News

 

De La Rue has abandoned its plan to appeal against the government’s decision to award a contract to make UK passports to a Franco-Dutch company.

The UK firm said that since its announcement on 22 March, it had “considered all options”.  De La Rue also issued its second profit warning in less than a month, saying income will be around £60m to £65m.  It blamed £4m in costs for tendering to continue making UK passports, as well as delays in other contracts.  The burgundy passport, in use since 1988, will revert to its original blue and gold colour from October 2019.

Martin Sutherland, chief executive of De La Rue, told the BBC’s Today programme that he remained “surprised and disappointed” by the government’s decision.  However, he added:

We’re a business, we have to make pragmatic business decisions.  We’ve done our homework, we’ve taken legal advice, we’ve looked at, frankly, the likelihood of overturning the decision and the sensible thing for us to do is to refocus our efforts elsewhere and to move forward.

Mr Sutherland initially called the decision to award the £490m contract to rival Gemalto “shocking” and pledged to appeal.

 

The government then granted a two-week extension in a process to decide who would make UK passports after Brexit.  That appeal process ended at midnight on Tuesday.  A spokesperson for De La Rue, said: “As we initially announced, we have looked at all possible avenues open to us, and thoroughly evaluated all our options.  “Following four weeks of intense consideration and clear legal advice, we have taken the decision not to challenge the award of the UK passport contract.”

De La Rue has held the contract to manufacture British passports since 2009. It claimed that it had been “undercut on price” by Gemalto.  The company makes British passports at its Gateshead factory where it employs around 600 people.  Mr Sutherland said: “We have the contract for another 18 months, that gives us plenty of time to take stock, refocus and drive forward on the international front so we haven’t made any decisions about jobs in Gateshead.”  De La Rue’s share price fell by 4.17% to 471.5p following the announcement which also included its second profit warning since March.  Full-year operating profit will fall short of £70.2m in operating income for the previous 12 months.  As well as the cost of bidding to make post-Brexit passports, it said there had been “delays in the shipment of certain contracts” in the last week of the financial year.

 

Lloyds Banking Group has announced that 49 branches will be closed.

Those closures, along with reorganisation elsewhere at the bank, will affect 1,230 jobs.  Lloyds says it is creating 925 jobs and existing staff will be redeployed “wherever possible”.  Of the 49 banks earmarked for closure eight belong to the Halifax network and the other 41 are Lloyds branches. After those cuts the group will have 1,750 branches in total.Like other banks Lloyds has been reducing the size of its network as customers have switched to online and telephone banking.  When chief executive Antonio Horta Osorio took over in 2011 Lloyds Banking Group had almost 2,900 outlets, of which more than 600 were were spun-off in 2013 under the TSB brand name.

In October 2014 Lloyds announced 400 branch closures as part of a three year plan and last November another 49 were scheduled to be shut.  Lloyds says the banks affected in the latest round of closures all have a Post Office “within short walking distance”, where banking services will be available.  Even after the latest closures, Lloyds says it will still have the biggest branch network.

The Bank said in a statement:

The changes in roles are in line with our plan to adapt to and meet the changing needs of our customers,

“Today’s announcement involves making difficult decisions, and we are committed to working through these changes in a careful and sensitive way,” it added.  However, Federation of Small Business national chairman Mike Cherry said the bank’s decision to accelerate its bank branch closure programme would “come as a real blow” to small businesses in the local communities affected.  “Equally, bank branches are vital to encouraging high street footfall. Cash is still the preferred payment method for thousands of shoppers.  “Reduced access to free to use cash machines is bad for our already embattled high streets and bad for local growth,” he added.  In February Lloyds announced annual profits of £5.3bn, up 24% on the previous year and its strongest performance since 2006.

UK consumer price inflation fell in March to 2.5%, the lowest rate in a year, according to the Office for National Statistics.

It fell from 2.7% in February after prices for clothing and footwear, in particular womenswear, rose at a slower rate compared to this time last year.  Alcohol and tobacco also helped ease inflation pressures.  ONS head of inflation Mike Hardie said the new autumn Budget means tobacco duty rises no longer appear in March.  The new data may raise doubts over predictions that the Bank of England is set to raise interest rates in May.

UK wages are rising – the latest data revealed an 2.8% increase in February – while inflation is easing.  The new inflation figure sent the pound 0.7% lower on the dollar to below $1.42.

David Cheetham, chief market analyst at XTB, a trading firm, said:

The bank has been widely expected to hike rates again next month, as inflation remains stubbornly above [the 2%] target, but the latest data suggest that a high-water mark may have been reached.  Therefore, the bank could well now decide to stand pat in May and await further developments as it appears that inflation could now be starting to move in the right direction.

 

Jaguar Land Rover says it will not be renewing the contracts of 1,000 temporary workers at two factories.

The UK’s biggest carmaker, owned by India’s Tata Motors, blamed “continuing headwinds” affecting the car industry.  It said it was continuing to recruit large numbers of engineers and apprentices and it remained committed to its UK plants.  Earlier this year, it said it would cut production amid uncertainty over Brexit and changes to taxes on diesel cars.  Those cuts were made at its Halewood plant in Merseyside. These jobs will go at the Solihull.

JLR was expected to announce the cuts on Monday, with Brexit and confusion over diesel cars again being cited as the chief reasons for the changes.  JLR employs 40,000 people in the UK, 10,000 at Solihull.  Professor of industry, David Bailey, from Aston University, said:

With the big turn against diesel engines, Jaguar Land Rover is particularly exposed as more than 90% of its UK sales are diesels.  “JLR has just revealed its full-electric i-Pace model and have indicated offering all-electric or hybrid variants of all their models by around 2021, but they have been far too slow compared with Tesla and BMW.”

He said the problems caused by Brexit were also unlikely to be solved in a timely manner: “It’s hard to say how long this production uncertainty will continue around Brexit negotiations, because it’s still unclear what the trading relationship will be between the UK and EU with regards to tariffs.”

Analysis: Simon Jack, business editor

JLR was very exposed to the demise of diesel. Recent figures from the trade body showed sales of diesels fell a whopping 37% in March compared with the previous year.  Unhappily for JLR, 90% of its vehicles are powered by diesel engines and there are critical industry voices that say they have been slower than their rivals to embrace hybrids and electric.  JLR Plants in China and Slovakia are increasing production, but company insiders were keen to stress that it would continue to invest in its UK plants and recently launched a drive to recruit another 5,000 engineers. Jaguar sales are down 26% so far this year, compared with last year, while demand for Land Rovers in the UK is down 20%.  Last year, global sales hit a record, but the company acknowledged that the UK market was “tough”.  Diesel registrations overall in the UK industry have plunged, down a third compared with January to March 2017

 

Sir Martin Sorrell could make almost £20m from WPP shares over the next five years despite stepping down as chief executive of the world’s biggest advertising group on Saturday.

Although Sir Martin gets no payoff or pension under his contract terms, he is entitled to share bonus awards.  The maximum number of shares Sir Martin may be awarded if WPP meets certain targets is 1.65 million.  They are worth about £19m. WPP’s shares opened down about 4%.  Sir Martin and his family own about 2% of the company – a stake worth about £300m.  After peaking at almost £19 in February 2017, WPP shares have since fallen sharply and closed on Friday at £11.88, valuing it at £15bn.  Some analysts believe WPP, which comprises about 400 separate businesses, including Ogilvy & Mather, Kantar Group, Hogarth Worldwide and Young & Rubicam, could be broken up.  Alex deGroote, at Cenkos Securities, said divisions such as Kantar, a market research business, could be sold and be worth as much as £3.5bn.

 

Marc Mendoza, founder of 360 Degree Media, told BBC Radio 4′s Today programme a sell-off was inevitable.  “When you’re that strong a personality leader within that field and you command such loyalty – a little bit of fear with it as well – you’re impossible to replace with one individual, so the parts must be sold off now to create value for shareholders.”  In March WPP reported its weakest annual results since the financial crisis, with Sir Martin describing 2017 as “not a pretty year” for the company even though pre-tax profits were just over £2bn.  Meanwhile, the Financial Times reported that the 73-year-old is free to start a rival company because he never had a non-compete agreement, according to WPP insiders.

Sir Martin departed following claims of personal misconduct. WPP had also hired a law firm to investigate claims of financial impropriety against him, but the company said that probe had concluded.  Brian Wieser, a senior analyst at Pivotal, told Today that it is unlikely that we will find out exactly why Sir Martin was being investigated.  “A lot of people will want to know what it was, just because a lot of people do know Sir Martin, but at a pragmatic business level, it’s more about who’s going to succeed him, what’s the shape of the company,” he said.  Mr Wieser said that the advertising industry as a whole had been hit hard by “package-based marketers” seeking to “cut costs aggressively”.  He said: “WPP’s been hit harder than most – they had some unusually large account losses. AT&T was one, Volkswagen was another. But there is nothing that far away from the overall industry average that was affecting WPP at the time.”

 

Coffee chain Starbucks has apologised after two black men were arrested while waiting for a friend at one of their shops in the US city of Philadelphia.

Amateur video shows police placing the pair, who were accused by shop staff of trespassing, in handcuffs.  The footage has been widely shared since it was posted on Twitter and has led to accusations of racial profiling.  Starbucks chief executive Kevin Johnson said the video was “hard to watch” and that the actions taken were “wrong”.  In the incident, which took place on Thursday evening, the two men were approached by the store manager and asked to leave after they requested the use of the toilet without making a purchase, police said.  In response, the men told staff that they were waiting for a friend and refused to leave.  Philadelphia police commissioner Richard Ross said his officers were right to carry out the arrest after staff told them the pair were causing a disturbance and trespassing.

Mr Ross said,

If a business calls and they say that someone is here that I no longer wish to be in my business, they [the officers] now have a legal obligation to carry out their duties,

n a statement released on Saturday, Mr Johnson expressed “our deepest apologies” to the two men involved in the incident and said Starbucks would do “whatever we can to make things right”.  “The video shot by customers is very hard to watch and the actions in it are not representative of our Starbucks mission and values,” Mr Johnson said.  He added that the call to the Philadelphia police department should not have been made on the “basis” of the events which took place beforehand.  However the footage of the incident, which has received nearly nine million views so far, sparked criticism and calls for a boycott of the Starbucks coffee store.  On Sunday, people gathered outside the shop in protest.  The company now plans to investigate its practices in order to “prevent such an occurrence from ever happening again”, Mr Johnson said.

 

Sales in baby goods retailer Mothercare have fallen, but online traffic is up.

The retailer reported like-for-like sales fell 2.8% in the last 12 weeks owing to decreased consumer footfall.  But internet sales were up 2.1%, with purchases from its own website up 7.2%.

Mothercare chief executive David Wood said in a statement,

“The UK retail trading environment remained relatively muted in the quarter, with a continuing trend of lower footfall in stores, in this competitive climate, promotional activity has been necessary to stimulate customer demand

Reducing Retail space 

The company also indicated that its strategy of moving away from bricks-and-mortar is continuing.  Earlier this year, the retailer said it would cut its store numbers from 140 to 80, in response to the trend to online shopping.  Mothercare’s boss said: “My immediate priority is to ensure Mothercare is put back on a sound financial footing and to improve its financial performance.  “We continue to make good progress in reducing the size of our UK store estate in response to changing consumer preferences.”

Banking on future financing 

Mothercare has struggled to managed its growing debt and has brought in consultancy firm KPMG to help with financial restructuring.

Mr Wood added,

We continue to explore additional sources of financing to support and maintain the momentum of our transformation programme,

The company is currently in negotiations to secure more funding and is expected to update the public and shareholders in May, when it next publishes results.
The global retailer hopes to avoid the fate of the likes of Toys R Us – which was forced to close all of its UK stores earlier this year – as shoppers increasingly turn to online to make their purchases.

 

A decision by the advertising watchdog has banned firms from making “misleading” claims over delivery charges.

he Advertising Standards Agency has issued an enforcement notice preventing claims of free UK delivery if it does not apply across the country.  It follows complaints that rural areas face a “postcode lottery” in additional delivery fees.  Campaigners calling for fairer charges across the UK have welcomed the move.

The Committees of Advertising Practice (CAP), which is part of the Advertising Standards Authority (ASA), concluded that companies must be more upfront in their advertising when it comes to surcharges.  Many online retailers make unconditional UK delivery claims when the same charge does not apply to all of the UK, the watchdog said.  Areas commonly affected include the Scottish Highlands and islands, Northern Ireland, the Isle of Wight and Anglesey.  ASA says it is reasonable for consumers to expect a definitive claim about delivery to apply to them wherever they live and that restrictions or exclusions must be made clear from the outset.  ASA Chief Executive Guy Parker said: “Companies must honour the delivery claims they’re making or stop making them. It’s simply not fair to mislead people about whether parcels can be delivered to them, or how much it will cost.”

‘Significant first step’

SNP MSP Richard Lochhead, who has been leading the Fair Delivery Charges campaign, praised the decision as “a significant first step”.  The Moray MSP provided information to the ASA earlier this year, detailing firms which were not upfront about additional fees.
Moray MSP said,

It’s now incumbent upon those companies who are failing to be upfront with consumers to sit up, take notice and change their practices. I hope they respond swiftly to this very clear shot across their bows.

However, Mr Lochhead called for more to be done to ensure people in the most remote and rural parts of the country are not subject to any extra costs.  He added: “Ultimately, if companies truly value their customers in rural and northern Scotland then they shouldn’t be discriminating at all when it comes to delivering goods.”  A study for Citizens Advice Scotland recently found that those living in the north and north-east pay at least 30% more for delivery than consumers elsewhere, with the figure rising to 50% more on average for the Scottish islands.  Scottish Conservative MP Douglas Ross, who has been campaigning on the issue at Westminster, also welcomed ASA’s decisions.  He said: “When delivery charges are advertised as United Kingdom, it should be clear that this includes all of the United Kingdom and not just certain locations of the company’s fancy.  “The new rules will ensure delivery charges are clear and transparent for consumers and I welcome that companies will now face penalties for misleading customers when advertising delivery charges.”

Companies must now take immediate action to ensure any adverts comply with the enforcement notice.  Any firms caught violating the notice after 31 May could be subject to enforcement action, including referral to Trading Standards.  CAP Director Shahriar Coupal said: “Our enforcement notice action makes very clear that advertisers must not mislead consumers by promising ‘free’ or ‘UK’ delivery when it turns out that delivery is not free or the item won’t be delivered if you live in certain parts of the UK.”

 

Carpetright says it is closing 92 stores and cutting 300 jobs as part of a restructuring plan.

The retailer recently started talks with lenders to ensure it does not breach the terms of its bank loans.  The chain is planning a company voluntary arrangement (CVA) that will allow it to shut the worst-performing stores and ask for rent concessions on another 113 sites.
It is the latest in a long list of businesses to run into trouble.

Retailers are being pummelled as fewer people are moving home, which means lower demand for new flooring. Consumers are also having to tighten their belts as inflation has outstripped wage growth.  Many retailers are also struggling to adjust to the shift from in-store shopping to buying goods online.  Carpetright, which has more than 400 UK shops, has been struggling with underperforming outlets which have made its rental costs harder to shoulder.  There have been similar, recent CVA arrangements at fashion retailer New Look and restaurant chains Jamie’s Italian, Prezzo and Byron.

Analysis: Kevin Peachey, BBC personal finance reporter -

The plight of Carpetright is not only a story of the struggling High Street, but also a tale of what is going on in the streets and avenues nearby.  The BBC recently revealed that homeowners are moving house half as often as they did before the financial crisis. Now, figures from surveyors have shown 12 consecutive months of falling demand from property buyers, with little sign of a turnaround.  So, with fewer people moving in to a new place, there is less demand for new fittings such as carpets and curtains. The squeeze on household finances means many of those staying put are delaying their plans to redecorate.  That is why the furniture store sales never seem to end, and why this sector is trying to find new ways to attract customers.

‘Tough Situations’ 

As part of its announcement on Thursday, it also said it had identified a “technical breach” in its borrowing agreement.  The company said it would raise £60m through a placing of new shares, which would raise money to cut debt and pay for the restructuring plan.
After initially falling by almost a quarter, shares in Carpetright were down 4.4% at 40.1p in morning trading.  The CVA needs approval from creditors, which it will seek at a meeting on 26 April, and it will then hold a meeting with shareholders to ask for their approval on 30 April.  The company gave a profit warning at the beginning of March. It added that trading conditions had remained difficult since then, but that it still expected to make only a small underlying pre-tax loss for the year.  Wilf Walsh, Carpetright chief executive, said: “These tough but necessary actions will enable us to address the burden of a legacy UK property estate consisting of too many poorly located stores on unsustainable rents and are essential if we are to restore our profitability and deliver a successful turnaround.”

In other retail developments:

  • Mothercare said its sales had fallen despite a rise in online sales. The retailer reported like-for-like sales fell 2.8% in the last 12 weeks owing to decreased consumer footfall.
  • Soft furnishings and homewares group Dunelm said its same-store sales rose 1.2% in the third quarter, sending its shares up 6% on the back of this rare piece of positive retail news.
  • And WH Smith said its profits fell 1% but it hailed a “good start” to the second half of the financial year, and is confident about the full year.

The home secretary is to announce £9m of funding to help fight criminals who use the dark web.

The hidden layer of the internet, accessed through specialist software, allows users to be anonymous – attracting those who do not want to be traced, such as online drug dealers.
Amber Rudd says the money will “enhance” responses to the crime.

Funding will come from a previously announced £50m pot for the Home Office to improve the UK’s cyber defences.