This week’s news includes; Apple and Samsung fined for device slow down, Lloyds landmark pension ruling, Tesla delivers third quarter profit and GBK to close stores
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- City A.M Reimagining the way we use space could reawaken our deserted high streets
- Bloomberg The Market’s Trump Sugar High Is Wearing Off
- BBC News How are your taxes spent and collected?
1. APPLE AND SAMSUNG FINED
Apple and Samsung have been fined for deliberately slowing down older devices. The companies were found by the Italian competition authority to have implemented “dishonest commercial practices” with updates that reduced device performance. Customers were also not informed of any means to restore original functionality. Apple acknowledged in December that it intentionally reduced performance of old models, supposedly to prolong the life of devices. It subsequently apologised and offered cheaper battery replacement to customers.
The Italian antitrust authority launched its own investigation following customer complaints. The Italian authorities fined Apple and Samsung €10 million and €5 million respectively. There are still many ongoing lawsuits over this issue globally. In France, it is illegal to intentionally shorten the life of products to increase sales. French law permits authorities to fine 5% of annual turnover where companies breach this law. Apple is also facing a class action lawsuit in the US.
The Guardian looks closer at the fines.
2. LLOYDS COURT PENSION RULING
The High Court has issued a landmark ruling on the gender equalisation of pension payouts. Three female former Lloyds’ employees sued the company over this issue. Historically, Lloyds pension schemes had paid male members more than female members. The court deemed that Lloyds was liable to redress any current and historic gender inequality in its pension payments. It is estimated that this could cost Lloyds up to £150 million.
The decision could have significant implications for the pension industry. Consultants LCP estimate that this ruling could cost companies in the industry £15 billion. There are likely to be numerous legal cases from members who also may have been underpaid. These lawsuits however, will also provide some much needed clarity on the full scope of the ruling. The Department for Work and Pensions will soon be providing guidance to pension schemes in light of the ruling.
BBC News explores the implications of the case.
3. BANKING FIGURES
Banks released their third quarter earnings last week and there was a mixed picture of results.
Deutsche Bank
Deutsche Bank profits have crashed 65% in the third quarter. Net profit for the quarter fell from €649 million in 2017 to €229 million this year. The bank is riddled with problems that simply won’t disappear. The bank suffered a ratings downgrade, numerous scandals and the departures of many senior executives. It has posted losses for the last three years but aims to return to profitability this year. In April this year, Deutsche Bank appointed Christian Sewing as its new CEO who introduced thousands of job cuts along with other changes. Revenue in the third quarter was down 9% to €6.2 billion
Metro Bank
Challenger bank Metro Bank had a great quarter, nearly tripling profits year on year. The challenger bank posted profits of £39.2 million a 197% increase compared to the same quarter last year. Deposits increased by £4 billion as it added over 102,000 new customers in the quarter. This failed to encourage investors as concerns about long-term growth still linger. Share prices fell by as much as 11% in response to the news.
Barclays
Barclays saw a 10% fall in profits over the first three quarters after numerous fine payouts. In 2018 alone, Barclays paid out; £1.4 billion to settle the mortgage-backed securities mis-selling scandal and over £400 million in PPI claims. These brought pre-tax profits down to £3.1 billion. Barclays say without the charges, profits would have risen 23% to £5.3 billion.
4. O2 POSTPONES FLOATATION OVER BREXIT FEARS
O2 has announced it will postpone its £10 billion floatation due to market uncertainty fuelled by Brexit. The telecoms giant was expected to float this year but it has been revealed that these plans have been put on ice. This follows Aston Martins IPO which failed to impress investors. EY claims that Brexit has cast a shadow over London’s IPO market. O2 owned by Telefonica, turned over £15 billion last year. It currently has over £35 billion of debt. The floatation was seen as a method to reduce this but the market conditions have deterred O2 from proceeding. (Sky News)
5. DEBENHAMS DRAMA
Debenhams may be forced to close 50 stores after posting heavy losses. The retailers posted a record annual loss of £492 million in the year to September 2018. The losses were largely due to £500 million non-cash writedowns. Debenhams has already begun its turnaround plan to modernise the 240 year old retailer. Unfortunately, many jobs are likely to be lost as well. The company will potentially close up to 50 stores over the next five years, putting 5000 jobs at risk. The CEO is confident that a turnaround will be achievable but investors aren’t sure. Shares in Debenhams have crashed 75% in 2018 alone. Debenhams joins a long list of retailers struggling to stay afloat. Check out our video explaining the difficulties in the sector.
6. BA DATA BREACH
BA has announced that it had suffered an additional data breach. Another 185,000 may have card payment details stolen through a hack. The airline has said that affected customers have been contacted to inform them of the breach. Hackers were able to exploit a flaw on the BA website. This allowed them to gain access to personal details and credit card information.
Last month, BA had also uncovered another data breach affecting 380,000 customers. It is believed that the same groups committed both attacks. Full details on the latest attack are still not clear. (BBC News)
7. MORRISONS LOSES LEGAL BATTLE
Morrisons has lost a significant data protection lawsuit which could see it pay millions. The case relates to a data breach that occurred in 2014. A former senior internal auditor leaked details of 100,000 employees. A group of 5,518 affected employees claimed the supermarket was vicariously liable and sued Morrisons for breach of confidence, privacy and data protection law. The High Court initially agreed and held Morrisons vicariously liable. Now the court of Appeal has upheld that judgement and dismissed Morrison’s appeal. This could potentially open the flood gates for claims of a similar nature. Supporters claim that the ruling makes employers truly responsible for what happens to employee data. Morrisons was held responsible, not because its data protection was inadequate but was vicariously liable for the actions of their employee.
The former auditor was jailed for 8 years. There is no evidence that affected employees suffered material loss as a result of the breach. Morrisons is the UK’s 4th largest supermarket. It posted revenue of over £16 billion in 2017. (The Independent)
8. TESLA POSTS PROFIT
Tesla has posted a quarterly profit of $311 million. This is only the third time in its 15 year history that it has posted a quarterly profit. Usually, Tesla tells investors not too read much into its financial reports. The company has changed its tune this quarter. CEO Elon Musk said this was a historic quarter due to its incredible hard work. Musk predicts profitability for ever quarter going forward. Production has ramped up to 80,000 and revenue increased to $6.8 billion.
This comes as welcome news following a tumultuous few months shrouded in controversy. Tesla has been tight lipped about the election of a new Chairman after Musk was forced to step down after a breaching SEC rules with a tweet. The car manufacturer is still struggling to meet its huge customer demand but appears to be on the right track. Tesla is still yet to post an annual profit.
To find out more about Tesla and its recent troubles check out our company watch page.
9. GBK TO CLOSE STORES
Gourmet Burger Kitchen is to close up to 17 stores to stay afloat. This forms part of its company voluntary agreement in which it will seek reduced rents and close stores. Over 250 jobs are now at risk. GBK has taken a £47 million hit due to consistently weak performance. Last year, it recorded a loss of £872,000 but this half year it’s expected to post a loss of £2.6 million. Famous Brands, which also owns Wimpy, purchased GBK in 2016 for £120m. It has now called in Grant Thornton to oversee the CVA process.
Gourmet burger kitchen is another casualty in the casual dining sector. Gaucho, Jamie’s Italian and Prezzo have all closed stores this year to deal with the decline. The slump has been caused by a multitude of factors. Increased staff costs and business rates have slashed profit margins. For more on the decline in casual dining check out our insight article.
10. HALFORDS WITHDRAWS FROM EVANS CYCLE RESCUE
Halfords has withdrawn its offer to rescue the UK’s largest cycling retailer. It plans to focus on its own premium cycling and invest in other areas. This has put the future of Evans Cycles into jeopardy. The company has also suffered due to the challenging retail market. While turnover increased to £138 million, annual operating losses fell to nearly £1.7 million. The firm needs over £10 million of new funding in order to stay afloat. It is now expected the Mike Ashley will make an offer to rescue the firm.
