Tesco suspends execs and call in Deloitte over profits overstatement
Huge overstatement sees execs suspended, including UK FD, and Deloitte called in to investigate
DELOITTE has been called in to investigate troubled supermarket group, Tesco, after it admitted it had overstated its profits by £250m.
Britain’s largest grocer told the stock market this morning that it had immediately suspended four senior executives, reportedly including UK finance director Carl Rogberg, and its managing director, while a probe is led into an overstatement that has seen its shares plunge by 11%.
Deloitte are now set to join forces with Tesco’s legal adviser’s Freshfields to investigate an “overstatement of its expected profit for the half year, principally due to the accelerated recognition of commercial income and delayed accrual of costs.” Tesco is audited by PwC.
Just three weeks ago, on 29 August, Tesco issued a warning to investors that its profits would be in the region of £1.1bn for the six months to 23 August, dramatically down from £1.6bn the previous year.
Now news of the overstatement means Tesco’s first-half profit will be even lower at some £850m.
The overstatement was unearthed as Tesco was on the cusp of publishing its first-half results, which have now been delayed.
It had originally planned to publish them on 1 October, but they have now been pushed back to 23 October.
Tesco shares have hit an 11-year low in this morning’s trading, and have plunged some 40% in the last year.
2014 has been a rocky year for the beleaguered supermarket chain, with previous chief executive Philip Clarke leaving in July when his doomed attempts to turnaround Tesco’s fortunes failed.
That same month it employed ex-Marks & Spencer FD Alan Stewart to take on the finance director’s role, but he is not scheduled to start until December. Group FD Laurie Mcilwee handed in his notice and left the board in April but has been acting in a consultancy role until Stewart officially takes up the reins.
In August it announced that its half-year dividend would be cut by 75% and full-year profits would be in the region of £2.4bn to £2.5bn, less than its previous estimate of £2.8bn, and already £500,000 down on last year’s £3.3bn reported profits.