Tesco revamps Hudl tablet amid accounting crisis

Tesco has pushed ahead with the launch of its second-generation Hudl tablet, despite the £250m profit overstatement that has plunged Britain's biggest retailer into crisis.

Michael Comish, group digital officer of Tesco, on Friday said the new Hudl was a "truly unique second-generation product".

He would not say whether this Hudl would be Tesco's last after the retailer said new chief executive Dave Lewis would review all aspects of the business.

"Its impossible for me to say about any item what will happen in the future. My expectations are this will be a massive success in the market," he said.

However, he did confirm that Tesco would not be going ahead with plans to launch a Hudl phone.

People close to the situation suggest the Hudl is losing money, but Mr Comish insisted it was "commercially viable".

The new tablet will retail for £129. Faster than its predecessor and with a bigger screen, the Hudl 2 also boasts "a market leading parental control app", according to the company.

Mr Cornish refused to comment on whether video streaming service Blinkbox, another key plank of former chief executive Philip Clarke's digital strategy, was up for sale.

The Hudl launch comes amid increasing expectations that Tesco will launch a rights issue, possibly at about £3bn.

Analysts at Nomura said this week that a rights issue had become "a lot more likely".

Dave McCarthy, analyst at HSBC, also raised the possibility that rival J Sainsbury might be forced to turn to investors for capital.

However, he said in a note that the problem for Sainsbury was that "Tesco may have pre-empted Sainsbury by then with a rights issue of its own, and it might not make sense for investors to back both Sainsbury and Tesco".

Bankers noted that Tesco could be constrained from raising equity until the completion of an investigation into its accounting problem by the Financial Conduct Authority.

Tesco said this week that the regulator had begun a full investigation into the company.

Credit rating agencies Fitch, Moody's and Standard & Poor's all put Tesco's credit ratings on review for possible downgrade in the wake of the announcement, which represented Tesco's third profit warning in as many months.

Tesco said: "We have no current plans for a rights issue."

Bankers said other options for Tesco included selling some of its assets. Tesco's Asian operations would be valuable, they said, but if sold now, would leave Mr Lewis with few growth opportunities for the future. Investors would like to see Tesco sell assets in central Europe. However, these would be less valuable.

Other possibilities include selling or floating Tesco Bank, bankers suggested, or selling Dunnhumby, the data consultancy that helped Tesco create its Clubcard loyalty scheme and is now wholly owned by the retailer.

There are also swaths of businesses within the UK that are expected to be tidied up, including Dobbies Garden Centres, Blinkbox, the Harris + Hoole coffee chain and even the One Stop convenience store business.

Bankers said raising capital could give Mr Lewis breathing space to decide which assets to keep and which to sell.

Tesco did not comment further.

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