Companies in the news ... and how they were assessed
KPMG: questionable ethics that need accounting for
Fashion retailer Ted Baker makes much of what it calls the “Tedication” of its staff, said Kate Burgess in the FT. To protect our ethos and reputation, they say, “we always ask ourselves: ‘Would Ted do it that way?’” Maybe so, but its auditors, KPMG, “seem to have been reading from a different script”. The Financial Reporting Council (FRC) has fined the firm £3m (discounted to £2.1m following a settlement) for a breach of ethical standards in regard to Ted Baker’s 2013-14 accounts. It seems KPMG was providing “expert” witnesses for Ted Baker in a court case while it was also handling its books. This is but the latest pearl in “a string of high-profile scandals” involving KPMG, said The Daily Telegraph. It failed to spot a giant hole in the “ill-fated” Carillion’s accounts; it is heavily embroiled in a South African corruption scandal; and it’s also under investigation for its work with the collapsed booze distributor Conviviality, the Co-operative Bank and Rolls-royce. The £2.1m fine is “a flea bite” to KPMG, whose global revenues top $26bn, said the FT. But the FRC – itself under fire for being too cosy with the Big Four – has rightly gauged that “skewering individuals” will hurt more and has also slapped a £80,000 penalty on KPMG senior auditor Michael Barradell, cut to £46,800 after he settled.
House of Fraser/mulberry/xpo: ripple effects
“There are always knock-on effects when a big retailer fails,” said Larry Elliott in The Guardian, and the ripples from the fall of House of Fraser are already spreading, with luxury bag-maker Mulberry among the first casualties. In a profit warning this week that “at one stage wiped 30% off its shares”, the company said it would take a £3m hit from Hof’s collapse. “There’ll be plenty of similar announcements over the coming weeks.” Mulberry is just “one of scores of unsecured creditors” each owed more than £1m by the store group, which was bought out of administration by Mike Ashley’s Sports Direct for £90m, in a “pre-pack deal” that allowed it to shed liabilities, said Joanna Bourke in the London Evening Standard. Ashley has earned plaudits for saving the Oxford Street flagship store. But his decision not to cover outstanding debts has had a chaotic effect on Hof’s operations. Among its largest creditors is US warehousing firm XPO Logistics, which is owed £30m. It has told warehouse staff “to down tools” and stop fulfilling Hof’s online orders until it is paid, said Deirdre Hipwell in The Times. But sources close to Ashley say he won’t “be held to ransom”. Expect the “stand-off” to continue.
Monzo: new British unicorn
It’s been quite a year for British digital bank Monzo, said Martin Arnold in the FT. A year ago, pretty much its sole claim to fame was a “distinctive pink card” that was proving popular among millennials. Yet it now has close to one million current accounts and is poised to become “the latest European fintech ‘unicorn’” to be valued at more than $1bn. Having secured backing of about $150m from investors including the Silicon Valley venture capital group Accel Partners, the smartphone bank is now reckoned to be worth $1.5bn: quadruple the paper value it achieved at its last fundraising, in November 2017. Monzo is still a tiny outfit: “its customer deposits at the end of February were £71.2m – equivalent to less than £150 per account”. But this latest cash injection “underlines the growing appetite of investors for digital upstarts that are challenging high street banks”. Indeed, according to hedge fund manager Crispin Odey, old-school banks are already “starting to resemble” fading department stores such as House of Fraser, said Nishant Kumar on Bloomberg. As Odey observes in a letter to investors, “they have been the serial lagging sector, luring every year value investors to their deaths”.
Farfetch: heading for Wall Street
Another garlanded British tech start-up is Farfetch, the Shoreditch-based luxury fashion platform whose prices – £1,012 for a pair of ripped jeans – “make you wonder if it’s had a decimal point outage”, says Robert Lea in The Times. Farfetch, which operates as a kind of “Just Eat for fashionistas”, assembling brands from Gucci to Valentino on its site, has announced plans to list in New York at a mooted value of $5bn. Should we care that London is so out of fashion? The company says it chose New York because the city has more attractive investment opportunities for tech firms – “another way of saying that American investors do like to put a fancy price on an unproven lossmaker”. Still, given Britain’s “present self-inflicted neurosis” about its place in the world, surely the London Stock Exchange “should be making a better fist of attracting stocks like Farfetch”.