Tesco suspends execs as inquiry launched into profit overstatement

wotsthat

Thrugelmir wrote: »

I've often seen good people bullied and disregarded. Change of culture is coming at the right time to address the fundamental issues of the business. Very much like the process that Barclays is on the road to in the wake of the Bob Diamond era.

A change of culture isn't underway from what I see. Even if it is it's years too late. Things were going wrong when Leahy was still there.

I've not been to a Tesco meeting where the customer was mentioned since about 2010. They've been too busy ignoring them in favour of internal politics, extracting cash from suppliers and, it seems, getting involved in over complicated accounting.

This is a business in trouble. They are struggling with the discounters and simply have too much space. This latest news just compounds their problems.

antrobus

tincans wrote: »

I'd suspect, given the amount that it can't just be this 6 month period,....

Oh I don't know, you are talking about a business with a UK turnover of £43 billion, so it's quite possible that £250 million is less than 1% of the annual supplier total.

Pay me enough and I could hide quite a lot behind £40 billion.:)

antrobus

wotsthat wrote: »

A change of culture isn't underway from what I see. Even if it is it's years too late. Things were going wrong when Leahy was still there.

I've not been to a Tesco meeting where the customer was mentioned since about 2010. They've been too busy ignoring them in favour of internal politics, extracting cash from suppliers and, it seems, getting involved in over complicated accounting.

This is a business in trouble. They are struggling with the discounters and simply have too much space. This latest news just compounds their problems.

Interesting report here from the BBC - http://www.bbc.co.uk/news/business-29310445 - if only because it has a nice little graph showing grocery market shares over the past 20 years. Curious to see that, 20 years ago, Co-Op were Number 3 and not that far behind Tesco.

Bad things can happen to any business.

wotsthat

antrobus wrote: »

Interesting report here from the BBC - http://www.bbc.co.uk/news/business-29310445 - if only because it has a nice little graph showing grocery market shares over the past 20 years. Curious to see that, 20 years ago, Co-Op were Number 3 and not that far behind Tesco.

Bad things can happen to any business.

Maybe I'm being too hard on them. To an extent this is the first rule of numbers at play - they go up and they go down.

Much of this is self inflicted though. They've just put millions into Giraffe and posh in-store coffee shops thinking it would drag in customers? What sort of person makes a generic restaurant a destination and does a bit of shopping at the same time? It's the other way round - they need to deliver what people want in-store and they might stop for a bite to eat.

Co-op continue to amaze me. I don't know how they stay open - they seem to have the highest price and poorest customers.

wymondham

not sure if this is true but the chap who delivered our Tesco shopping last night said the staff shares are now worthless?

princeofpounds

I think its a bit harsh to think the chairman should have been aware of it, afterall he is just the head of the board, he isn't involved in day to day operations.

This isn't a day-to-day operational matter. It is a question of financial control systems, and paritcularly accounting and audit control. The Board are the ones who appoint and oversee the auditors, and approve the audit. They probably also have a committee supervising financial control systems more generally.

I have no idea if this is serious enough a failing that the Chairman should be axed over it. But there is a very valid reason why he gets dragged into the speculation.

Since 2009, Tesco (ticker: TSCO) has used special purpose vehicles (SPVs) to issue nearly £4bn of property bonds as part of its sale and leaseback programme. Despite Tesco being responsible for repayment of the bonds, they are not included on Tesco’s balance sheet, nor are they disclosed in the notes to its financial statements.

Such things do smell bad but this is not necessarily something suspicious. Is the finger actually being pointed at this sort of structure? One poster already talked about the matter of recourse. The other question I would ask is what happened to the proceeds of the bond issuance? This was probably not taken on balance sheet either (though it may have helped the cashflow statement)

It's an interesting graph, and certainly this has been a problem for Tesco, but it's also somewhat misleading in that, in itself, it is not an indication of a problem. An under-geared company pursuing the same strategy would be applauded.

antrobus

wotsthat wrote: »

....Co-op continue to amaze me. I don't know how they stay open - they seem to have the highest price and poorest customers.

They do reductions.:)

I think they basically survive because they're a convenience store chain with a largely captive local customer base. (Not everyone has access to a car for shopping.) I doubt if any of their stores could survive the opening of a LIDL on the other side of the street.

The trouble is that eventually LIDL probably will.

antrobus

princeofpounds wrote: »

This isn't a day-to-day operational matter. It is a question of financial control systems, and paritcularly accounting and audit control. The Board are the ones who appoint and oversee the auditors, and approve the audit. They probably also have a committee supervising financial control systems more generally.....

I don't have a very high opinion of the Big 4 auditors. They're entirely staffed with geography graduates with two-ones from Russell Group unis that don't have a frackin clue about actual accounting. They can work their way through their checklists and that's about it. I wouldn't rely on them to find anything of importance.

Financial control systems are all very well and good, but they're basically there to stop people stealing the money. But there ain't a financial control system in the world that can really stop someone (for example) understating bad debts or juggling around with the recognition of supplier discounts. You are basically 100% reliant on the honesty and integrity of the individuals concerned. Which is why the Americans have SOX.

Nikkster

antrobus wrote: »

They do reductions.:)

I think they basically survive because they're a convenience store chain with a largely captive local customer base. (Not everyone has access to a car for shopping.) I doubt if any of their stores could survive the opening of a LIDL on the other side of the street.

The trouble is that eventually LIDL probably will.

I know of a small Co-op that shares a car park with a German supermarket. Still, there always seems to be a queue in the Co-op.

SunReader

Revealing insider info here, seems this 'error' might be the tip of the iceberg

http://www.verylittlehelps.com/index.php?topic=14084.90