Tesco results checklist

Tesco should have published its half-year results three weeks ago, but it's been a bit busy looking into the small matter of a £250 million black hole in its accounts. With a new boss and finance chief in place, and with other directors suspended, numbers for the six months ended 31 August will now be published on 23 October. But what should investors look out for?

First question: how is the investigation into the accounting scandal progressing?

Early booking of commercial income on promotional deals, discounts and rebates negotiated with suppliers had been rife at Tesco, it seems. Management delayed booking of costs, too. Deloitte has been drafted in to go through the books, but the "comprehensive independent investigation" promised by new CEO Dave Lewis will take time. It's incredibly complicated stuff, and a final conclusion may take many months. But expect some news for shareholders on Thursday.

"The initial findings should allow management to guide to the full-year impact," reckons Deutsche Bank. "We assume a £250 million full year impact, on the basis that the second-half budget possibly included a similar overstatement."

What about the full investigation by the Financial Conduct Authority (FCA)

The City watchdog thinks the situation at Tesco is so serious it has launched its own "full investigation" into the overstatement of profits. Tesco will have little control over this, and no update is expected from the FCA.

Will management announce a new strategy?

Unlikely. Both Lewis and sidekick Alan Stewart have only been at the company a matter of weeks, and will not want to rush into anything. That said, they must make changes, and sooner rather than later. Deutsche Bank thinks it's too early for management to commit to a new strategy. And even if they did have a plan, the broker suspects they'll take a "doing rather than talking approach." The first we're likely to hear about new initiatives is after they've been implemented.

Could Lewis resort to a rights issue?

This would be a real surprise so early in his tenure. The supermarket is making money and would rather offload international operations or some of its vast UK property empire before passing the begging bowl to shareholders.

Have things improved in the second half?

No. The supermarket price war is hotting up and Tesco is losing. Latest data from Kantar Worldpanel has just revealed Tesco was the worst performing supermarket in the three months to 12 October. Sales sank by 3.6% and its share of the market fell 1.3 percentage points to 28.8%. Clearly, the second half has not got off to a great start.

How bad will the numbers be?

Ugly. Tesco had said trading profit for the six months is expected to be in the region of £1.1 billion, but that was before it had identified the £250 million black hole. We've listed some other key numbers forecast by Deutsche Bank.

• Sales excluding VAT: down 1% at £31.6 billion
• UK sales: down 3% at £21 billion
• Underlying operating profit: down 46% at £854 million
• UK profit: down 68% at £365 million
• Underlying profit margin: down 230 basis points to 2.7%
• UK margin: down 350 basis points to 1.7%
• Dividend: down 75% to 1.2p

Also watch out for any comment on pricing and promotions, cost-cutting or property sales.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.