Tesco to give investors back cash in £235m accounting scandal payout

● Supermarket giant reaches agreement with authorities over market abuse

Supermarket giant Tesco will take a £235 million hit after reaching an agreement with authorities over its accounting scandal that will see it make a hefty compensation payout to investors.

The UK’S biggest supermarket said its subsidiary – Tesco Stores – had entered a Deferred Prosecution Agreement (DPA) with the Serious Fraud Office (SFO), which couldseeitescapeprosecution but pay a £129m fine and costs.

The agreement, which will face court approval on 10 April, came as Britain’s financial watchdog concluded that Tesco had committed market abuse when it inflated profits by £263m in a trading update on 29 August 2014.

In an unprecedented move, the Financial Conduct Authority (FCA) said the supermarket chain would pay £85m in compensation to investors who bought shares and bonds on – or after – 29 August and had held stock when the financial statement was corrected on 22 September 2014.

Tesco suspended eight directors, and the SFO charged three former executives with fraud, after the black hole was discovered in the firm’s accounts in 2014.

The scale of the problem was later revised from £263m to £326m, helping drag the Big Four grocer to a £6.4 billion loss in 2015, one of the largest in corporate history.

Dave Lewis, Tesco chief executive, said the firm was doing everything it could to “restore trust” after seeing the brand suffer following the accounting scandal.

He said: “What happened was a huge source of regret to all of us at Tesco, but we are a different business now.

“The decisions over the last years are evident to all and the job now is to keep this momentum.

“I am pleased with how our colleagues have responded and that has allowed us to rebuild the business since 2014.

“The brand was affected by the announcement back in 2014, that is clear.

“I think everyone will recognise that there is nothing here to proud of, but I am proud that we faced into it.”

If the DPA is approved by the Crown Court next month, Tesco will join blue-chip firms Rolls Royce and BAE Systems, which both reached multimillion-pound settlements with the SFO following high-profile investigations.

Focusing on compensation, the FCA said Tesco’s share price was inflated when the firm reported inaccurate financial results to the market in 2014, meaning some investors were forced to pay a higher price.