Tesco is one of the worlds leading international retailers. Since the company first the trading name of Tesco, in the mid 1920s, the group has expanded into different formats, different markets and different sectors. The UKs leading retailer Tesco was floated on the stock exchange in 1947 and in 1995 took over rival Sainsburys position as the UK number one. The principal activity of the group is food retailing, with over 2,000 stores worldwide. Tesco has a long term strategy for growth, based on four key parts: growth in the Core UK business, to expand by growing internationally, to be as strong in non-food as in food and to follow customers into new retailing services. The company launched a home shopping service in 2000, allowing customers to order their shopping online. Tesco is now expanding its convenience stores and overseas into areas such as Taiwan, Malaysia, Poland, the US and Ireland.

Upper graph = 12 month share price with 6 month moving average
Lower graph = 12 month volume (red line = volume average).

EXCLUSIVE: Dave Lewis says pay deal is 'under review' in exclusive interview after £263m accounting scandal: Reward me when I rescue Tesco, pleads new chief

By Simon Watkins, Financial Mail on Sunday

Published: 22:21, 25 October 2014 | Updated: 22:21, 25 October 2014


Taking control: Dave Lewis said he joined Tesco on a package similar to his predecessor Phil Clarke

Taking control: Dave Lewis said he joined Tesco on a package similar to his predecessor Phil Clarke

Tesco chief Dave Lewis is in talks over a new bonus deal with the company’s board as he battles to reverse the retailer’s falling profits and tackle the company’s recent £263 million accounting scandal.

Lewis said he joined Tesco on a package similar to his predecessor Phil Clarke, but in an interview with The Mail on Sunday he said the details of his bonuses are now being reviewed by senior non-executives.

‘In fairness, one of the things that the chairman and remuneration committee are doing, and have asked me to look at, is reviewing what the long-term plan and the long-term incentives should be,’ said Lewis.

It has already been announced that Lewis will earn £1.25 million in salary and £525,000 a year in lieu of pension.

Previous executives have been awarded bonuses based on a range of performance targets including earnings per share and return on capital. But previous targets are likely to be inappropriate in the wake of the recent tide of bad news at the stores group.

Tesco reported a 92 per cent slump in profits last week and chairman Sir Richard Broadbent, announced he would be stepping down once a replacement had been found.

Lewis, known as an expert in turning around troubled businesses, said he agreed that senior executive bonuses should be pegged to the long-term success of their company rather than short-term targets, but said that rewards for company chiefs might have to reflect the extraordinary circumstances.

‘If you are doing a turnaround, then maybe you’d want some shorter-term targets for the leadership team,’ he said.

Lewis is already paying a personal price for mistakes made under his predecessor. Share awards he accrued over 28 years at his previous employer, Unilever, were transferred into Tesco shares when he joined the supermarket.

The shares were allocated on the basis of the Tesco share price in the first four days of Lewis’s tenure, when the price stood at about 230p.

Asked if it hurt, Lewis said: ‘Yes, it’s probably about 25 per cent down since we started.’

Lewis also revealed he had been instructed by City regulators to stop his internal probe into the accounting issues once he had established accurate figures. He had initially asked accountants Deloitte to also report on how and why the errors had occurred but had been told by the City watchdog not to do so in case it interfered with their own probe.

He said: ‘The Financial Conduct Authority said they completely agreed on our focus on being able to report the number, but they didn’t want us to focus on the how. That was the investigation they would do.

I've just been reading the early posts regarding the property portfolio... I'd be keen to hear how that currently stacks up... Anyone with info or a view?

W.

Interesting in Saturdays Sun newspaper -

Tesco value blast

Tesco was yesterday accused of over valuing its property - a day after it admitted over stating profits for the first half of the year by £263 million. The struggling stores giant portfolio is on the books at £20 billion, but top analyst Rickin Thakrar, of BEST RESEARCH, says it is really worth £10 billion, Mr Thakrar also told clients to ditch the ailing stock, saying the share price will keep diving . He wrote ''we continue to believe Tesco profits could go to zero in the UK, because of high running costs''.

WStirrup this may help -


Tesco PLC’s Property Time Bomb

By G A Chester - Sunday, 27 July, 2014


Analysts at Cazenove have painted a grim — but I think realistic — picture of the way Tesco’s UK property valuation is heading:

“The gap between the performance of large out-of-town stores and convenience stores continues to widen … This has direct and strong implications for the property valuation of the Extra stores (45% of the UK space). The company says that its UK real estate is worth £20bn based on the extrapolation of past sale and lease-back transactions to the entire estate. We believe it is likely worth less than half that value — the book value of UK land and buildings is £9.3bn and the alternative use value towards which several out of town stores are converging is a fraction of the book value”.





http://www.fool.co.uk/investing/2014/07/27/tesco-plcs-property-time-bomb/

The statement of the property portfolio by Tesco needs looking at by the Financial Conduct Authority. All basic accountancy work. The auditors are from top rank accountancy firms, Britain's cream supposedly?

http://www.dailymail.co.uk/news/article-2807913/Tesco-boss-forces-managers-eat-humble-pie-Scandal-hit-supermarket-chain-makes-executives-shop-cook-like-housewives.html

All the above post 1254 done in the 80's.

A shambles !!!!!!!!!!!!!!!!!!!!!!!!!!!

If the balance sheet's total assets has £10bn taken out of it, then doesn't this massively downvalue the whole company by £10bn?

I think it does.

Before the downvaluation: X shares = Balance sheet valuation.
After downvaluation: X shares = Balance sheet valuation minus £10bn.

Looking at this scenarion in reverse:

Let's say, that all of a sudden Tesco realised their investment into property had really paid off because all the land and buildings they had previously purchased were now worth double.

Well! That would be utterly fantastic! Massive hidden value has suddenly been unearthed.

For the moment, the book value stays as it is until the board decides to have a formal revaluation. If they never make such a decision then I don't think it affects the balance sheet.

''If the balance sheet's total assets has £10bn taken out of it, then doesn't this massively downvalue the whole company by £10bn?

I think it does.'' CORRECT .

Tesco should of had a full valuation of any property after 5 yrs of owning, with an interim valuation after 3 more yrs (ie 8yrs) and in future only when there has been a material change in value (+ or - ) Any change in the value of property due to normal market movements should be showed in a revaluation reserve, displayed separately on the balance sheet.

Hidden off the balance sheet and no notes, are property bonds that are part of the sale and lease back. In short the leases are 30yr, which can be broken by Tesco after 10yrs . This is when Tesco can buy back the property at market value and repays the bonds. In short because they have two options of buying back or paying the rent, they can avoid recording either of them by saying both are options. What is hidden off the balance sheet ?

Tesco Auditors should of captured all of the above so there should be no surprises in a great property gain or indeed a loss in value.

Tesco may be able to build on some of its land banks. If they put stores up for sale - what is the demand going to be like? with the war that's going on in the grocery market.

So everything 'property wise' is already 'correctly' already in the share price. There are no hidden surprises to the negative - or to the positive.

You tell me? :-)) You cannot believe the news that has been put out by Tesco in the last few weeks. It will be very interesting to see what the City Regulators unearth.
They in my view are going to need to siphon some of the property value to start any form of turn round.

What businesses will Tesco sell after ruling out a rights issue to raise cash?


by Lynsey Barber

October 23, 2014, 4:34pm

Harris and Holle could be one part of Tesco to go (Source: Getty)

Tesco may be in dire straits, but a rights issue was ruled out by chief executive Dave Lewis this afternoon. Rather, the team will look “to extract value” from the business, most likely by selling off some of its non-core business assets.

The supermarket sells much more than just groceries after embarking upon a rapid diversification programme. However, now in troubled times, these once-sound investments may be heading for the checkout, hopefully not with a discount sticker.

With the prospect of disposals making their way towards the checkout, which ones are likely to be bagged up?





Blinkbox

Blinkbox, the digital service for video and music streaming and book downloads, is already rumoured to be one of the assets up for grabs.

Tesco picked up the startup in 2011 for an undisclosed sum and the service has been steadily integrated with the retailer’s move into digital, with founder and chief Michael Comish even becoming Tesco’s digital director.

Customers who buy DVDs in store are able to stream the movie through Blinkbox at no extra cost, and the Clubcard loyalty scheme was introduced to the service so users can pick up points.

As the world moves online, the buy was forward thinking. One of the only positives from Tesco’s results today was an 11 per cent growth in online sales, signalling where future growth may lie. However, with competitors such as Netflix and Amazon, the service is currently loss-making.

Giraffe

Giraffe, the restaurant which attracts pushchairs from far and wide, was snapped up by Tesco for £48.6m last year. The plan was to introduce the chain into stores to make the weekly shop more of an experience.

However, the cause of Tesco’s - and the rest of the supermarkets’- profit problems is a drastic change in shopping habits. Customers are moving away from the traditional large weekly shop and towards multiple, smaller trips to the supermarket throughout the week. Tesco shoppers are heading to its smaller town and city Express and Metro stores, rather than the out of town megastores. In those, there is hardly room for people sometimes, let alone a Giraffe.

Harris + Hoole

Another food-focused buy, cute coffee shop Harris + Hoole received Tesco backing in 2013, amounting to a 49 per cent stake.

The same Giraffe strategy has already stumbled with the cafe, though. The chain had to close six of its 40 stores earlier this year and has faced mounting questions about whether Tesco will continue to back it in the current climate.

Dunnhumby

One of Tesco’s biggest successes, this time under former boss Sir Terry Leahy, the company invented the Tesco Clubcard and basically the entire loyalty scheme concept now beloved by retailers.

Tesco originally invested in the firm in 2001, upping its stake and then taking full control, and Dunnhumby now acts as a marketing services agency to many other global brands

Analysts estimate the value of the firm at nearly £1.5bn, making it by far one of the most valuable assets when it comes to selling, but it is also a money maker for the supermarket.

Asia

Back when things were good under Leahy, Asia looked like a good bet, now it’s not quite so lucrative. It’s still estimated to be worth around £7bn across various stores and malls in the region, however, but that could be a nice figure to pay into the bank in addition to cutting the costs of doing business abroad- it's already selling off the private jets the top brass previously used to travel there.

Dobbies garden centre

This may be an unfamiliar one south of the border. Dobbies is a string of Scottish garden centres which Leahy bought up in 2007. Then valued at £155m, it's now estimated to be worth £88m to the supermarket, far from the billions the supermarket is in need of and could find elsewhere. It's not pennies down the back of the sofa either though, and by selling it the supermarket would be trimming back on less lucrative non-core assets

there may be a very welcome silver lining if tesco has to abandon some or even many of its town-centre-wrecking hypermarkets
i for one would be delighted and it just may bring about a revival of "proper" food shops - butchers, bakers, greengrocers, delis and even fishmongers - in towns across the country ..... anyway, it's a nice pipedream

Sharecast -

Dave Lewis, Tesco's boss, has indicated that a third of the retailer's hypermarkets are failing, the Sunday Times said. Lewis told investors two-thirds of the giant Extra stores were "to die for", suggesting the remainder were underperforming. Clayton Dubilier & Rice, the private equity firm advised by Tesco's former boss Terry Leahy, is at an early stage in mulling an approach for Tesco's £2bn Dunnhumby data business, which was behind the success of its Clubcard loyalty programme.

Tesco dishes out £4m in share options to two most senior bosses - days after posting 91% fall in half-year profits

By City & Finance Reporter for the Daily Mail

Published: 22:09, 27 October 2014 | Updated: 08:35, 28 October 2014

Bonanza: The embattled grocer has given golden hellos to new chief executive Dave Lewis and finance director Alan Stewart

Bonanza: The embattled grocer has given golden hellos to new chief executive Dave Lewis and finance director Alan Stewart

Tesco has dished out more than £4m of share options to its two most senior bosses just days after posting a 91 per cent fall in half-year profits.

The embattled grocer, which has seen its shares fall more than 53 per cent over the past 12 months, gave the golden hellos to new chief executive Dave Lewis and finance director Alan Stewart.

The rationale for the awards was to compensate the pair for potential windfalls they may have received if they had stayed on with their previous employers.

Lewis, who came from Unilever, is due three tranches of shares which vest in 2015, 2016 and 2017.

Together the 1.6m shares are worth £2.7m calculated using yesterday’s closing price of 169.1p, down 0.35p. Stewart, who worked for Marks & Spencer before, will get 881.956 shares worth £1.4m.

However these amounts may increase dependent on dividends paid by their previous employers.

Stewart is also due more money linked to the bonus of Marks and Spencer. But Tesco said: ‘It is not possible to make this award at the current time as the level of the M&S bonus payout is not yet known
‘The directors were granted nil-cost options over ordinary shares in respect of the buy-out of awards forfeited on leaving their previous employment.’

Golden hellos are controversial with some corporate governance watchdogs who feel incentive schemes are not intended to be transferable.

Tesco attempted to head off concerns saying: ‘The remuneration committee believes that these awards fairly reflect the awards the directors forfeited on leaving their previous employment in terms of value and timescale of vesting.’

Bought a bottle of Cote de Rhone Villages at Lidl today £5 , lovely jumbly nice and dry

Not sure that selling "non-Core businesses" is the answer, although the cash will be welcome, er for hole-plugging. BUT once sold they're gone ( Where have I heard that before?), so this is no LT fix for TSCO woes.
-Indeed one might suggest that ( Selling-off) will be the cause of greater problems in the years to follow.
Also, without the Tesco-link I wonder that these peripheral businesses will be worth
anything like as much as the Bosses think.
- I bought this stock at £4+ = Ooops!
Any news of the Auditors?
Chains dragging?