Sunday Retail News Roundup
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Britain's ailing high streets have been stung by a botched review of the business rates system. Struggling stores in less prosperous parts of the UK face delays in receiving much-needed tax cuts totalling billions of pounds. Following a long-awaited revaluation, new draft business rate lists were unveiled on Friday. They propose cuts in the local tax rate at more than 300 of 431 retail centres. Thousands of firms in the North of England and the Midlands who had been expecting an immediate benefit are likely to be disappointed. A transitional scheme announced last week to gradually phase in the changes over the next five years would proceed at too slow a pace for many retailers.
BT has vowed to challenge the Government's new business rates valutations and has said it could have to push up the cost of broadband services for customers if they are enforced. The threat to its customers comes as the review which is set to come into force at the beginning of April 2017 sees BT's annual rates bill increase by 350 per cent from £165million to £743million. Business rates are calculated by taking into account property value and the business sector, as well as relevant machinery and equipment.
Dominic Chappell’s private company appears to have made a deliberate decision not to pay its tax and VAT bills and instead chose to pay out hundreds of thousands of pounds in dividends to Chappell, according to a report prepared for MPs. The study by accountancy professor Prem Sikka, commissioned by the Work and Pensions Committee, called for the Serious Fraud Office to be alerted to his findings and for MPs and investigators to probe in detail any firm ever owned by Chappell. Frank Field MP, the committee’s chairman, forwarded Prof Sikka’s report to SFO director David Green with a letter raising his own concerns about its contents. The SFO has yet to launch a formal investigation, but is looking into the events surrounding the BHS collapse. A preliminary report from the SFO to MPs was due on Friday but has not yet been received.
BT and regulator Ofcom are locked in disagreement over the future of its broadband arm Openreach with just days to go before a consultation on its future closes. The telecoms group fears a forced split could put its vast pension fund under pressure. The two sides were still some distance apart after Ofcom earlier this year said it wanted BT to set up Openreach, which sells broadband access to both BT and its rivals, as a legally separate company, with a chief executive appointed by and accountable to a new board. BT is understood to believe that the legal separation of the business could restrict pension trustees’ access to Openreach’s cashflow which could bump up pension scheme costs. It fears the scheme would affect the stability of its £53billion pension scheme which has 300,000 members and a deficit of £6billion.
Tesco could be forced to hike payments into its staff pension scheme after an increase in the deficit to as much as £5billion. The company is currently paying £270million over a ten-year period but falling yields on long-term investments mean the supermarket giant is facing a larger pension gap than anticipated. The existing payment schedule, which has been agreed with its pension trustees, would mean it would take about five years longer than previously hoped to cancel out the deficit. New plans could be made once next year’s three-year revaluation of the scheme’s liabilities is complete.
The company is expected to announce on Wednesday that sales have risen for the past three quarters. Interim profit could increase by 40 per cent to £487million. Its lower-price Farm brands range is said to be delivering rising volumes as sales speed up.
The owner of the Liberty department store in London has teamed up with the founder of Jack Wills as part of a multi-million-pound buyout of the preppy fashion chain. The private equity firm Bluegem and Pete Williams have become the retailer’s new joint shareholders as part of a deal that sees the company’s long-standing investor Inflexion bow out after nine years, while Jack Wills’s chairman, Mervyn Davies, a former chief executive of Standard Chartered and Government minister, steps down. Derek Lovelock, chairman of the retailer Mamas and Papas, will replace Lord Davies, while Mr Williams will continue as chief executive after returning to the business last year to head a turnaround. A poor start to the year saw like-for-like sales fall 3.9pc, before they rose 3.9pc in the second half of the year. Turnover was up 4.1pc to £137.4m and pre-tax earnings hit £5.1m. However, a series of exceptional items associated with the distribution issues pushed the company to a £13.8m operating loss. The new capital allows to continuation of international expansion and fast-paced revival. Thirteen new stores will open in 2016.
Tesco’s turnaround will be given another boost this week when Britain’s biggest supermarket chain is expected to post a doubling in profits and a third straight quarter of UK sales growth. However, a ballooning pension deficit will cast a shadow over an otherwise upbeat set of half year results with analysts forecastingTesco to confirm its black hole to have doubled to £5bn. The widening of the pension deficit, caused by falling bond yields since Brexit and the Bank of England’s rate cut, is expected to delay the resumption of a dividend, last paid in 2015. Tesco is expected to post pre-tax profits of £333m for the six months to the end of August, compared to the £74m recorded last year. The City is also forecasting a range of like-for-like sales between 0.5pc and 1pc, proving there is momentum behind Tesco’s return to growth. The retailer posted a 0.3pc lift in like-for-like sales in the last quarter.
Chinese takeaway chain Hotcha has sealed a £7.5m investment to fund national expansion plans, as it vows to become the Domino’s pizza of the Chinese takeaway market. Using a five-year loan from Beechbrook Capital, Hotcha will open ten new locations in London and the South East over the next 18 months, doubling its existing presence in West of England. The chain turned over £6m in the year to March 31, 2016, and generated £1m in earnings before interest, taxes, amortisation and depreciation (ebitda). The deal is a further sign that the capital’s takeaway market is getting increasingly fierce, with Amazon recently launching a one-hour restaurant delivery service to challenge the likes of food delivery apps, Deliveroo and Uber Eats. Earlier this year, the gourmet Chinese takeaway start-up, Zing Zing, raised £410,000 in a crowdfunding campaign so it could open new sites in London.
He’s jumping without a parachute. After 31 years in the cosy world of John Lewis, the employee-owned department store’s £1m-a-year managing director, Andy Street, is checking out with no payoff in a bid to become mayor of the West Midlands. Operating profits at the chain, which is regarded as a bellwether for the UK economy, slumped 31% to £32m in the first half of this year as it struggled to adapt to a fast-changing market in which shoppers increasingly expect to buy online for convenient delivery. Street’s lack of pay-off contrasts strongly with the £1.9m golden goodbye cheque collected by his former colleague Waitrose boss Mark Price when he exited to become a Tory peer and trade minister earlier this year. Street’s lack of a payoff could reflect the group’s reluctance for him to leave at such short notice. He will be out of the business on 28 October, just a month after the company confirmed he would be leaving, while Price stayed on for six months after his resignation. But it’s big leap for Street who is thought to be paid around £1.1m a year.
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