Tesco Profits Plunge 92% In Accounting Chaos

Tesco's chief executive has told Sky News he will not take an axe to prices in the short term to win back shoppers, after first-half profits fell 92%.

Dave Lewis was speaking after the supermarket chain revealed its latest results and the conclusions of an inquiry into an accounting scandal.

Its chairman Sir Richard Broadbent confirmed a plan to quit as the probe identified a £263m profit overstatement.

Tesco said the internal investigation by Deloitte into its procedures had found historic failures in its UK food business going back a number of years, having previously suggested the error was a one-off.

The overstatement reflected profits in previous reporting periods too, Tesco confirmed, not just in the first half of its financial year.

Phillip Clarke was sacked as chief executive

Its share price fell 7% when the FTSE 100 opened for business in the wake of the statement but later eased back.

Analysts said it could be explained by UK sales continuing to fall and Mr Lewis' decision not to launch an immediate discount challenge to rivals - especially hard discounters at the bottom and Waitrose at the top end, who have eaten away at its market share.

Video: Ex-Investor Wants Tesco Redress

Mr Lewis told Sky's Business Presenter Ian King: "Our promotional intensity is very high."

He said: "The critical thing is that I and 320,000 other people give great service, make sure everything's available in a really good, quality way, and then price will be part of the equation."

But he added he might think about price in a "different way" once his business review was completed.

Thursday's results statement was delayed by a month because of the investigation.

Eight senior executives have been suspended pending the outcome of the inquiry, which examined how Tesco logged suppliers' rebates and if they were reported in the correct accounting period.

Tesco said there was no evidence anyone at Tesco had sought to gain personally but the findings raise questions about the leadership of former chief executive Philip Clarke, who stepped down in the summer before the accounting issues were made public.

Tesco said his pay-off - and that of former finance chief Laurie McIlwee - was being delayed until such time as inquiries were complete.

Sir Richard said his decision to stand down reflected "the important principle of accountability."

The accounting scandal failed to overshadow the spotlight on Tesco's turnaround efforts.

Pre-tax profits fell 92% to £112m in its first six months while UK trading profit was down 55.9% to £499m.

Video: Waitrose Wins As Tesco Struggles

UK like-for-like sales were 4.6% lower - slightly better than expected.

Mr Lewis said: "We know that we have got a lot of work to do.

"We know what it is we need to do to turn the business around".

Tesco's market value - which has lost £17.6bn in the last five years - has plunged more than 50% in the past 12 months alone.

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EU Wants An Extra £1.7bn Payment From UK

Britain is facing a demand from the European Union for an extra £1.7bn because of the success of the economy.

The increase would add almost a fifth to the UK's annual contribution of £8.6bn.

A spokesperson for the European Commission said it was fair because it was like personal taxation - the more a person earns, the more they have to pay.

Commission spokesperson  Patrizio Fiorilli said: "Britain's contribution reflects an increase in wealth, just as in Britain you pay more to the Inland Revenue if your earnings go up."

The demand is intended to reflect improvements to Britain's economy since 1995.

Video: Does EU Membership Benefit UK?

The change in each state's contribution is a result of changes in the way the EU calculates gross national income.

A Commission spokesman said it was mainly due to the fact that the economic strength of EU's member states had increased or decreased relative to each other.

Preliminary figures seen by the Financial Times suggest that Britain is facing the largest adjustment in the amount it is required to pay compared to other members states.

The Netherlands, another country that is being asked to pay more, is being asked for an extra £509m.

By contrast, France is due to receive a rebate of £0.8bn, Germany £618m, and Poland £250m.

Britain's surcharge is due for payment on 1 December - just days after the crunch Rochester and Strood by-election.

The vote to decide who takes the seat hangs on a knife edge with David Cameron's Tories struggling to fight off a challenge from anti-EU Ukip.

Mr Cameron held talks on Thursday evening with Dutch counterpart Mark Rutte, who is also facing a large demand for more cash, on what can be done to challenge the demands.

The surcharges are likely to overshadow a European Council summit in Brussels, where Mr Cameron is meeting leaders of the 27 other EU States, some of which are looking forward to reductions in their contributions.

Several Conservatives MEPs have already spoken out against the surcharge, saying Britain is being punished for its success.

Downing Street said the UK will be challenging the demand.

A source said: "It's not acceptable to just change the fees for previous years and demand them back at a moment's notice.

"The European Commission was not expecting this money and does not need this money and we will work with other countries similarly affected to do all we can to challenge this."

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Amazon Bleeds Value As Microsoft Delights

Shareholders headed for the fulfillment centre exit door on Thursday night as Amazon posted disappointing numbers, though Microsoft investors had more to cheer.

Amazon's stock price tumbled 11% in after-hours trading in New York - the result of a deepening quarterly loss of $437m (£272m) compared to a figure of $41m in the same period last year.

Revenue jumped to $20.6bn from $17.1bn.

The profit performance is explained by the world's largest online retailer's decision to keep investing heavily in its offering and new products at the expense of returns for shareholders.

Its forecast for Christmas sales was also cited by analysts as a reason for the latest sell-off, with Amazon stock already 22% lower this year.

The company said it expected holiday revenue of between $27.3bn and $30.3 billion - below expectations.

The Fire is Amazon's first smartphone

Amazon launched a smartphone, the Fire, earlier this year and has been offering a set-top video streaming device, a streaming video service and several tablets and e-book readers.

The company has also been investing in services for its loyalty programme, Prime, adding grocery delivery services and music streaming for Prime members as well as offering original TV shows such as the critically acclaimed "Transparent" starring Jeffrey Tambor.

It confirmed in August plans to buy the video game streaming service, Twitch, spending the best part of $1bn on the acquisition.

But it is increasingly clear that what investors want more than revenue growth, is a solid profit.

In a conference call with analysts, chief financial officer Thomas Szkutak defended its strategy and said the company is focused on "using its capital wisely so that over time we get good returns on invested capital."

Rival Microsoft's quarterly figures were well received in comparison.

Xbox consoles continue to sell well for Microsoft

The tech firm's profit and revenue sailed past expectations as chief executive Satya Nadella's push to embrace cloud computing and diversify into mobile devices helped lift sales by 25%.

Revenue from cloud services, including software delivered over the Internet, more than doubled last quarter at a time when some of Microsoft's better-known segments are slowing.

Shares jumped over 3% in after-hours trading having risen 33% in the past 12 months.

Microsoft still makes most of its money from selling traditional software for businesses and home computers but Nadella wants a shift towards software that can be easily accessed online and on the move.

The company confirmed it was to ditch the Nokia name on smartphones following the firm's purchase of the brand.

Costs related to the acquisition ate into profits to the tune of almost $1bn, with net income of $4.54bn supported by strong sales of Surface tablets and Xbox gaming consoles.

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Lloyds To Cut 9,000 Jobs In Three-Year Plan

By Mark Kleinman, City Editor

Lloyds Banking Group is to cut approximately 9,000 jobs - equating to just over 10% of its workforce - as part of moves to automate consumer-facing services at the UK's biggest high street lender.

Sky News has learnt that Lloyds will disclose plans for the cuts, which will take place over a three-year period ending in December 2017, alongside its third-quarter results next Tuesday.

The numbers are still being finalised ahead of next week's announcement, but sources confirmed that 9,000 was the most likely jobs figure to be outlined by the bank.

A target for branch closures would also be announced, according to one insider, but this was likely to be smaller than some reports had suggested.

"This is about responding to customer behaviour and ensuring that Lloyds is in the right shape for the next 20 years of consumer banking," they said.

Lloyds is understood to have more than 10 million customers who actively use online banking services, including 4.5 million mobile banking users - a level which has quadrupled during the last three years.

All of the major high street banks are shedding jobs and pruning branch networks, a trend exacerbated by the explosion in the number of banking transactions now conducted online and on mobile devices.

Lloyds is led by Antonio Horta-Osorio

Earlier this year, the British Bankers' Association (BBA) published research showing that UK-based customers conducted almost 40 million mobile and internet banking transactions each week in 2013, a huge increase on the previous year.

The job cuts at Lloyds, which employs roughly 80,000 people, will be on a far smaller scale than the cull which has taken place since the merger of Lloyds TSB and HBOS during the banking crisis of 2008.

Since then, tens of thousands of jobs have been axed at the combined group, and at rivals including Barclays, HSBC and the state-backed Royal Bank of Scotland (RBS).

It was unclear on Wednesday how many of the 9,000 roles affected would be in branches and how many in support roles at, for example, call centres.

Lloyds, led by chief executive Antonio Horta-Osorio, has also shed hundreds of branches as part of a state aid settlement with Brussels during the last five years.

His strategy update, which will be unveiled alongside results for the third quarter of 2014, is unlikely to include details of a return to the dividend list, with Lloyds - alongside other banks - facing European and UK stress tests between now and mid-December.

A spokesman for Lloyds, which is 25%-owned by taxpayers, declined to comment.

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Tesco Profits Plunge 92% In Accounting Chaos

Tesco chairman Sir Richard Broadbent is to quit as an inquiry into its accounting practices reveals a £263m profit overstatement, resulting in a 92% fall in first-half profits.

The supermarket chain said an internal investigation by Deloitte into its procedures had found historic failures in its UK food business.

It had suggested in September that the error was a one-off but said today the overstatement figure reflected previous reporting periods too.

Its share price fell 7% when the FTSE 100 opened for business in the wake of the statement.

Eight senior executives had been suspended pending the outcome of the inquiry, which examined how Tesco logged suppliers' rebates and if they were reported in the correct accounting period.

Tesco said there was no evidence anyone at Tesco had sought to gain personally but the findings raise questions about the leadership of former chief executive Philip Clarke, who stepped down in the summer before the accounting issues were made public.

Tesco said his pay-off - and that of former finance chief Laurie McIlwee - was being delayed until such time as inquiries were complete.

Sir Richard said his decision to stand down reflected "the important principle of accountability."

The business, which has been battling hard discounters and strong competition from other major chains, made the announcements as it confirmed the effect on its current half-year results.

Pre-tax profits fell 92% to £112m while UK trading profit was down 55.9% to £499m.

UK like-for-like sales were 4.6% lower - slightly better than expected.

Chief executive Dave Lewis said: "We know that we have got a lot of work to do.

"We know what it is we need to do to turn the business around".

Tesco's share price has plunged more than 50% in the past 12 months as its dominance in the UK's grocery sector was eaten away by rivals.

It had previously admitted taking its eye off the ball while hunting growth overseas though its big investment in America fell flat.

The results statement said: "We have three immediate priorities. The first is restoring competitiveness in our core UK business.

The second is protecting and strengthening our balance sheet. The third is to begin the long journey of rebuilding trust and transparency in the business and the brand."

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Profit Fall Points To Scale Of Tesco Chief’s Task

There's no getting away from it: today's numbers from Tesco are horrible, whichever way you look at them.

First, the positive spin.

A 4.6% fall in UK like-for-like sales was – astonishingly – better than many analysts had forecast, while a £937m group trading profit was substantially higher than the City expected.

But those glimmers of light will not put the underlying task facing Tesco's new boss Dave Lewis in the shade.

The UK performance in the six months to August 23 was dreadful, and it will take a miraculous transformation to show a significant improvement by the time the company reports full-year results next spring.

Tesco said the like-for-like sales fall was the result of "strong competition across the grocery market, headwinds from price cuts and fewer untargeted promotions".

For most of the last 20 years we became accustomed to hearing those gripes from Tesco's rivals, not the market leader: in itself, that illustrates just how far Tesco has fallen amid intense competition from much smaller competitors in the shape of Waitrose, Marks & Spencer (at the premium end of the market) and discounters Aldi and Lidl.

By one measure – statutory pre-tax profit, which includes one-off nasties – earnings slumped by almost 92%.

Under Philip Clarke, who was sacked as chief executive in the summer, profit declines became wearily familiar to Tesco shareholders, but not on this scale.

Improving things will be made much harder by the absence of eight key executives from the business during the most crucial trading period of the year.

Their enforced (temporary?) departure is the result of an accounting scandal now being probed by the Financial Conduct Authority and other regulators.

Tesco disclosed today that profits had been overstated by a total of £263m, the majority of which relates to the current financial year but some of which dates to prior periods.

That casts a pall over the reign of Mr Lewis's predecessor, Philip Clarke, and explains why the board has decided to delay 'liquidation' payments to him and the former chief financial officer, Laurie McIlwee.

"To be clear, we are not saying that they won't be paid, but the board has made a decision to withhold those payments until the investigations are concluded".

There's further boardroom upheaval in store. Tesco confirmed Sky News' report from earlier this week that chairman Sir Richard Broadbent is to step down next year.

The arrival of a new chief executive and chief financial officer (Alan Stewart, most recently of Marks & Spencer) would, Sir Richard said, "mark the beginning of a new phase for the company".

Tesco shareholders certainly hope so.

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Foreign Criminals Costing Taxpayers £850m

By Tom Parmenter, Sky News Correspondent

Foreign criminals are costing taxpayers £850m a year, with thousands of offenders setting up home in the UK instead of being deported.

Of the 4,200 foreign convicts living in the community, one in six - 760 - have absconded, according to a National Audit Office (NAO) report.

Among those who have absconded are 58 "high harm" individuals who have been missing since 2010, the report said.

The NAO found that despite greater resources the Home Office has made "slower than expected progress" in dealing with the problem.

The report estimated that public bodies spent £850m in 2013/14 managing and removing foreign national offenders, working out at around £70,000 per offender.

Video: How Police Stop Foreign Criminals

Meanwhile, the number of foreign prisoners has risen 4% from 10,231 to 10,649 since 2006, the NAO said.

Removal numbers have fallen to 5,097 from a peak of 5,613 in 2008/09. Meanwhile, the time it takes to deport an overseas criminal is 319 days.

This comes despite a 10-fold increase in the number of Home Office staff working on foreign national offenders (FNOs), from 100 to more than 900.

Amyas Morse, of the National Audit Office, said: "It is no easy matter to manage foreign national offenders in the UK and to deport those who have completed their sentences.

"However, too little progress has been made, despite the increased resources and effort devoted to this problem."

Conservative MP Philip Hollobone, has long raised concerns about the number of foreigners in UK prisons and failures to deport them.

He said: "Most people will be staggered that despite increasing its staffing for deportations from 100 to 900, the Home Office is not actually deporting any more FNOs than it was before.

Video: Romanian Police Fighting UK Crime

"The public will also be concerned that at any one time over 4,000 convicted FNOs are at large within our communities and that, of these, over 700 go missing.

"My view is that if you are a foreign national who commits a crime in the UK, you should be caught, convicted and sentenced with your sentence served back in your own country at the expense of your fellow nationals."

Immigration and security minister James Brokenshire MP said: "The countless appeals and re-appeals lodged by criminals attempting to cheat the system cost us all money and are an affront to British justice.

"That is why we are putting a stop to that abuse through the Immigration Act.

"New powers came into force this week to cut the number of grounds on which criminals can appeal their deportation and to end the appeals conveyor belt in the courts.

"The Immigration Act will help us deliver an immigration system that is fair to the people of this country and legitimate immigrants and tough on those who flout the rules."

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Homebase: A Quarter Of Stores To Be Closed

The owner of the DIY chain Homebase is to close a quarter of its stores over the next three years, leaving thousands of jobs hanging in the balance.

Home Retail Group (HRG), which made the announcement as it confirmed its half-year results, said it planned to shut 25% of its 323 stores by 2018 through scheduled lease expirations and sales.

It said: "The result should be a more efficient and productive estate that can support future investments". 

Homebase currently employs 17,000 people.

A spokesperson told Sky News: "HRG has announced a three-year plan for Homebase to revitalise the business for the future.

Argos, also owned by HRG, was already getting a digital makeover

"Part of the plan will be to right-size the store estate through scheduled lease expiries and a series of sales to other retailers.

"Once they are identified, our colleagues will be the first to be informed about any of the affected stores, and where possible we will redeploy colleagues to other stores within the Group, or encourage retailers buying our leases to offer roles within their businesses locally".

The transformation to a greater digital offering was confirmed against a backdrop of rising sales at Homebase.

Home Retail said group underlying first half profit rose 13%, reflecting sales growth at Argos particularly.

Profit before tax reached £30.9m in the six months to 30 August though its full-year result would depend on Argos' Christmas trading, HRG said.

Argos has itself undergone a turnaround, with Home Retail moving away from its traditional catalogue store offering towards digital click & collect.

Homebase like-for-like sales grew by 4.1% over the six-month period.

Its improved website helped multi-channel sales rise 12%.

John Walden, chief executive of HRG, said "Homebase is a good business with the basis for future growth.

"In this context, Homebase will pursue a three-year plan through to the end of 2018 to improve the productivity of its store estate, strengthen its propositions and accelerate its digital capabilities by leveraging Argos' investments.

"This will position Homebase as a smaller but stronger business, ready for investment and growth".

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Yahoo Nets Profits Boost From Alibaba Stake

A rise in mobile revenues and proceeds from the sale of Alibaba shares helped Yahoo shares gain more than 5% after-hours in New York.

The third-quarter update beat expectations and prompted chief executive Marissa Mayer to launch a defence of her strategy after it came under attack from activist investor Starboard Value.

Crucial mobile advertising revenue was $200m (£124m) and she estimated that gross revenues from mobile would be more than $1.2bn (£770m) this year.

The sale of part of Yahoo's stake in the Chinese e-commerce firm Alibaba yielded $6.3bn, taking profits for the quarter to $6.8bn (£4bn).

But there is concern that Yahoo's total revenue during the three months to September rose by just 1% from last year - a dramatic contrast to the 20% increase posted by rival Google.

Yahoo still owns nearly 384 million Alibaba shares

Yahoo's share of the roughly $141bn worldwide market for digital advertising now stands at 2.4%, down from 3.9% in 2011, according to the research firm eMarketer.

Starboard Value - a New York hedge fund - went on the attack, claiming that Ms Mayer, who took the top job in 2012, had been wasting money on ill-advised acquisitions and a bloated payroll while mismanaging its lucrative stake in Alibaba.

Ms Mayer, a former Google executive, told investors the $1.6bn she had spent during her tenure had made Yahoo more competitive in the mobile-device market.

And she insisted that Yahoo would not have been in a position to make as much money as it had on its Alibaba holdings if she had not taken steps to ease "years of tension and hard feelings" that existed between the two companies.

"This team has now been in place for two years and we've achieved much more than many people realise," Ms Mayer said.

Yahoo still owns nearly 384 million Alibaba shares, currently worth about $35bn (£21.7bn), eclipsing the value of Yahoo's ongoing internet business.

The investment leaves Ms Mayer facing further questions over how the windfall will be spent.

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Apple Revenues Up 12% After iPhone Launch

Apple has posted a 12% jump in revenue - exceeding expectations following its best ever iPhone launch.

Sales of the smartphone hit 39.27 million in the quarter ending in September, up 16% on last year.

This surpassed the roughly 38 million some on Wall Street had expected, and excluded sales in China, its largest market outside of the United States.

The new iPhone 6 and 6 Plus models went on sale last month and have already surpassed the previous-generation model in volumes, according to chief financial officer Luca Maestri.

This helped Apple record sales of $42.12bn (£25bn) and profits of $8.5bn (£5.2bn).

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1. Gallery: The Man Who Took Over From Steve Jobs

   Tim Cook, pictured here with Steve Jobs in August 2007, was born in 1960 in Alabama. He grew up in Robertsdale, finishing second in his year at the local high school

2. He has two degrees, the first in industrial engineering from Auburn Uni. He later received an MBA from Duke Uni in 1988

3. Cook was a part of the so-called Computer Revolution. He worked at computer giant IBM for 12 years, before moving to Intelligent Electronics in 1994

4. Cook gained a reputation as an excellent operations executive, next taking his skills to Compaq

5. He struck up a rapport with Steve Jobs immediately, joining Apple in 1998 when it was barely afloat

6. Within a year, he had helped Apple to swing to profit in 1998, later managing the resurgent Mac division

7. Promoted to Apple's No 2 spot in 2005, he ran the company as chief operations officer during Mr Jobs' medical leave

8. Widely liked, he is a dedicated supporter of Auburn Tigers football team and a keen sportsman

"Our fiscal 2014 was one for the record books, including the biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus," Tim Cook, Apple's CEO, said.

"With amazing innovations in our new iPhones, iPads and Macs, as well as iOS 8 and OS X Yosemite, we are heading into the holidays with Apple's strongest product lineup ever."

However, the iPad continued to struggle amid a general decline in tablet sales.

Video: Sept: Complaints Of Bendy iPhone 6

The device slid more than 13% to 12.3 million units.

Apple hopes its recent alliance with IBM will help drive more tablet and phone sales to corporate customers.

Shares in Apple were roughly flat at about $100 (£62) in after-hours trade.

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1. Gallery: Apple Unveils New iPads

   Apple has launched its new iPad Air 2 and iPad Mini 3 just hours after their details were apparently leaked by mistake on the technology giant's website

2. The devices feature Touch ID fingerprint sensors and a camera 'burst mode'

3. Burst mode lets a user take multiple shots within a split second of each other on the Air model

4. Extra features complement the boosted processor power and better camera optics which come with each new iDevice iteration

5. Apple CEO Tim Cook claims there are now 675,000 apps available for the iPad

6. Apple has also confirmed that its desktop computer, the Mac, is also receiving an update to mark its 30th birthday

7. Tim Cook says the upgrades make it Apple's "strongest ever line up"

Video: Sept: Supersize iPhone 6 And Watch

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