Business

Tesco fined £129m for overstating profits

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Tesco has agreed to pay a fine of £129m to avoid prosecution for overstating its profits in 2014.

The supermarket giant has reached a deferred prosecution agreement with the Serious Fraud Office (SFO) after a two-year investigation.

The SFO said Tesco had co-operated with the investigation and had undergone an “extensive” period of change.

Tesco also said it had accepted a finding of “market abuse” from the Financial Conduct Authority (FCA).

Between February and September 2014, Tesco gave a false account of its performance, leading to a trading statement on 29 August 2014 that gave a rosier view of its profits than was the case.

Tesco originally estimated it had overstated profits by about £250m, but this was subsequently revised up to £326m.

The FCA, has, for the first time, insisted a company compensate investors, although it has not issued its own penalty.

Tesco says it will compensate those who bought shares or bonds between 29 August and 19 September that year at a cost of about £85m.

Tesco’s current chief executive, Dave Lewis, said: “Over the last two-and-a-half years, we have fully co-operated with this investigation into historic accounting practices, while at the same time fundamentally transforming our business.

“We sincerely regret the issues which occurred in 2014 and we are committed to doing everything we can to continue to restore trust in our business and brand.”

Tesco expects to take an exceptional charge of £235m to cover the penalty, compensation scheme and related costs.

The charge will be taken in its results for the 2016-17 financial year, which are due to be published on 12 April.

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