The week’s news included; Travelex hack: high street banks without foreign currency, JustEat & takeaway.com merger, UK financial services M&A deals hit £14.9bn, 2019 marks worst year on record for retail
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 – The top tech predictions for 2020.
- Reuters – Central banks might struggle to fight deep downturn – Carney
- FT – Law firm alcohol culture is damaging mental health
- City A.M. – Will cooling US jobs growth encourage Fed to cut rates?
1. TRAVELEX HACKED
Foreign exchange firm Travelex is being held to ransom by hackers and all IT systems are currently down. The Travelex website across 30 countries have been down since New Years Eve and ransomware gang Sodinokibi has demanded $6 million to restore the systems. They have also stolen personal data of customers, including credit card information. They say if payment is received, the information will not be used, but if not received ultimately the information will be sold on the dark web. Travelex branches are still operating but workers have resorted to using pen and paper as all online systems have been shut down. Staff have even been forced to hand over their company laptops to be scanned for viruses. A number of high street banks have had to suspend foreign currency services because Travelex supplies their foreign bank notes. Barclays, Lloyds and RBS amongst others have all been affected.
The Information Commissioner’s Office has not been notified of a breach from Travelex. All companies must report data breaches to the ICO within 72 hours of becoming aware of a data breach except where individual’s rights and freedoms are not at risk, in which case, a detailed record must be kept. Firms can face fines of up to 4% of global revenue under GDPR. For Travelex this amounts to roughly £30 million.
2. JUSTEAT AND TAKEAWAY.COM MERGER
The £5.9 billion merger between JustEat and Takeaway.com has received a greenlight from JustEat’s shareholders, ending a long standing bidding war. The deal will see takeaway.com take a 58% in JustEat for 916p a share . JustEat will also sell its take in Brazilian food delivery firm iFood.
80.4% of Just Eat shareholders approved the merger, after rejecting takeover bids from rival firm Prosus. JustEat shareholders felt Prosus’ bid failed to evaluate the challenges facing the firm. Takeaway.com’s final bid dwarfed Prosus’ which was 800p. The merger is expected to be completed by late February 2020. The joint companies process a staggering £6.6 billion worth of takeaway orders every year.
3. DIXONS CARPHONE FINE
Dixons Carphone has been fined £500,000 for a data hack which saw 14 million customers’ data compromised. Hackers installed malware on 5390 Currys PC World and Dixons Travel stores tills. They gained access to 14 million customers’ data, including 5.6 million payment card details. The breach took place in the 9 months until April 2018 when it was identified. Dixons Carphone says there is no evidence of any fraud or financial loss due to the breach. The Information Commissioners Office found that they failed to adequately take steps to protect customer data. The company did not sufficiently patch and update software, nor did it carry out effective security testing. Fortunately for Dixons Carphone, the breach was identified before the introduction of GDPR in May 2018. GDPR introduced fines of up to 4% of global revenue for data breaches. The owner of British Airways is currently facing a £183 million fine over data breach affecting 500,000 customers, substantially less than Dixons Carphone’s breach.
4. WEWORK HALTS EXPANSION
WeWork has decided to put a halt to its rapid expansion after its IPO collapse and subsequent financial drama. Amid the drama, new leases in its main markets, London and New York, have tanked. WeWork had been on a drive to increase its spaces over the past few years but has decided to put the brakes on the expansion. This is no doubt to have a knock-on effect on wider demand for new buildings which has been buoyed by the office leasing sector. WeWork held 33% of the entire flexible work space market, with over 23.4 million square feet of office space.
WeWork has had an extraordinary fall from grace. In summer 2019, it was valued at $47 billion and was due to get $10 billion in new cash from IPO investors and associated loans. After analysts and investors raised serious concerns about its structure and profitability it became clear the IPO would flop. It’s largest stakeholder and backer SoftBank put together a $5 billion rescue package, valuing the company at just $8 billion. This included a $1.7 billion severance package to Adam Neumann, over which shareholders have sued SoftBank. Now, WeWork is undergoing a substantial restructuring process to stabilise the business.
5. M&A DEAL VALUES RISE
UK financial services firms saw a £14.9 billion rise in the value of M&A deals completed in 2019. Firms pushed through £39.8 billion worth of mergers and acquisitions last year. This huge sum was largely driven by the London Stock Exchange’s £27 billion purchase of Refinitiv. The total number of deals, however, actually shrank notably last year by 25 to 211 deals. This was a slow year for M&A in the insurance sector where the value of deals shrank by £4.5 billion in 2019.
The value of foreign acquisitions of UK firms has nosedived by over £6 billion down to £5.5 billion last year. Many firms will be holding their breath awaiting the outcome of Brexit. Depending on the nature of the deal agreed, the regulatory landscape in the UK could shift dramatically, adding another layer of complexity for M&A deals. Furthermore, UK firms may be off the target list for firms looking to gain unfettered access to the EU Single Market.
6. UK RETAIL SALES
2019 was the worst year on record for UK retail stores, according the British Retail Consortium and KPMG. Many retailers had hoped for strong Christmas sales to shore up their balance sheets but this failed to materialise. There were some winners over Christmas, cinemas saw sales up 19% and dining sales rose by 10%. Across the retail sector, however, sales in November and December fell 0.9%. In 2019, total retail sales fell 0.1%, compared to a 1.2% growth in 2018. According to the retail lobby group, British Retail Consortium, this is the worst performance since records began in 1995.
7. UBER CALIFORNIA CHANGE
Uber is changing its system in California due to more stringent employment regulations. The US state introduced strict requirements in order for firms to classify workers as independent contractors, as opposed to employees. Rather than creating new protections for gig economy workers, the laws introduce a new test for classifying workers as independent contractors. Uber sued the state of California over these laws but while this case is ongoing it has taken steps to maintain its model. Uber will now introduce measures such estimated price ranges for trips instead of fixed prices and freedom for higher rated drivers to accept passengers. Axios looks more about the legal case against the state of California.
8. ASTON MARTIN PROFIT WARNING
Aston Martin has issued a profit warning following a poor 2019. It expects underlying earnings of around £130 million, around £60 million less than markets previously expected. Retail sales were up by 12% but wholesale sales fell by 7%. The company also took a hit spending more cash on marketing and customer finance. Furthermore, its lacklustre IPO in October 2018 had a knock-on effect throughout 2019. By August 2019, its stock price has plunged 75% from its IPO price. Aston Martin has said it is reviewing its funding options and plans for 2020. Aston Martin shares tanked by 16% in response to the news.
9. SUPERDRY PROFIT WARNING
Superdry has issued a profit warning after poor Christmas sales. Revenues tanked 15.8% in the run up to the new year and now predicts profits could be completely wiped out. This has been blamed upon a poor strategy to sell more clothes at full price, led by the co-founder. This issue was compounded by rivals launching “unprecedented levels of promotional activity.” The firm has also been having severe inhouse conflicts. In April 2019, all the executive board quit in protest at shareholders’ decision to place co-founder, Jordan Dunkerton, as interim CEO in April. Superdry shares sank by 20% in response to the new.
10. IPHONE SALES UP IN CHINA
iPhone sales in China soared 18% last year boosted by attractive discounts and a strong marketing campaign. The smartphone maker sold 3.2 million iPhones in China, according to the government. iPhone sales have been struggling in China recently due to increasing local competition from rivals such as Huawei, who have eaten up market share. Huawei currently holds 42% of the market. Apple shares were up 1.65% in response to the news.