Hertfordshire / UK. (tesco) British Tesco PLC announces that its subsidiary, Tesco Stores Limited, has in principle reached a Deferred Prosecution Agreement (DPA) with the UK Serious Fraud Office (SFO) regarding historic accounting practices. The proposed DPA was the subject of a preliminary court ruling April 09, and the SFO and Tesco Stores Limited will now seek final judicial approval to the DPA from the court on 10 April 2017.
The DPA relates to false accounting by Tesco PLC’s subsidiary, Tesco Stores Limited, between February 2014 and September 2014. The DPA is a voluntary agreement under which Tesco Stores Limited will not be prosecuted provided the business fulfils certain requirements, including paying a financial penalty of 129 million GBP.
Over the last two and a half years, Tesco PLC has fully cooperated with the investigation and undertaken an extensive programme of change, which the SFO has recognised in offering the DPA. This programme includes extensive changes to leadership, structures, financial controls, partnerships with suppliers, and the way the business buys and sells.
Tesco PLC also announces that it has agreed with the UK Financial Conduct Authority (FCA) to a finding of market abuse in relation to the Tesco PLC trading statement announced on 29 August 2014. This statement overstated the expected profits of the Group at that time and arose from the same historic accounting practices. In making its finding, the FCA has expressly stated that it is not suggesting that the Tesco PLC Board of Directors knew, or could reasonably be expected to have known, that the information contained in that trading statement was false or misleading.
Tesco PLC has agreed with the FCA (under its statutory powers) to establish a compensation scheme which will compensate certain net purchasers of Tesco ordinary shares and listed bonds who purchased those securities for cash between 29 August 2014 and 19 September 2014 (inclusive). Each net purchaser of shares will be entitled to compensation of 24.5p per share purchased, plus interest at 1.25 percent per annum if the net purchaser is an institutional investor or 4 percent per annum if the net purchaser is a retail investor, in each case with such interest running from 19 September 2014 until approximately 4 months after the opening of the scheme.*
The cost of the compensation payable is estimated by both Tesco and the FCA to be in the region of 85 million GBP excluding interest. Tesco has appointed KPMG to administer the compensation scheme, with oversight from the FCA. A further announcement will be made when KPMG has completed the preparations required to open and operate the scheme, which is expected to be before the end of August 2017. Further questions and answers relating to the scheme can be found at www.tescoplc.com
There is no penalty being levied by the FCA on Tesco.
Subject to approval by the court and compliance with the terms of the DPA, this concludes the SFO’s investigation into Tesco. It also concludes the FCA’s proceedings in relation to this matter in respect of Tesco. The Group expects to take an exceptional charge of 235 million GBP in respect of the penalty, compensation scheme and related costs. This will be booked as an adjusting post balance sheet event in 16/17.
Dave Lewis, Tesco Group Chief Executive, said: «Over the last two and a half years, we have fully cooperated 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».
