Tesco has fulfilled City expectations by becoming the first UK retailer to break through the £2 billion profit barrier.
The company has posted underlying pre-tax profits of £2.03bn, up 20.5 per cent on 2004.
Sir Terry Leahy, chief executive, said the group’s overseas expansion and moves into non-food were behind the growth.
Tesco's overall turnover increased 12.4 per cent to £37.1bn, with sales in the UK making up £29.5bn of that figure.
The retailer has also seen its market share grow considerably in the UK, with latest figures from ACNielsen giving it a 30 per cent share of the market.
Sir Terry said: “These results again demonstrate the broad appeal of the Tesco brand.”
However, he said the retailer was expecting a “more normal year” in the UK in 2005, on the back of rising business costs and an unclear consumer outlook.
Despite the impressive results, in early morning trade, shares in Tesco were down 1.18 per cent at 315 pence.
However, a price war with Asda has been blamed for putting pressure on rival food retailers and for squeezing prices paid to farmers.
In an interview on BBC Radio 4’s Today programme Sir Terry described Tesco's deals with suppliers as "tough but fair".
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