 | GBP0.10 A Ordinary | 100 † | | Tesco Personal Finance Limited | 6 | GBP0.10 Ordinary | 100 | | Tesco Property (Nominees) Limited | 11 | GBP1.00 Ordinary | 100 | | Tesco Property (Nominees) (No.1) Limited | 11 | GBP1.00 Ordinary | 100 | | Tesco Property (Nominees) (No.2) Limited | 11 | GBP1.00 Ordinary | 100 | | Tesco Property Finance 1 Holdco Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Tesco Property Finance 1 PLC | 1 | GBP1.00 Ordinary | 100 (d) | | | | GBP0.25 Ordinary (f) | 100 (d) | | Tesco Property Holdings (No.2) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Property Holdings Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Property Nominees (No.5) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Property Nominees (No.6) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Property Partner (GP) Limited | 1 | GBP1.00 A Ordinary | 100 † | | | | GBP1.00 B Ordinary | 100 † | | Tesco Property Partner (No.1) Limited | 1 | GBP1.00 Ordinary | 100 † | | Tesco Sarum (1LP) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Sarum (GP) Limited | 1 | GBP1.00 A Ordinary | 100 | | | | GBP1.00 B Ordinary | 100 | | Tesco Sarum (Nominee 1) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Sarum (Nominee 2) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Sarum (Nominee Holdco) Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Seacroft Ltd | 1 | GBP1.00 Ordinary | 100 | | Tesco Secretaries Limited | 1 | GBP1.00 Ordinary | 100 | | Tesco Services Limited | 1 | GBP1.00 Ordinary | 100 | Tesco PLC Annual Report and Financial Statements 2026 209 GovernanceStrategic report Additional informationFinancial statements ![]() | | | | | | --- | --- | --- | --- | | | Registered | | % held by | | Name of undertaking | address | Class of share held | Group | | Tesco Stores Limited | 1 | GBP1.00 Ordinary | 100 | | | | GBP1.00 A Preference | 100 | | | | GBP1.00 B Preference | 100 | | Tesco Underwriting Limited | 31 | GBP1.00 Ordinary | 100 | | The Big Food Group Limited | 8 | GBP0.10 Ordinary | 100 | | The Teesport Limited Partnership | 1 | Limited Partnership | 100 (d) | | The Tesco Atrato Limited Partnership | 1 | Limited Partnership | 100 | | The Tesco Blue Limited Partnership | 1 | Limited Partnership | 100 (d) | | The Tesco Coral Limited Partnership | 1 | Limited Partnership | 100 | | The Tesco Dorney Limited Partnership | 1 | Limited Partnership | 100 | | The Tesco Navona Limited Partnership | 1 | Limited Partnership | 100 (d) | | The Tesco Passaic Limited Partnership | 1 | Limited Partnership | 100 (d) | | The Tesco Property Limited Partnership | 1 | Limited Partnership | 100 | | The Tesco Sarum Limited Partnership | 1 | Limited Partnership | 100 | | TPI Fund Managers Limited | 1 | GBP1.00 Ordinary | 100 | | TPT Holdco No.1 Limited | 1 | GBP1.00 Ordinary | 100 (d) | | Transcend Retail Solutions Limited | 1 | GBP1.00 Ordinary | 100 | | TSFM Limited | 1 | GBP1.00 Ordinary | 100 | | Venus Wine & Spirit Merchants Limited | 8 | GBP1.00 Ordinary | 100 | | Weymouth Avenue (Dorchester) Limited | 1 | GBP1.00 Ordinary | 100 | Related undertakings of the Tesco Group continued Subsidiary undertakings incorporated in the United Kingdom continued International subsidiary undertakings | | | | | | | --- | --- | --- | --- | --- | | | Registered | | | % held by | | Name of undertaking | address | | Class of share held | Group | | Arena (Jersey) Management Limited | 33 | | GBP1.00 Ordinary | 100 † | | dunnhumby (Thailand) Limited | 19 | | THB100 Ordinary | 100 | | dunnhumby Australia Pty Ltd | 39 | | AUD1.00 Ordinary | 100 | | dunnhumby Brasil Consultoria Ltda | 16 | | BRL1.00 Ordinary | 100 | | dunnhumby Canada Limited | 58 | | CAD1.00 Ordinary | 100 | | dunnhumby Chile SpA | 48 | CLP500,000 | Ordinary | 100 | | dunnhumby Colombia S.A.S. | 29 | COP1,000 | Ordinary | 100 | | dunnhumby Consulting Services India | 53 | INR10.00 Ordinary | | 100 | | Private Limited | | | | | | dunnhumby Czech s.r.o. | 7 | CZK1.00 Ordinary | | 100 | | dunnhumby Denmark ApS | 56 | DKK1.00 Ordinary | | 100 | | dunnhumby Finland Oy | 30 | EUR1.00 Ordinary | | 100 | | dunnhumby France SAS | 18 | EUR2.00 Ordinary | | 100 | | dunnhumby Germany GmbH | 14 | EUR1.00 Ordinary | | 100 | | dunnhumby Hungary Kft | 32 | HUF1.00 Ordinary | | 100 | | dunnhumby Inc. | 35 | No Par Value Stock | | 100 | | dunnhumby Information Technology | 45 | USD1.00 Ordinary | | 100 | | Consulting (Shanghai) Company Limited | | | | | | dunnhumby Ireland Limited | 52 | EUR1.00 Ordinary | | 100 | | dunnhumby IT Services India Private | 36 | INR10.00 Ordinary | | 100 | | Limited | | | | | | dunnhumby Italia s.r.l | 37 | EUR1.00 Ordinary | | 100 | | dunnhumby Japan K.K | 38 | JPY10,000.00 Ordinary | | 100 | | dunnhumby México S. de R.L. de C.V. | 49 | MXN1.00 Quota | | 100 | | dunnhumby Netherlands B.V. | 47 | EUR100 Ordinary | | 100 | | dunnhumby New Zealand | 23 | NZD1.00 Ordinary | | 100 | | dunnhumby Poland sp. z o.o. | 42 | PLN50,000 | Ordinary | 100 | | dunnhumby SARL | 10 | EUR100 Ordinary | | 100 | | dunnhumby Serviços de Promoção Digital | 16 | BRL1.00 Ordinary | | 100 | | Ltda | | | | | | dunnhumby Slovakia s.r.o. | 57 | No Par Value Ordinary | | 100 | | dunnhumby South Africa (Pty) Ltd | 43 | ZAR1.00 Ordinary | | 100 | | dunnhumby Spain S.L | 50 | EUR1.00 Ordinary | | 100 | | dunnhumby Ventures LLC | 44 | USD1.00 Capital | | 100 | | ELH Insurance Limited | 34 | GBP1.00 Ordinary | | 100 | | Gresham Properties Limited | 24 | EUR1.00 Ordinary | | 100 | | Longford Centre Management Services | 21 | EUR1.25 Ordinary | | 56.90 | | Limited | | | | | | Merrion Shopping Centre Ltd | 24 | EUR0.012697 | Ordinary | 51.88 | Tesco PLC Annual Report and Financial Statements 2026 210 ![]() | | | | | | | | --- | --- | --- | --- | --- | --- | | | Registered | | | | % held by | | Name of undertaking | address | | | Class of share held | Group | | Nadační fond Tesco | 7 | | | CZK500 Capital | 100 | | Omnisol Private Limited | 41 | | | INR10.00 Equity | 100 | | Shopping Mall Eden s.r.o. | 7 | CZK | 100,000 | Ordinary | 100 | | Sociomantic Labs Private Limited | 46 | | INR10.00 Ordinary | | 100 | | Tesco Akadémia Képzési és Fejlesztési | | | | | | | Korátolt Felelősségű Társaság | 32 | | HUF1.00 Business Share | | 100 | | Tesco Angel Foundation | 32 | | HUF1.00 Assets | | 100 | | Tesco Bengaluru Private Limited | 41 | | INR10.00 Ordinary | | 100 | | Tesco Capital No. 1 Limited | 28 | | GBP1.00 A Ordinary | | 100 † | | | | | GBP0.50 B Ordinary | | 100 † | | | | | GBP0.01 Guaranteed Cumulative Fixed | | 100 † | | | | | Rate Preference | | | | | | | GBP0.01 Preferred Ordinary | | 100 † | | Tesco Corporate Treasury Services | 24 | | EUR1.00 Ordinary | | 100 | | Europe Designated Activity Company | | | | | | | Tesco Foundation (Nadaçia Tesco) | 57 | | No Par Value Ordinary | | 100 | | Tesco Franchise Stores ČR s.r.o. | 7 | | CZK2,000,000 | Ordinary | 100 | | Tesco-Global Stores Privately Held | 32 | | HUF10.00 Common | | 100 | | Company Limited | | | | | | | Tesco Holdings B.V. | 40 | | EUR1.00 Ordinary | | 100 | | Tesco International Clothing Brand s.r.o. | 57 | | EUR1.00 Ordinary | | 100 | | Tesco International Franchising s.r.o. | 57 | | EUR1.00 Ordinary | | 100 | | Tesco International Sourcing Limited | 20 | | HKD10.00 Ordinary | | 100 | | Tesco Ireland Holdings Limited | 24 | | EUR0.00008 | Ordinary | 100 | | Tesco Ireland Limited | 24 | | EUR1.25 Ordinary | | 100 | | Tesco Ireland Pension Trustees | 24 | | EUR1.25 Ordinary | | 100 | | Designated Activity Company | | | | | | | Tesco Joint Buying Service (Shanghai) Co. | 17 | | USD1.00 Ordinary | | 100 | | Limited | | | | | | | Tesco Mobile Ireland Limited | 24 | | EUR1.00 Ordinary | | 100 | | Tesco Sourcing India Private Limited | 41 | | INR10.00 Ordinary | | 100 | | Tesco Stores ČR a.s. | 7 | | CZK250.00 Ordinary | | 100 | | Tesco Stores SR, a.s. | 57 | | EUR33,193.92 Ordinary | | 100 | | Tesco Technology and Services Europe | 3 | | PLN50.00 Ordinary | | 100 | | Sp. z o.o. | | | | | | | Tesco Trustee Company of Ireland DAC | 24 | | EUR1.25 Ordinary | | 100 † | | TESCO-BST Üzleti és Technológiai | 25 | | HUF100,000 | Ordinary | 100 | | Szolgáltatások Zârtköruen Múködó | | | | | | | Részvénytársaság | | | | | | | The Teesport Unit Trust | 9 | | | – | 100 (d) | | Tesco Atrato Unit Trust | 33 | | | – | 100 | | | | | | | --- | --- | --- | --- | | | Registered | | % held by | | Name of undertaking | address | Class of share held | Group | | Tesco Blue Unit Trust | 5 | – | 100 (d) | | Tesco Breakfast Unit Trust | 33 | – | 100 | | The Tesco Navona Unit Trust | 5 | – | 100 (d) | | The Tesco Passaic Unit Trust | 5 | – | 100 (d) | Subsidiary undertakings in liquidation The following subsidiary undertakings were incorporated in the United Kingdom: | | | | | | --- | --- | --- | --- | | | Registered | | % held by | | Name of undertaking | address | Class of share held | Group | | Day And Nite Stores Limited | 60 | GBP1.00 Ordinary | 100 | | Tesco Food Sourcing Limited | 60 | GBP1.00 Ordinary | 100 | | Tesco (Overseas) Limited | 60 | GBP1.00 Ordinary | 100 † | | Tesco Brislington Limited | 60 | GBP1.00 Ordinary | 100 | | Tesco Bury Limited | 60 | GBP1.00 Ordinary | 100 | The following subsidiary undertakings were incorporated outside of the United Kingdom: | | | | | | --- | --- | --- | --- | | | Registered | | % held by | | Name of undertaking | address | Class of share held | Group | | Cheshunt Holdings Guernsey Limited | 27 | GBP1.00 Ordinary | 100 | | Patrick C. Joyce Supermarket (Headford) ULC | 24 | EUR1.25 Ordinary | 100 | Tesco PLC Annual Report and Financial Statements 2026 211 GovernanceStrategic report Additional informationFinancial statements ![]() Associated undertakings The following associated undertakings were incorporated in the United Kingdom: | | | | | | --- | --- | --- | --- | | | Registered | | % held by | | Name of undertaking | address | Class of share held | Group | | Broadfields Management Limited | 12 | GBP0.10 Ordinary | 35.33 | | Shire Park Limited | 15 | GBP1.00 Ordinary | 48.57 | | Tesco Mobile Limited\* | 1 | GBP0.10 A Ordinary | 100 | | | | GBP0.90 B Ordinary | 100 | | W23 Global Fund LP | 51 | Limited Partnership | 20 | | W23 Global GP LLP | 51 | Limited Liability Partnership | 20 | | W23 Global Ltd | 51 | GBP1.00 Ordinary | 20 | The following associated undertakings were incorporated outside of the United Kingdom: | | | | | | | --- | --- | --- | --- | --- | | | Registered | | | % held by | | Name of undertaking | address | | Class of share held | Group | | Booker India Limited | 26 | | INR 4.00 Equity | 49 | | China Wisdom dunnhumby Limited (g) | 22 | | No Par Value Ordinary | 50 | | dunnhumby Norge A.S. | 55 | NOK1,000 | Ordinary | 50 | | Fiora Hypermarket Limited | 26 | INR10.00 Equity | | 49 | | Tesco Mobile ČR s.r.o. | 7 | CZK100,000 | Ordinary | 50 | | Tesco Mobile Slovakia s.r.o. | 54 | | EUR1.00 Ordinary | 50 | | The Arena Unit Trust | 5 | | – | 50 | | The Blackpool Unit Trust | 5 | | – | 50 | | The Broadstairs Unit Trust | 5 | | – | 50 | | The Coventry Unit Trust | 5 | | – | 50 | | Trent Hypermarket Private Limited | 13 | | INR10.00 Equity | 50 | | W23 Global Manager Pty Ltd | 59 | | AUD1.00 Ordinary | 20 | Consolidated structured entities | | | | | --- | --- | --- | | Name of undertaking | Registered address | Nature of business | | Delamare Finance PLC | 11 | Securitisation entity | | Delamare Group Holdings Limited | 11 | Securitisation entity | | Delamare Limited | 11 | Securitisation entity | | Tesco Property Finance 2 PLC | 11 | Securitisation entity | | Tesco Property Finance 5 PLC | 11 | Securitisation entity | | Tesco Property Finance 6 PLC | 11 | Securitisation entity | \* Undertaking where other share classes are held by a third party. † Interest held directly by Tesco PLC. (a) Newross Property Limited changed name to Tesco Newry Limited on 18 March 2026. (b) 95% held by Tesco PLC. (c) 66.6% held by Tesco PLC. (d) Tesco Pension Trustees Limited (TPTL), a 100% owned subsidiary of the Group and the corporate trustee of the Tesco PLC Pension Scheme (the Scheme), holds shares on behalf of the Scheme. These comprise 50% of the shares of three property joint ventures with Tesco (The Tesco Blue Limited Partnership, The Tesco Passaic Limited Partnership, and The Tesco Navona Limited Partnership), and 100% of the shares of TPT Holdco No.1 Limited and Tesco Pension Investment Limited. The other 50% of shares in the three property joint ventures are held by other Group companies. Therefore, while the Group owns 100% of the shares in these entities and their subsidiaries, it has only 50% of the beneficial interest in them and has joint control over them with the Scheme. They are therefore accounted for as joint ventures. The Group has no beneficial interest in TPT Holdco No.1 Limited and Tesco Pension Investment Limited, and so no entries for them are included in the accounts. (e) 50% held by Tesco PLC. (f) One ordinary share of the same class partly paid. (g) This company is in liquidation. Related undertakings of the Tesco Group continued Tesco PLC Annual Report and Financial Statements 2026 212 ![]() 1 Tesco House, Shire Park, Kestrel Way, Welwyn Garden City, AL7 1GA, United Kingdom 2 Apex Road, Brownhills, Walsall, West Midlands, WS8 7HU, United Kingdom 3 ul. Przy Rondzie 4, 31-547 Kraków, Poland 4 184 Shepherds Bush Road, London, W6 7NL, United Kingdom 5 22 Grenville Street, St Helier JE4 8PX, Jersey 6 2 South Gyle Crescent, Edinburgh, EH12 9FQ, United Kingdom 7 Vršovická 1527/68b, Vršovice, 100 00 Prague 10, Czech Republic 8 Equity House, Irthlingborough Road, Wellingborough, Northamptonshire, NN8 1LT, United Kingdom 9 Lime Grove House, Green Street, St Helier JE1 2ST, Jersey 10 15 rue de Bruxelles, 75009, Paris, France, 75009 11 5 Churchill Place, 10th Floor, London E14 5HU, United Kingdom 12 2 Paris Parklands, Railton Road, Guildford, Surrey, GU2 9JX, United Kingdom 13 26th Floor, Vios Tower, New Cuffe Parade, Sewri-Chembur Road, Near Imax Dome Theatre, Wadala, Antop Hill, Mumbai, Maharashtra, India, 400037, India 14 Ritterstraße 6, 10969 Berlin, Germany 15 Riverside House, 3 Place Farm, Wheathampstead, St. Albans, AL4 8SB, United Kingdom 16 Avenida Brigadeiro Luís Antônio, No. 3530, CJ 51 and 52 Jardim Paulista, São Paulo 01402-001, Brazil 17 Unit 01, 02, 07, 08, 09, Floor 17, No. 610 Xujiahui Road, Huangpu District, Shanghai, People’s Republic of China 18 5-7 rue des Italiens,75009 Paris, France 19 No 319 Chamchuri Square Building, 24th Floor, Phayathai road, Pathumwan sub district, Pathumwan District, Bangkok 10330, Thailand 20 604-2605 AXA Tower, Landmark East, No. 100 How Ming Street, Kowloon, Hong Kong 21 Longford Shopping Centre, Longford Town, Co. Longford, Longford, N39 R7R6, Ireland 22 27/F One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong 23 RSM New Zealand, Level 2, 62 Highbrook Drive, East Tamaki, Auckland, 2013, New Zealand 24 Gresham House, Marine Road, Dun Laoghaire, Co. Dublin D01 F5P2, Ireland 25 II38, Budapest, Váci út, 187, Hungary 26 Trent House, Plot No. C-60, G-Block, Besides Citi Bank, Bandra Kurla Complex, Bandra (East), Mumbai 400051, India 27 PO Box 25, Martello Court, Admiral Park, St. Peter Port GY1 3AP, Guernsey 28 Level 1, IFC1 Esplanade, St Helier JE2 3BX, Jersey 29 Carrera 48, No 32B Sur 139, OF 909 P. 9, Envigado, Antioquia, Medelin 055428, Colombia 30 Vanha Kaarelantie 33 A, Vantaa 01610, Finland 31 The Omnibus Building, Lesbourne Road, Reigate, Surrey, RH2 7LD, United Kingdom 32 2040 Budaörs, Kinizsi út 1-3, Budapest, Hungary 33 47 Esplanade, St Helier JE1 0BD, Jersey 34 Dorey Court, Admiral Park, St. Peter Port, GY1 4AT, Guernsey 35 The Corporation Trust Company, 1209 Orange Street, Corporation Trust Center, Wilmington, Delaware19801, United States 36 Ground Floor and First Floor, Worldmark 1, Asset Area 11, Aerocity, Hospitality District, Indira Ghandi Int. Airport, New Delhi, South West Delhi DL 110037, India 37 Via Tiziano 32, Milan 20145, Italy 38 9th Floor, Shiroyama Trust Tower, 4-3-1, Toranomon 4-chome, Minato-ku, Tokyo 105-6009, Japan 39 c/o RSM Australia Pty Ltd, Level 27, 120 Collins Street, Melbourne, VIC 3000, Australia 40 6-H, Jan Luijkenstraat 6-H, 1071 CM, Amsterdam, The Netherlands 41 81 & 82, EPIP Area, Whitefield, Bangalore, Bangalore South, Karnataka 560066, India 42 ul. Grzybowska 2/29, 00-131 Warsaw, Poland 43 237 Aloe Ridge 2, Stoneridge Drive Greenstone Hill, Gauteng, Johannesburg 1610, South Africa 44 3300 Great American Tower, 301 East Fourth Street, Cincinnati, Ohio 45202, United States 45 Room 1001, Enterprise Development Tower, Unit 01 – 10th Floor, No 398, Jiangsu Road, Changning District, Shanghai 200050, People’s Republic of China 46 c/o Vaish Associates, 106, Peninsula Centre, Dr. S. S. Rao Road, Parel Mumbai 400012, India 47 Kingsfordweg 151, 1043 GR Amsterdam, The Netherlands 48 Antonio Bellet 444, Oficina 504, Comuna de Las Condes, Ciudad de Santiago, 7500025, Chile 49 Artemio del Valle Arizpe No 16, piso 2, Colonia del Valle, C.P.03100, Benito Juárez, Ciudad de México 50 48, 1D, Calle de Hermosilla 1ª, Madrid 28001, Spain 51 8 Sackville Street, London, W1S 3DG, United Kingdom 52 Floor 3, 2 Harbour Square, Crofton Road, Dun Laoghaire, Dublin A96D6R0, Ireland 53 4th Floor, Tower B, Paras Twin Towers, DLF Golf Course Road, Sector 54, Haryana-HR, Gurgaon 122002, India 54 Pribinova 40, Bratislava 811 09, Slovakia 55 Tordenskiolds gate 8, Oslo O160, Norway 56 C/O GALST Advokataktieselskab, Gammel Strand 44, Kobenhavn K, 1202, Denmark 57 Cesta na Senec 2, Bratislava, 821 04, Slovakia 58 1400-340 Albert Street, Ottawa, Ontario K1R 0A5, Canada 59 Suite 502, 80 Cooper Street, Surry Hills, New South Wales 2010, Australia 60 1 More London Place, London SE1 2AF, United Kingdom Tesco PLC Annual Report and Financial Statements 2026 213 GovernanceStrategic report Additional informationFinancial statements ![]() Supplementary information (unaudited) Like-for-like sales performance (exc. VAT, exc. fuel) Like-for-like sales Q1 Q2 Q3 Q4 H1 H2 FY On a 52-week basis 2025/26 2025/26 2025/26 2025/26 2025/26 2025/26 2025/26 UK & ROI 5.1% 4.6% 4.0% 3.2% 4.9% 3.6% 4.2% UK 5.1% 4.6% 3.9% 3.1% 4.9% 3.5% 4.2% ROI 5.5% 4.0% 5.0% 3.9% 4.8% 4.4% 4.6% Booker 2.0% 1.3% (0.9)% (1.8)% 1.7% (1.3)% 0.2% Central Europe 4.1% 2.9% 1.2% 0.9% 3.4% 1.0% 2.2% Like-for-like sales growth 4.6% 4.0% 3.1% 2.4% 4.3% 2.7% 3.5% Growth in sales (exc. VAT, exc. fuel) Actual rates Constant rates H1 H2 FY H1 H2 FY On a 52-week basis 2025/26 2025/26 2025/26 2025/26 2025/26 2025/26 UK & ROI 5.6% 4.7% 5.1% 5.6% 4.4% 5.0% UK 5.6% 4.3% 4.9% 5.6% 4.3% 4.9% ROI 6.4% 11.2% 8.9% 6.5% 6.7% 6.6% Booker 2.4% (1.4)% 0.6% 2.4% (1.4)% 0.6% Central Europe 4.4% 9.8% 7.2% 5.0% 2.4% 3.7% Growth in sales 5.1% 4.2% 4.6% 5.1% 3.5% 4.3% Country level revenue detail is provided in Note 3. UK sales area by size of store 28 February 2026 22 February 2025 Store size (sq. ft.) No. of stores Million sq. ft. % of total sq. ft. No. of stores Million sq. ft. % of total sq. ft. 0–3,000 2,755 6.1 15.7% 2,716 5.9 15.4% 3,001–20,000 282 3.0 7.7% 281 3.0 7.7% 20,001–40,000 304 9.0 23.2% 302 9.0 23.3% 40,001–60,000 192 9.7 25.0% 192 9.7 25.2% 60,001–80,000 111 7.6 19.6% 111 7.6 19.6% 80,001–100,000 31 2.7 7.0% 31 2.7 7.0% Over 100,000 6 0.7 1.8% 6 0.7 1.8% Total\* 3,681 38.8 100.0% 3,639 38.6 100.0% \* Excludes franchise stores. Group space summary Actual Group space – store numbers 2024/25 year end Openings Closures/ disposals Net gain/ (reduction) (a) 2025/26 year end Large 809 4 - 4 813 Convenience 2,094 65 (11) 54 2,148 Online only 6 - - - 6 UK excluding One Stop 2,909 69 (11) 58 2,967 One Stop (b) 730 8 (24) (16) 714 UK (b) 3,639 77 (35) 42 3,681 ROI 182 9 - 9 191 UK & ROI (b)(c) 3,821 86 (35) 51 3,872 Booker 190 - (1) (1) 189 Czech Republic (b) 184 1 (1) - 184 Hungary 198 3 (1) 2 200 Slovakia 179 3 - 3 182 Central Europe (b) 561 7 (2) 5 566 Group excluding franchise stores 4,572 93 (38) 55 4,627 UK (One Stop) 354 67 (35) 32 386 Czech Republic 114 1 (2) (1) 113 Franchise stores 468 68 (37) 31 499 Total Group 5,040 161 (75) 86 5,126 (a) The net gain/(reduction) reflects the number of store openings less the number of store closures/disposals and, for sq. ft. tables, adjustments for repurposing/extensions. (b) Excludes franchise stores. (c) The 2024/25 figures have been restated to exclude Booker. Refer to Note 2. Tesco PLC Annual Report and Financial Statements 2026 214 ![]() Actual Group space – ’000 sq. ft. 2024/25 year end Openings Closures/ disposals Repurposing/ extensions (d) Net gain/ (reduction) (a) 2025/26 year end Large 31,092 71 - - 71 31,163 Convenience 5,615 186 (54) - 132 5,747 Online only 716 - - - - 716 UK excluding One Stop 37,423 257 (54) - 203 37,626 One Stop (b) 1,205 15 (40) - (25) 1,180 UK (b) 38,628 272 (94) - 178 38,806 ROI 3,572 89 - 2 91 3,663 UK & ROI (b)(c) 42,200 361 (94) 2 269 42,469 Booker (e) 7,653 - (11) - (11) 7,642 Czech Republic (b) 4,085 20 (3) (16) 1 4,086 Hungary 5,316 9 (3) (29) (23) 5,293 Slovakia 3,179 19 - (12) 7 3,186 Central Europe (b) 12,580 48 (6) (57) (15) 12,565 Group excluding franchise stores 62,433 409 (111) (55) 243 62,676 UK (One Stop) 509 102 (47) - 55 564 Czech Republic 103 1 (2) - (1) 102 Franchise stores 612 103 (49) - 54 666 Total Group 63,045 512 (160) (55) 297 63,342 (a)-(c) Refer to previous table for footnotes. (d) Repurposing of retail selling space. (e) The prior year has been re-presented for sales areas remeasurements. Group space forecast to 27 February 2027 – ’000 sq. ft. 2025/26 year end Openings Closures/ disposals Repurposing/ extensions (d) Net gain/ (reduction) (a) 2026/27 year end Large 31,163 32 - - 32 31,195 Convenience 5,747 168 (11) - 157 5,904 Online only 716 - - - - 716 UK excluding One Stop 37,626 200 (11) - 189 37,815 One Stop (b) 1,180 - (15) - (15) 1,165 UK (b) 38,806 200 (26) - 174 38,980 ROI 3,663 105 - - 105 3,768 UK & ROI (b) 42,469 305 (26) - 279 42,748 Booker 7,642 - - - - 7,642 Czech Republic (b) 4,086 18 - (1) 17 4,103 Hungary 5,293 - (51) (8) (59) 5,234 Slovakia 3,186 93 - (18) 75 3,261 Central Europe (b) 12,565 111 (51) (27) 33 12,598 Group excluding franchise stores 62,676 416 (77) (27) 312 62,988 UK (One Stop) 564 46 (3) - 43 607 Czech Republic 102 - - - - 102 Franchise stores 666 46 (3) - 43 709 Total Group 63,342 462 (80) (27) 355 63,697 Refer to previous table for footnotes. Tesco PLC Annual Report and Financial Statements 2026 215 GovernanceStrategic report Financial statements Additional informationAdditional information ![]() Introduction In the reporting of financial information, the Directors have adopted various Alternative performance measures (APMs). These measures are not defined by International Financial Reporting Standards (IFRS) and therefore may not be directly comparable with other companies’ APMs, including those in the Group’s industry. APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measures. Purpose The Directors believe that these APMs assist in providing additional useful information on the trends, performance and position of the Group. APMs aid comparability between geographical units or provide measures that are widely used across the industry. They also aid comparability between reporting periods, adjusting for certain costs or incomes that derive from events or transactions that fall within the normal activities of the Group but which, by virtue of their size or nature, are adjusted, and can provide a helpful alternative perspective on year-on-year trends, performance and position that aids comparability over time. The alternative view presented by these APMs is consistent with how management views the business, and how it is reported internally to the Board and Executive Committee for performance analysis, planning, reporting, decision-making and incentive-setting purposes. Further information on the Group’s adjusting items, which is a critical accounting judgement, can be found in Notes 1 and 5. Some of the Group’s IFRS measures are translated at constant exchange rates. Constant exchange rates are the average actual periodic exchange rates for the previous financial period and are used to eliminate the effects of exchange rate fluctuations in assessing performance. Actual exchange rates are the average actual periodic exchange rates for that financial period. All income statement measures are presented on a continuing operations basis. Changes to APMs There were no changes to APMs in the year. Week 53 reporting As with many retail businesses, the Group operates a weekly accounting calendar to ensure equal trading days, and has a 53-week financial year every five to six years. As detailed in Note 1, the financial statements cover the 53 weeks ended 28 February 2026 (prior financial year 52 weeks ended 22 February 2025) for the UK & ROI (excluding Insurance and Money Services) and Booker. For all other operations, the results are for the calendar year ended 28 February 2026 (prior calendar year 28 February 2025). In order to provide comparability with the prior year results, certain APMs are presented on a 52-week basis by adjusting the Group’s statutory 53-week results to exclude the 53rd week for the UK & ROI (excluding Insurance and Money Services) and Booker. No week 53 adjustments are required in respect of the Group’s operations in Central Europe or Insurance and Money Services as these results are already comparable with the prior year. In determining the week 53 adjustments, revenue, sales, cost of goods sold and payroll expenses predominantly represent the actual trading performance for week 53. Overhead expenses where weekly data is not available are allocated proportionally based on the 5-week period ended 28 February 2026. Glossary – Alternative performance measures Alternative performance measures Tesco PLC Annual Report and Financial Statements 2026 216 ![]() Group APMs APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition and purpose Income statement Revenue measures Sales Revenue – Fuel sales – Excludes the impact of fuel sales made at petrol filling stations. This removes fuel price volatility which is outside of the control of management. – This measure is presented on a country, segmental and Group continuing operations basis. – This is a key management incentive metric. Growth in sales No direct equivalent – Ratio N/A – Growth in sales is a ratio that measures year-on-year movement in Group Sales from continuing operations on a 52-week basis. It shows the annual rate of increase in the Group’s sales and is considered a good indicator of how rapidly the Group’s core business is growing. – This measure is presented at both actual and constant foreign exchange rates. Like-for-like (LFL) sales growth No direct equivalent – Ratio N/A – LFL sales growth is a measure of growth in Group online sales and sales from stores that have been open for at least a year (but excludes prior year sales of stores closed during the year) at constant foreign exchange rates. – It excludes revenue from dunnhumby, Insurance and Money Services, and mall rental income as this revenue is not directly linked to the sale of goods. – It is a widely used indicator of a retailer’s current trading performance and is important when comparing growth between retailers that have different profiles of expansion, disposals and closures. Profit measures Adjusted operating profit Operating profit from continuing operations (a) – Adjusting items (b) – Adjusted operating profit is the headline measure of the Group’s performance, based on operating profit from continuing operations before the impact of adjusting items. Refer to the APM Purpose section of the Glossary and Note 1 for further information on adjusting items. – Amortisation of acquired intangibles is included within adjusting items because it relates to business combinations and does not reflect the Group’s ongoing trading performance (related revenue and other costs from acquisitions are not adjusted). – This measure is presented on a segmental and Group continuing operations basis. – This is a key management incentive metric. Adjusted net finance costs Net finance costs – Adjusting items (b) – Adjusting items within net finance costs include net pension finance income/(costs) and fair value remeasurements on financial instruments. Net pension finance income/(costs) are impacted by corporate bond yields, which can fluctuate significantly and are reset each year based on external market factors that are outside management’s control. Fair value remeasurements are impacted by changes to credit risk and various market indices, which can fluctuate significantly outside of management’s control. This measure helps to provide an alternative view of year-on-year trends in the Group’s net finance costs. Adjusted profit before tax Profit before tax – Adjusting items (b) – This measure is the summation of the impact of all adjusting items on profit before tax. Refer to the APM Purpose section of the Glossary and Note 1 for further information on adjusting items. Adjusted operating margin No direct equivalent – Ratio N/A – Adjusted operating margin is calculated as Adjusted operating profit divided by revenue. Progression in Adjusted operating margin is an important indicator of the Group’s operating efficiency. Adjusted diluted earnings per share Diluted earnings per share from continuing operations – Adjusting items (b) – This metric shows the adjusted profit after tax from continuing operations attributable to owners of the parent divided by the weighted average number of ordinary shares in issue during the financial period, adjusted for the effects of dilutive share options. EBITDA (earnings before adjusting items, interest, tax, depreciation and amortisation) Operating profit from continuing operations (a) – Adjusting items (b) – Depreciation and amortisation – This measure is widely used by analysts, investors and other users of the accounts to evaluate comparable profitability of companies, as it excludes the impact of differing capital structures and tax positions, variations in tangible asset portfolios, and differences in identification and recognition of intangible assets. It is used to derive the Net debt/EBITDA ratio, and Fixed charge cover APMs. Tax measures Adjusted effective tax rate Effective tax rate – Adjusting items (b) – Adjusted effective tax rate is calculated as total income tax credit/(charge) excluding the tax impact of adjusting items, divided by Adjusted profit before tax. This APM provides an indication of the ongoing tax rate across the Group. (a) Operating profit is presented on the Group income statement and is a generally accepted profit measure. (b) Refer to Note 1 and Note 5. Tesco PLC Annual Report and Financial Statements 2026 217 GovernanceStrategic report Financial statements Additional informationAdditional information ![]() Group APMs continued APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition and purpose Balance sheet measures Net debt No direct equivalent – N/A – Net debt excludes the net debt of discontinued operations to reflect the net debt obligations of the continuing business. – Net debt comprises borrowings, lease liabilities and net derivative financial instruments, offset by cash and cash equivalents, short-term investments, joint venture loans, and interest and other receivables. – It is a useful measure of the progress in generating cash and strengthening of the Group’s balance sheet position, and is a measure widely used by credit rating agencies. Net debt/EBITDA ratio No direct equivalent – Ratio N/A – Net debt/EBITDA ratio is calculated as Net debt divided by the rolling 12-month EBITDA. It is a measure of the Group’s ability to meet its payment obligations, showing how long it would take the Group to repay its current Net debt if both Net debt and EBITDA remained constant. It is widely used by analysts and credit rating agencies. Fixed charge cover No direct equivalent – Ratio N/A – Fixed charge cover is calculated as the rolling 12-month EBITDA divided by the sum of net finance costs (excluding net pension finance costs, finance charges payable on lease liabilities, capitalised interest and fair value remeasurements on financial instruments) and all lease liability payments from continuing operations. It is a measure of the Group’s ability to meet its payment obligations and is widely used by analysts and credit rating agencies. Capex Property, plant and equipment, intangible asset, and investment property additions, excluding those from business combinations – Additions relating to property buybacks and store purchases – Additions relating to decommissioning provisions and similar items – Capex excludes additions arising from business combinations, buybacks of properties (typically stores), purchases of store properties, refits associated with business combinations and purchases of store properties, as well as additions relating to decommissioning provisions and similar items. – Property buybacks and purchases of store properties are variable in timing, with the number and value of transactions dependent on opportunities that arise within any given financial year. Excluding property buybacks and store property purchases therefore gives an alternative view of trends in capital expenditure in the Group’s ongoing trading operations. – Additions relating to decommissioning provisions and similar items are adjusted because they do not result in near-term cash outflows. Return on capital employed (ROCE) No direct equivalent – Ratio N/A – ROCE is Adjusted operating profit divided by the average of opening and closing capital employed from continuing operations. – Capital employed from continuing operations is defined as net assets of the Group excluding: the pension deficit/surplus; net assets of the disposal group and non-current assets classified as held for sale; current and deferred tax balances and an adjustment to remove the impact of deferred tax liabilities recorded against identified assets acquired in business combinations; and Net debt. – This metric represents the profit generated as a proportion of the total average capital that the business has utilised in the period. – Management believes this is a useful measure to assess performance. Cash flow measures Free cash flow No direct equivalent – N/A – Free cash flow includes the following cash flows (excluding Insurance and Money Services and adjusting cash flows): – Continuing cash flows from operating activities of the business. – Investing cash flows relating to: the purchase of property, plant and equipment (excluding property buybacks and store purchases and refits associated with both store purchases and business combinations) and investment property; purchase of intangible assets; dividends received from Insurance and Money Services (excluding special dividends); dividends received from joint ventures and associates; and interest received. – Financing cash flows relating to: market purchase of shares net of proceeds from shares issued in relation to share schemes; and repayment of obligations under leases. – Directors and management believe this provides a view of free cash flow generated by the Group’s trading operations, excluding Insurance and Money Services, that is more predictable and comparable over time, and reflects the cash available to shareholders. Insurance and Money Services is excluded because free cash flow is not a common metric within this industry. – This is a key management incentive metric. Glossary – Alternative performance measures continued Tesco PLC Annual Report and Financial Statements 2026 218 ![]() APMs: Reconciliation of income statement measures Sales A reconciliation of Sales is provided in Note 2. Growth in sales and Like-for-like (LFL) sales growth Continuing operations Notes 2026 2025 Revenue – current year on a 53-week basis (£m) 2,3 73,712 69,916 Exclude: 53rd week 2 (1,248) n/a Revenue – current year on a 52-week basis (£m) 2 72,464 n/a Revenue – prior year (£m) 2,3 69,916 68,187 Revenue growth 3.6% 2.5% Exclude: Fuel impact 1.0% 1.0% Growth in sales at actual rate 4.6% 3.5% Exclude: Foreign exchange (0.3)% 0.5% Growth in sales at constant rate 4.3% 4.0% Exclude: Revenue from dunnhumby, Insurance and Money Services, and mall rental income (a) (0.3)% (0.4)% Exclude: Underlying net new space impact (0.3)% (0.5)% Exclude: Impact of retail partnerships reclassification (b) (0.2)% n/a Like-for-like sales growth 3.5% 3.1% (a) From the start of the current financial year, mall rental income was reclassified from cost of sales to revenue. Prior year revenue has not been restated as amounts were immaterial. This has no impact on Like-for-like (LFL) sales growth because mall rental income is excluded in both years. (b) From the start of the current financial year, certain retail partnerships income was reclassified from cost of sales to revenue. Prior year revenue has not been restated as amounts were immaterial. Growth in retail partnerships income has been excluded in the year of change to ensure a like-for-like comparison and will be included in future reporting periods. Adjusted operating profit and EBITDA 2026 2025 As reported on a 53-week basis Exclude 53rd week On a 52-week basis 52 weeks Continuing operations Notes £m £m £m £m Operating profit 2 2,985 (30) 2,955 2,711 Exclude: Adjusting items 5 209 (12) 197 417 Adjusted operating profit 2 3,194 (42) 3,152 3,128 Include: Depreciation and amortisation before adjusting items 1,813 (30) 1,783 1,697 EBITDA 5,007 (72) 4,935 4,825 Adjusted profit before tax A reconciliation of Adjusted profit before tax is provided in Note 7. Adjusted operating margin A reconciliation of Adjusted operating margin is provided in Note 2. Adjusted diluted earnings per share A reconciliation of Adjusted diluted earnings per share is provided in Note 10. Adjusted effective tax rate A reconciliation of Adjusted effective tax rate is provided in Note 7. APMs: Reconciliation of balance sheet measures Net debt A reconciliation of Net debt is provided in Note 31. Reconciliation from Free cash flow to Net debt 2026 2025 Notes £m £m Opening Net debt 31 (9,454) (9,684) Free cash flow 1,957 1,750 Other cash movements: Own shares purchased for cancellation (1,443) (1,016) Dividends paid to equity owners (937) (864) Adjusting items included in operating cash flow activities (80) (81) Repayments of capital element of obligations under leases (a) 668 597 Interest paid on lease liabilities (a) 395 380 Net other interest paid/(received) 129 136 Proceeds from sale of property, plant and equipment, investment property, intangible assets and assets held for sale 47 137 Cash outflows attributable to property buybacks and store purchases (191) (225) Disposal of Banking operations, net of costs to sell 8 - 586 Free cash flow impact of 53rd week (163) - Other cash movements (b) 5 (21) Non-cash movements in Net debt: Fair value movements (45) 20 Foreign exchange movements (98) 44 Net interest charge (122) (144) Non-cash movements in lease liabilities (1,231) (1,066) Non-cash movement arising from acquisitions and disposals - (5) Other non-cash movements - 2 Closing Net debt 31 (10,563) (9,454) (a) Comparatives have been re-presented following the Group’s change in accounting policy for economic hedges. There is no impact on Net debt. See Note 32 for further details. (b) Predominantly relates to the equivalent of free cash flow for Insurance and Money Services and proceeds from/(purchase of) other investments. Tesco PLC Annual Report and Financial Statements 2026 219 GovernanceStrategic report Financial statements Additional informationAdditional information ![]() APMs: Reconciliation of balance sheet measures continued Net debt/EBITDA ratio Net debt is presented as at the balance sheet date. EBITDA is presented on a 52-week basis. 2026 2025 Notes £m £m Net debt 31 10,563 9,454 EBITDA 4,935 4,825 Net debt/EBITDA ratio 2.1 2.0 Adjusted net finance costs and Fixed charge cover Notes 2026 2025 As reported on a 53-week basis Exclude 53rd week On a 52-week basis 52 weeks £m £m £m £m Net finance costs 6 581 (5) 576 492 Exclude: Net pension finance income/(costs) 6 (14) - (14) (32) Exclude: Fair value remeasurements of financial instruments 6 (26) (5) (31) 76 Adjusted net finance costs 541 (10) 531 536 Exclude: Interest expense on lease liabilities \* 6 (390) 7 (383) (377) Adjusted net finance cost, excluding finance charges payable on lease liabilities 151 (3) 148 159 Include: Total lease liability payments 13 1,063 (5) 1,058 980 Exclude: Discontinued operations total lease liability payments - - - (3) 1,214 (8) 1,206 1,136 EBITDA 5,007 (72) 4,935 4,825 Fixed charge cover (ratio) 4.1 4.2 \* Interest expense on lease liabilities is presented net of £14m hedging impact (2025: gross of £7m). Capex Notes 2026 2025 As reported on a 53-week basis Exclude 53rd week On a 52-week basis 52 weeks £m £m £m £m Property, plant and equipment additions\* 12 1,369 (15) 1,354 1,361 Goodwill and other intangible asset additions\* 11 323 (6) 317 286 Exclude: Additions from property buybacks 12 (141) - (141) (157) Exclude: Additions from store purchases and associated refits 12 (22) - (22) (24) Exclude: Additions from refits associated with business combinations 12 - - - (18) Exclude: Additions relating to decommissioning provisions and similar items 3 - 3 9 Capex 1,532 (21) 1,511 1,457 \* Excluding amounts acquired through business combinations. Return on capital employed (ROCE) Adjusted operating profit is presented on a 52-week basis. Capital employed is presented as at the balance sheet date. 2026 2025 Notes £m £m Adjusted operating profit 2 3,152 3,128 Capital employed from continuing operations: Net assets 11,457 11,662 Exclude: Pension deficit/(surplus) gross of deferred tax 28 (197) 251 Exclude: Non-current assets classified as held for sale (114) (50) Exclude: Net current tax (asset)/liability (25) (14) Exclude: Deferred tax assets (49) (47) Exclude: Deferred tax liabilities 635 503 Exclude: Adjustment to remove the impact of deferred tax liabilities recorded against identified assets acquired in business combinations (133) (133) Exclude: Net debt 31 10,563 9,454 Capital employed 22,137 21,626 Average capital employed from continuing operations 21,882 21,475 Return on capital employed (ROCE) 14.4% 14.6% Glossary – Alternative performance measures continued Tesco PLC Annual Report and Financial Statements 2026 220 ![]() APMs: Reconciliation of cash flow measures Free cash flow Continuing operations excluding Insurance and Money Services Insurance and Money Services Total Group On a 52-week basis (APM) Include 53rd week On a 53-week basis before adjusting items Adjusting items Total Total Total 53 weeks ended 28 February 2026 £m £m £m £m £m £m £m Operating profit/(loss) 2,985 42 3,027 (181) 2,846 139 2,985 Depreciation and amortisation 1,764 30 1,794 82 1,876 19 1,895 Net impairment loss/(reversal) on property, plant and equipment, right of use assets, intangible assets and investment property - - - 53 53 - 53 Net remeasurement (gain)/loss on non-current assets held for sale - - - 1 1 - 1 Defined benefit pension scheme payments (31) - (31) - (31) - (31) Share-based payments 56 2 58 - 58 (3) 55 Other reconciling items (a) 10 - 10 (2) 8 - 8 Cash generated from/(used in) operations excluding working capital 4,784 74 4,858 (47) 4,811 155 4,966 (Increase)/decrease in working capital 385 (216) 169 (7) 162 40 202 Cash generated from/(used in) operations 5,169 (142) 5,027 (54) 4,973 195 5,168 Interest paid (745) (14) (759) - (759) - (759) Corporation tax paid (497) 3 (494) - (494) (9) (503) Net cash generated from/(used in) operating activities 3,927 (153) 3,774 (54) 3,720 186 3,906 Include the following cash flows generated from/(used in) investing activities: Purchase of property, plant and equipment and investment property (b) (1,200) (7) (1,207) (4) (1,211) (4) (1,215) Purchase of intangible assets (315) (5) (320) - (320) (2) (322) Ordinary dividends received from Insurance and Money Services 50 - 50 - 50 (50) - Dividends received from joint ventures and associates 2 - 2 - 2 - 2 Interest received 227 4 231 - 231 4 235 Include the following cash flows generated from/(used in) financing activities: Own shares purchased for share schemes, net of cash received from employees (100) - (100) - (100) - (100) Repayment of capital element of obligations under leases (634) (2) (636) (31) (667) (1) (668) Free cash flow 1,957 (a) Other reconciling items primarily relate to adjustment for non-cash element of pensions charge (2025: primarily relate to (profit)/loss arising on sale of property, plant and equipment, investment property, intangible assets, assets classified as held for sale and early termination of leases). Refer to the Group cash flow statement. (b) Total purchase of property, plant and equipment and investment property in the Group cash flow statement of £(1,344)m (2025: £(1,247)m) excluding £(129)m (2025: £(133)m) of store buybacks, direct store purchases and refits associated with both direct store purchases and business combinations. Tesco PLC Annual Report and Financial Statements 2026 221 GovernanceStrategic report Financial statements Additional informationAdditional information ![]() APMs: Reconciliation of cash flow measures continued Continuing operations excluding Insurance and Money Services Insurance and Money Services Discontinued operations Tesco Group Before adjusting items Adjusting items Total Total Total Total 52 weeks ended 22 February 2025 £m £m £m £m £m £m Operating profit/(loss) of continuing operations 2,973 (403) 2,570 141 - 2,711 Operating profit/(loss) of discontinued operations - - - - 35 35 Depreciation and amortisation 1,680 78 1,758 17 - 1,775 Net impairment loss/(reversal) on property, plant and equipment, right of use assets, intangible assets and investment property 12 286 298 - - 298 Net remeasurement (gain)/loss on non-current assets held for sale - - - - 64 64 Defined benefit pension scheme payments (30) - (30) - - (30) Share-based payments 39 - 39 (6) 4 37 Fair value movements included in operating profit/(loss) - - - (7) 16 9 Other reconciling items (a) 18 (15) 3 8 - 11 Cash generated from/(used in) operations excluding working capital 4,692 (54) 4,638 153 119 4,910 (Increase)/decrease in working capital (45) (1) (46) (860) 53 (853) Cash generated from/(used in) operations 4,647 (55) 4,592 (707) 172 4,057 Interest paid (c) (758) - (758) (13) (1) (772) Corporation tax paid (355) - (355) (11) - (366) Net cash generated from/(used in) operating activities 3,534 (55) 3,479 (731) 171 2,919 Include the following cash flows generated from/(used in) investing activities: Purchase of property, plant and equipment and investment property (b) (1,112) - (1,112) (2) - (1,114) Purchase of intangible assets (280) - (280) (5) (7) (292) Dividends received from joint ventures and associates 2 - 2 - - 2 Interest received 255 - 255 - - 255 Include the following cash flows generated from/(used in) financing activities: Own shares purchased for share schemes, net of cash received from employees (54) - (54) - - (54) Repayment of capital element of obligations under leases (c) (595) - (595) (2) (2) (599) Free cash flow 1,750 (a)-(b) Refer to previous table for footnotes. (c) As a result of the Group’s change in presentation of economic hedges in the Group cash flow statement, comparatives for Interest paid and Repayment of capital element of obligations under leases have been re-presented by £3m. There is no impact on the Free cash flow APM. See Note 32 for full details. Glossary – Alternative performance measures continued Tesco PLC Annual Report and Financial Statements 2026 222 ![]() Glossary Other CPI Consumer price index. Dividend per share This is calculated as interim dividend per share paid plus final dividend per share declared in respect of that financial year. Expected credit loss (ECL) Credit loss represents the portion of the debt that a company is unlikely to recover. The expected credit loss is the projected future losses based on probability-weighted calculations. ESG Environmental, social and governance. FTE Full-time equivalents. LPI Limited price index. Market capitalisation The total value of all Tesco shares calculated as total number of shares multiplied by the closing share price at the year end. MTN Medium term note. Net promoter score (NPS) This is a loyalty measure based on a single question requiring a score between 0-10. The NPS is calculated by subtracting the percentage of detractors (scoring 0-6) from the percentage of promoters (scoring 9-10). This generates a figure between -100 and 100 which is the NPS. RPI Retail price index. SONIA Sterling Overnight Index Average. Tesco PLC Annual Report and Financial Statements 2026 223 GovernanceStrategic report Financial statements Additional informationAdditional information ![]() Five-year record The statistics below reflect the latest published information: – 2026 statutory measures are presented on a 53-week basis and 2026 APMs are presented on a 52-week basis (except for Net debt and the capital employed component of ROCE - see Glossary). All measures for all other years are presented on a 52-week basis. – In the current financial year, following changes to the Group Executive Committee and management reporting to the CODM, Booker is now a separate reportable segment. Comparatives for 2025 have been restated, but years prior to this have not. – From 2025, following the sale of the Group’s Banking operations, UK & ROI information includes the retained Insurance and Money Services business. Comparatives for 2024 have been restated, but years prior to this have not. – From 2025, following the sale of the Group’s Banking operations, Return on capital employed and Net debt are presented on a Group continuing operations basis. Both measures were previously on a retail basis. Retail free cash flow was renamed Free cash flow and includes refits associated with store purchases and business combinations. Comparatives for 2024 have been restated, but years prior to this have not. – In 2024, the Group adopted IFRS 17 and presented its Banking operations as a discontinued operation. Comparatives for 2023 have been restated, but years prior to this have not. 2022 2023 2024 2025 2026 Financial statistics (£m) Sales (a) UK & ROI 49,984 52,369 57,155 50,460 53,058 Booker - - - 8,990 9,040 Central Europe 3,862 4,181 4,322 4,186 4,490 Tesco Bank 922 666 - - - Group sales (a) 54,768 57,216 61,477 63,636 66,588 Revenue UK & ROI 56,404 60,246 63,691 56,593 59,889 Booker - - - 8,990 9,194 Central Europe 4,018 4,410 4,496 4,333 4,629 Tesco Bank 922 666 - - - Group revenue 61,344 65,322 68,187 69,916 73,712 Adjusted operating profit (a) UK & ROI 2,481 2,307 2,739 2,726 2,745 Booker - - - 290 292 Central Europe 168 180 90 112 115 Tesco Bank 176 22 - - - Group adjusted operating profit (a) 2,825 2,509 2,829 3,128 3,152 Adjusted operating profit margin (a) 4.6% 3.8% 4.1% 4.5% 4.3% Operating profit/(loss) UK & ROI 2,191 1,249 2,755 2,517 2,687 Booker - - - 212 215 Central Europe 193 144 66 (18) 83 Tesco Bank 176 17 - - - Group operating profit 2,560 1,410 2,821 2,711 2,985 Share of post-tax profits/(losses) of joint ventures and associates 15 8 6 (4) (1) Net finance costs (542) (536) (538) (492) (581) 2022 2023 2024 2025 2026 Profit/(loss) before tax 2,033 882 2,289 2,215 2,403 Taxation (510) (224) (525) (611) (616) Profit/(loss) for the year from continuing operations 1,523 658 1,764 1,604 1,787 Discontinued operations (40) 78 (572) 26 - Profit/(loss) for the year 1,483 736 1,192 1,630 1,787 Attributable to: Owners of the parent 1,481 737 1,188 1,626 1,787 Non-controlling interests 2 (1) 4 4 - Adjusted profit before tax (a) 2,197 1,954 2,277 2,588 2,620 Other financial statistics Diluted earnings/(losses) per share – continuing operations 19.6p 8.8p 24.5p 23.1p 27.1p Adjusted diluted earnings per share (a) 21.9p 20.5p 23.4p 27.4p 29.0p Dividend per share (b) 10.90p 10.90p 12.10p 13.70p 14.50p Free cash flow (£m) (a) 2,277 2,133 2,063 1,750 1,957 Return on capital employed (ROCE) (a) 12.1% 11.8% 13.4% 14.6% 14.4% Net debt (£m) (a) 10,516 10,493 9,684 9,454 10,563 Group statistics (c) Number of stores (d) 4,752 4,859 4,942 5,040 5,126 Total sales area (’000 sq. ft.) (d)(e) 64,034 63,835 63,426 63,045 63,342 Average employees 354,744 336,926 335,392 341,108 336,123 Average full-time equivalent employees (FTE) 231,223 222,306 223,636 229,140 227,188 UK & ROI statistics Number of stores (d) 4,074 4,169 4,273 4,175 4,258 Total sales area (’000 sq. ft.) (d)(e) 50,588 50,735 50,632 42,709 43,033 Average full-time equivalent employees (FTE) 204,974 196,911 203,107 194,893 193,002 (a) See APM definitions and reconciliations in the Glossary section on pages 216 to 223. (b) Dividend per share relating to the interim and proposed final dividend. (c) On a continuing operations basis. (d) Including franchise stores. (e) 2025 has been re-presented for sales area remeasurements. Refer to page 215. Five-year record Tesco PLC Annual Report and Financial Statements 2026 224 ![]() The Directors present their report, together with the audited accounts for the 53 weeks ended 28 February 2026. In addition to the information set out herein, and in accordance with section 414C(11) of the Companies Act 2006, this Directors’ report incorporates, by reference, the following sections of the Annual Report: – Strategic report. – Corporate governance report. – Group information, including Articles of Association and material contracts. – Financial statements. – Additional information. The Strategic report and the Directors’ report together constitute the management report as required under Rule 4.1.8R of the Disclosure Guidance and Transparency Rules. Other information relevant to the Directors’ report, and which is incorporated by reference into this report, can be found by referencing the table to the right. Directors’ report Directors’ statement of disclosure of information to the auditor Each of the persons who is a Director at the date of approval of this Annual Report confirms that: – so far as the Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and – the Director has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Information Location in this Annual Report Pages Appointment and retirement of Directors Nominations and Governance Committee report 70 to 72 Business model and strategy Strategic report 16 Cautionary statement regarding forward- looking information Additional information 233 Corporate governance report Corporate governance report 50 to 109 Directors and their interests Corporate governance report, Directors’ remuneration report 54 to 57 88 to 97 Directors’ indemnities and insurance Corporate governance report 60 Dividends/Dividend policy Strategic report, Financial statements – Note 9 26 and 142 Employee engagement Strategic report, Corporate governance report 18 62, 65 to 66, 91 Events after the reporting period Financial statements – Note 34 199 Financial instruments and financial risk management Financial statements – Notes 25 and 26 165 to 181 Future developments Strategic report 2 to 49 GHG emissions/SECR disclosures Strategic report 34 to 37 Going concern and viability statement Strategic report 48 to 49 Research and development Strategic report 2 to 49 Section 172 statement – including fostering the Company’s relationships with suppliers, customers and others Corporate governance report 68 Share buybacks Strategic report, Financial statements – Note 29, Additional information 19, 190 and 227 Share capital and control of the Company and significant agreements Financial statements – Note 29 190 Share forfeiture Sustainability Committee report, Financial statements – Note 30 76 and 190 Stakeholder engagement Strategic report 18 to 19 Tesco PLC Annual Report and Financial Statements 2026 225 GovernanceStrategic report Financial statements Additional information ![]() Directors’ report continued Articles of Association The Company’s Articles of Association may only be amended by special resolution at a general meeting of the shareholders. The Directors may exercise all the powers of the Company subject to the Articles of Association, relevant law and any directions that may be given by the Company at general meetings by shareholder resolution. Anti-bribery matters We have a zero-tolerance approach to bribery and corrupt business practices. Our anti-bribery programme operates across the Group. The programme is built around a clear understanding of how and where bribery risks affect our business and comprises of key controls such as: policies (anti-bribery, gifts and entertainment, conflicts of interest and charitable donations); procedures (such as conducting due diligence on suppliers, in particular those who will engage public officials on our behalf); training colleagues on bribery risks every year and ongoing assurance programmes to test that the controls are functioning effectively. Bribery risk management is discussed at senior leadership groups in each business unit, including at the executive level, and also with the Audit Committee. Information required to be disclosed under the UK Listing Rules can be found on the following pages: UK Listing Rule 6.6.1R Pages Allotment for cash of equity securities 190 Waiver of dividends 142 and 226 UK Listing Rule 6.6.6(8) Climate-related financial disclosures consistent with TCFD 34 to 37 UK Listing Rule 6.6.6(9) and (10) Diversity disclosures 20 and 73 Appointment and retirement of Directors The appointment and retirement of Directors is governed by the Company’s Articles of Association, the 2024 UK Corporate Governance Code, the Companies Act 2006 and other related legislation. In the interests of good governance, all Directors will retire and those wishing to serve again will submit themselves for re-election at the forthcoming AGM. For additional information concerning the Directors who served during the year and changes to the composition of the Board, see pages 53 to 57. Directors and their interests The biographical details of the current serving Directors are set out on pages 54 to 57. The interests of Directors, and their immediate families, who served during the year, in the shares of Tesco PLC along with details of Executive Directors’ share options, are contained in the Directors’ remuneration report set out on pages 88 to 108. At no time during the year did any of the Directors have a material interest in any significant contract with the Company or any of its subsidiaries. Directors’ indemnities and insurance A qualifying third-party indemnity provision, as defined in section 234 of the Companies Act 2006, is in force to the extent permitted by law for the benefit of each of the Directors and the Group Company Secretary (who is also a Director of certain subsidiaries of the Company) in respect of liabilities incurred as a result of their office. Dividend policy It is the Board’s intention to continue to pay a progressive dividend by aiming to grow the dividend per share each year, broadly targeting a 50% payout of adjusted earnings per share. Dividends The profit for the financial year, after taxation, amounts to £1,787m (2024/25: £1,604m) from continuing operations. The Directors have declared dividends as follows: Ordinary shares £m Paid interim dividend of 4.80 pence per share (a) (2024/25: 4.25 pence per share) 310 Proposed final dividend of 9.70 pence per share (b) (2024/25: 9.45 pence per share) 619 Total dividend of 14.50 pence per share for 2025/26 (2024/25: 13.70 pence per share) 929 (a) Excludes £2m dividends waived (2024/25: £2m). (b) Subject to shareholder approval at the 2026 AGM, the final ordinary dividend will be paid on 26 June 2026 to all shareholders on the register of members at the close of business on 15 May 2026. Certain nominee companies representing our employee benefit trusts hold shares in the Company in connection with the operation of the Company’s share plans. Evergreen dividend waivers remain in place on shares held by these companies that have not been allocated to employees. For more information on dividends, see page 26 and Note 9 on page 142. Compliance with the Groceries (Supply Chain Practices) Market Investigation Order 2009 and the Groceries Supply Code of Practice (the Code) The Code regulates aspects of the commercial relationship between 14 designated grocery retailers in the UK and their suppliers of grocery products. The aim of the Code is to establish and embed the overarching principles of fairness and lawfulness within retailer-supplier relationships. Specific supplier protections under the Code include the obligation for agreements to be in writing and copies retained; reasonable notice to be given of changes to the supply chain or reduction in the volume of purchases; and a number of provisions relating to payments to suppliers, including obligations for retailers to pay suppliers in full and without delay. Retailer compliance with the Code is overseen by the Groceries Code Adjudicator (GCA). We have regular meetings with the GCA throughout the year to discuss Code compliance and any Code-related supplier issues. During the reporting year, we have continued to enhance our Code compliance programme. We have provided clear and regular guidance, communications and training sessions that incorporated feedback from suppliers and the GCA. As part of our compliance programme, we provided mandatory annual refresher training for all colleagues involved in buying groceries across our business. This included not only the buying teams but also a wider set of colleagues, including those working in our quality and supply chain divisions. In total, 1,493 colleagues completed the GSCOP annual refresher training, with the majority being trained via role-based microlearning scenarios. 89% of colleagues said that they found microlearning a better way to learn and retain training than a single, longer training module. In addition to refresher training, 158 new starters across our business completed new starter GSCOP training. In addition to computer-based training, we have also provided numerous face-to-face training sessions on GSCOP, whether on a standalone basis or combined with another element of legal or regulatory education. Tesco PLC Annual Report and Financial Statements 2026 226 ![]() In the GCA’s annual supplier survey for 2025, 96.95% of our suppliers recognised that we comply ‘consistently well’ or ‘mostly well’ with the Code. In our own Supplier Viewpoint survey, conducted in January 2026, the results continue to reflect the progress we have made with our supplier relationships. The total Group score for suppliers rating their satisfaction with Tesco as either ‘extremely satisfied’ or ‘very satisfied’ was 88.9%, our highest score to date. Our UK satisfaction score was 89.2%. Among topics relevant to the Code, our strongest UK score in Viewpoint continues to be ‘Tesco pays promptly (within policy terms)’ at 96.5%. 89.2% of suppliers agreed that ‘Tesco treats me fairly’. Also, in the 2025 independent, industry-wide Advantage survey of retailers, we were pleased to be ranked first for overall performance for the tenth year running. In response to the 2025 GCA survey findings, we implemented a targeted action plan focused on forecasting, promotion funding, delisting, and Requests for Cost Price Changes (RFCPCs). Among other things, we enhanced forecasting accuracy through system upgrades and supplier engagement, clarified internal guidance and controls to combat the perceived requirement to predominantly fund promotions, created category-specific delisting support programmes, and increased resource in our validation teams to improve RFCPC turnaround time. Two Code-related issues were carried over from the 24/25 reporting period and resolved during the 25/26 reporting year. No formal Disputes under the Code arose during the 25/26 reporting year. Seven new Code-related- issues were raised by suppliers during the reporting year. Two of those issues fell outside the scope of the Code. Of the five issues within the scope, two concerned delisting, two related to RFCPCs and one involved invoice duplication. Four of these issues were resolved and no GSCOP breaches identified. One issue remains ongoing. Based on the issues raised, we do not consider there to be any material or systemic GSCOP concerns evidenced during the reporting year. Employment policies Following continued partnership negotiations with USDAW, Tesco has built on the significant enhancements already made to company sick pay (CSP). In 2025, Office and Distribution salaried colleagues transitioned onto the same service-based CSP scheme as hourly-paid colleagues, creating a single, consistent scheme for all colleagues below Director level. Further investment agreed through pay negotiations in 2025 increased the maximum CSP entitlement to up to 20 weeks, depending on length of service, reinforcing our commitment to fair and meaningful support during periods of ill health. Our Group anti-bullying, harassment and discrimination policy, launched in 2024, continues to underpin our inclusive culture. Throughout 2025/26, the policy has been supported by mandatory e-learning and leadership training, with UK leaders completing leading by example and compulsory anti- harassment learning embedded across office and operational roles. We remain committed to addressing concerns promptly and fostering safe, respectful workplaces. Our family-friendly policies remain a key strength. The improvements introduced in 2024 continue to apply in 2025/26, including 26 weeks’ full maternity pay, followed by up to 13 weeks’ statutory maternity pay, and six weeks paid paternity leave, paid at the higher of contractual pay or average earnings over the previous 52 weeks. These policies remain competitive, with no further changes planned this year. As part of the 2026 pay agreement with USDAW, Tesco has also committed to introducing a new domestic abuse policy, including up to three days’ paid leave. This policy will go live later in 2026, building on existing guidance and reinforcing our focus on colleague safety and wellbeing. Our wider wellbeing offer continues to develop. Alongside access to the virtual GP service, now supporting over 17,000 colleagues, Tesco has introduced additional financial and practical support in 2026, including energy-switching support, free will-writing and a lower-cost Health cash plan. These enhancements sit alongside our employee assistance programme and external partnerships, providing holistic support for colleagues. In April 2025, the everyone’s welcome policy was reviewed and refreshed, reaffirming Tesco’s commitment to equal opportunities for all colleagues, irrespective of age, disability (including those who become disabled during service), gender reassignment, marriage and civil partnership, pregnancy or maternity, race, religion or belief, sex or sexual orientation. The policy underpins fair treatment across recruitment, development, flexible working and throughout the colleague’s employment. We are committed to ensuring a fair, inclusive and consistent process, in line with our everyone’s welcome policy to ensure we select the best candidate for every role. As a Disability Confident employer, we actively support employment, training and career development opportunities for colleagues with disabilities. Because of this, we have completed a full review of our workplace adjustment policy and supporting materials in 2025/26 working in partnership with our trade union USDAW and the business disability forum, moving away from focusing on disability, and instead focusing on the barriers a colleague may experience at work and how we can best support them to remove or reduce the impact of these barriers. Tesco’s office ways of working continue to support flexibility and collaboration through a hybrid approach. Our office colleagues are required to spend a minimum of 60% of their time working in a work-related location or external business meeting. Together, these updates reflect Tesco’s continued investment in its people and our commitment to a positive, inclusive and supportive workplace, ensuring Tesco remains a great place to work now and in the future. Going concern, longer term prospects and viability statement The Directors consider that the Group and the Company have adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the financial statements. The UK Corporate Governance Code (available at the FRC website www.frc.org.uk) requires the Directors to assess and report on the prospects of the Group over a longer period. Our longer term viability statement is set out on pages 48 to 49. Modern Slavery Act As per section 54(1) of the Modern Slavery Act 2015, our modern slavery statement is reviewed and approved by the Board on an annual basis and published on our Group website. The statement covers the activities of Tesco PLC and certain UK subsidiaries. It details policies, processes and actions we have taken to ensure that slavery and human trafficking are not taking place in our supply chains or any part of our business. Tesco is diligent in tackling forced labour and modern slavery more broadly. One of our four key human rights strategic priority areas is anti-slavery, in which we work to bring about positive change in partnership with experts and people representing lived-experience. Our modern slavery statement can be viewed at www.tescoplc.com/modernslavery. Tesco PLC Annual Report and Financial Statements 2026 227 GovernanceStrategic report Financial statements Additional information ![]() Political donations The Group did not make any political donations or incur any political expenditure during the year 2025/26 (2024/25: £nil). Share buyback programme On 10 April 2025, the Company committed to buying back an additional £1.45bn worth of shares by April 2026. This tranche completed in January 2026. For further details on the share buyback programme, see page 19 and Note 29 on page 190. Share capital and control of the Company and significant agreements Details of the Company’s share capital, including changes during the year in the issued share capital and details of the rights attaching to the Company’s Ordinary shares are set out in Note 29 on page 190. No shareholder holds securities carrying special rights with regards to control of the Company. There are no restrictions on voting rights or the transfer of securities in the Company. The Company is not aware of any agreements between holders of securities that result in such restrictions. The Company was authorised by shareholders at the 2025 AGM to replace the existing authority (as granted by shareholders at the AGM held on 14 June 2024) for Directors to allot new shares that represent not more than one third of the issued share capital of the Company. It was also given the authority to allot relevant securities in connection with a rights issue up to a further one third of the issued share capital as at 1 May 2025. No shares were allotted under that authority during the financial year. The Company is seeking to renew this authority at the forthcoming AGM, within the limits set out in the notice of that meeting. The Company was authorised by shareholders at the 2025 AGM to replace the existing authority (as granted by shareholders at the AGM held on 14 June 2024) to purchase its own shares in the market up to a maximum of approximately 10% of its issued share capital. The Company is seeking to renew this authority at the forthcoming AGM, within the limits set out in the notice of that meeting. Shares held by the Company’s Share Incentive Plan (SIP) Trust, International Employee Benefit Trust, Employees’ Share Scheme Trust and Booker Group 2010 Employee Benefit Trust rank pari passu with the shares in issue and have no special rights. Voting rights and rights of acceptance of any offer relating to the shares held in these trusts rests with the trustees, who may take account of any recommendation from the Company. The trustees of the SIP Trust may vote in respect of shares held in the SIP Trust, but only as instructed by participants in the SIP in respect of their free shares, partnership shares and dividend shares. The trustees will not otherwise vote in respect of shares held in the SIP Trust. The Company is not party to any significant agreements that would take effect, alter or terminate following a change of control of the Company. The Company does not have agreements with any Director or officer that would provide compensation for loss of office or employment resulting from a takeover, except that provisions of the Company’s share plans may cause options and awards granted under such plans to vest on a takeover. Share forfeiture The Group undertakes an annual share forfeiture programme, following the completion of a shareholder tracing and notification exercise, and in accordance with the Company’s Articles of Association, the funds forfeited are returned to the Group to use towards good causes. In FY 25/26, the Group completed a share forfeiture programme and as part of this exercise, 279,670 shares were forfeited resulting in approximately £2m. Additional funds were also released which were retained from previous programmes for late claims, this amount totalled approximately £1m. Following a review of the fund by the Sustainability Committee, the total amount of approximately £3.1m is to be used to expand the Fruit & Veg for Schools programme. For further information, see page 76 and Note 29 on page 190. Streamlined energy and carbon reporting (SECR) disclosures A breakdown of our GHG emissions in accordance with our regulatory obligation to report GHG emissions pursuant to section 7 of the Companies Act 2006 (Strategic report and Directors’ report) Regulations 2013 and the Companies (Directors’ Report), and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 can be found on page 37. We continue to implement initiatives to drive energy efficiency across our operations in support of our net zero ambitions. Examples include: – Addressing emissions from heating, ventilation and air conditioning (HVAC) by trialling low carbon alternatives to gas boilers; – Improving refrigeration efficiency and reducing refrigerant emissions in our stores and distribution centres; – Switching from diesel to electric vans in our UK home delivery fleet; – Addressing transport emissions associated with our distribution fleet, trialling low-carbon fuels while working directly with manufacturers on long-term decarbonisation solutions such as electric HGVs; and – Installing electric hook up points for our refrigerated trucks and low-emission refrigeration units powered by electricity. For further information, see pages 34 to 37. For and on behalf of the Board Chris Taylor Group Company Secretary 15 April 2026 Directors’ report continued Tesco PLC Annual Report and Financial Statements 2026 228 ![]() Reporting requirement Relevant policies and documents that govern our approach Where to find more information and outcomes Page Social matters – Customer – Product safety and food integrity – Responsible sourcing – People – Our tax principles – Responsible retailing of alcohol, tobacco and other age- restricted products Group whistleblowing policy 62 Sustainability Committee report 74 Group charitable donations policy 226 Groceries Supply Code of Practice (GSCOP) 226 Details of our sustainability strategy, together with ESG performance, can be found in our latest Sustainability Report at www.tescoplc.com Respect for human rights – Responsible sourcing Health and safety policy 43 Group whistleblowing policy 62 Sustainability Committee report 74 Principal risks and uncertainties 42 Details of our modern slavery statement can be found in our latest Sustainability Report at www.tescoplc.com Anti- corruption and anti- bribery – Code of Business Conduct – GSCOP – Group anti-bribery policy – Group fraud policy – Group gift and entertainment policy – Tesco’s political donations policy – Cyber security – Data privacy Principal risks and uncertainties 42 Corporate governance report: purpose and culture 62 Directors’ report: political donations, anti-bribery matters, modern slavery statement 226 How we manage risk – Schedule of matters reserved for the Board – Audit Committee terms of reference Principal risks and uncertainties 38 TCFD risks and opportunities 46 Governance framework 58 Audit Committee report 78 Business model – Strategic drivers – Performance framework – Schedule of matters reserved for the Board Our business model 16 Governance framework 62 Non-financial key performance indicators KPIs 17 TCFD 34 CFD 37 The table below constitutes the Company’s non-financial and sustainability information statement as required by sections 414CA and 414CB of the Companies Act 2006. In addition, our website www.tescoplc.com contains a wide range of non-financial information, including actions we take to manage our environmental and social impact and look after our colleagues. The due diligence carried out for each policy is contained within each respective policy’s documentation. Policies are available on our website. Reporting requirement Relevant policies and documents that govern our approach Where to find more information and outcomes Page Environmental matters – Group environment policy – Sustainability policies on key risk commodities including soy, palm oil and seafood What we stand for 7 Chair’s statement 8 Market context 13 KPIs 17 Planet 30 Principal risks and uncertainties 41 Nature and TCFD 32 Sustainability Committee report 74 Audit Committee report: environmental disclosures 82 Directors’ report (SECR) 228 Details of our sustainability strategy together with ESG performance can be found in our latest Sustainability Report at www.tescoplc.com Colleagues – Code of Business Conduct – Health and safety policy – Bullying and harassment policy – Everyone’s welcome policy – Group whistleblowing policy – Colleague engagement – Conflicts of interest policy What we stand for 7 KPIs 17 Principal risk and uncertainties 43 Corporate governance report: purpose and culture 62 Board activity 64 Colleagues 65 Stakeholder engagement 18 Nominations and Governance Committee report: diversity, equity and inclusion 73 Directors’ remuneration report 88 Directors’ report disclosures: employment policies 227 Nominations and Governance Committee report: conflicts of interest 72 NFSIS Tesco PLC Annual Report and Financial Statements 2026 229 GovernanceStrategic report Financial statements Additional information ![]() Additional information for shareholders Electronic communications We encourage our shareholders to take advantage of electronic communications. By signing up to receive electronic communications, you will be helping to reduce print, paper and postage costs and the associated environmental impact. Tesco Share Account The Tesco Share Account (TSA) is a free service available to Tesco shareholders that allows you to hold your Tesco shares electronically. The TSA is a sponsored nominee service operated for Tesco by Equiniti Financial Services Limited, authorised and regulated by the FCA. Holding your shares electronically removes the need to hold paper share certificates, making dealing quicker and more secure. When you join the TSA, you remain the beneficial owner of your shares and continue to have the right to receive shareholder communications, vote at general meetings and to receive any dividends paid on your shares. Share dealing service Equiniti offers shareholder services for dealing in Tesco PLC shares. Dealing fees vary between brokers and you are recommended to check that you are being charged the most competitive rate. For further information please visit www.shareview.co.uk/dealing. Equiniti can also assist with shareholding and voting queries. Please contact Equiniti online at www.shareview.co.uk (from here, you can securely email them with your enquiry). Your dividend options You have the option to reinvest your dividend to purchase shares by joining the Tesco PLC dividend reinvestment plan (the DRIP). For further information please visit www.shareview.co.uk/info/drip (terms and conditions apply). Managing your shares and shareholder communication The Company’s share register is maintained by our registrar, Equiniti. Shareholders can manage their holdings online or elect to receive shareholder documentation in electronic form by setting up a Shareview portfolio. Go Online. Go Paperless. It’s Simple. Additional information for shareholders It only takes a few minutes to register for a Shareview portfolio using your 11-digit Shareholder Reference Number. You can either: Register at www.shareview.co.uk/info/register Elect to receive shareholder communications electronically and transfer your shares into the TSA Update your details online including change of address and your dividend elections Submit your proxy voting instructions Buy and sell shares easily through your Shareview portfolio Shareview A free, easy and secure service that enables you to manage your shareholding online. www.shareview.co.uk Scan the QR code: Tesco PLC Annual Report and Financial Statements 2026 230 ![]() American Depositary Receipts (ADRs) The Company has a sponsored Level 1 ADR programme for which J.P. Morgan Chase Bank N.A. acts as depositary. The ADRs are traded in the US, where one ADR represents three Ordinary shares. The ADR programme confers the right to receive dividends in US Dollars. ADR details Symbol TSCDY CUSIP 881575401 Exchange OTC Ratio 1:3 Effective date 1 April 1992 All enquiries relating to the ADR programme should be directed to: Shareowner Services P.O. Box 64504 St. Paul, MN 55164-0504 Email: StockTransfer@equiniti.com Website: www.adr.com Major shareholders Information provided to the Company by major shareholders pursuant to the FCA’s Disclosure Guidance and Transparency Rules (DTR) are published via a Regulatory Information Service and are available on the Company’s website. As at 28 February 2026 and the date of this report, the Company had received notification of the following interests in voting rights pursuant to Chapter 5 of the DTR: % of voting rights (a) BlackRock, Inc. 6.64 a) Percentages are shown as a percentage of the Company’s total voting rights as at the date the Company was notified of the change in holding. Annual General Meeting (AGM) The 2026 AGM will be held at the Heart building, Shire Park, Welwyn Garden City, AL7 1GA and via the Lumi Global Platform at 11.00am on Thursday, 18 June 2026. The Notice of Meeting and the Annual Report and Financial Statements 2026 are available to view and download at www.tescoplc.com. We strongly encourage shareholders to join the meeting via the Lumi Global platform so that the Board can continue to strengthen its engagement with you. Information on how to join, vote and ask questions can be found within the Notice of Meeting. Financial calendar 2026/27 February 2026 28 February 2026 Financial year end 2025/26 May 2026 14 May 2026 Ex-dividend date, final dividend 15 May 2026 Record date to be eligible for final dividend June 2026 18 June 2026 Annual General Meeting and Q1 trading statement 26 June 2026 Proposed payment date for final dividend October 2026 8 October 2026\* Interim results announcement January 2027 14 January 2027\* Q3 and Christmas trading statement February 2027 27 February 2027\* Financial year end 2026/27 \* Provisional dates which are subject to change. Tesco PLC Annual Report and Financial Statements 2026 231 GovernanceStrategic report Financial statements Additional information ![]() Share register analysis As at 28 February 2026, the Company had 6,385,182,796 shares in issue (22 February 2025: 6,736,841,762) and 184,068 registered holders of Ordinary shares (22 February 2025: 195,332). Shareholdings are analysed below: Breakdown of shareholdings Range of shareholding Number of holdings % of issued share capital 1 – 500 123,550 0.22% 501 – 1,000 15,927 0.18% 1,001 – 5,000 30,443 1.12% Over 5,001 14,148 98.47% Total 184,068 100% Breakdown of holders with over 5,000 shares Range of shareholding Number of holdings % of issued share capital 5,001 – 10,000 7,279 0.80% 10,001 – 50,000 5,417 1.58% 50,001 – 100,000 367 0.40% 100,001 – 500,000 497 1.90% 500,001 – 1,000,000 159 1.72% 1,000,001 – 5,000,000 250 8.96% Over 5,000,001 179 83.11% Total 14,148 98.47% Category of shareholders Number of holdings % of total registered holders Number of Ordinary shares % of issued share capital Private 182,043 98.90% 347,053,827 5.44% Institutional and corporate 2,025 1.10% 6,038,128,969 94.56% Shareholder security In recent years, Tesco PLC has become aware that its shareholders (and holders of other Tesco securities) have received unsolicited phone calls or correspondence concerning investment matters. These callers can be very persistent and extremely persuasive and often have professional websites and telephone numbers to support their activities. These callers will sometimes imply connection to Tesco and provide incorrect or misleading information. Shareholders are advised to exercise caution over any unsolicited advice, offers to buy shares at a discount or offers of free company reports. Spot the warning signs Fraudsters will often: 1 contact you out of the blue; 2 apply pressure to invest quickly; 3 downplay the risks to your money; 4 promise returns that sound too good to be true; and 5 state that the offer is only available to you; or that you cannot inform anyone else. If you are suspicious, report it You can report the firm or scam to the FCA by contacting their Consumer Helpline on 0800 111 6768 or by visiting the FCA’s website at fca.org.uk/scamsmart How to avoid investment scams 1 Reject unexpected offers: scammers usually make unsolicited phone calls, but they can also contact you by email, post, word of mouth or at a seminar. If you have been offered an investment opportunity out of the blue, it is likely to be a high-risk investment or a scam. 2 Check the FCA Warning List: use the FCA Warning List to check the risks of a potential investment opportunity – you can also search to see if the firm is known to be operating without FCA authorisation. 3 Get impartial advice: get impartial advice before investing – do not use an advisor from the firm that contacted you. 0300 123 2040 www.reportfraud.police.uk Beware of share fraud Additional information for shareholders continued Tesco PLC Annual Report and Financial Statements 2026 232 ![]() Cautionary statement regarding forward-looking information Where this Annual Report contains forward- looking statements, these are based on current expectations and assumptions regarding anticipated developments and other factors affecting Tesco. These statements should be treated with caution due to the inherent risks, uncertainties and assumptions underlying any such forward- looking information. The Group cautions investors that a number of factors, including matters referred to in this document, could cause actual results and developments to differ materially from those expressed or implied in any forward-looking statement. Such factors include, but are not limited to, those discussed under principal risks and uncertainties on pages 38 to 47. Forward-looking statements can be identified by the use of relevant terminology including the words: ‘may’, ‘will’, ‘seek’, ‘aim’, ‘anticipate’, ‘target’, ‘projected’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning and include all matters that are not historical facts. They appear in a number of places throughout this Annual Report and include statements regarding the intentions, beliefs or current expectations of our officers, Directors and colleagues concerning, among other things, the Group’s results of operations, financial condition, liquidity, prospects, growth, strategies and the business. Neither the Group, nor any of its officers, Directors or colleagues, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Annual Report will actually occur. Undue reliance should not be placed on these forward-looking statements. Forward-looking statements speak only as of the date they were made. Other than in accordance with our legal and regulatory obligations, the Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Registered office Tesco House Shire Park Kestrel Way Welwyn Garden City AL7 1GA Website: www.tescoplc.com Investor Relations Investor Relations Department Tesco House Shire Park Kestrel Way Welwyn Garden City AL7 1GA Registrars Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA Website: www.shareview.co.uk From here, you can securely email Equiniti with your enquiry. Group Company Secretary Chris Taylor Corporate brokers Barclays Bank PLC Citigroup Global Markets Limited Independent auditors Deloitte LLP This report is printed on Arctic Volume paper and board. The paper is Forest Stewardship CouncilR (FSCR) certified from well managed forests and other controlled sources. The paper is Carbon Balanced with World Land Trust, an international conservation charity, which offset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked in that would otherwise be released. These protected forests are then able to continue absorbing carbon from the atmosphere, referred to as REDD (Reduced Emissions from Deforestation and forest Degradation). This is now recognised as one of the most cost-effective and swiftest ways to arrest the rise in atmospheric CO 2 and global warming effects. Additional to the carbon benefits is the flora and fauna this land preserves, including a number of species identified at risk of extinction on the IUCN Red List of Threatened Species. Printed in the UK by Pureprint Group, a CarbonNeutralR company with FSCR certification. Photographer: Mike Abrahams Designed and produced by Conran Design Group. If you have finished with this Annual Report and no longer wish to retain it, please pass it on to other interested readers or dispose of it in your recycled paper waste. Contact us ![]() Tesco PLC Tesco House Shire Park Kestrel Way Welwyn Garden City AL7 1GA www.tescoplc.com Independent auditor’s reasonable Assurance Report to the Members of Tesco PLC on the compliance of the Electronic Format Annual Financial Report with Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R-DTR 4.1.18R Report on compliance with the requirements for iXBRL mark up (‘tagging’) of consolidated financial statements included in the Electronic Format Annual Financial Report. We have undertaken a reasonable assurance engagement on the iXBRL mark up (‘tagging’) of consolidated financial statements for the 53 week period ended 28 February 2026 of Tesco PLC (the “company”) included in the Electronic Format Annual Financial Report prepared by the company. Our assurance conclusion Based on our procedures described in this report, and evidence we have obtained, in our opinion, the consolidated financial statements for the 53 week period ended 28 February 2026 of the company included in the Electronic Format Annual Financial Report, are marked up, in all material respects, in compliance with DTR 4.1.15R-DTR 4.1.18R. Scope of our work Tesco PLC has engaged us to conduct an independent reasonable assurance engagement in accordance with International Standard on Assurance Engagements (UK) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information (“ISAE (UK) 3000”) issued by the Financial Reporting Council, to express an opinion on whether the iXBRL mark up of consolidated financial statements complies in all material respects with DTR 4.1.15R-DTR 4.1.18R based on the evidence we have obtained. Directors’ responsibilities The directors are responsible for preparing the Electronic Format Annual Financial Report in compliance with DTR 4.1.15R-DTR 4.1.18R. This responsibility includes: • The selection and application of appropriate iXBRL tags using judgement where necessary. • Ensuring consistency between digitised information and the consolidated financial statements presented in human-readable format. • The design, implementation, and maintenance of internal control relevant to the application of DTR 4.1.15R- DTR 4.1.18R. Our responsibilities We are responsible for: • Planning and performing procedures to obtain sufficient appropriate evidence in order to express an independent reasonable assurance conclusion on the iXBRL mark up. • Reporting our conclusion in the form of an independent reasonable Assurance Report to the Members. Our independence and competence In conducting our engagement, we complied with the independence requirements of the FRC’s Ethical Standard and the ICAEW Code of Ethics. The ICAEW Code is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. We applied the International Standard on Quality Management (UK) 1 (“ISQM (UK) 1”), issued by the Financial Reporting Council. Accordingly, we maintained a comprehensive system of quality management including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Key procedures performed A reasonable assurance engagement in accordance with ISAE (UK) 3000 involves performing procedures to obtain reasonable assurance about the compliance of the mark up of the consolidated financial statements with the DTR 4.1.15R-DTR 4.1.18R. The nature, timing and extent of procedures selected were based on our professional judgement, including the assessment of the risks of material departures from the requirements set out in DTR 4.1.15R-DTR 4.1.18R, whether due to fraud or error. Our reasonable assurance engagement consisted primarily of: • Obtaining an understanding of the iXBRL mark up process, including internal control over the mark up process relevant to the engagement. • Assessing the D&I of relevant controls over the mark up process. • Reconciling the marked up data with the audited consolidated financial statements of the company dated 15 April 2026. • Evaluating the appropriateness of the company’s mark up of the consolidated financial statements using the iXBRL mark up language. • Evaluating the appropriateness of the company’s use of iXBRL elements selected from a generally accepted taxonomy and the creation of extension elements where no suitable element in the generally accepted taxonomy has been identified. • Evaluating the use of anchoring in relation to the extension elements. In this report, we do not express an audit opinion, review conclusion or any other assurance conclusion on the consolidated financial statements themselves. Our audit opinion on the consolidated financial statements of the company for the 53 week period ended 28 February 2026 is set out in our Independent Auditor’s Report dated 15 April 2026. Use of our report This report is made solely to the company’s members, as a body, in accordance with ISAE (UK) 3000 and our agreed terms of engagement. Our work has been undertaken so that we might state to the company those matters we have agreed to state to them in this report and for no other purpose. Without assuming or accepting any responsibility or liability in respect of this report to any party other than the company and the company’s members, we acknowledge that the company may choose to make this report publicly available for others wishing to have access to it, which does not and will not affect or extend for any purpose or on any basis our responsibilities. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our work, for this report, or for the conclusions we have formed. Richard Muschamp (Senior statutory auditor) For and on behalf of Deloitte LLP Statutory Auditor London, United Kingdom 11 May 2026