Unveiling the rise, chief executive Terry Leahy brushed off suggestions that it had come at the expense of consumers and farmers.

We made good progress on our long term transformation from a domestic to an international retailer

Terry Leahy, Tesco chief executive

"Tesco have grown profits by taking [market] share from other retailers, not from farmers," he told BBC Radio 4's Today programme.

Marks & Spencer is the only other UK retailer to have ever reported a profit of more than �1bn in a single year.

Consumer complaints

The size of the profits prompted a spate of criticism from consumer groups and farmers.

"It's high time Tesco cut their prices more and gave the customers more benefits from their profits," said a spokeswoman for the National Consumer Protection Council.

The National Farmers Union also said that the profits would be hard to understand for many of its members, who have been devastated by the foot-and-mouth crisis.

"We fervently hope Tesco suppliers will also benefit from the success of Tesco, particularly that the benefits are passed onto British farmers," the NFU said.

But Tesco chief executive Terry Leahy was keen to fend off any accusations of ripping off consumers, charges of which the industry was cleared of last year by the UK Competition Commission.

"Our prices are down 11% in real terms over five years. We don't stick prices up when people's backs are turned," said Mr Leahy.

He also insisted that the profits had not been made at the expense of farmers.

"We don't exploit farmers any more than we would exploit any other supplier... it's not good business in the long term," he said.

Tesco.com loss

Growing sales of electrical items such as televisions and DVDs, plus more non-UK stores, helped the retailer report full-year profits of �1.07bn, up 12% from last year.

Total sales for the group were up nearly 12% to �22.8bn.

The record profit came despite its Tesco.com online operation making a loss of �9m on sales of �237m.

The retailer, which employs 240,000 people worldwide, now plans further expansion, with 20,000 jobs to be created this year.

On the international side, it said operations in Hungary and Thailand moved into profit for the first time.

Share price falls

Total international sales grew by 43% to �2.9bn and contributed �74m to group profits, 48% more than last year. Sales in Asia were up 85% to �919m.

"A strong core UK business, non-food, retailing services and our international business have contributed to these strong results," said Terry Leahy, Tesco chief executive.

"We made good progress on our long term transformation from a domestic to an international retailer," he added.

Tesco's results come a day after Sainsbury's, the UK's second biggest grocer, surprised the City by releasing a positive trading update, saying it had seen a 4.8% increase in like-for-like sales in the first three months of the year.

Tesco shares were down 10p at 259.25p in late trading on Tuesday, as the results came in largely in line with expectations.