Tesco pays $12m to settle US lawsuit

Tesco has paid $12m to settle one of two class action lawsuits brought by disgruntled US investors who sued over the overstatement of the grocer's 2014 first-half profits.

The class action was made in New York against the company and certain of its former directors but the settlement agreement will, subject to confirmation by a federal court in New York, settle the class action with no admission of liability, with Tesco denying wrongdoing.

The settled claimants owned Tesco American depository receipts (ADRs) representing roughly 2% of the issued share capital of the company.

Once confirmed, this will leave one further court claim arising from the profit overstatement that was brought in Ohio by holders of ADRs equivalent to less than 0.2% of the total.

The overstatement originally came to light after a whistleblower in the accounting department alerted new chief executive Dave Lewis in September 2014, with the FTSE 100 supermarket group admitting it had overstated its interim profits by £263m due to what it said was an “accelerated recognition of commercial income” and “delayed accrual of costs”.

Tesco suspended eight executives and withheld the pay of former chief executive Philip Clarke and finance director Laurie McIlwee while the Financial Conduct Authority and Serious Fraud Office investigated the causes of the breach.

Settlement of the first US claim was "small beer in the big scheme of things", said analyst Clive Black at Shore Capital, "albeit not should it have mushroomed".

"Whilst the devil is in the detail, we deem this development to be another notch of good news, allowing senior management to focus that little bit more on the more important day job of turning this once great business around."

Shares in Tesco were 1.3% higher at 170.65p at 0830 GMT on Thursday.