Saturday, September 23, 2017

Tesco exec sold shares ahead of profit warning

Tesco exec sold shares ahead of profit warning

Stock Market Predictions

LONDON (Global Markets) - A senior Tesco (TSCO.L) executive sold stock just over a week before a profit warning sent its shares plunging, a regulatory filing shows, causing fresh embarrassment for the world's third-biggest retailer.

Noel "Bob" Robbins, UK chief operating officer, sold 50,000 shares at 404.51 pence apiece on January 4, netting around 202,000 pounds ($309,000), according to a filing published on January 5.

That was eight days before Tesco reported its biggest drop in underlying British sales for decades, and just three days before the end of the period covered by its trading statement.

UK listing rules say directors should not buy or sell shares in their company while in possession of unpublished, price-sensitive information.

The regulations, policed by the Financial Services Authority (FSA), also require directors and senior managers to obtain board-level approval before selling shares and forbid trading in shares during so-called "close periods" between the end of a financial period and the reporting of its results.

One shareholder watchdog described the sale as troubling.

"It doesn't look very good, especially in this case, when you are head of UK operations," said Simon Wong, a partner at corporate governance watchdog Governance4Owners.

Tesco said it and Robbins had operated within the rules.

"Bob Robbins sold less than 5 percent of his substantial shareholding in Tesco for necessary family expenditure," a spokesman said.

"We are confident that Bob was not in possession of any price-sensitive information at the time the sale was approved."

Wong, however, said simply operating within the letter of the law was not enough. "If these companies say it's still within the rules, then I think the rules may need to change, because this is a concern and it damages confidence."

Indeed the FSA says its listing rules are designed not only to avoid abuse but also to ensure that the right thing is seen to be done. Companies are given the freedom to impose even stricter guidelines should they deem it necessary.

Under Tesco's rules, directors were barred from trading company shares from January 7 to Jan 12.

Other retailers opted for much longer close periods ahead of their key Christmas trading updates. Marks & Spencer's (MKS.L) and J Sainsbury's (SBRY.L), for example, both ran for about four weeks, although they were reporting quarterly sales figures. Tesco published third-quarter sales on December 8, and was giving just a seven-week trading snapshot on Thursday.

Morrisons (MRW.L), on the other hand, which like Tesco had a truncated Christmas trading period of six weeks, had a similar close period that ran from December 30 to January 9.

The importance of keeping to the spirit, as well as the letter, of rules on personal dealings was highlighted last week when Swiss National Bank chairman Philipp Hildebrand resigned, saying he could not prove he had been unaware of a currency trade made by his wife.

SHARE PRICE PLUNGE

On Thursday, Tesco said investment to improve its British business would hit profits in its 2012-13 financial year, sending its shares down as much as 19 percent, their biggest one-day drop since 1988.

The stock fell a little further on Friday to touch a 34-month low of 315 pence.

"The significant movement in the share price on Thursday was, we believe, primarily due to the announcement on profit guidance and UK investment plans for 2012/13. Bob was not party to discussions around the profit guidance or the investment plans at the time he made his sale," the Tesco spokesman said.

The FSA, which routinely looks into large share price movements, declined to comment.

A Tesco veteran, Robbins, 54, was appointed UK chief operating officer on March 1, 2011, having previously worked as chief executive officer for central and eastern Europe and strategy and development director in Asia. He sits on the group's executive committee, one level below its main board.

A regulatory filing on Friday showed Tesco's new chairman Richard Broadbent bought 30,149 shares at 329.98 pence on Thursday, or about 99,000 pounds.

On December 22, internet director Ken Towle also sold 40,193 shares at 385.6 pence apiece, worth around 155,000 pounds.

($1 = 0.6528 British pounds)

(additional reporting by Paul Hoskins, James Davey, Peter Thal Larsen and Sinead Cruise; Editing by Chris Wickham and Will Waterman)

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