SUPERMARKET giant Tesco set a new milestone for UK business today when it became the country's first retailer to post annual profits of more than £2 billion.

Underlying pre-tax profits rose 20.5 per cent to £2.03 billion on worldwide sales of £37.1 billion - up 12.4 per cent. It is just four years since the Hertfordshire-based group broke through the £1 billion barrier.

A total of £29.5 billion was rung up at the tills of its UK supermarkets, increasing its share of the UK grocery market to 29.5 percent. The 81-year-old company is reckoned to take £1 in every £3 spent in British supermarkets.

Tesco, which employs 3,400 people in and around south Hampshire at 14 stores and a supply depot, was celebrating success outside of its core food and shopping divisions.

Tesco Personal Finance delivered a £202m profit, of which Tesco takes £101m, up 26.5 per cent. Online, Tesco.com sales were up 24.1 per cent to £719m with profits of £36m and Tesco Telecom customers reached 1 million.

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."

Britain's largest supermarket chain, Tesco now sells everything from clothes, paint, and DVDs to washing machines and insurance.

It has also been opening outlets in places such as China and Hungary as price competition and planning restrictions at home limit growth. Tesco has been opening stores outside the UK since 1993 and now operates more hypermarkets than any other retailer in Hungary, Poland, Slovakia and Thailand.

Tesco said it planned to create 25,000 jobs worldwide this year, including about 11,000 in the UK.