Tesco has recorded a 10.1% increase in underlying pre-tax profit to £3.4bn in its full year results, in line with City estimates.

For the year to February 27, group sales excluding petrol were up 8.5%, or 6.8% including petrol at £62.5bn. Net debt is reduced to £7.9bn, ahead of plan.

In the UK, sales were up 5.5% excluding petrol to £42.2bn. Profit increased 6.7% to £2.41bn. The grocer said its performance was better in the second half. Excluding petrol and adjusting for VAT, like-for-like sales were 3.7% in the first half and 2.7% in the second half, driven by strong volume.

Tesco said it has continued to invest in availability, service, range and quality. It said its Double Points offer on Clubcard has led to 18% more households redeeming vouchers than a year ago. It is also adding more partner deals to Clubcard and technology innovations such as an iPhone app.

Chief executive Sir Terry Leahy said:  “By remaining focused on our strategy Tesco has weathered the economic storm well. Across the group, we have successfully adapted our cost structures and ranges to help customers save money when they’ve needed to and treat themselves when they’ve wanted to. Our positions in international markets and non-food meant we faced strong headwinds when the downturn came but it will be these parts of our business which will grow fastest as the recovery strengthens.

“Across all parts of our strategy - UK, International, Non-food, Services – our business is now stronger than it was before the recession. With leaner operations, improved market shares, strategic acquisitions performing well and a strong organic development programme, we’re well placed for sustained profitable growth. And with the balance sheet strengthening, we have strong foundations in place for improving returns on capital going forward.”

In non-food, sales rose 6.2% to £13.1bn, with £9bn in the UK and £4.1bn in international. It said it reported particularly strong growth in categories such as electricals, entertainment, toys and clothing.

In electricals, sales have doubled in the last four years, its market share in games has doubled in the last year, toy sales are up 25% this year, and clothing sales grew by 7.3%, including positive like-for-like growth, to reach £1bn in sales for the first time, buoyed by a 15% increase in childrenswear and the launch of clothing online.

In Asia, profit is up 24% to £440m, and in Europe, profit is £474m. In its Fresh & Easy business in the US, sales are up 72% to £354m but it is still not yet making a profit, down £165m. The retailers said increased customer awareness and improvements in-store helped drive positive like-for-like sales growth in the second half of the year. It said that while it does not expect losses to be much lower in 2010/11, the retailer believes it has peaked.

Tesco will create a further 16,000 jobs this year, including 9,000 in the UK.