Profits at Tesco have more than halved in the 26 weeks to 29 August as it seeks to turn the business around by investing in customer service and price cuts.

Underlying profits for the first half of its financial year were £354m, down 55% on the same period last year.

However like for like sales, while still down, are improving – down 1.3% compared with 4.3% this time last year.

Customers were responding well to improvements in its core offer, resulting in a 1.5% growth in transactions and a 1.4% rise in volumes, chief executive Dave Lewis said.

“We have delivered an unprecedented level of change in our business over the last twelve months and it is working. The first half results show sustained improvement across a broad range of key indicators,” he added.

“In the UK, we continue to improve all aspects of our offer for customers, resulting in volume growth which is allowing us to create a virtuous circle of investment.

Our transformation programme in Europe has accelerated growth and reduced operating expenses, and in Asia, we have gained market share in challenging economic conditions.”

Tesco has also closed 53 unprofitable stores in the UK since the start of the year and reduced new store openings.