Tesco has reported a 55% slide in half-year profits as boss Dave Lewis continues his attempts to turn around the business.

The Tesco board was grilled at its AGM

Like-for-likes in the second quarter declined 1.1%, an improvement on a 1.5% fall in the first quarter. Here are the analysts’ reactions to the results:

Tesco’s interim results, in our view, are disappointing on many levels: across the regions, P&L and balance sheet. If, on our estimates, UK stores are loss-making at the operating level in H1 and there are significantly fewer buyers of grocery retail outlets, then we should expect more closures across the 3,500 UK Tesco stores and, more importantly, higher impairments and more profit downgrades.

“In addition, any UK margin recovery is now, in our view, reset at a lower starting point, indicating any recovery could take a lot longer and cost a lot more to execute in store changes and new IT systems.” Mike Dennis, analyst at Cantor Fitzgerald

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“There were encouraging signs on volumes at Tesco, indicating this is a volume-led recovery.

“These figures have firmly cemented the split in the UK mid-market into two camps – Tesco/Sainsbury’s showing signs of recovery and Asda/Morrisons being the laggards. Considering Tesco was in the throes of the accounting scandal just 12 months ago, being in the former camp is an achievement in itself.” David Gray, Planet Retail

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“Tesco’s interims are predictably awful, with operating profits 55% down at £354m, and there is no interim dividend. But the big interest was in what Tesco said about the balance sheet and its asset disposal programme.

“Somewhat surprisingly, Tesco has said the portfolio review is now concluded (with the wretched Dunnhumby retained after all) and that further reduction in the £8.6bn debt mountain (excluding the Tesco Bank) can be achieved by driving cash out of the business. That seems to firmly knock a potential rights issue on its head, which would have been embarrassing at this stage of the proceedings, although Tesco had always played down the chances of that, to be fair.” Nick Bubb, independent analyst

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“Tesco’s performance is looking more credible.

“Dave Lewis set out three strategic priorities around this time last year and, to his credit, seems to be making progress in differing degrees against all of these. The first focused on regaining competitiveness in the UK, mainly by reducing SKU count and reducing prices, providing the customer with a clearer, edited choice. The increase in volumes and transactions shows progress.

“The second measure – strengthening the balance sheet – has been more difficult. The sale of data analytics arm Dunnhumby has been scrapped – the hoped-for sale price of £2bn appears to have proved unachievable – but the retailer has reached an agreement to sell its Korean Homeplus business, which will reduce debt by £4.2bn.  It has also replaced its UK defined benefit pension scheme and reduced capital expenditure by 61% in other moves.

“Its third strategic measure concentrated on rebuilding trust and transparency, something that can be hard to measure, but in a retailer that needs to win back disillusioned customers, it is a key priority.

“Tesco claims that investments in staff on the shop floor, more stable pricing structures and a focus on building supplier relationships have all contributed to the rising transactions and volumes.” Sophie McCarthy, Conlumino

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“Tesco looks like it is ready to move from intensive care into the recovery ward. Let’s be clear, Tesco isn’t cured but it is definitely over the worst.

“It seems extraordinary that only 12 months after a major accounting scandal Tesco is one of the stronger of the big four and testimony to Dave Lewis’ leadership.

“With better volumes and more transactions, he is in a much stronger position to tackle the problem areas of cost and margin in order to maintain bottom-line profit.” Phil Dorrell, Retail Remedy retail partner