Tesco fined £129m by Serious Fraud Office for overstating profits

Tesco released a statement to the stock exchange in September 2014 in which it admitted that it had identified a £250m overstatement of first-half profits for that year

Tesco shares lost almost half of their value in the months after the scandal broke (Reuters)

Tesco has agreed with the Serious Fraud Office to pay a £129m fine for overstating its profits in 2014.

The retailer said that it had reached a deal under which it will not be prosecuted for the accounts that were misstated between February 2014 and September 2014, but that it had agreed to pay the penalty.

In September 2014, Tesco released a statement to the stock exchange in which it admitted that it had identified a £250m overstatement of first-half profits for that year.

The UK’s supermarket watchdog later found that Tesco deliberately and repeatedly withheld money owed to suppliers to boost its sales performance artificially, in a serious breach of supermarket regulations.

Scores of investors sued the company as a result, alleging they lost millions because they bought shares on the basis of misleading accounts.

Tesco shares lost almost half of their value in the months after the scandal broke.

On Tuesday, the supermarket chain said that it had fully cooperated with the investigation over the last two and a half years and that it had “undertaken an extensive programme of change” including “extensive changes to leadership, structures, financial controls, partnerships with suppliers, and the way the business buys and sells”.

Tesco also said that it had agreed with the Financial Conduct Authority to a finding of market abuse in relation to those accounts from 2014.

The company said that the FCA has expressly stated that it is not suggesting Tesco’s board of directors “knew, or could reasonably be expected to have known, that the information contained in that trading statement was false or misleading”.

It said that it had established a compensation scheme aimed at some of the buyers of Tesco’s shares and bonds for cash during that period.

Both Tesco and the FCA said that the cost of that compensation is likely to be around £85m, excluding interest.

“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,” said Dave Lewis, Tesco’s chief executive.