Tesco’s board was thrown into fresh turmoil last night as it was forced to make an apparent U-turn and admit no director had been in charge of its finances for the past five months.
The admission seemed to contrast with the impression given earlier in the week by chairman Sir Richard Broadbent that the former finance director Laurie McIlwee had been working on a part-time basis since quitting in April.
Analysts said the latest statement made Sir Richard’s position untenable.
He has been under increasing pressure, since the shocking statement earlier this week about the company’s £250m profit shortfall, to explain who precisely had been in charge of Tesco finances since Mr McIlwee quit.
At the time of Mr McIlwee’s departure, it said he would be available to help out during the transition period, with the bizarre job title of “CFO Emeritus”.
On Monday, Sir Richard refused to say when exactly Mr McIlwee had been working, but gave the impression during a conference call with the media that he had been in the office only a few weeks earlier. This was before Tesco announced that the start date of Mr McIlwee’s replacement, Alan Stewart, was being brought forward by two months to yesterday.
When asked during the call, following the shock warning of Tesco’s profit shortfall, why Mr McIlwee was not present, Sir Richard first said Mr McIlwee “was available to us to oversee that transition but he has not been in the office this weekend.”
He was then grilled again for further details about Mr McIlwee’s whereabouts and said: “ He’s not in the office because, as I said, he was not directly involved and has not been directly involved in the recent days and weeks.” That use of the phrase “recent days and weeks”, appeared to be at odds with last night’s new statement that Mr McIlwee had not in fact been involved since April – a full five months ago.
In that period, Tesco issued its second and third profit warnings for the year, saw its former chief executive fired and a new one installed, and then on Monday admitted to its extraordinary overstating of its revenues.
In the statement last night, Tesco said: “Tesco stated on the 4th of April that until he officially left the company in October, Laurie McIlwee would be available to carry out transitional activities and support handover with colleagues as required.
“During the transition period Laurie has in fact not been called upon by Tesco and has not been involved or had any input to any financial matters or held any position of responsibility in the company.”
Instead, it said, a group of “senior finance personnel”, excluding Mr McIlwee, had been in charge, reporting to the chief executives – Phil Clarke and then Dave Lewis when he took over.
The announcement was shocking not only because of the change in narrative from the board, but because it meant nobody had been in charge of the finances from 4 April until Tuesday, when Alan Stewart, Marks & Spencer’s former finance director, joined the company.
In that time, Tesco issued its second and third profit warnings for the year, followed shortly after by Monday’s admission that it had been overstating its revenues with a resulting £250m shortfall in profits.
Mr Stewart had been due to start later in the year, but M&S agreed to allow him to finish his “gardening leave” early. However, that acceleration of his start date raised more questions for Sir Richard about why he had not made the request earlier, given that Mr Stewart had stopped working at M&S two months ago. The Independent revealed the request for his early start had been made only this week and was granted by M&S almost immediately.
Tesco’s admission about Mr McIlwee came just hours after big City investors started dumping tens of millions of Tesco shares. BlackRock, the world’s biggest investment company, ditched more than £151m-worth of shares, while Deutsche Bank sold more than £19m, as either the funds, or their clients, appeared to lose faith with the company.
Although it remains Tesco’s third biggest investor, BlackRock’s sale took its stake down below 5 per cent.
News of the massive sell-offs came shortly after credit rating agency Standard & Poor’s said it may cut the company’s credit rating by more than one level due to the crisis, adding to similar statements from Moody’s and Fitch. S&P warned that, if the grocery giant’s independent investigation uncovers “weak” management and governance it could impose a big cut in its rating.Reuse content