This week’s news includes; Williamson sacked over Huawei leak, Beyond Meat IPO, KPMG fined £6 million for poor audit, Fortnite sued under new EU copyright directive
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:
- BBC News: What went wrong at Green’s topshop empire?
- The Guardian: Brexit will slow UK economy for rest of 2019, forecaster warns – Uncertainty over future will cut growth and prevent interest rate rise, says EY Item Club.
- Chambers Student Guide: – What is corporate law?
1. GAVIN WILLIAMSON SACKED OVER HUAWEI LEAK
Former defence secretary, Gavin Williamson has been sacked for allegedly leaking information from a National Security Council meeting, but no criminal wrongdoing was found. The government made a has supposedly taken a decision to allow Chinese tech firm Huawei to help develop “non-core” aspects of the UK’s 5G network. This decision was then leaked to the press and an internal inquiry pointed the finger at Williamson. Williamson denies all wrong doing and swore on his children’s lives that he was not responsible for the leak. Despite this, Theresa May stated she had lost confidence in his ability to serve and sacked him. Former international development secretary Penny Mordaunt was appointed to the post.
Later in the week however, the head of national counterterror policing, Neil Basu revealed that Willaimson will not face criminal charges. The agency was satisfied the information disclosed to the media did not breach the Official Secrets Act. Basu confirmed that this was not a matter for the police.
The government contests that the decision to allow or refuse Huawei permission to develop the 5G network has not yet been taken.
Check our insight article exploring the potential threat posed by Huawei.
2. BEYOND MEAT IPO
Beyond Meat wowed investors and took the crown of best IPO of 2019 so far. The meat alternative food manufacturer saw its share price soar 163% on its IPO day, giving it a value of $3.77 billion. The firm had a initial offering price of $25 per share but its opening trade hit $46.
Beyond Meat posted revenue of $87.9 million last year, a 170% increase. The company is still yet to profit but its plan to increase marketing to meat-eaters could be a game-changer. Beyond Meat hope is not primarily targeting vegan shopper but rather meat-eaters. It hopes its meat-free substitutes can provide a sustainable alternative to meat. Its products are available at Whole Foods but also restaurants such as TGI Fridays and Del Taco.
3. UBER IPO
Uber is floating on the stock exchange this month and is seeking a $90 billion valuation. This valuation is some $30 billion below the upper value range predicted by some analysts. The taxi-hailing app aims to raise $10 billion. As part of the float $500 million in shares will be sold to PayPal. A number of other high-profile companies such as Alphabet and Softbank will also be investing.
Uber has never made it profit in its 10 year history and has warned investors that it may never be profitable. Last quarter, it recorded a loss of $1 billion. Some investors however, believe Uber’s involvement in driverless technology could be a game-changer for the company.
4. KPMG FINED
KPMG has been reprimanded and fined £6 million over its audit of insurance firm Syndicate 218. The Financial Reporting Council (FRC) has found KPMG made “insufficient inquiries in its 2008 and 2009 audit. The FRC also noted an “unacceptable deterioration” in the quality of KPMG’s work and committed to closer monitoring of the firm. Partner Mark Taylor and former partner Anthony Hulse have both been fined £100,000. KPMG was also responsible for the audit of collapsed contractor Carillion.
The Big Four accountancy firms have come under significant scrutiny over their audits. Last month, the CMA stopped short of recommending a complete breakup of the audit giants. The CMA have however, proposed that advisory clients can no longer be audit clients. Further measures are likely to be introduced in the coming months.
5. MUSICIANS TAKE AIM AT FORTNITE
In February, online video game Fortnite ran a virtual gig hosted by DJ Marshmello and now the PRS for Music is seeking to collect royalties for its members. At the event, 11 million players attended a virtual gig. The controversial Article 13 EU copyright directive now allows musicians and publishers to collect royalties from online gaming platforms.
The PRS for Music represents 140,000 people in the music industry and collects royalites for “performances” of music. Performances include music played at gigs or businesses but also streams, downloads or TV broadcasts. In 2018 alone, the body collected royalties from 11.2 trillion performances worldwide. Royalty revenues from streaming sites have boomed by nearly 20% to £145.7 million.
6. APPLE SALES
iPhone sales are dwindling at a substantial rate. Sales of Apple’s flagship product fell 17% to $31 billion. Total sales surpassed $58 billion in the first quarter of 2019.
It’s outlook over the next quarter is positive due to increased sales in China after Apple slashed prices. Apple had been struggling in China due to cheaper competitors such as Huawei and Xiaomi. Apple is now seeking to shift it’s business over to services. It announced the launch of its credit card, streaming platform and more. Sales from services increased year on year by nearly $2 billion to $11.49 billion. Given the gradual decline in the iPhone, Apple will be seeking to shift the balance.
Spotify has broken the 100 million mark. The music streaming service added 25 million subscribers last year to retain its dominant position in the streaming sector. The company saw growth in its US market and launched throughout the middle East and Africa. These new launches are expected to further increase its subscriber base.
Apple Music is giving Spotify a run for its money in the US, topping Spotify with 28 million, besting Spotify’s base by 2 million. Spotify’s core user base however, is in Europe where it has roughly 40 million paid subscribers. Spotify posted a 33% rise in revenue up to €1.51 billion, but also a pre-tax loss of €169 million.
8. ALPHABET RESULTS
Alphabet, the parent company of Google, saw q1 revenue grow at the slowest rate in three years, sending its share price sinking. Revenue grew to $36.34 billion in the first quarter of 2019, up by 17% since the same period last year. This figure however, fell short of analysts expectations by nearly $100 billion. Net profit also shrank from $9.4 billion down to $6.7 billion. This decline has also been attributed to $1.7 billion EU Commission fine. Alphabet’s share price fell by 6% in response to the news. Its market cap dipped beneath its record high of $890 billion. Alphabet has invested heavily in staff, add nearly 20,000 employees in the past year alone. Alphabet has also spent heavily in data centres.
9. SPORTS SPONSORSHIP
Global spending on sports sponsorship has reached record heights. The total figure is set to top £35 billion in 2019, up by 4%. Research agency Two Circles believe there is £14 billion in unrealised revenue due to outdated packages. The agency predicts that total revenue will continue to grow at 6% year on year and hit £48 billion by 2024.
Due to increasing scrutiny on the advertising of gambling firms, this could have a significant adverse impact on the figures. GVC Holdings, the owner of Gala, Ladbrokes and Coral, have stopped all football shirt sponsorship, and perimeter advertising at matches. Gambling firms currently account for 12% of all UK sports sponsorship.
10. CROSSRAIL DELAY
The delay to Crossrail has been forecast to cost TfL about £1 billion. Crossrail announced that the railway will not open in December 2019 as planned. This was primarily due to delays to signal tests and the completion. Crossrail is now expected to open between October 2020 and March 2021. TfL had initially predicted that it the delay would cost around £600 million but Moody’s has predicted the delay costs would be higher.