LONDON (Alliance News) - Britain's biggest supermarket chain Tesco has stunned the market Monday after it said it had overstated its first half pretax profit guidance by GBP250 million, and it has suspended four executives while it undertakes a thorough investigation into the issue.
Tesco shares opened 11% lower at an 11-year low, with just over GBP2 billion wiped off its market capitalisation. The stock has since pared back the losses slightly, but remains down 7.4%, by far the biggest decline on the FTSE 100.
In a serious blow to the struggling grocer's reputation, and in its first public announcement under new Chief Executive Dave Lewis, Tesco said it has launched an investigation into whether any staff have broken any rules.
Tesco said the over-statement was down to commercial income being recognized in its accounts too early while some costs that should have been included in the first half were delayed.
This means Tesco's profit for the first half ended August 23 will be only around GBP850 million, well below the GBP1.1 billion it had guided last month. That was its most recent profit warning, following profit expectation downgrades earlier in the year. Tesco made a GBP3.32 billion trading profit in the whole of its last financial year, and GBP1.59 billion in the first half of that year.
Tesco is currently without a finance director. Outgoing CFO Laurie McIlwee has not been in the office for some time and has not been involved in recent weeks, Tesco said, while incoming CFO Alan Stewart is not due to start until December 1.
The supermarket chain said it is "exploring all possibilities", including whether to bring in Stewart earlier than planned.
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Markets: Stocks across Europe have starter the week lower, with the FTSE 100 Monday giving back all of the gains made on Friday from the results of the Scottish referendum.
The Mining sector has continued its recent downward trend amid a continuing slump in commodity prices, underperformed only by the Food & Drug Retailers after Tesco's shock announcement.
The price of Chinese iron ore futures fell 4% to a multi-year low of CNY558 per tonne overnight. Gold reached USD1,207.76 overnight, its lowest level since January 2, and silver reached USD17.31 per ounce, its lowest level in more than four-years.
US Stock futures are currently pointing to a lower open on Wall Street, with the DJIA indicated down 0.1%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.3%.
FTSE 100: down 0.7% at 6,791.09
FTSE 250: down 0.5% at 15,773.66
AIM ALL-SHARE: down 0.2% at 760.78
GBP-USD: up at 1.6328
EUR-USD: up at 1.2841
GOLD: down at USD1,212.88 an ounce
OIL (Brent): down at USD97.80 a barrel
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Other Top UK Corporate News
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Media buying giant WPP said that it has agreed to invest USD25 million, plus its ad server platform technology, for a significant stake in advertising technology company AppNexus Inc. WPP's advertising technology, part of the company's Xaxis business, was originally acquired as part of WPP's acquisition of 24/7 Real Media in 2007, and WPP says it is the second largest publisher advertising server in the world. Staff from the 'Xaxis for Publishers' business will join AppNexus.
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British Land Co said it has exchanged on the sale of 18 apartments at its new London residential development, Clarges Mayfair, generating proceeds of GBP210 million. The London-based property investment company said the sales come after a number of apartments were released in a pre-launch to targeted potential buyers over the summer. The sale price reflects an average capital value of GBP4,750 per square foot and sets "new records for prices in Mayfair," said British Land.
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Dixons Carphone and EE were closing in on deals over the weekend to buy parts of collapsed mobile phone retailer Phones 4U, the Financial Times reported Sunday. Dixons Carphone was understood to be in talks to buy some Phones 4U stores, meaning more than 200 of the company's outlets would be kept open in the UK, in addition to the 160 Phones 4U concessions which had operated within Dixons stores, the FT said. The news comes after Vodafone Group on Friday said it would buy 140 stores from Phones 4U administrator PwC, retaining 900 workers from the chain. Phones 4U had a total of 550 standalone stores.
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Laird said Chief Financial Officer Jonathan Silver will be stepping down from the role at next years' annual general meeting after nearly 29 years with the company. Silver will leave the company upon conclusion of Laird's AGM on May 8, 2015. The company said he will work closely with Chief Executive David Lockwood on the appointment of a successor to ensure a smooth transition.
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Electra Private Equity struck back in the war of words with Sherborne Investors, as the private equity investment trust accused the activist shareholder of making "unverifiable statements" and "unsubstantiated claims" ahead of a general meeting next month. Electra said Sherborne provided "no further detail" as to how it would create the additional value referred to in its letter.
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London Mining said it is in dispute with Glencore over a cash prepayment it claims the FTSE 100-listed group has refused to pay and said it was considering its options on the offtake agreement it has with Glencore, including potentially terminating the deal.
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AIM Movers
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Coal Of Africa is doing well after it said it will sell the Mooiplaats Colliery in South Africa to a subsidiary of Blackspear Holdings Proprietary Ltd for ZAR250 million, the penultimate stage of its turnaround plan. MoPowered Group has lost nearly two-thirds of its value after it raised GBP3.5 million in a heavily-discounted share placing, money it will use to strengthen its balance sheet and accelerate growth via sales and marketing. It issued 70 million shares at 5 pence each, a 75% discount to its middle market share price of 20.25 pence on Friday. Publishing Technology is down after it warned that it expects its results for 2014 to be "significantly below market expectations," and to extend the loss reported in its first-half, as a result of one-off costs to realign the business. Red Leopard is down despite recording revenue and a slightly narrowed pretax loss for the half-year to the end of June. Fox Marble Holdings is another faller after it warned its sales were "below expectations" for the first-half, although it expects improvements in production and sales now that its quarries are fully operational. Leyshon Energy is also down after it said results received so far from two wells at the Zijinshan gas project were below its expectation.
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Top Economics And General
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The Ukrainian government said Sunday it would withdraw heavy weapons from the conflict zone in the country's east only after the pro-Russian separatists adhere to the ceasefire. Security Council spokesman Andriy Lysenko said in Kiev that the government will implement a fresh agreement with the separatists step by step, beginning with the ceasefire. "So far the first step is not fulfilled we are not talking about the others," Lysenko was quoted as saying by the Interfax Ukraine news agency. He said any withdrawals would be carried out only if separatist militias withdraw simultaneously.
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China's macro policy will continue to focus on growth objectives, especially on employment and inflation, Finance Minister Lou Jiwei said Sunday. Any weakness in single economic indicator will not change the government's economic policies, he said. Data released last week showed that industrial output growth slowed to 6.9% in August raising expectations of additional stimulus. Lou said tax cuts for small and micro firms and bringing social capital to more sectors will help to generate growth.
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Bundesbank President Jens Weidmann has criticized the European Central Bank's latest measures to boost the euro area economy, such as the planned purchases of covered bonds and asset-backed securities and covered bonds, as well as the interest rate reduction this month. The latest decisions suggest a fundamental shift in strategy and a drastic change for the ECB's monetary policy, Weidmann reportedly said in an interview to the German magazine Der Spiegel, published on Sunday.
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The Irish Fiscal Advisory Council said more progress is needed on fiscal consolidation front to reduce the debt to safer levels. The council said the fiscal consolidation measures introduced since 2008 significantly lowered the size of the structural deficit. Nevertheless, it is likely that at least some part of the remaining deficit is structural.
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When US President Barack Obama chairs a UN Security Council meeting on Wednesday, he will ask the 15-member committee to vote on a US-drafted resolution that compels 193 UN member states to prevent their citizens from joining terrorist groups. The resolution is part of the US strategy to expand the international effort against the Islamic State in Iraq and Syria, as Washington expands airstrikes and seeks partners for a broader military effort.
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Palestinian and Israeli delegations will resume negotiations Tuesday in Cairo on a long-term truce for the Gaza Strip, a senior Israeli government official said. A 50-day conflict ended in late August with a temporary ceasefire deal, and with both sides agreeing to start talks on a long-term arrangement within one month. Egypt had invited delegations to meet on Wednesday. At Israel's request, the talks were brought forward by a day because the Jewish New Year starts on Wednesday after sunset.
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Afghanistan's election commission on Sunday named former finance minister Ashraf Ghani Ahmadzai the next president after he and his rival signed a power-sharing agreement to end a nearly six-month dispute over electoral fraud. The agreement will see Ghani's challenger, former foreign minister Abdullah Abdullah, become chief executive officer in a new national unity government. The position is a new one, similar to a prime minister responsible for the council of ministers and day-to-day affairs. The pact, hammered out Saturday night with help from US and UN officials after more than two months of talks, gives Abdullah and his allies significant powers, including a substantial number of seats in the cabinet and other positions in the government and judiciary. Ghani, as president, will be head of the state and the government.
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Crowds of people gathered around the globe Sunday to demand action against climate change ahead of a special UN summit, calling on world leaders to cease political posturing and commit to a concrete international plan. Many of the demonstrations took inspiration from the flagship event in New York City, where the summit is slated to take place. Protests there were billed as the "largest climate march in history" and initiated by a broad worldwide coalition of activists.
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Afternoon Watchlist (all times British Summer Time)
14:00 EU ECB President Draghi's Speech
15:00 EU Consumer Confidence Preliminary
15:00 US Existing Home Sales
15:05 US Fed's William Dudley speech
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Tuesday's Key UK Corporate Events
Regenersis - Full Year Results
Netcall - Full Year Results
Close Brothers Group - Full Year Results
Augean - Half Year Results
AG Barr - Half Year Results
Air Partner - Half Year Results
Highland Gold Mining - Half Year Results
GLI Finance - Half Year Results
Cupid - Half Year Results
Dolphin Capital Investors - Half Year Results
PZ Cussons - Interim Management Statement
Faroe Petroleum - Half Year Results
AA - Q2 Results
NAHL Group - Half Year Results
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Tuesday's Key Economic Events (all times British Summer Time)
All Day Japan Autumnal Equinox Day
00:30 US Fed Minneapolis's Narayana Kocherlakota speech
02:45 China HSBC Manufacturing PMI Preliminary
07:45 France Gross Domestic Product
08:00 France Markit Manufacturing PMI Preliminary
08:00 France Markit Services PMI Preliminary
08:30 Germany Markit Manufacturing PMI Preliminary
08:30 Germany Markit Services PMI Preliminary
09:00 EU Markit Manufacturing PMI Preliminary
09:00 EU Markit PMI Composite Preliminary
09:00 EU Markit Services PMI Preliminary
09:30 UK BBA Mortgage Approvals
09:30 UK Public Sector Net Borrowing
13:55 US Redbook index
14:00 US Housing Price Index
14:45 US Markit Manufacturing PMI Preliminary
15:00 US Richmond Fed Manufacturing Index
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29 Jun 2016 10:34
