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UK retailer Tesco has announced a drop in profit for the half year to 25 August, despite a slight increase in group sales.

Group sales rose by 1.4 per cent to £36bn (€45bn), according to the company, but group trading profit dropped by 10.5 per cent to £1.6bn (€2bn).

UK profits were down by 12.4 per cent to £1.1bn (€1.4bn), while international profits fell by some 17.1 per cent to £0.4bn (€0.5bn).

The group attributed the performance to the challenging trading environment, with customers facing financial pressures and businesses being burdened by higher costs.

Chief executive Philip Clarke commented: 'The external environment continues to present challenges all over the world. Whilst our businesses in Asia and Europe have continued to do a great job for customers, our financial performance there reflects the tough economic backdrop and particularly the regulatory changes in South Korea.'

As for the US, the group's Fresh & Easy banner has reportedly delivered a small reduction in losses, which now stand at £74m (€92.5m).

Clarke said that Tesco would continue to implement its strategy of reducing the group's retail space growth in the UK and other markets, while focusing on the performance of its existing stores and investing in online shopping.