Tesco saw its operating profits rise by 60% for the first six months of this year to reach £596m, thanks in part to lower prices, repeat shoppers and increased own-label sales.

The supermarket giant, which is being turned around by relatively new boss Dave Lewis, saw a full year of increased volumes last year – for the first time in five years.

This trend has continued for the first six months of this year, with all regions recording an increase in sales and volumes. Volumes in the UK were up 2.1%, while international volumes increased 3.3%. All of which is boosting profits.

Like-for-like sales in Ireland grew 0.2%, Tesco said top-line growth in value terms was reduced due to lower prices.

It attributed the increase in volumes to fresh food.

Once exceptional items are included, operating profits rose 38.4% to £515m. Sales increased 3.3% to £24.4bn. Net debt decreased 49.3% year-on-year to £4.4bn, which was down 14.8% on year-end figures.

Cost reductions

Tesco is aiming to return to its market-leading 3.5% to 4% operating margins before 2020.

To get there, it is targeting a further £1.5bn in cost reductions which will include “a more efficient distribution system and a simpler store operating model”.

The group said it “outperformed the market in volume growth in all food categories” and it attributed an improved fresh produce and meat brands “delivered at market leading prices” for some of the volume boost.

Tesco said prices were now more than 6% lower than two years ago for a typical customer basket.

It had also increased own label space by 10% in its larger stores.

During the period it sold many businesses including its Giraffe restaurant chain.

The group said it is on track to deliver £1.2bn operating profit before exceptionals for the full year. Shares rose almost 9% in early trading in London reaching at £2.05.