Supermarket group Tesco has become the first UK retailer to post annual profits in excess of £2 billion.

Tesco, the UK's largest supermarket chain posted underlying pre-tax profits of £2.03bn, an increase of 20.5 per cent compared to the previous year.

The company reported an overall turnover of £37.1bn - an increase of 12.4 per cent on 2004.

International sales increased by 18.7 per cent to £7.6bn - while UK sales grew by 11.9 per cent to £29.5bn for the year up to February 26.

A rapid move into non-food areas has contributed to Tesco's success. Non-food sales in the UK were up 17 per cent to £6bn, including growth in clothing sales by 28 per cent.

Tesco Personal Finance delivered a £202m profit, with Tesco's £101m share of the joint venture up 26.5 per cent.

There was also good news for Tesco Telecom as customer numbers reached 1 million.

Meanwhile its online business has continued to grow. Tesco.com saw sales grow by 24.1 per cent to £719m, with profits up 51.8 per cent to £36m.

Terry Leahy, Chief Executive, said: "These results again demonstrate the broad appeal of the Tesco brand.

"They also show that our new growth businesses - in international, in non-food and in services - have contributed as much profit as the entire business was making in 1997."

Tesco operates more than 2,300 stores in 13 countries including Japan, South Korea, Taiwan, Turkey, Hungary, Slovakia and Poland.

The company said it plans to create 25,000 jobs worldwide in 2005, including about 11,000 in the UK.