European markets close higher
The day’s big story in the UK of course has been Tesco, and after its latest update its shares have dropped 6.5% or 12p to 171p, writes Nick Fletcher. That means around £972m has been wiped off the supermarket’s value today, as investors took fright at a bigger black hole than previously reported and a certain lack of strategy going forward. As a reminder, Tesco was trading at 330p at the start of the year.
Overall though an opening rise on Wall Street after good results from the likes of Caterpillar and 3M helped lift European markets out of the doldrums. Poor figures from, yes, Tesco, as well as Unilever and Michelin held European markets (especially the UK0 back but the US bounce meant they still finished in positive territory. The final scores showed:
- The FTSE 100 finished 19.42 points or 0.3% higher at 6419.15
- Germany’s Dax added 1.2% to 9047.31
- France’s Cac closed up 1.28% at 4157.68
- Italy’s FTSE MIB rose 0.88% to 19, 434.98
- Spain’s Ibex ended 0.82% better at 10,333.7
On Wall Street, the Dow Jones Industrial Average is currently a hefty 246 points or 1.49% higher, more evidence if it were needed of the current volatile state of the markets.
And with that, it’s time to close up for the evening. Thanks for all your comments and we’ll be back tomorrow.
Updated
More bad news for Tesco (if such a thing has any impact any more).
Moody’s has downgraded its rating on the supermarket’s long term ratings from Baa2 to Baa3. Sven Reinke, a Moody’s vice president, said:
We have downgraded Tesco’s ratings because of the materially reduced trading profit for the first half of fiscal 2015 that is affected by the rapid structural changes in the UK retail grocery market as well as the ongoing uncertainties related to the investigation by the FCA into Tesco’s accounting irregularities.
Even if the FCA concludes its investigation without material negative financial implications, Tesco faces huge operational challenges which continue to put its investment grade rating at risk.
Updated
Here’s City analyst Louise Cooper explaining how Tesco’s finances have reached the ‘worst point’ in its history
Mid-afternoon catch-up
Time for another catch-up:
Tesco remains under pressure after announcing a 92% tumble in pre-tax profits this morning, a 4.6% drop in sales in its core UK market, and a wider-than-expected black hole in previous results (see earlier summary for details).
Archie Norman has now emerged as the front-runner to replace outgoing chairman Sir Richard Broadbent, with both William Hill and Paddy Power. Not clear if the former ASDA chief, and MP for Tunbridge Wells, is up for the challenge, though.
Analysts are calling for Tesco chief Dave Lewis to outline a new strategic direction for the company.
Jon Copestake, Retail Analyst at The Economist Intelligence Unit, warned:
If Dave Lewis wasn’t considering radical action when he began in his role as CEO then he certainly will be now.
And David McCarthy of HSBC warned that turning Tesco around is a huge challenge:
Tesco’s problems can be summed up as Tesco having lost its emotional connection with the consumer.
This needs rebuilding by Tesco becoming the shopper champion and by behaving as a market leader. This will take time and money.
What the analysts say
Tesco has admitted that it will continue to pay former CEO Phil Clarke a salary until next January, even though these profit over-statements took place on his watch.
Dave Lewis has dampened speculation that he might raise cash from shareholders, saying a rights issue is not being planned.
Lewis also told reporters that Tesco is close to selling two of its corporate jets, and revealed that he has swapped his limo for a train ticket.
Shares in Tesco are currently down more than 7%, wiping almost £1bn off its market capitalisation. Rivals have also been hit (Morrisons has lost 3.6%, and Sainsbury’s are down 2.8%).
Duncan Swift, a partner at Moore Stephens LLP, says that Tesco’s troubles shows how supermarkets have become so centred on forcing discounts and payments from their own suppliers:
You would think the amount of price reductions that a supermarket can get through supplier contributions is going to be nothing like what we as consumers spend at the tills and relatively you are right.
But in profit terms, at the margin, it’s 15 times more attractive for a supermarket to get an extra £1 of supplier contribution than it is to encourage the likes of you and I to spend an extra £1 at the till.
Another piece of OK-ish economic news from Europe -- consumer confidence in the euro area was flat in October, having fallen for the previous four months.
Tesco’s rivals insist that their own accounts are fully accurate, reports Sky News’s Naomi Kerbel.
Updated
How Tesco extracted bonuses from its suppliers
The £263m black hole that build up Tesco’s profits has its roots in the various payments that the company would extract from its own suppliers.
They include ‘incentives’ to give their products a good show on the shelves, or ‘bonuses’ when Tesco managed to shift enough of a suppliers’ goods.
Duncan Swift, a partner at Moore Stephens LLP, has written an explanation on how this ‘commercial income’ is now vital to supermarkets:
“What shareholders and customers of the Top 10 supermarkets do not realise is the extent of the buyer bonus culture that underpins demands for suppliers to pay commercial income.
“This bonus culture is comparable to the bank bonus culture, with supermarket buyers, operating in trading rooms similar to those operated by the banks and investment companies.
“The main part of a supermarket buyer’s annual bonus is based on the total amount of supplier-paid commercial income they have extracted from the suppliers in the food category (e.g. eggs, cheese, fresh produce, beers, wines and spirits etc) for which they have responsibility.
“Tesco’s overstatements of profit means their buyer bonuses will have been similarly overstated and already paid over a number of years.
“As with the banks, someone must ultimately pay for these bonuses and although on the face of it the supplier seems to be footing the bill, we must ask how much of this cost the consumer pays for at the checkout.
“It is also important to consider the impact on the supplier’s business in as much as what pressure that business is under to be able to afford to pay these supplier contributions. Also, the impact this has on the treatment of supplier staff and the quality of our food that we are paying for at the checkout.”
Moore Stephens calculate these financial contributions are worth several billions of pounds per year to the top ten supermarkets.
As Swift explains:
“You would think the amount of price reductions that a supermarket can get through supplier contributions is going to be nothing like what we as consumers spend at the tills and relatively you are right. But in profit terms, at the margin, it’s 15 times more attractive for a supermarket to get an extra £1 of supplier contribution than it is to encourage the likes of you and I to spend an extra £1 at the till.
“It is very easy for a supermarket to levy these supplier contributions directly against what they owe in debt to the supplier for goods already supplied.”
An analysis by Moore Stephens found that the top ten supermarkets owe suppliers approximately £15bn in unpaid bills at any one time. That’s a big pool of ‘supplier debt’ to dip into.
Dow Jones jumps 200 points in early trading
Shares are rallying on Wall Street in early trading, pushing the Dow Jones index up over 200 points, or 1.2%.
Caterpillar is leading the way; shares are up 3.5% after reporting solid results and raising its profit forecasts. It said there was a “reasonable” chance that world economic growth would pick up, despite the Ukraine crisis, conflicts in the Middle East and the slower growth in China.
Gloomier news from the eurozone this lunchtime. The Bank of Italy has predicted that the country’s economy probably contracted slightly in the last three months.
That would put Italy officially back into recession.
The recovery in Britain’s manufacturing sector appears to have hit a road bump last month.
More firms have seen falling export orders than rising ones, according to the latest survey by the CBI.
And looking at the next quarter, 29% of manufacturers expect total new orders to increase, and 9% expect them to fall. That gives a balance of +20%, the lowest since October 2013.
Full story: CBI warns export demand is slowing in latest sign of faltering UK recovery
Some lunchtime light relief -- City AM are running an online quiz on Tesco’s woes. Complete with some groan-worthy puns.
I scored 4 out of 6.
US jobless claims data released
Over to the US briefly... and the number of Americans filing new claims for unemployment benefit has risen, by 17,000 last week to 283,000.
But the underlying trend looks better -- the average initial claims figure over the last four weeks has dropped to its lowest in 14 years.
The continuing claims figure (people receiving benefit for at least the second month running) also hit a 14-year low, of 2.35m.
Dave Lewis has told reporters that he has ditched his corporate limo, and is using the train to travel to London from Tesco’s HQ in Cheshunt, Hertfordshire.
We’re collecting expect reaction to Tesco’s results here:
Tesco results: what the analysts say
Tesco’s shares haven’t recovered their early losses -- still down around 6%. And the Evening Standard is blaming Dave Lewis, saying:
The City hurled brickbats at new Tesco boss Dave Lewis today after he refused to reveal his plans to tackle the most devastating crisis in the supermarket’s history and return it to growth....
Unforgiving place, the City. Lewis only started last month, and immediately found that the challenge was far worse than anyone imagined.
Updated
Archie Norman is favourite to become Tesco's next chairman
Bookmakers have installed Archie Norman, the retail veteran who rescued Asda from collapse, as the front-runner to become Tesco’s next chairman.
William Hill reckons that the former Conservative MP is the best choice to rescue Tesco (as my colleague Nils Pratley suggested early this morning).
Spokesman Graham Sharpe says:
‘Tesco’s catch-phrase is ‘every little helps’, and it seems they need every bit of help they can get at the moment’
Here’s William Hills odds:
- 3/1 Archie Norman
- 4/1 Sir Ian Cheshire
- 5/1 John Gildersleeve
- 5/1 Allan Leighton
- 7/1 Mike Ashley
- 9/1 David Tyler
- 9/1 Richard Cousins
- 10/1 Moya Greene
- 10/1 Adam Crozier
- 14/1 Robert Swannell
- 25/1 Glenn Murphy
Paddy Power have also installed Archie Norman as the favourite (on less generous odds):
- 5/4 Archie Norman
- 5/2 John Gildersleeve
- 5/1 Allan Leighton
- 12/1 Terry Leahy
- 12/1 Charlie Mayfield
- 16/1 Mark Price
Tesco close to buying two jets
Just in... Tesco is hoping to sell two of its corporate jets (!) within days.
Buy one, get one free?
Updated
Tesco will continue to pay former CEO Philip Clarke a salary until next January, my colleague Zoe Wood reports.
As reported at 7.34am, Tesco has frozen the payoffs due to Clarke, and former finance director Laurie McIlwee.
The FCA have told Tesco’s chief Dave Lewis not to give details about how it overstated its profits by £263m, according to Channel 4’s Paul Mason.
It’s not been a bad morning for European economic data.
Manufacturing output across the eurozone grew at a faster rate this morning, and German factories led the way.
Germany’s manufacturing PMI jumped to 51.8 from 49.9 in September, which shows a return to growth.
And Spain’s unemployment rate has dropped to its lowest level since the third quarter of 2011.
Bloomberg has a good take:
Euro-Area Manufacturing Grows as Risk of Recession Eases
It may only be October, but that hasn’t stopped UK retailer Selfridges launching its Christmas decorations display this morning.
And this year, they’ve created an eye-catching montage of scenes based around fairytales. Quite impressive too.
As Lisa Bachelor reports:
A glittering golden spider’s web fills the window of Selfridges in Oxford street,London. Hanging from its skeins are shoes with impossibly high heels, jewel-encrusted bags and a pair of designer sunglasses. At the base is a spinning wheel, its drive wheel slowing turning under the warm glow of the lights. Next to it sits a mannequin in a Simone Rocha dress, her legs crossed and a hand placed nonchalantly on one hip. Everything is spray-painted gold. This is Sleeping Beauty, Selfridges style.
The window was one of the store’s 25, unveiled late on Wednesday night by workmen dressed in high-visibility jackets as they peeled black sheets of vinyl to reveal the eye-catching displays.
More words and photos here: Selfridges’ Christmas window wonderland conjures magic of fairytales
Updated
Here’s our news story on the 0.3% month-on-month drop in UK retail sales in September:
Retail sales fell more than expected last month as shoppers put off buying new winter clothes amid the driest September on record.
Sales fell 0.3% over the month, driven down by falling sales of textiles, clothing and footwear according to the Office for National Statistics (ONS) as people shunned winter coats and jumpers to bask in the last of the warmer weather. Economists had forecast a smaller drop of 0.1%.
“Feedback from retailers suggested the fall was a result of unseasonably warm weather meaning consumers have delayed purchases of autumn and winter clothing,” the ONS said.
Alan Clarke, economist at Scotiabank, said the drop in sales was a sign that things were cooling off, but nothing sinister.
“There is probably a little more cooling off to come, but it is just that – cooling off not an arctic chill.”
More here: Warm autumn depresses UK retail sales
Foxton shares slide 15% as London slowdown bites
In other news.... it’s been a bad morning for shareholders in London estate agents Foxtons.
It warned that the housing market in the capital is slowing, and blamed political and economic concerns in the UK and Europe, tighter mortgage lending markets and a mismatch between price expectations of buyers and sellers.
Turnover in the last quarter fell 3%, and Foxtons how expects to make fewer profits this year than last year.
Shares have tumbled 15%, or 33p, to 174p.
They were worth 230p when Foxtons floated on the stockmarket, a year ago.
Full story: Foxtons shares slump 15% as London property slowdown hits profits
Tesco: Not working on a rights issue today
Back to Tesco...and CEO Dave Lewis has just told analysts that it is not working on a rights issue* at the moment.
Instead, he’s planning to sell certain parts of the business to improve its balance sheet.
* - in a rights issue, investors are asked to give money to the company in return for more cheap shares. If they decline, their stake is diluted.
Last month’s drop in retail sales shows that Britain’s economy is “gently” slowing down, says Rob Wood, economist at Berenberg.
But it’s not a reason to panic:
British growth is gently slowing as several domestic and external headwinds blow a bit stronger. But we are far away from the sort of drag on the UK in 2011/12 during the extreme times of Euro crisis.
Falling food and petrol prices will aid consumer spending power over the next few months, as will slightly cheaper mortgage rates.
We find out tomorrow how the UK economy performed in the last quarter, with the first estimate for GDP in July-September. Economists expect growth slowed to +0.7%, from +0.9% in April-June.
Updated
UK retail sales down 0.3%
Britain’s wider retail industry is also finding life tough, according to new figures this morning.
The volume of stuff bought fell by 0.3% in September, compared to August, a bigger fall than expected.
The Office for National Statistics reported that textile, clothing and footwear sales slid by 7.8% during the month.
Retailers blamed:
unseasonably warm weather meaning consumers have delayed purchases of autumn and winter clothing.
There are also signs of deflation. The amount spent on retail goods fell by 0.6% month-on-month, as shops cut prices.
Average store prices (including petrol stations) fell by 1.4% in September 2014 compared with September 2013, the ONS added.
Another quote from the Tesco analyst call, via Reuters:
- TESCO CEO SAYS DOING SOMETHING ON PRICE WHEN YOU HAVEN’T GOT THE SERVICE AND AVAILABILITY PERFECT MIGHT NOT BE BEST THING
So Lewis might resist a price war until he’s fixed some of Tesco’s structural problems....
Nils Pratley: Tesco needs a strategy
Our financial editor, Nils Pratley, is alarmed that Tesco “remains in a strategic vacuum”.
That, rather than the accounting scandal that has grown only slightly bigger, is likely to be shareholders’ biggest worry today.
How can Dave Lewis consider asking shareholders for a helping hand, through a rights issue, if he can’t outline his grand turnaround plan? He can’t even tell them who the next chairman will be (could retail veteran Archie Norman be lured?).
Nils concludes:
A new strategy has to appear as soon as possible in the new year. Christmas seems to be case of muddling through with “£5 off” vouchers. In the circumstances, another 5% off the share price – the market’s initial reaction – is entirely understandable. Errors with revenue recognition are one thing; what shareholders want now is a recognisable strategy.
Here’s the full piece: Tesco in crisis: where’s the strategy?
Tesco is now briefing City analysts -- and Louise Cooper is helpfully tweeting from the call.
She’s not terribly impressed:
Here’s our news story on the troubles at Tesco (full coverage starts at 7am)
Tesco’s profits black hole bigger than expected and runs back several years
Tesco’s failure to slow its sales decline has worried Jon Copestake, Retail Analyst at The Economist Intelligence Unit.
He says:
“If Dave Lewis wasn’t considering radical action when he began in his role as CEO then he certainly will be now. A 4.4% decline in like for like sales is, in many ways, more significant than the 92% decline in profits given the investment the firm has been making to halt its decline.
The only good news, Copestake reckons, is that Lewis has a clean slate, with his predecessors taking the blame:
If there is a silver lining for Tesco it is that Lewis will no doubt now have carte blanche in engineering a turnaround.
Having fallen up to 7% in early trading, Tesco’s shares have settled at around 174p, down almost 5% today.
New chief executives often like to get the bad news out of the way early.
Dave Lewis didn’t have much choice at Tesco, given the mess he’s been confronted with.
But he has still managed to include various one-off costs in today’s results:
They include stock write-downs of £63m, impairment charges of £136m in the UK and Europe, restructuring costs of £41m, a £41m retrospective charge relating to a Valuation Office ruling on ATM rates and an extra £27m set aside to cover compensation to Tesco Bank customers who were missold PPI products.
But, as Richard Hunter of Hargreaves Lansdown Stockbrokers, says:
“Even after this classic example of kitchen sinking, it remains impossible to gauge whether today is Tesco’s nadir.”
Mike Dennis of Cantor Index says Tesco’s management must focus on UK trading ahead of the important Christmas period, to make sure it has enough stock and promotions.
CEO Dave Lewis must then:
...simplify the business via UK and International asset sales, then reconnect with suppliers by changing payment terms and lowering his cost of goods and then start on the long road to rebuilding the Tesco brand with shoppers.
City traders are aghast that Tesco’s statutory pre-tax profits have slumped by 92% so far this year (see chart here)
James Abbott of Accendo Markets says:
Supermarket giant Tesco has yet again not failed to disappoint loyal investors this morning. A record 92% decline in pre-tax profits in the first half of the year and a fall in organic British sales described as the worst performance in 40 years does not sit well with traders across the City!
Blackrock has publicly been dumping the stock, Warren Buffett announced his investment was a ‘huge mistake’ and a further £13m on top of the £250m accounting black whole sees the shares back around multi-year lows!
Why would anyone take a risk on a company that continues to disappoint in this manner? Fortune often favours the brave, but the stupid?
Julie Palmer, retail expert at Begbies Traynor, warns that Dave Lewis may be running out of time:
What shareholders will want to know is why the supermarket chain has been so slow to respond to the seismic changes in consumer buying behaviour, when rivals like Asda and Morrison’s already made swift changes, and whether it has the management bandwidth to continue that improvement as we move into the important pre-Christmas trading period.
CEO Dave Lewis will now be concentrating on a strategy that can compete with Aldi and Lidl’s unwavering success whilst also addressing the shift in consumer demand from supermarket to convenience shopping. The question is, will it be too little too late for what was once Britain’s favourite supermarket”
Shore Capital: "rudderless" Tesco has been badly damaged
Analysts at Shore Capital say they simply cannot remember a worse period in Tesco’s history than the last six months:
Tesco has had quite a few years of challenge and disappointment. However, we can never recall a period so damaging to the reputation of the company as H1 FY2015.
That a powerhouse of international retailing was reduced to a rudder less corporate entity where downgrade followed downgrade, executive followed executive out of the business, with no effective succession planning, capped by a material accounting issue, reflects to a detrimental extent, to our minds, upon those who are the guardians of Tesco on behalf of its owners.
They add that shareholders will be pleased to see the chairman stepping down.
But they are also concerned that Tesco wasn’t able to full year profit guidance.
As such there is a further risk of earnings downgrades to our minds with management demonstrably signalling that customers must come first.
Phil Dorrell, director of Retail Remedy, has welcomed Sir Richard Broadbent’s decision to step aside soon:
“Sir Richard Broadbent’s decision to fall on his sword was, on balance, the right one. Unlike Dave Lewis, he has been there throughout.
“Tesco needs a clean break from this sorry saga and, through Sir Richard Broadbent’s departure, will have the best chance of achieving it.
Tesco’s shares have now fallen by 48% so far this year, a staggering tumble for one of Britain’s major companies.
Its value has fallen to around £14.2bn, from almost £30bn in January.
The rise and fall of Tesco, through its share price:
Dave Lewis needs to decide on his turnaround strategy for Tesco, and fast, says Josh Raymond of City Index.
Raymond says that “the lack of clarity in strategy and direction” is the most worrying aspect of today’s news.
Dave Lewis is Tesco’s new CEO. He simply HAS to show his strength of leadership to steer Tesco through its worst crisis in decades. His failure to provide a detailed strategic direction for the firm at this stage will only deepen shareholder fears and cloud the markets view of how and when Tesco can bounce back.
The fact the firm is unable to tell the market what it thinks it will report for a full year is perhaps the biggest worry. Either it’s own full year projection is too terrible to state (does not make sense as surely you would want all the bad news out at once) or it simply has no idea how it could perform (equally troubling!).
Updated
Today’s statement contains little guidance on how Lewis will turn Tesco around. OK, he’s only been there 55 days, but the former Unilever executive simply doesn’t have time to spare.
As retail analyst Nick Bubb puts it:
It would be nice to know exactly what Tesco’s strategic priorities are, with today’s results largely focused on the problems of the past.
Tesco has helped to drag the FTSE 100 index of bluechip shares down by 1.1%, or 70 points, to 6327. Only three shares are up (Glaxo, Royal Mail and Severn Trent)
Tesco shares drop 6.5%
Scrap that idea that Tesco’s share might rise -- they are tumbling in early trading, down 6.5% to 171p.
Tesco: the key points
So to quickly recap:
Britain’s biggest supermarket has confirmed that it overstated its profits by £263m, going back at least two years. That’s £13m than first thought.
An investigation by Deloitte has confirmed that earnings were booked early, and costs delayed, to improve Tesco’s figures. And that the practice snowballed, as those responsible had to pull forward more and more revenue to keep the numbers looking good.
The company’s under-fire chairman, Sir Richard Broadbent, is to step down once CEO Dave Lewis and his team are up and running.
Tesco is withholding the payouts due to Lewis’s predecessor Phil Clarke, and FD Laurie McIlwee, while the Financial Conduct Authority investigates the issue.
Tesco has scrapped its profit guidance for this financial year, and admitted that profits could suffer as Lewis tries to restore its fortunes.
As Lewis put it:
“Our business is operating in challenging times. Trading conditions are tough and our underlying profitability is under pressure.”
The company is clearly struggling -- UK like-for-like sales are down by 4.6% in the first half of this year, trading profits are down by 40%, and pre-tax profits have tumbled by 92%.
Updated
Tesco: some instant reaction
Joshua Raymond of City Index isn’t impressed by Tesco’s performance so far this year -- with trading profits down 40% and UK like-for-like sales down 4.6%,
Dharshini David of Sky News points out that profits also fell at its operations in Asia (which could be sold to raise funds):
Joseph Cotterill of the FT flags up some good news -- Tesco has avoided the humiliation of restating historic financial results.
Tesco’s shares are expected to rise around 3% when the London stock market opens in 20 minutes:
That may reflect relief that Deloitte didn’t discover any more nasties lurking in the Tesco accounts.....
Dave Lewis is now explaining that there is no evidence that the misreporting was done for “personal gain”.
He’s arguing that bonuses weren’t paid during the three years under this review, so executives didn’t benefit directly.
Tesco holds back payoffs to ex-CEO and finance chief
Big news: Tesco reveals that it is holding back the payoffs that were due to be handed to former CEO Philip Clarke, and finance director Laurie McIlwee.
The money is frozen while the City watchdog investigates the issue.
Clarke, who resigned this summer, was due to walk away with a £10m payoff.
The news this morning that Tesco overstated its profits in previous financial years, as well as this year, puts more pressure on both men.
Tesco is holding a conference call with reporters now....
Tesco scraps profit guidance
Another sign that all isn’t well at Tesco -- the company has just scrapped its outlook for profits in this financial year.
The company says that its relative performance simply wasn’t competitive enough in the first half of the year. And it warns that full year profitability could be “further impacted” by actions we choose to take.
As such, there are a number of uncertainties which limit visibility of future performance. We will do the right thing for customers - and therefore the business - despite these uncertainties. For these reasons we are not providing full year profit guidance.
Dave Lewis, Tesco’s new chief executive, says Tesco is operating in “tough trading conditions”, adding:
I have been heartened by the team’s welcome and their determination to stay focused on doing the very best for our customers.
Tesco profits investigation: here's what Deloitte found
Tesco called Deloitte in last month after a whistleblower flagged up that the company had been overstating its profits (mainly, we think, by mis-reporting revenues and costs related to suppliers)
The investigators have concluded that:
- our overall commercial income adjustment in the current reporting period of £263m is reasonable;
- amounts have been pulled forward or deferred, contrary to Tesco Group accounting policies;
- there have been similar practices in prior reporting periods;
- the current and prior practices appear to be linked as income pulled forward grew period by period.
Updated
This chart shows underlying profits at Tesco have almost halved in the first half of this financial year (from March to August).
And statutory pre-tax earnings are down a staggering 92%!
Updated
Chairman begins 'orderly' succession process
Tesco is looking for a new chairman.
Sir Richard Broadbent, who has been criticised for allowing Tesco to run without a full-time finance director, has announced that is “preparing the ground” to step aside.
Stability and orderly process are now of primary importance to the company. The Board’s immediate focus must be on ensuring that we complete the transition to a new management team and that new and far-reaching business plans are put in place quickly. These plans 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.
My decision reflects the important principle of accountability on behalf of the Board and will support the company to draw a line under the past as it enters the next phase of its development.
Tesco profits overstatement goes back further than expected.
It also appears that the problems with Tesco’s financial reporting predate this financial year.
It says that around £118m of the profit overstatement relates to the first half of this financial year.
A further £70m relates to the 2013/14 financial year. And an extra £75m relates to “pre-2013/14”.
Today’s results show that Tesco continues to struggle -- like-for-like sales excluding VAT and petrol in the UK fell by 5.5% in the second quarter.
Updated
Tesco results released: black hole bigger than thought
Breaking: Tesco’s delayed results have just been released.
And the supermarket says that the investigation launched by Deloitte has found that its profits in the first half of the year were overstated by £263m.
That’s bigger than the £250m which it initially estimated.
The Agenda: Tesco results, eurozone PMIs, a speech...
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and finance.
The big story of the morning will be Tesco, which is releasing its delayed financial results, a month after shocking the City by revealing that it had overstated its results by £250m.
Also coming up today....
We’ve also got the latest surveys of private sector activity across France, Germany and the eurozone this morning, and UK retail sales for September at 9.30am.
Ben Broadbent, one of the Bank of England’s deputy governors, is giving a speech in London (around 9.10am)
And later, the weekly US jobs data, and results from Caterpillar, Amazon and Microsoft.
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