Scandal puts Tesco in the red again
Britain’s biggest retailer, Tesco, revealed on Wednesday that it fell into an annual net loss of £40m because of a costly accounting scandal.
The after-tax loss was skewed by a £235m hit in costs arising from the three-year-old scandal. The company’s performance contrasted with a net profit of £138m in the previous financial year, Tesco said.
However, operating profit before one-off items rallied almost a third to £1.28bn in the year to end-February, beating market expectations.
Annual sales grew for the first time in seven years — 3.7% to £55.9bn — despite fierce domestic competition.
The news comes two weeks after Tesco agreed to a fine and compensation costs in a Serious Fraud Office deal, under which the firm will not face prosecution. Charges have already been brought against three former Tesco executives, who will face trial over alleged fraud and false accounting.
PAST INDISCRETIONS ASIDE, THERE IS PLENTY FOR EXECUTIVES TO CROW ABOUT IN TODAY’S NUMBERS
Tesco has been accused of overstating profits by £326m between February and September 2014 in an accounting error.
Tesco also said on Wednesday that it expected its vast £3.7bn takeover of British wholesaler Booker to be submitted for shareholder approval by late 2017 or early 2018.
“We are confident that we can build on this strong performance in the year ahead,” said CEO Dave Lewis.
“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,” he said.
The results were badly received on the London stock market. Tesco shares fell 3.14% to 189.45p in mid-morning deals, topping the fallers’ board on the FTSE 100 index, which was 0.25% lower.
“Tesco’s historic troubles have left a lingering mark on its current results,” noted David Alexander, a retail analyst at GlobalData. “Past indiscretions aside, there is plenty for executives to crow about in today’s numbers.”
The group slumped into an enormous loss of £5.7bn in 2014-15 after a vast property write-down and amid challenging home trade. However, it rebounded into slender profit in 2016.