Tesco's UK forecasts changing overnight in 2014, court told

LONDON, Oct 10 (Reuters) - Tesco had become such a complex business by 2014 that internal forecasts for its UK grocery business were changing overnight, a London court heard on Tuesday.

Amit Soni, a senior accountant at Tesco, was giving evidence for a fifth day at the trial of three former senior executives at Britain’s biggest retailer who are accused of fraud and false accounting in 2014.

Christopher Bush, 51, who was managing director of Tesco UK, Carl Rogberg, 50, who was UK finance director, and John Scouler, 49, who was UK commercial director for food, all deny any wrongdoing and have pleaded not guilty.

The trial, which opened on Sept. 29, follows Tesco’s announcement in September 2014 that its group profit forecast had been overstated by 250 million pounds ($330 million) mainly due to booking commercial deals with suppliers too early.

On Tuesday Nicholas Purnell representing Rogberg told the court about an email Soni sent to Rogberg at the end of March 2014.

In the email Soni noted that the forecast for the difference between the UK food business’s actual result for “period 1” (March) in the 2014-15 financial year and its budget had narrowed from 108 million pounds ($143 million) on the Thursday of the week to one of 75.6 million pounds on the Friday as more data became available.

“I’m not criticising Mr Soni, I’m merely pointing out that overnight the figure can move from 108 to 76 ... Pointing out what can happen in a business as complex as Tesco,” Purnell said during his cross examination of Soni at Southwark Crown Court.

Tesco’s disclosure in September 2014 saw its shares tumble and plunged the company into the worst crisis in its near 100-year history.

Last week lead prosecutor Sasha Wass had told the court that all three defendants were well aware that a hole in Tesco’s accounts was “spiralling out of control” in the first half of 2014 but connived to conceal their failure to meet targets.

On Tuesday Purnell told the court about a document Soni and his colleague John Williamson prepared in March 2014 ahead of a meeting with Tesco’s then chief financial officer Laurie McIlwee.

Soni said his aim was to explain to McIlwee how Tesco’s commercial gross margin behaved quarter by quarter and to see if spikes in commercial gross margin could be smoothed out.

Purnell told the court the paper became known as “Reporting the Truth.”

“Reporting the Truth has got nothing whatever to do with mis-reporting the accounts from one year to another has it ?” he said.

He said it instead highlighted the problem inherent in Tesco’s system.

The trial is expected to last beyond Christmas. ($1 = 0.7569 pounds) (Reporting by James Davey; Editing by Greg Mahlich)