TESCO shares have dived nearly seven per cent after chairman Sir Richard Broadbent quit the troubled supermarket giant over an accounting blunder.
Sir Richard resigned after an independent report found Tesco had overstated its profit guidance by £263 million.
It came on the day the crisis-hit retailer unveiled a 92 per cent fall in half-year profits, as tough competition in the grocery market continued to take its toll on the group.
But there was better news for Tesco Bank. The Edinburgh-based outfit saw pre-tax profits rise by 18.4 per cent to £117m, before a further £27m set aside for settling PPI (Payment Protection Insurance) mis-selling claims is taken into account.
Tesco tasked Deloitte to investigate after the retailer admitted accounting errors had led it to overstate its profits guidance by £250m in September.
The errors stemmed from the accelerated recognition of commercial income and the delayed accrual of costs.
Deloitte said Tesco had overstated its profit expectations of £263m, with the retailer noting the impact on trading would be £118m in the first half of this year.
The balance, £70m relating to 2013/ 2014 and £75m to "pre-2013/14", will be treated as one off items in those accounts.
The Deloitte report has been passed to the Financial Conduct Authority, which launched its own investigation on October 1.
Sir Richard, who took over as chairman three years ago, described the crisis which has engulfed Tesco in recent weeks as a "matter of profound regret".
He said: "We have acted quickly to clarify the financial performance of the company. A new management team is in place to address the root causes of the mis-statement and to develop and implement the actions that will build the company's future."
Noting that efforts to find his successor would begin straight away, Sir Richard said his decision to step down "reflects the important principle of accountability on behalf of the board".
Tesco continues to be battered by intense competition in the UK grocery market, played out against a backdrop of declining real incomes.
As discounters Lidl and Aldi continue to eat into the share of the big supermarkets, it cited the impact of strong competition, price cuts and fewer untargeted promotions as pre-tax profits fell by 92 per cent to £112m.
Like for like sales were down 4.6 per cent in the UK, excluding petrol.
UK revenue was down by 2.7 per cent, again excluding petrol, at £21.3 billion, while trading profit for the UK plunged by 55.9 per cent to £499m.
However, total online sales for the UK were up 11 per cent and there was like for like sales growth of 0.8 per cent across its UK convenience stores.
Trader James Abbott at Accendo Markets questioned why anyone would "take a risk on a company that continues to disappoint in this manner?"
He said: "A record 92 per cent decline in pre-tax profits in the first half of the year and a fall in organic British sales described as the worst performance in 40 years does not sit well with traders across the city."
Tesco chief executive Dave Lewis, who joined one month ahead of schedule on September 1, said: "Our business is operating in challenging times. Trading conditions are tough and our underlying profitability is under pressure."
Meanwhile, Tesco Bank said it had grown customer numbers for its banking products by 13.9 per cent year on year in the six months ended August 31.
The period covered the launch of the bank's first current account in July, investment in which is expected to "broadly offset underlying profit growth for the year".
The bank reported that lending has continued to grow since year end, with personal loans up 5.4 per cent and credit card balances rising by 3.4 per cent. Balances on mortgage products had grown to £1.03bn by August 31, compared with £696.5m as of February.
Shares in Tesco closed down 12p, or 6.56 per cent, at 171p.
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