Tesco Keeps Pounds 2m From Chiefs as Profits Dive

The company declined to comment on the causes of the black hole, saying it will leave the FCA to responsible.

Published: 24th October 2014 10:26 AM  |   Last Updated: 24th October 2014 10:28 AM   |  A+A-

Tesco is withholding payouts totalling pounds 2m to Philip Clarke and Laurie McIlwee, its former chief executive and chief financial officer, as it reels from the discovery of a pounds 263m shortfall in its profits.

retail_b3.jpgBritain's biggest retailer revealed that it was suspending payments due to the two former executives as it reported a 92pc fall in pre-tax profits following the accounting scandal and slide in UK sales.

Sir Richard Broadbent, chairman of Tesco, said he would step down as result of the crisis. He insisted he was "not being pushed to go" but wanted to "draw a line" under the scandal. He is expected to leave the company next year.

"On behalf of the board, to demonstrate to the world that principles exist, I choose to go," he said. "You can't really say that nobody's carrying the can."

Shares in Tesco fell 12p, or 6pc, to 171p on the back of the results, while credit ratings agencies Moody's and Fitch both downgraded the group.

More than pounds 1.1bn was wiped off the value of food retailers in sympathy, with shares in J Sainsbury and Wm Morrisons also declining.

Clive Black, analyst at Shore Capital, said of Tesco: "We can never recall a period so damaging to the reputation of the company."

Tesco has been rocked by the biggest crisis in its history after a whistleblower alerted new chief executive Dave Lewis to a black hole in the company's profits.

The retailer said accounting firm Deloitte had completed an investigation into the scandal, with the findings now in the hands of the Financial Conduct Authority, the City regulator.

The company declined to comment on the causes of the black hole, saying it will leave the FCA to establish where the responsibility lies.

Tesco has already suspended eight executives, including UK boss Chris Bush, as part of the investigation and revealed yesterday that it will also withhold payments to its former management team.
Mr Clarke, who was in charge for the period under scrutiny and stepped down as chief executive at the end of August, is still being paid his full pounds 1.1m salary.

However, he was in line to receive a further 12 months' pay in a lump sum in January as part of his exit agreement. This will now be withheld, as will a similar pounds 880,000 payment which was due to be made to Mr McIlwee, who left Tesco in April, within weeks.

Mr Lewis said Tesco was "withholding" the payments until the FCA's investigation is complete.
Referring to Mr Clarke, he said: "I don't know what he did or didn't see. That is a matter for the FCA."
Mr Lewis said he planned to get Tesco back on track by returning the retailer to its roots.

He has already added 2m more staff hours to the company's stores and also wants to improve availability. Once these improvements are in place, he will "consider" price cuts.

The new Tesco boss confirmed that the company will consider selling off assets. He added: "We are not currently working on a rights issue."

Tesco reported that pre-tax profits fell by 92pc to pounds 112m for the 26 weeks to August 23.
This included a 4.6pc fall in like-for-like sales and a 56pc fall in trading profits in the UK.


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