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Tesco Overstated Profit Guidance By GBP263 Million, Chairman To Depart
[October 23, 2014]

Tesco Overstated Profit Guidance By GBP263 Million, Chairman To Depart


(Alliance News Via Acquire Media NewsEdge) LONDON (Alliance News) - Tesco PLC Thursday said it overstated its first-half profit expectations by GBP263 million, higher than the GBP250 million it had revealed last month, and said Chairman Richard Broadbent will step down once the business is "back on track".



The news came as the UK supermarket giant reported a first-half trading profit of just GBP937 million, down 41% on the year before.

Britain's largest supermarket chain said the Deloitte investigation into its overstatement of expected half year profit has been concluded, with the "impact" confirmed as GBP263 million - of which GBP118 million related to first-half trading profit, and the rest to prior years.


"The GBP263 million refers to the accounting issue which refers to the timing of commercial income," Chief Executive Dave Lewis told journalists Thursday Lewis said the Deloitte investigation determined exactly how much the overstatement was. However the UK Financial Conduct Authority investigation still underway will establish why and how it happened in the beginning.

"A new management team is in place to address the root causes of the mis-statement and to develop and implement the actions that will build the company's future," said Broadbent in a statement.

"Once this transition is complete and business plans are in place, it will mark the beginning of a new phase for the company, and I will begin now to prepare the ground to ensure an orderly process for my own succession at that time," Broadbent added.

Broadbent said his decision to step down reflects the "important principle of accountability on behalf of the board".

Tesco reported a trading profit of just GBP937 million for the 26 weeks to August 23, down 41% on the GBP1.59 billion trading profit it reported a year earlier.

Its underlying pretax profit came in at GBP783 million, down from GBP1.47 billion the prior year.

Its statutory pretax profit was GBP112 million, down a huge 92% on the prior year's GBP1.39 billion pretax profit it reported a year earlier.

Tesco said its interim profit was hit by a weakening UK grocery market, investments it is making in its customer offer, and challenging trading conditions overseas. Group trading margin was 3.04%, down 189 basis points year-on-year.

Group sales, including VAT, fell by 4.4% to GBP34.01 billion from GBP35.58 billion the prior year. At constant exchange rates, sales were down 2% including petrol, and by 1.9% excluding.

"Our relative performance was not competitive enough in the first half of the year, and the business continues to face a softening market and tough trading conditions, particularly in the UK. In this challenging environment, we will continue to invest for customers," Tesco said.

Tesco declared an interim dividend of 1.16 pence, slashed 75% from a dividend of 4.63p the prior year.

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