I wonder whether the press corps, or the press corpse we might call them, are aware of what they are working on. Did they consider the events? It is such an interesting wave when we see the consequences, yet those who write about them don’t seem to be too fussed about the reality of the facts. So shall we take a look?
Fact: ‘He abandoned this post to become CEO of Tesco effective of 1 September, 2014‘ (at http://online.wsj.com/articles/lewis-to-become-tesco-chief-executive-a-month-early-1409312947)
Fact: ‘Tesco reveals it overstated first-half results by £250m‘ (at http://www.ft.com/cms/s/0/67fb8db4-421e-11e4-9818-00144feabdc0.html#axzz3FvJ9DhJP)
There was a fallout, as we would expect, yet to what extent are we confronted with facts and to what extent are we introduced to the real events.
From October 3rd onwards, we have seen news in regards to the gulfstream that was apparently ordered in 2013 (at http://www.bbc.com/news/business-29488777), now let’s take a look at the quotes “Tesco has confirmed it has taken delivery of a new private jet worth £30m, a week after major errors were discovered in the company’s accounts” and “Tesco paid for the jet 20 months ago and is required to take delivery”. How interesting this news (not really), in addition we see the news from the Guardian (at http://www.theguardian.com/business/2014/oct/03/tesco-corporate-jet-gulfstream-supermarket), with the quote “Tesco’s new chief executive, Dave Lewis, moved quickly to defuse a situation likely to anger investors who have seen the value of their shareholdings halve this year. No Tesco executives will ever board the jet, as he has put it up for sale – along with the rest of the Tesco fleet, which includes a Hawker 800 and two Cessna Citations” and “To charter a G550 for a 12-hour flight would cost nearly £67,000 – more than twice the average UK salary of £26,000” and finally “In a further irony Tesco has only retrenched from overseas markets in recent years. It has shut down its US chain Fresh & Easy, pulled out of Japan and scaled back its ambitions in China”.
So how about the following questions:
- Why was the board not grilled initially?
- Why do we not see the press going after the ‘departed’ managers?
- So, why are the shareholders up in arms? Were they not informed of these purchases?
That entire issue becomes odd when we consider the fact that there was retrenching moving away from the international scene and no one asked questions? Was the purchase not approved 20 months ago? Was it not reported? No one seems to ask or investigate those questions, it was ordered 20 months ago, was there no down payment?
Personal note: Can I offer a deal on one citation? I can raise $20.00 (pretty much all I have left)
‘Tesco Workers Want The New CEO To Know About The Unpaid Overtime They’re Working‘ (at http://www.businessinsider.com.au/tesco-unpaid-overtime-2014-9)
Let’s take a look at the quotes “Six of them mentioned, without being prompted on the issue, that they or their staffers were required to work unpaid overtime“, so when we consider gov.uk “Employers don’t have to pay workers for overtime. However, employees’ average pay for the total hours worked mustn’t fall below the National Minimum Wage“, was that taken into consideration? What is stated in the contracts on working overtime? Those are issues that are a given and have been a known quantity, so why does this pop up now? Let’s not forget the quote “Lewis, who started his new job earlier this month“, from an article on September 8th, the man has had the function for only one week. So is this article by Jim Edwards at the Business Insider anything but a hack job? It is even more interesting that the name Philip Clarke does not come up once in the entire article, who was in charge whilst this mess was growing, were the overtime issues properly investigated? 6 out of 500.000, I think that the business insider has other issues to explain. This article did not just pop up, a mere week after Dave Lewis got to be in charge, questions should be asked! (especially at the desk of Business Insider)
This takes us to the Guardian article (at http://www.theguardian.com/business/nils-pratley-on-finance/2014/jun/27/mark-carney-interest-rates-tesco-barclays), the quote “Half the City is playing the game of fantasy chief executive, and some former Tesco directors have been muttering darkly about Clarke’s supposed strategic errors and how the company’s woes shouldn’t be dumped on former boss Sir Terry Leahy” gives us the issue that there are several problems in the works, when we consider “This boils down to a simple question: do investors believe Tesco should cut its prices deeply, take the fight to Aldi and Lidl, and accept that profit margins of 5% are no longer viable?” gives us the question that this is all a year after the gulfstream was ordered, why was the order not cancelled at this point? The article has an interesting paragraph: “Do Tesco shareholders really want to sanction a price war, which would mean accepting a lower share price, at least in the short-term? Most, one suspects, are not convinced by Clarke’s strategy but still hope he might be proved correct. Another profits warning would force them to get off the fence. If it doesn’t happen, Clarke ought to be safe. But a warning after three years of heavy capital investment would surely force a strategic rethink“, what was decided by the shareholders? This article came on June 28th 2014, 8 weeks before Dave Lewis took the reins, so what happened in these 8 weeks? More important, it seems that no criminal investigation into Philip Clarke has been reported up to now. Before we even consider whether there are criminal charges yes or no, we see overstatements by a quarter of a billion, we see a 50 million dollar plane delivery and there are questions of the process of reporting, towards the shareholders, within the corporate structure, an oversight of transparencies and a stronger indications that the board of directors is either inapt or uninformed, which seems to point towards strong levels of negligence, possibly criminal ones. The press seems uninformed and unable to inform, so why the half-baked (as I see it) levels of the active press?
If we consider the Tesco PLC Annual General Meeting 2014 (at http://www.tescoplc.com/assets/files/cms/Notice_of_Tesco_PLC_Annual_General_Meeting_2014.pdf), we see at the first part: “1. To receive the audited accounts for the financial year ended 22 February 2014, together with the strategic report, directors’ report and auditors’ report on those accounts. The directors are required to present the annual accounts, strategic report, directors’ report and the auditors’ report on the accounts to the meeting“, that sounds nice, but in a 12 page document, which I admit is just a notice of the meeting, we see several references and an overall ‘dividend’ of as stated “To declare the final dividend of 10.13 pence per Ordinary Share recommended by the directors“, was that including or excluding the 250 million balloon act? If including, what is the dividend after that? So what was in play to begin with?
In addition in another Guardian article (at http://www.theguardian.com/business/2014/jun/27/uk-growth-figures-awaited-as-tesco-faces-agm-business-live) on June 28th we see “Shareholders may also quiz CEO Philip Clarke about the 310 separate, undeveloped sites across the UK which Tesco owns, but hasn’t developed. Enough to build 15,000 new homes, as a Guardian investigation has found“, really? So what about that gulfstream prices at 20% of the inflated amount, where is that one in the books? So this opens another door for Dave Lewis. What if these sites get converted to houses and as such people can get a Tesco mortgage? It is long term, it offers a stable future and it gives you a consumer base as you open a small Tesco on one of the plots. Tesco must change, yet to what extent?
Yet one other article from June 30th showed “Clarke repeatedly refused to bow to shareholder pressure to set a target date for when its US business Fresh & Easy – which has been in the red since it launched in 2007 – would finally begin to turn a profit“, so after 7 years there is a profit? Why was there no stronger investigation in regards to these parts? Why was there no real tally of the Tesco corporation in the Guardian and pretty much every other paper?
Now we see the following (at http://www.theguardian.com/business/2014/oct/10/tesco-sell-financial-footing-blinkbox-dobbies-dunnhumby), written last Saturday by Zoe Wood. The title is kind of catchy ‘Passed their use-by date? The businesses Tesco could sell‘, oui oui Zoe!
“Analysts think Lewis needs to find £2bn-£3bn, either from the pockets of big City investors or selling some of the family silver – or both – if it is to have a sure financial footing from which to recover from this year’s collapse in profits and the accounting scandal that has exposed a £250m black hole in expected first half profits“. First of all, these analysts are not really worth the paper they write on. This all went by them as there suddenly was a whistle blower, as such, before that none of them wondered on how there was too much (like a quarter of a Billion) in the report and until the blower of the whistle, they kept pretty quiet. I feel at times that the Monday morning quarterback is a better judge then these analytical experts. Then there is “But some retail experts think it strayed too far when it started investing in trendy restaurant chains, tablet computers and video streaming services“, is that so? It seems that the tablet sold like hot cakes and was a good alternative to the iPad and its competitors. As for selling its assets the first being ‘Dunnhumby’ “The accounts for that year show a pre-tax profit of £67.6m on sales of £165m – a year when it paid Tesco a £140m dividend. There’s no doubt Dunnhumby’s services are valuable but getting someone to part with £2bn might be a stretch“, this might be true on several counts, yet are these dividends part of the 1.1 billion profits? If not, then we are not told the whole thing, if yes, then losing 10% of the profit is not a good thing, more imp0ortant, who owns the data, who owns the parks and who is in charge? Data of this magnitude has multiple applications and additional value. Yes Lewis might want to focus on retail, but getting a shave on road to the guillotine is also questionable. Some say, if that is all that is left, then the shave is extremely important. I state, data is treasure, you only need to combine it with the right databases and you open up an entirely new branch from the initial base, which would all be Tesco’s if it is currently all Tesco’s. The important part is shown in the part of Tesco Air, the quote “Kansas Transportation’s accounts show Tesco spent £29m flying executives around the world in private planes between 2005 and 2012, but with fewer countries to visit the company’s airfare bill will probably come down anyway“, so we see on average four million a year. How many did fly? Can anyone explain how negligent acts are not investigated? Is there a case for criminal investigations? How many executives and where to? If we consider London – Tokyo business class and it costs Business Class at £1,290, it means they either flew 3100 executive, or one executive for 8 years EVERY DAY. Is anyone seeing the writing on the airplane yet? You see, in my old job we has a VC, a Sandhurst graduate. He had one massive rule (actually he had 12 of them), the rule was in place since 1992 at least. ‘Rule 4, Don’t give our profits to the airlines‘, that rule made perfect sense 12 years before the financial collapse; it should have been a biblical rule from 2004 onwards with every big corporation.
You might think that getting rid of several executives would solve it, but consider the amounts and the level of actions from long before Dave Lewis stepped in, why was this not sanitised on a massive scale al lot earlier, which gets me back to the actual AGM’s, what was discussed, what was presented and where are these documents? It feels so right to quote baby Herman from ‘Who framed Roger Rabbit‘, “this whole case smells like yesterday’s diapers!”
I can understand that the press was to some extent unaware, yet no one dug into this, why is all this managed by Kansas Transportation, were they in the AGM documents, with every small fact I get loads of additional questions, questions that I did not see anywhere in the press, so what else did they miss? Seeing it mentioned now by Zoe Wood does not count in my books, this should have been on the front page a lot longer before this.
Yet, most of the issues here we see that they ask questions of the CEO Dave Lewis, which makes sense as he is Mr Big Boss, yet the other members are not chased for answers. Why not? It seems that these people were there when massive issues were bungled. The article only has one issue that bothers me, it is not with the writer, or how she wrote it, it is an excellent piece, yet this part “Tesco is thought to be soliciting offers for Blinkbox, which was set up by former Channel 4 and Vodafone executives to create a competitor to Amazon’s LoveFilm and Netflix. If a buyer cannot be found the heavily loss making streaming service could just be closed down. “The inherent value of Blinkbox is its relationships with content providers,” says Ken Olisa, chairman of technology merchant bank Restoration Partners. “It’s an example where content is king.”” troubles me. ‘If a buyer cannot be found the heavily loss making streaming service could just be closed down‘, so why not let it close down? Why pay for the bungling of others? When we consider the part ‘The inherent value of Blinkbox is its relationships with content providers‘, so if there is enough content, there should not be heavily losses. Yes, it all depends on customers, yet content draws in customers. Is the content of good value? There is more when I look at the website. If it is so clued in, why are Nextgen consoles not there, why is the Tesco tablet not mentioned there? Seems to me that either this is not updated, especially as the Nextgen consoles were here in 2013, it seems to me that if you want a growing interest, being the first in Nextgen seems to be a high priority.
There is more, yet when we consider the issues in play, like Tesco Mobile, I see opportunities ignored, the fact that the chips are down seems to be a massive push for the siblings of Tesco to put them into high gear. Perhaps this is done, which would be fair, but the press is not noticing any of that, which makes me wonder whether things are not happening, or whether the press seems to be looking at issues wearing very specific glasses. I honestly cannot tell which, yet considering the Sony Mobile debacle, we see options for Tesco to swoop in and grab some revenue (as Sony lost 2.4 billion), there are more avenues, yet I wonder whether I should state them now, or should I wait and see what else the press at large is missing over the coming week.
Should be more fun to wait, I reckon!
P.s. Consider the AGM PDF, how come PwC is nowhere to be found in press mentions (if they are there then only in the most shallow of mentions).