Tesco fall into annual loss of £40 mn due to costly accounting scandal

Supermarket giant Tesco revealed that it fell into an annual net loss of £40 million due to a costly accounting scandal at Britain’s biggest retailer on Wednesday.

The after-tax loss, equivalent to $50 million or 47 million euros, was skewed by an exceptional charge of £235 million 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 rallied almost a third to £1.28 billion in its 2016/2017 financial year, which ran until the end of February.

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.

However, charges have previously been brought against three former Tesco executives, who will face trial over alleged fraud and false accounting.

Tesco also said 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.

Chief Executive, Dave Lewis said in the statement, “We are confident that we can build on this strong performance in the year ahead.”

“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.”

Tesco is the world’s third-biggest supermarket chain after France’s Carrefour and global leader Wal-Mart.

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.

In recent years, Tesco has suffered in the face of fierce competition in its domestic market from German-owned discount retailers Aldi and Lidl — and also from Sainsbury’s, Morrison and Wal-Mart unit Asda.

Source: AFP

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