There are no gaps in our finances, Asda boss tells MPs
Supermarket chief Mohsin Issa said there was no reason for concern over its debts, despite confirming it owes £4.2 billion.
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Your support makes all the difference.Bosses at Asda have told MPs there are “no gaps” in its finances amid criticism over the supermarket giant’s accounting structures.
The UK’s third largest supermarket also said nobody should be concerned about its debts, despite confirming it has £4.2 billion of debts on its books.
The supermarket chain’s leadership team faced questions on Tuesday from MPs on Parliament’s Business and Trade Select Committee.
MPs quizzed the firm over its finances, more than two years after its debt-laden takeover by the billionaire brothers, Mohsin and Zuber Issa.
The brothers are behind petrol forecourt firm EG Group and private equity partners TDR Capital.
Mohsin Issa, co-owner of Asda, which employs 151,000 people across the UK, shrugged off suggestions there was money unaccounted for in its accounts.
“I can assure you there is no gap in the accounts signed off by our auditors,” he said.
The company confirmed it has about £4.2 billion worth of debt across its different registered companies in the UK.
When asked if he had any worries about its degree of debt, Mr Issa said: “No, I don’t.
“What I would say is that the debt leverage at the start of the year was at 4.2 times, that has gone down to 3.8 times and that trajectory is to go down even further by the end of this year.
“At the same time, we are investing in colleague pay, customer pricing and loyalty. The business in highly cash generative.”
Liam Byrne MP, chair of the select committee, told the retailer he was worried about the “very large but unclear amount of debt” he claimed the firm is facing.
Michael Gleeson, chief financial officer at Asda, said a portion of its debt will face fresh borrowing rates next year and highlighted that the business is therefore expecting a further £30 million worth of interest costs.
The finance boss also defended the use of holding companies based in Jersey within its accounting, stressing that it pays UK corporation tax on all its operations.
He added: “Companies registered in Jersey can, in the longer term, facilitate corporate restructurings more quickly than can happen in England and Wales.”
He also said registering the companies in Jersey could reduce its exposure to stamp duty upon selling any parts of its business, adding that this process can also take place through UK-based companies, but will be a slower process.
The scrutiny comes days after reports that rival retailer Morrisons, which was bought by US private equity firm CD&R, told staff it needs an urgent overhaul as it seeks to improve its finances in the face of a growing debt burden.