Murphys law dictates that machinery fails unless defensive design prevents it. namesake ken murphy has made an appropriately wary start at tesco. the new chief executive of the uks largest supermarket chain is offering no hostages to fortune, beyond a healthy 21 per cent dividend increase. brokers clamouring for higher distributions may be disappointed.

Tesco is coping comfortably with the pandemic, as half-year results demonstrated. the business spent most of the past decade groping to recover its grocering mojo via price cuts and service improvements. the threat from german discounters aldi and lidl has not gone away. a sharp acceleration in home deliveries creates a second counterweight to profits growth.

This explains why mr murphy made no commitments to steeper payouts and remained resolutely vague about the exact profitability of tescos online uk sales. these jumped impressively from 9 to 16 per cent of the uk total as customers shied away from store visits and infection risks.

Three lex charts showing: stocking up, shares down, tesco share price (rebased to the start of mar 2020), and tesco foodsales growth (%) costs of covid, tescos extra overheads (m) booming grocery orders, uk online grocery sales, actual and forecasts (bn)

It is wise to assume a portion of that increase will be permanent, justifying investment in mini-depots within tesco outlets. but even with growing economies of scale, margins will be much lower than for in-store sales.

Operating profits in the core uk and irish business rose 6.4 per cent to 1.13bn, beating consensus. group operating profits fell 15.6 per cent to just over 1bn, mainly because of a bad debt provision at tesco bank.

That tagalong lender betrays tescos conglomerate character during its noughties imperial over-reach. the group is selling thai and malaysian businesses, another legacy of those times.

The price should cover a 5bn payback to shareholders and a 2.5bn pension fund injection. investors fears of a failed sale are one reason tescos shares are down 17 per cent since mid-february, more than double the drop for rivals.

Prospective free cash flow yield of 11 per cent per share in 2022 makes the stock look cheap. sadly, a step change in online deliveries is positive for amazon but negative for tesco. cannibalising an old business is sometimes the only way to create a new one.

Sign up to the city bulletin newsletter for the latest company news. every morning our lombard writer cat rutter pooley covers the biggest business stories and delivers them straight to your inbox