Tesco announces one of biggest company losses in history at £6.4 billion after year of scandal, write-downs and heavy competition
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Version 0 of 1. Tesco has announced a £6.4 billion loss in the year ending February 28, marking the end of a catastrophic year for the supermarket chain in which an accounting scandal, a series of profit warnings and a price war with rivals weighed on results. It is one of the biggest losses ever reported by a British company. Underlying profits were 68% lower at £961 million in the period but new chief executive Dave Lewis said the company had drawn a line under the past and was seeing some encouraging signs. Mr Lewis was drafted in to turn around its fortunes following a series of profit warnings amid a ferocious price war with cut-price rivals Aldi and Lidl. Experts at Barclays earlier pencilled in a statutory pre-tax loss at around £2.9 billion with Shore Capital estimating around £3 billion. Shore's Clive Black said: “At a statutory level, it's going to be a horror show. But, for shareholders, it is about Dave Lewis and the future.” Shares fell to a low of 155.4p in December but have since added about 50% as Mr Lewis has laid out a series of major plans to revive Tesco's fortunes. Bernstein's Bruno Monteyne said: “Dave Lewis has regularly surprised us with how quickly he has moved since taking over: dealing with the accounting crisis, getting Tesco ready for a good Christmas period, starting the cost savings with aplomb.” The latest figures show a sharp decline in trading which saw Tesco's annual profits near £4 billion, before sales went into an alarming slide under Mr Lewis's predecessor Philip Clarke, who departed last year. Tesco has been caught up in a price war with rivals Asda, Sainsbury's and Morrisons as their market share is gnawed away by discounters Aldi and Lidl. Since the arrival of former Unilever executive Mr Lewis, it has announced the closure of 43 loss-making stores as well as shelving plans for a further 49. The group has shut its final salary pension scheme and sold its loss-making blinkbox online video operation. It also plans to save £250 million a year by shutting its headquarters in Cheshunt and has said it will not pay a final dividend this year. Tesco has recruited former Dixons chairman John Allan to head its board to succeed Sir Richard Broadbent, who left after the discovery last autumn of a £263 million accounting blunder, now being investigated by the Serious Fraud Office. Analysts will be looking for further moves by Mr Lewis including the possible sale of £1.5 billion-rated dunnhumby, the customer data company behind its Clubcard loyalty scheme. It is argued that Tesco needs to sell assets or place shares to raise more cash. Borja Olcese of JP Morgan Cazenove said: “We find it difficult to believe that Tesco can continue to drive volumes, improve margins and pay down debt simultaneously without raising capital. ”The most obvious solutions Tesco could opt for in order to strengthen its balance sheet are ... either in the form of asset disposals or a potential share placing.“ |