Sunday Retail News Roundup
BHS fees row erupts, Philip Green new clash BHS, Sports Direct profit slump expected, BT Openreach separation, Marks & Spencer reorganisation, Mastercard rip off fears, Warehouse, Oasis and Coast eyed by private equity groups, Liquidators seize control BHS, Six Degrees prepares flotation, Sports Direct board recruits, Grim truth Chinese producing West’s Christmas toys.
The Pension Protection Fund (PPF), bailing out the huge shortfall in BHS’s retirement scheme, has vetoed an invoice for £4.1m submitted by Duff & Phelps. The spat marks the latest outbreak of hostilities between the two sides since BHS collapse. The pensions “lifeboat” appointed a second administrator, FRP Advisory, after Duff & Phelps was accused of being too close to BHS’s former owner, Topshop billionaire Sir Philip Green. Duff & Phelps is understood to have said that its fees for seven months’ work came to £4.1m, higher than its original estimate of £3.5m for 12 months. The PPF voted against the invoice at a creditors’ meeting on November 15. Retail Acquisitions took more than £7m from BHS during its 13 months in charge, more than £4m is believed to have flowed to Chappell and his family. FRP’s lawyers are also investigating the validity of a £35m charge Green’s Arcadia Group empire held over BHS’s assets when it went bust.
Mail on Sunday.
Hopes of a solution to the BHS pension crisis before Christmas were fading last night as Philip Green’s advisers and pension regulators clashed over the state of negotiations. The stores group was finally placed into liquidation on Friday and a fresh row broke out over £35 million Green claims to be owed by the failed business, relations between the two sides appear to be worsening. It is believed the £35 million is included in the calculations by Green’s advisers of his proposal for the pension deficit. The Pension Regulator is understood to be looking for £350 million from Green. Green has insisted any arrangement to plug the BHS pension deficit and funded by him remains voluntary. Chappell, three-times bankrupt, arrested last month as part of a tax investigation into his family firm Swiss Rock which had received payments from BHS, has not yet been charged. The Serious Fraud Office is also conducting preliminary inquiries in order to consider whether to launch a formal investigation.
Sports Direct is expected to say this week that profits slumped by more than a quarter after it failed to protect itself against the huge drop in sterling following the Brexit vote. The company warned in October that ‘extreme movements’ in sterling meant profits would suffer. Sportswear is mostly made in the Far East and paid for in dollars. Most large retailers hedge against currency volatility and are not expected to feel the effects until 2017, even if sterling stays low. Analysts fear Mike Ashley will have to admit interim profits fell by more than 25 per cent to £170 million. MPs are expected to meet this week to discuss Ashley’s offer of a ‘TV debate’ at the firm’s head office.
Plans to legally separate BT from its Openreach arm to improve UK broadband provision could be blocked by Brussels. Telecoms regulator Ofcom said last week that it would begin moves to force a legal separation, but investment bank Goldman Sachs pointed out that the European Commission would have to approve Ofcom’s plan. The bank predicted Brussels would create considerable obstacles. Ofcom is calling for full legal separation of BT from Openreach after it concluded BT could favour its own retail broadband arm when making strategic decisions about Openreach. BT is resisting Ofcom’s terms, saying such a move could affect BT pensioners and drawing attention to the fact it has obligations to shareholders to retain control of the business. The broadband arm operates the wires and other hardware used to provide broadband on behalf of BT and rivals including Sky and TalkTalk. BT’s competitors claim Openreach provides slow speeds and a poor service.
Marks & Spencer could be forced to stump up at least another £500 million to fund its latest reorganisation plans. The money will be needed to close UK and international stores over the next five years as the company reshapes its business to focus on food and its more profitable sites. The plans will cut UK clothing and home retail space by a million sq ft by 2022, about ten per cent of the total. Chief executive Steve Rowe is also shelving brands Indigo, Collezione and North Coast in 2017 to focus on the core Marks & Spencer range aswell as Per Una, Autograph and Blue Harbour.
Mastercard says card payment machines will soon ask customers at tills whether they want to split the cost of expensive purchases over fixed monthly instalments. When shoppers insert their credit card into a terminal to pay, they will receive a prompt which allows them to select a repayment plan over a number of months, or pay as normal. If shoppers agree, they will be charged a monthly interest rate or a one-off fee on the purchase, which replaces the usual annual interest rate charged on the card. Mastercard says it will offer a structured repayment plan on big ticket items such as televisions and washing machines by getting customers to commit to pay a set amount each month. Retailers and banks could charge sky-high interest rates or fees that might be more expensive than the original rate on the credit card. Families are racking up debt at the fastest pace in 11 years. More than £190billion is now owed on credit cards, loans and overdrafts, 11 per cent more than only a year ago.
High street fashion chains Warehouse, Oasis and Coast are being eyed by a number of private equity groups after their Icelandic owners put the brands up for sale. The retail outlets, known as Aurora Fashion Group, have been put under ‘strategic review’, suggested price tag of £100 million. The chains are being sized up by a number of private equity firms, including turnaround group Alteri. Kaupthing’s administrators plan to retain control of UK retailer Karen Millen, although it could also be put up for sale as early as next year. Rumours grew last week of interest in the House of Fraser department store chain following the departure of its chief executive Nigel Oddy.
FRP Advisory has now placed BHS into liquidation following pressure from the Pension Protection Fund (PPF), the company’s biggest unsecured creditor. FRP, acting along with lawyers at Jones Day, have now questioned Sir Philip Green's right as a secured creditor, which would mean that he automatically receives his £35m floating charge ahead of creditors including suppliers, employees and pensioners.
A man who started his business career selling stolen bicycles to students is expected to enjoy a bumper payday in a stock exchange listing next year. Six Degrees, a London-based telecoms group, is preparing a £200m flotation in London, just five years after being founded and a year after being sold to a US private equity firm. The company is led by Alastair Mills, who sold his previous venture, Spiritel, to the Aim-listed telecoms provider Daisy Group for £27m in 2010.
Sports Direct is hoping to soothe simmering tensions with the City by beefing up its board amid the chain’s worst results in four years. This week it will reveal this week that it has hired two City figures to boost its depleted board. The appointees have a mixture of retail and financial backgrounds.
Undercover investigation by China Labor Watch exposes low wages, hazardous chemicals and overtime beyond legal limits. Toys including Barbie, Thomas the Tank Engine and Hot Wheels were made by staff earning as little as 86p an hour. Overtime can run to nearly three times the legal limit. In some factories, including one producing Happy Meal toys for McDonald’s from the new DreamWorks movie Trolls, that means some are on 12-hour shifts and have to work with hazardous chemicals.
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