These slides are related to Tesco's fraud which occurred in 2014. The fraud was regarding overstating of profits.

1. Tesco Financial Fraud
Presented by:
Mohammad Ameer Hamza

2. Introduction to Tesco (2014)
• Multinational grocery & merchandise retailer
based in England
• 2nd largest retailer in profits and revenues
• UK’s largest private sector employer
• Stores across 12 countries (Asia, Europe & North
America)
• Constituent of FTSE 100 index
• Market capitalization approx 13.2 million Euros
• Has diversified into other sectors (Blink box,
H&H & Giraffe)

3. Tesco Logo

4. Tesco’s investment source
• Retained earnings
• Fixed Assets
• Government Grants
• Supplier’s credit

5. Business Model

6. Leading up to the scandal
2012
• Discounters (Aldi, Lidl) enjoy rapid sales growth (9%)
• First profit warning in 20 years wipes 5bn Euros off Tesco’s
market cap.
2013
• Decline in profits; full year pre-tax profit halves to 1.96bn Euros
• Continuing profit loss for 5 years in US; Tesco quits fresh & easy
2013-2014
• Share loses more than half their value
• Feb-Aug, 2013: Pre-Tax profit 1.6bn Euros
• Feb-Aug, 2014: Pre-tax profit 112 million Euros

7. Scandal Timeline
(19/9) Employee suggests
that the profit may have
been overstated
(22/9) Profit hole
discovered
Deloitte begins
investigation
(1/10) Financial conduct
authority begins
investigation
Blink box put up for sale
(16/10) Moody’s & Fitch
downgrade Tesco’s debt to
BAA3
23/10) Deloitte results:
Profit overstatement (Euro
263m)
Premature income
recognition & delayed
accrual costs
(29/10) Serious Fraud
officer begins investigation

8. My Inference
• Related to overstating of profits
• Lost 2 billion euros
• Several executives & directors fired
• Reached an agreement with authorities
• Avoided Prosecution
• Should be given a second chance

9. Counter Measures
• Strengthen UK business core
• Strengthen balance sheet
• Build trust & Transparency on brand