TESCO'S chairman will stand down after it announced a 91.9 per cent drop in first half pre-tax profits to £112m.

Sir Richard Broadbent said he is preparing to leave his role after UK like-for-like sales fell 4.6 per cent for the six months to August.

Sir Richard said: "The issues that have come to light are a matter of profound regret."

Tesco has been battered by a supermarket price war amid the threat from discounters Aldi and Lidl.

Chief executive Dave Lewis said a full review of the business was under way.

The UK's largest supermarket also revealed an investigation into overstated profit expectations had concluded it had an impact of £263m.

A review by Deloitte into the profits overstatement identified £118m in relation to trading profit for the six months to August, with £70m covering the 2013/14 financial year and about £75m for previous periods.

Sir Richard, who became chairman in 2011, said his decision to step down will help the company draw a line under the past.

He added: "The board's immediate focus must be on ensuring that we complete the transition to a new management team and that new and far-reaching business plans are put in place quickly.

"These plans will mark the beginning of a new phase for the company and I will begin now to prepare the ground to ensure an orderly process for my own succession at that time."

The company said its performance was not competitive enough in the first half of the year.

Total sales in the UK declined by 2.6 per cent to £23.6bn in the six months, with like-for-like sales for the final three months of the period down 5.5 per cent.

Trading profits in the UK declined by 55.9 per cent year-on-year to £499m as a result of falling sales and a sharply reduced trading margin as price cuts hit home.