Sunday Retail News Roundup
BHS’s bosses may face clawback, May retreat workers on boards, Crisis for Chappell another company on brink, Business rates shock, Post Office reforms, Jackpot! Online gambling bonanza, Black Friday overhyped, Industry bodies slam new business rates appeals, Blitz on betting machine stakes, Marstons push pays off, Shocking Pink Tuesday, Paralympians join top label.
BHS’s biggest creditor is pushing for legal action against former directors of the failed retail chain. The Pension Protection Fund (PPF) is in the process of rescuing the company’s 20,000 retirement scheme members at a cost of hundreds of millions of pounds. It is understood to have asked BHS’s administrators to put it into liquidation by the end of the month. One of a liquidator’s key duties is to explore whether legal claims can be brought against former directors and shadow directors to claw back funds for creditors. It can also decide if past deals should be reversed. FRP Advisory, the City firm that is set to carry out the liquidation, is expected to look into the possibility of bringing misconduct charges against former directors, including Dominic Chappell.
Prime minister’s olive branch to City in return for curbs on bosses’ pay. Theresa May is quietly trying to back away from her controversial plan to place workers on company boards as part of an attempted truce with the City. Faced with protest from business leaders over the logistical complications of adding employee representation at the highest level of the FTSE 100, the prime minister is said to have agreed to a watered-down version of the plan. In exchange, bosses are being told to back No 10’s push for additional curbs on executive pay including annual, legally binding shareholder votes on director remuneration. The peace deal follows months of hostilities between the new government and big business, stoked by May’s attacks on multinational tax manipulation, cosy boardroom appointments and “international elites” at the top of big businesses who are “citizens of nowhere”.
Mail on Sunday.
Former BHS owner Dominic Chappell is struggling to keep another business interest afloat and has admitted that it is running out of cash. The serial bankrupt is the sole director at Todex Corporation, a stock market listed business based in Las Vegas. Chappell acquired the company, originally a software developer, earlier this year. He may have wanted to use it as a vehicle for his retail assets and to gain a fast-track listing across the Atlantic known as a reverse takeover. Chappell was appointed to Todex’s board in April while battling to keep control of chain store BHS. Todex filed a warning with the US stock exchange authorities last month. Chappell was arrested earlier this month by Revenue & Customs in connection with his family business, Swiss Rock.
The Government is planning radical changes to the business rates regime which could cost firms billions of pounds by blocking them from appealing against their rates bills even when they are known to be wrong. The overhaul of the system has been condemned by a consortium of business groups representing hundreds of thousands of firms which predicts it will result in companies being forced to close. The barrage of criticism comes ahead of the Autumn Statement next week when Chancellor Philip Hammond is expected to reveal a shortfall of up to £100 billion in the budget over the next five years as a result of Brexit. There have been years of bitter complaints about the £26 billion-a-year business rates system. Sharp rises in rates bills and a delay in revaluations have been blamed for undermining firms and compounding misery on high streets. The Government’s plans would slash the number of appeals and help it reduce the backlog of 280,000.
Paula Vennells spent her career on the high street, working at Lunn Poly, Argos and Costa. At the Post Office, in clambering back from a £200 million loss at its nadir, Vennells tells a tale of entrepreneurship on either side of the counter. The centuries old British institution is set to report its first profit in decades. Just like the drop-off in letter-writing, the decline of the Post Office seemed a foregone conclusion in digitally-driven times. Only last month, union members staged another walkout in protest at further job cuts. Yet Vennells has openings in mind. She can see room for an extra 2,000 post offices over time, some of them on wheels to serve remote communities. In fact, the growth of her 11,600-strong network might hasten shutterings of a different kind. When a ‘universal access’ deal is struck early next year, the Post Office will take on more basic banking services on behalf of the high street lenders who are eager to scale back on costly branches themselves. It is one of the reasons that Vennells believes she can report a first profit in almost two decades for the 371-year-old institution in 2018. She said ‘My ambition now is to create a business that generates a profit of £50 million to £100 million on an annual basis’. The Communication Workers Union and Unite are angry at the transfer of some of the directly-run Crown post offices to WH Smith stores, as well as 600 redundancies at the firm’s cash-handling operation. The squeeze continues. Vennells suspects more of the near-300 remaining directly run post offices will transfer to concessions within the stores of partners such as McColls, Spar and the Co-op.
Online gambling companies are facing a £100 million tax hike under plans by the Government to tax ‘free spins’ and bonuses, even as the industry pays double what was expected in new levies on offshore operators. Online bingo or Las Vegas-style slot machine games regularly offer free spins or bonuses to customers as a reward for signing up and playing. They are seen as an essential way to attract new customers and keep existing ones. Even though these perks are free to customers, Revenue & Customs plans to force operators to pay tax on them to bring them into line with bonuses in sports betting that are already subject to tax. The move, expected to come into force next autumn, is set to cost the industry more than £100 million a year. With between 200 and 300 online gaming companies operating in the UK, the tax could increase consolidation in an industry that is already scrambling to mitigate the effects of Remote Gaming Duty, also known as the Point of Consumption tax. Nearly every bookmaker in the UK has set up an offshore division for phone and internet gambling in the past 20 years as they could then pay little or no tax. But a change in the law in 2014 meant any operator who took bets from UK-based customers had to be licensed by the Gambling Commission and were liable for Remote Gaming Duty at 15 per cent of gross profits. Since the tax was introduced, the industry has been growing by about 10 per cent a year, which has contributed to the higher tax receipts,’ he said. One smaller online bookmaker admitted the duty was costing it £10 million a year, meaning the larger players are paying much more. William Hill paid £54 million in Remote Gaming Duty in 2015. Betting companies must also pay General Betting Duty and Machine Games Duty, adding to pressure to consolidate over the past year. The Ladbrokes and Gala Coral merger earlier this month was just the latest in a long line of tie-ups. Paddy Power and Betfair, GVC and Bwin, Stan James and Unibet have also merged. William Hill fought off a takeover bid from 888 and Rank Group, but rumours still persist about a potential bid from private equity firm CVC, owner of Skybet. William Hill itself has also tried and failed to merge with 888 which had also tried to take over Bwin.
It is overhyped, overrated and over here yet one in three shoppers is expected to hit the shops this ‘Black Friday’ in the hope of snapping up a bargain. The US phenomenon is now part of the British festive calendar and along with Cyber Monday three days later it has toppled Boxing Day from its traditional start of the winter sales season. Despite warnings by consumer group Which? that as many as half of UK ‘deals’ were cheaper before or after Black Friday last year, the four-day extravaganza is expected to ignite a £5 billion spending spree. The weaker pound might mean that now is a good time to stock up on big items. Patrick O’Brien, retail analyst at Verdict Research, says: ‘It is a difficult message for retailers to signal, “Buy now or pay more later.” But it will be hard for them next year not to pass on the increased costs from a weaker pound.’
Under a new “reasonable professional judgment” provision, ratepayers will not be able to argue against a rates bill if its margin of error was inside 15pc, in an attempt by the Government’s Valuation Office Agency (VOA) to try to reduce the number of appeals. The new business rates appeal regime, known as Check, Challenge, Appeal, has been condemned by the British Property Federation, the British Beer and Pub Association, the Association of Licensed Multiple Retailers, British Hospitality Association, retail body Revo, Business Centre Association and the British Retail Consortium.
A looming government crackdown on high-stakes gambling machines threatens to wipe a quarter off Ladbrokes Coral’s earnings in the first year after their £3.3bn tie-up. The betting behemoth has the industry’s largest exposure to the fixed-odds gambling terminals, which have come under the glare of policymakers in a triennial review of the sector. Ladbrokes’ revenue from the betting terminals makes up 60pc of UK revenue, the political threat could wipe £100m from pre-tax earnings next year. Government figures show that in 2015 the gambling industry employed more than 100,000 people and contributed £10.3bn to the economy.
Marston’s board is preparing to raise a glass to the brewer’s gruelling three-year overhaul this week as the push towards premium food and beers pays off. The Wolverhampton-based pub chain is expected to unveil a three-fold surge in full-year profits after shedding older outlets in favour of new gastropub dining and craft beer. The company’s £70m-a-year investment in pub dining is likely to serve up a pre-tax profit of £98m compared with £31.3m last year and a loss of £59m in 2014. Marston’s, which operates around 1,700 sites across the UK, including the Pitcher & Piano chain, sold off 450 sites and invested in 134 pub restaurants. The brewer also paid £25.1m for Thwaites’ brewers, which makes premium ales, including Wainwright and Lancaster Bomber. By tapping into demand for high-end pub experiences, Marston enjoyedlike-for-like sales growth of 2.3pc over the past year, despite a slowdown in the final months of its financial year. By contrast, Mitchells & Butlers, which operates the O’Neill’s and Toby Carvery chains, has underperformed against its peers, which analysts blame on underinvestment in its estate. Last year, pre-tax profit climbed to its highest in three years to £184m from £126m in 2014, but investors expect its full- year results this week to reveal a small slip, at £183.8m as sales stall. In September, Mitchells said like-for-like sales had crept higher over the year as revenue from food sales was virtually unchanged.
We are now getting close to the hullabaloo of Black Friday, which officially kicks off on November 25th. In all this consumer hubbub, however, we should not be distracted from other important days at this time of the year. Let me remind you: Puce Monday (November 28) is the official start day for postmen to go on their rounds wearing Santa hats. Unfortunately it coincides with the start date for supermarket check-out staff to put on reindeer antlers. Fights tend to break out between Santas and reindeer. Also there may be some locking of antlers on late-shopping nights.
At a memorable London fashion show in 1998, Alexander McQueen sent double-amputee athlete Aimee Mullins down the catwalk wearing a pair of hand-carved wooden prosthetic legs. It was seen as a groundbreaking moment for an industry not renowned for being inclusive. Why aren't more big brands designing clothes for people with disabilities?. That was nearly 20 years ago. Today, however, high-profile disabled models are still few and far between, and fashion brands, from high-end to high street, do little to communicate with disabled shoppers. Now one well-known label is hoping to change that. Teatum Jones, which opened this year’s London Fashion Week with a collection inspired by the LBGT community, is setting its sights on people with disabilities and designing a new range specifically for them.
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