Tesco takes £1.2bn hit from US business

British supermarket giant Tesco on Wednesday took a £1.2-billion ($1.8-billion, 1.4-billion-euro) hit from failed US division Fresh & Easy, sparking the first drop in annual profits in almost two decades, and confirmed its exit from the United States. Net profits slumped 95 percent to £124 million in its 2012/2013 financial year, compared with £2.806 billion last time around, Tesco said in a results statement. Revenue edged 1.4 percent higher to £64.83 billion. Earnings dived as Britain's biggest retailer also booked a £804-million writedown on the value of its property portfolio in Britain. In addition, the London-listed supermarket took a £495-million goodwill writedown for its operations in Poland, the Czech Republic and Turkey. Pre-tax profits collapsed 51.5 percent to £1.96 billion in the 52 weeks to February 23, as Tesco was rocked by "deteriorating" economic conditions in Europe and regulatory restrictions in South Korea. Tesco, which has struggled in recent times in its home market Britain and abroad, added that its performance was dented by an investment plan aimed at turning around its domestic business. "The announcements made today are natural consequences of the strategic changes we first began over a year ago and which conclude today," said chief executive Philip Clarke in the statement. He added: "We have set the business on the right track to deliver realistic, sustainable and attractive returns and long-term growth for shareholders. "The consequences are non-cash write-offs relating to the United States, from which we today confirm our decision to exit, and for UK property investments which we will not pursue because of our fundamentally different approach to space." "We have also faced external challenges which have affected our performance, notably in Europe and Korea. "Our focus now is on disciplined and targeted investment in those markets with significant growth potential and the opportunity to deliver strong returns." Tesco had already signalled its intention to exit the US in November. The company said on Wednesday that it would not retain any part of Fresh & Easy but has not yet finalised its disposal plans. However, the group revealed that its US exit plans were "well-advanced", with interest from buyers for all or parts of the business. In response to the gloomy numbers, Tesco's share price sank 3.92 percent to close at 369.75 pence on London's FTSE index of top companies. "The bill for the UK turnaround, US exit, goodwill impairment in Poland, the Czech Republic and Turkey, and the unwelcome surprise of the property portfolio writedown all provided significant headwinds and have eaten into profits," said equities analyst Richard Hunter at Hargreaves Lansdown stockbrokers. "Meanwhile, the strategic return to a UK focus is progressing but will be a slow process before the company can hope to recapture its former glories."