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Tesco : Former Tesco chairman not alerted to likely profit miss, court hears

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11/08/2017 | 10:01pm CEST
FILE PHOTO - Former Tesco chairman Richard Broadbent leaves an office, after the announcement of the company's interim results, in the City of London

LONDON (Reuters) - The former chairman of Tesco said he did not recall Carl Rogberg, finance director of its British operations, raising any red flags in the summer of 2014 to indicate that the retailer was likely to miss profit forecasts.

Richard Broadbent, who chaired Tesco from 2011-2015, was giving evidence at the trial of Rogberg and two other former senior executives of Britain's biggest retailer, who are accused of fraud and false accounting in 2014.

Rogberg, 50, who was UK finance director, Christopher Bush, 51, who was managing director of Tesco UK and John Scouler, 49, who was UK food commercial director, all deny any wrongdoing and have pleaded not guilty.

The case centres on Tesco's Sept. 22 2014 announcement to the stock exchange that its profit forecast had been overstated by 250 million pounds, mainly due to booking commercial deals with suppliers too early.

Tesco's disclosure that day saw its shares tumble and plunged the company into the worst crisis in its near 100-year history.

Lead prosecutor Sasha Wass told the court last month that all three defendants were well aware that a hole in Tesco's accounts was "spiralling out of control" in the first half of 2014 but connived to conceal their failure to meet targets.

Rogberg was a member of a committee that was overseeing Tesco's finances until a new finance director joined in September 2014, the court was told.

Broadbent said he did not recall Rogberg raising any concerns about profit targets at an August meeting of the committee.

He said he "certainly didn't recall being told" there were any issues that indicated the targets would not be met.

Broadbent told the court he was aware that trading conditions were tough, and he said he also "would have been interested" if Christopher Bush had raised any concerns about the forecasts to him.

"I don't have a recollection of Chris saying to me that we are going to miss those targets," he said.

The court has previously heard that Amit Soni, a senior accountant at Tesco who is described by the prosecution as a whistleblower in the case, had commissioned a detailed report which showed how around 250 million pounds of income had illegitimately been "pulled forward" in Tesco's accounts.

Broadbent said on Wednesday he had not previously heard any hint that income was being pulled forward.

Soni eventually passed the report on to Kay Majid of Tesco's legal team.

Chief Executive Dave Lewis then became aware of the report and dealt with it as an emergency.

He contacted Broadbent, who was on holiday in Rome, on the evening of Sept.19.

Broadbent returned to the UK on Saturday morning, he told the court, and he chaired board meetings throughout the weekend before a statement was issued to the stock market on Sept. 22.

The trial is expected to last beyond Christmas.

($1 = 0.7628 pounds)

(Reporting by Paul Sandle and James Davey)

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Financials (GBP)
Sales 2019 64 145 M
EBIT 2019 2 113 M
Net income 2019 1 247 M
Debt 2019 2 482 M
Yield 2019 2,20%
P/E ratio 2019 17,95
P/E ratio 2020 14,89
EV / Sales 2019 0,40x
EV / Sales 2020 0,38x
Capitalization 23 189 M
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Technical analysis trends TESCO
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Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 18
Average target price 2,67  GBP
Spread / Average Target 13%
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David Lewis Group Chief Executive Officer & Director
John Murray Allan Non-Executive Chairman
Antony John Hoggett Chief Operating Officer
Alan James Harris Stewart Chief Financial Officer & Executive Director
Guus Dekkers Chief Technology Officer
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