London, Oct 6 - Tesco, the world's third-biggest retailer, posted a better-than-expected 8.6 percent rise in first-half profit and said it was well positioned for a recovery in its markets.
"Progress across the group, combined with our strong financial position funding continued investment in new space and new businesses, means we're well-placed for the global recovery," chief executive Terry Leahy said on Tuesday.
The British supermarket group, which runs over 4,300 shops in 14 countries, made a profit before tax and one-off items of 1.57 billion pounds ($2.50 billion) in the six months to Aug. 29, on a 9.3 percent rise in sales to 27.8 billion pounds.
Analysts' average forecast in a Reuters poll was for a profit of 1.48 billion pounds and sales of 28.1 billion.
The interim dividend was raised 9 percent to 3.89 pence.
Profit was held back by higher interest payments after Tesco raised debt last year to pay for an acquisition in South Korea and to buy out a partner in a financial joint venture.
Second-quarter sales in Tesco's key British market -- around two thirds of the total -- rose 3.1 percent for stores open at least a year, excluding fuel and VAT sales tax.
That was down from 4.3 percent in the first quarter, due to lower food price inflation and below a forecast for 3.4 percent.
Tesco has been lagging its main rivals in Britain due, in part, to its exposure to non-food products, which have been hit harder than groceries in the recession. J Sainsbury, Britain's third-biggest grocer, is expected to post a 5.6 percent rise in underlying sales on Wednesday.
The firm said it was on-track to deliver 8 million square feet of new space this year, with 75 percent outside Britain.
It also said it was on course to cut net debt to 8.5 billion pounds by its financial year-end, adding further reductions were planned in 2010-11.
Tesco shares have underperformed the DJ Stoxx European Retail Index by 4 percent this year. They trade at about 13.4 times forecast earnings, below bigger rival Carrefour on 14.9 and world number one Wal-Mart on 13.8.
Tesco's shares closed at 391.4 pence on Monday, valuing the firm at 31 billion pounds.