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Tesco profit forecast overstated by £250m Tesco suspends execs as inquiry launched into profit overstatement
(35 minutes later)
Tesco has launched a review after it found it had overstated its expected half-year profits by £250m. Tesco says it has suspended "a number of people", including four executives, after it overstated its half-year profit guidance by £250m.
The supermarket chain said it was now working to establish the impact of the issue on its full-year results. It has launched an investigation headed by Deloitte. The supermarket chain says it is now working to establish the impact of the issue on its full-year results.
It had expected £1.1bn profit for the half year. It has appointed Deloitte to independently investigate the issue. Shares fell 10% in early trading.
"We have uncovered a serious issue and responded accordingly," said Tesco chief executive Dave Lewis. Shares in Tesco fell 10% in early trading. "We have uncovered a serious issue and responded accordingly," said Tesco chief executive Dave Lewis.
On a conference call later, Mr Lewis said "a number of people" had been suspended from duty while the investigation is under way, including four senior executives.
UK managing director Chris Bush is one of those suspended, according to Radio 5 Live presenter Adam Parsons.
Mr Lewis, who took the helm at Tesco on 1 September, said he expected the group "to operate with integrity and transparency".Mr Lewis, who took the helm at Tesco on 1 September, said he expected the group "to operate with integrity and transparency".
"We will take decisive action as the results of the investigation become clear," he added."We will take decisive action as the results of the investigation become clear," he added.
In a statement, Tesco said the overstatement was "principally due to the accelerated recognition of commercial income and delayed accrual of costs". Results delayed
It also said some of the error -which referred to its expected profits for the six months to 23 August - was due to "in-year timing differences". On 29 August, Tesco had said it expected its trading profit for the six months to 23 August to be about £1.1bn.
In its latest statement, Tesco said the profits overstatement was "principally due to the accelerated recognition of commercial income and delayed accrual of costs".
It also said some of the error - which referred to its expected profits for the six months to 23 August - was due to "in-year timing differences".
The error emerged when the firm was preparing its interim results.The error emerged when the firm was preparing its interim results.
It had originally planned to publish these on 1 October, but they have now been pushed back to 23 October.It had originally planned to publish these on 1 October, but they have now been pushed back to 23 October.
Deloitte will carry out its investigation with Freshfields, the group's external legal advisers.Deloitte will carry out its investigation with Freshfields, the group's external legal advisers.
Tesco's usual auditors are PricewaterhouseCoopers.
Profit warningProfit warning
Shares in Tesco reached an 11-year low in August after the firm cut its full-year profit forecast to £2.4bn from £2.8bn.Shares in Tesco reached an 11-year low in August after the firm cut its full-year profit forecast to £2.4bn from £2.8bn.
The supermarket group has been battling falling sales and a decline in its market share as discount chains such as Aldi and Lidl have gained in popularity.The supermarket group has been battling falling sales and a decline in its market share as discount chains such as Aldi and Lidl have gained in popularity.
Previous chief executive Philip Clarke stood down in July after his attempts to revive Tesco's fortunes through a £1bn turnaround plan failed.Previous chief executive Philip Clarke stood down in July after his attempts to revive Tesco's fortunes through a £1bn turnaround plan failed.
AvaTrade chief market analyst Naeem Aslam said Tesco had been "extremely slow" to respond to market changes. "Today's news is another disaster for the company," he added.AvaTrade chief market analyst Naeem Aslam said Tesco had been "extremely slow" to respond to market changes. "Today's news is another disaster for the company," he added.