Thursday 05/12/19

1. In TECH NEWS, digital services taxes set to go ahead despite Trump’s threats and Slack raises its forecasts
2. In TROUBLED COMPANY NEWS, Expedia loses its CEO and CFO, Metro Bank’s CEO departs, M&C Saatchi’s share price halves on an accounting scandal and M&G suspends its £2.5bn property fund
3. In RETAIL NEWS, Boohoo.com’s founders look to cash in, Clintons gets rescued and Quiz is looking questionable
4. In OTHER NEWS, I bring you an annoying puzzle…

So digital taxes are set to go ahead despite Trump’s threats and Slack lifts forecasts…

Countries vow to press ahead with digital taxes despite US threat (Financial Times, Tim Bradshaw) shows that countries including the UK, Canada, Austria and Indonesia are among those pressing ahead with plans to impose taxes on US tech companies despite threats of retaliation from Trump. There are two really good charts in this article that gives you a per country breakdown of existing and proposed digital services taxes from around the world as momentum on this seems to be building. * SO WHAT? * It’s imperative for something like this to be adopted as widely as possible IMO because only having a few countries do it just results in threats by the powerful digital giants to take their business (and jobs) elsewhere. There was an attempt in the EU to impose a Europe-wide 3% tax on US internet groups, but it failed last year because Sweden, Denmark and Ireland just didn’t have the balls to go through with it. Admittedly, this is easy for me to say – there are obviously a lot of jobs on the line on something like this and the companies concerned would argue that the jobs they create enrich the government via income taxes. Discussions on a broader digital services tax are ongoing currently at the OECD and there are hopes of a breakthrough that will negate the need for a piecemeal

approach by individual countries – and the fact that Trump has threatened to impose 100% taxes on French goods for doing this should give the talks more urgency. In the meantime, I expect more threats to come from the US, which is arguing that its companies are being targeted unfairly.

Slack raises outlook after winning new corporate customers (Wall Street Journal, Sarah E. Needleman and Kimberly Chin) shows that the workplace-software maker has raised its full year forecasts as it added more big corporate clients over the latest quarter. It has a major competitor in the form of Microsoft, which supplies its competing product – Teams – to its massive Microsoft 365 customers for free. Slack now has over 50 customers who generate at least $1m in annual revenues, which is a sizeable increase from the 30 or so it had this time last year. * SO WHAT? * It’s great that Slack is making progress, but when Microsoft’s Teams currently boasts over 20 million active users – up from over 13 million in July – versus Slack with 12 million daily users in July and 10 million in January you can see what it is up against. I would venture that many bigger, more established companies will be more tempted to stay with what they’ve always known and that Slack will find more success with smaller, younger companies that don’t have so much IT baggage. Also, with Microsoft being able to plug into a massive installed user base with a FREE product, I would imagine that Slack will hit a ceiling. Still, it seems that there will be growth enough for now!

Expedia and Metro Bank lose bosses, M&C Saatchi is the latest to succumb to an accounting scandal and M&G shuts the exit doors…

Expedia CEO, CFO ousted in clash with Barry Diller, Board (Wall Street Journal, Patrick Thomas) highlights problems at the travel company as senior bosses were the casualties after arguing with Chairman Barry Diller over where to take the company. Expedia’s brands include Hotels.com, Orbitz, Travelocity, Hotwire and CarRentals.com and the company’s share price has taken a battering recently – down 12% so far this year until Tuesday, but they dropped by 27% in one day last month after reporting poor third quarter results. * SO WHAT? * It’s unusual for such senior management to leave at the same time, but it seems that online travel companies are generally finding life tough after Google redesigned its hotel-search function which meant that they aren’t getting as many free links on Google search pages. Whoever takes up the senior roles will certainly have a lot of work to do in order to stay on top of an evolving industry.

Metro Bank in chaos after boss follows founder Hill out door (Daily Telegraph, Lucy Barton) heralds the departure of Metro Bank’s CEO shortly after founder and chairman Vernon Hill stepped down. They are both casualties of a disastrous year for the company that kicked off with an admission that it had misclassified its loan book. The share price has fallen by almost 96% since its 2018 peak. * SO WHAT? * Craig Donaldson’s departure reflects a U-turn by the board who didn’t accept his resignation in the immediate aftermath of the scandal. Still, given its scale, it is hardly surprising that senior management had to take ultimate responsibility. The company really needs to move forward now, so a race to get some top management who like a challenge is well and truly on!

Accounting crisis cuts value of M&C Saatchi shares in half (Daily Telegraph, Christopher Williams) shows an advertising agency in crisis as it issued a profit warning

and the damning results of a forensic review of its accounts which revealed that it had been overstating its performance for up to five years 😱. The share price fell by a whopping 46% as investors digested the news. * SO WHAT? * The company is now worth less than £74m – quite a lot less than the £320m it was worth before the dodgy accounting was brought to light in August. In what is probably one of the finest ever examples of acting once the horse has bolted M&C Saatchi’s chief exec David Kershaw said that “We have started implementing processes…to prevent such issues arising again”. This is serious stuff and I wonder whether the company will now be vulnerable to lawsuits from angry shareholders who will allege that they bought the shares under false pretences. For anyone in the market to buy a well-known ad agency, this one’s price is looking more and more like a bargain (but clearly there will be baggage involved). Will someone like WPP snap it up to at least get access to its client base??

M&G suspends £2.5bn property fund on Brexit and retail woes (Financial Times, Judith Evans and Siobhan Riding) shows that the fund manager has decided to stop trading in its property fund as Brexit concerns and crisis in the retail sector has prompted investors to pull their money out in increasing numbers. It has decided to take this drastic action because withdrawals are now reaching such a level that they can’t sell properties fast enough to return the money. The dealing suspension is temporary, but there was no time limit put on it. * SO WHAT? * I think that this could well result in an avalanche of investor requests to pull their money out from other property funds on fears that they will potentially take the same action as M&G. Mind you, M&G’s fund is particularly exposed to the ailing retail sector (about 40% of its portfolio is in retail property according to recent figures), so it might not be wise to sell off ALL property funds. There will be investors out there who will just want to get out of property generally, so there may be some opportunities to be had in buying funds that DON’T have as much retail property exposure. Brave/optimistic investors will either hang on and/or invest in other property funds if they are of the opinion that next week’s election result will bring some “certainty” back to the market. The current suspension will be monitored on a daily basis and then reviewed every 28 days.

Boohoo founders look to cash in, Clintons gets rescued and Quiz is in trouble…

In a quick scoot around the retail sector news today, Boohoo founders to sell shares (The Times, Ben Martin) highlights founders Mahmud Kamani and Carol Kane’s intent to sell off shares worth up to £150m in the company they founded in 2006 as its shares hit record highs. This will leave them with a stake of at least 13.1% and 2.7% respectively. * SO WHAT? * Good on ’em. Usually, mass sell-offs like this set off alarm bells for investors (is there something wrong with the company that we don’t know about??) but it seems like things are going in the right direction for the company and why not cash in on something that you built up into a behemoth worth £3.5bn?! 

Clintons seals rescue deal that saves 2,500 jobs (The Guardian, Sarah Butler) will give cause for sighs of relief for employees as the card retailer has been bought out of

administration. This means that all jobs will be safe, stores will continue to trade and debts owed to suppliers will be wiped out. It also resets leases, meaning that the company will be able to renegotiate rents or pull out of stores going into next year. * SO WHAT? * Sighs of relief all around, but the company is still not out of the woods just yet. With its more successful rival Card Factory constantly breathing down its neck and a continued tight market, the pressure will continue. However, it has survived in the meantime, which is a victory of sorts…

Then in Quiz warns of store closures after first-half loss (The Guardian, Mark Sweney) we see that fashion brand Quiz announced disappointing sales figures for the year that sent its share price down by 16% initially. It blamed weakness on ongoing tricky conditions on the high street and it is reviewing its current UK estate of 246 UK stores and concessions. * SO WHAT? * Falls in revenue at the company’s high street stores were widely expected, but investors were not impressed with their sluggish online revenues. Christmas trading really will be of utmost importance. I suspect that a serious cull of their shops will be in the offing in the not-too-distant future…

And finally, in other news…

I thought I’d leave you today with the annoying Can you spot the clock that’s telling a different time than the others? (mailonline, Chloe Morgan https://tinyurl.com/vwlgjt2). Apparently the record for doing this is 9 seconds. Can you beat it??