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Tesco's recovery gains momentum


In two separate moves, Tesco boss Dave Lewis is not slowing down with his drastic turnaround strategy for the Big Four grocer.

Tesco is divorcing PwC, its auditors of 32 years, following the £263m accounting scandal towards the end of last year – one that Britain’s largest retailer is still recovering from.

According to The Independent, directors at the grocer were furious with auditors last year after sources at the Big Four auditor attempted to distance themselves from the scandal.

Businesses are encouraged to refresh auditors regularly and even before the accounting scandal, there had been talks to replace PwC given the length of time it had worked with Tesco, but the process for a new independent auditor was brought forward by a year following the accounting saga last year and PwC, who declined to comment, have agreed not to put themselves forward for consideration.

The sources at PricewaterhouseCoopers claimed directors at the grocer “hid” the misreporting from auditors, which would explain why the questionable practices had been signed off for at least three years.

In September, Lewis commissioned an internal report into the accounting overstatements, revealing that profits from supplier payments were being banked in misleading timeframes and in some cases, before cash had been received.

The report, by Freshfields and Deloitte, was passed to police at the Serious Fraud Office, which is investigating along with the Financial Reporting Council and the Groceries Code Adjudicator.

A case is being prepared against Tesco, for misrepresentation to the stock market, which will claim that the value of shares was hit due to the problem.

The supermarket chain is also holding discussion with bankers to sell its mobile business, in a bid to strip its non-core assets, the Financial Times has reported.

According to those familiar with the matter, the business could be worth hundreds of millions of pounds, given that Tesco’s share of its profits totals around £100m a year.

TalkTalk, which acquired Tesco's TV service Blinkbox last year, and O2 are reportedly amongst the potential bidders.

Analysts expect the deal to be cleared by EU authorities, but only once it has been agreed upon to open the market to similar branded competitors.

Published on Monday 11 May by Veebs Sabharwal

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