Comment: Serious Fraud Office Tesco probe

The separate investigation by the Financial Conduct Authority into the £263 million accounting scandal at the company has been shelved in the light of the SFO’s entrance, but edges the probe by definition into the realms of potentially fraudulent territory rather than just possibly lack of judgment or incompetence.

For the SFO to get involved, there have to be reasonable grounds to believe that conduct might involve serious or complex fraud or bribery.

Of course, with the SFO’s chequered history on launching and securing convictions, City wags might say its involvement is good news for Tesco, and that new chief executive Dave Lewis may one day look back and say it was when Tesco began to draw a line under its problems.

But, more seriously, it has to be said the only reason the SFO has got involved is that the independent probe by accountants Deloitte and law firm Freshfields found the over-inflated profits accounting error was worse than first thought, and that Tesco had been found to be overstating its earnings for years. Without any imputation of guilt, Lewis revealed at Tesco’s latest results last week that the company had suspended payoffs amounting to about £2m to departed chief executive Phil Clarke and former finance director, Laurie McIlwee, while investigations went on.

The SFO’s involvement is not a bombshell because, as events unfolded since last summer, there was always a possibility initial investigations would unearth information that ensured things would take on a momentum of their own.

But it is still something Tesco’s much-changed management probably privately hoped would not happen.

It means we will have a backdrop of investigatory instability around Tesco for some time yet.

Oil specialist Plexus flexes its strategy

Plexus, the oil and gas wellhead specialists listed on the smaller Aim market for nearly a decade, seems to go from strength to strength.

The group, whose workforce has jumped from 17 at flotation to about 150 now, has posted a 26 per cent jump in pre-tax profits to £5.4 million, record revenues and a 12 per cent hike in the divi.

Plexus, whose announcement last September that it had doubled the size of its Aberdeen HQ seemed another statement of intent, has extended its reach globally from the North Sea over the years to currently have 15 per cent of the £400m exploration wellhead market.

But finance director Graham Steven says the group is now keen to make more impact with its technology in the significantly bigger long-term production wells market, valued at about £3 billion.

The margins are thinner due to the competition, but by its very nature there is far more volume to go for – with probably one hundred existing wells needing wellhead equipment renewal compared to every one new exploration well.

The latest results from Plexus show it doing just that – with a wellhead equipment order worth £850,000 from Centrica North Sea Gas.

If that alternative market gathers the sort of momentum for the business it has seen in its more traditional area we might be on the ground floor of a further step-change in performance from one of Aim’s unsung stars.

SEE ALSO

• Tesco chief faces grilling

• Tesco facing criminal fraud inquiry

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