Tesco dives into red on accounting scandal
Supermarket giant Tesco revealed yesterday that it fell into an annual net loss of £40 million due to a costly accounting scandal at Britain’s biggest retailer.
The after-tax loss, equivalent to $50 million or 47 million euros, was skewed by a £235-million hit in costs arising from the three-year-old scandal. The company’s performance contrasted with a net profit of £138 million in the previous financial year, Tesco added in a statement.
However, operating or underlying profits before one-off items rallied almost a third to £1.28 billion in its 2016/2017 financial year, which ran until the end of February. That beat market expectations. And annual sales grew for the first time in seven years by 3.7 percent to £55.9 billion, despite fierce domestic competition. The news comes two weeks after Tesco agreed to a fine and compensation costs in Serious Fraud Office deal, under which the firm will not face prosecution. Charges have previously been brought against three former Tesco executives, who will face trial over alleged fraud and false accounting.
Tesco also said yesterday that it expected its vast £3.7-billion takeover of British wholesaling giant Booker to be submitted for shareholder approval by either late 2017 or early 2018.
“We are confident that we can build on this strong performance in the year ahead,” said chief executive Dave Lewis in the statement. “On top of this, our proposed merger with Booker will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing ‘out of home’ food market.”
Share price slides
The results were badly received on the London stock market. Shares fell 3.14 percent to 189.45 pence in mid-morning deals, topping the fallers’ board on the FTSE 100 index, which was 0.25 percent lower. “Tesco’s historic troubles have left a lingering mark on its current results,” noted David Alexander, retail analyst at GlobalData. “Past indiscretions aside, there is plenty for executives to crow about in today’s numbers.”
Tesco is the world’s third-biggest supermarket chain after France’s Carrefour and global leader WalMart. The group had slumped into an enormous record loss of £5.7 billion in 2014/2015 after a vast property writedown and challenging home trade. However, it rebounded into slender profit last year.
Tesco had been accused of overstating profits by £326 million between February and September 2014 in an accounting error. Following the incident, the company appointed outsider and former Unilever executive Lewis in July 2014 to replace long-standing chief executive Philip Clarke and oversee a drastic restructuring of the group. —AFP