This week’s news stories include: Pepco valued at £5bn, new travel rules revealed, Issa brothers set to sell 27 petrol stations, Uber hit with $600m bill, and more.
Legally Possible’s top news story of the week: Uber Hit With $600m Bill
1. ISSA BROTHERS SET TO SELL PETROL STATIONS
Billionare brothers Mohsin and Zuber Issa have agreed to sell part of their network for the £6.8 billion Asda takeover to go through. The Competition and Markets Authority (CMA) issued concerns over the purchase of Asda due to the close proximity in which the Issa brothers’ already owned petrol stations were to some of Asda’s petrol stations, which could lead to higher petrol prices for motorists in 36 locations.
Due to the CMA’s concerns, the Issa brothers behind forecourt giant EG Group and private equity backer TDR Capital, had proposed the divestment of 27 stations. The regulator said there were “reasonable grounds for believing that the undertakings … or a modified version might be accepted by the CMA”.
You can read more about this news story in a previous weekly news roundup here.
Photograph: Maureen McLean/Rex/Shutterstock
⭐ 2. UBER HIT WITH $600M BILL ⭐
My top news story of the week!
Following the recent Supreme Court ruling that Uber’s drivers were workers, and not self-employed contractors, and therefore entitled to minimum wage and holiday pay, Uber has taken a $600m (£431m) hit which stems from historical claims from drivers. However, there are still significant future costs expected for providing the drivers with employment benefits going forward.
Uber reported $3.5bn in first-quarter revenue, ahead of an average analyst estimate for $3.29bn, according to Refinitiv data. Without the UK provision they would have grown by 8%. It does however hope for a surge in demand as economies begin to reopen.
Uber announced in April that it would invest an additional $250 million to further boost driver earnings in an effort to incentivize their new and prospective drivers. Evidently, these charges will bring down second-quarter mobility results.
The $600m UK charge is a sign of the costs the company could face if it were to provide similar benefits to US drivers, a measure it is pushing for with US regulators to avoid even costlier regulation that would turn gig workers into employees.
THOUGHTS AND IMPLICATIONS
Uber’s ride-hailing division has suffered a big downturn as a result of pandemic restrictions over the past year, contrasting with the success of its delivery segment, including Uber Eats, which more than tripled from last year and grew 28% from the last quarter to $1.7bn. This has prospered at a time when dining out has been banned in many places.
Although Uber is hoping for a surge in demand as lockdown restrictions ease, a reverse effect could instead happen with restaurants and the hospitality industry reopening, with more people opting to eat out rather than eating in.
Gig companies rely on low-cost flexible workers and US riding firms fear their services would become unavailable if workers were reclassified as employees.
Photo by Austin Distel on Unsplash
3. POUNDLAND OWNER PEPCO VALUED AT £5BN
Pepco, Poundland and Dealz’s owner, has been valued between £4.1 billion and £5 billion ahead of its IPO on the Warsaw Stock Exchange market (WSE). The offering is comprised of more than 102 million existing shares, representing around 18% of the company’s total issue share capital at admission.
Pepco’s listing on the WSE is likely to be the biggest one of the year. The WSE has seen a surge of activity ever since Poland’s dominant ecommerce platform Allegro raised 9.2 billion zlotys last yea in the country’s largest initial public offering (IPO).
Pepco Group trades from more than 818 Poundland stores in the UK, and has over 3200 stores across 16 countries. Andy Bond, Pepco’s chief executive, opened Pep&Co’s first clothing shop in 2015, and opened another 49 in towns across the UK. He intends to sell more than 1 million shares in the IPO, worth roughly €9.7 million at the midpoint of the price range.
For the six months to 31st March, revenue growth was 4.4%, reflecting the opening of 225 new stores. However, like-for-like revenue fell 2.1%, due to covid-19 pandemic related store closures.
THOUGHTS AND IMPLICATIONS
The Pepco group does not trade online. This brings concerns over how successful the group will continue to be as more shopping is done online, which now accounts for 14% of the market and has doubled in the last year. Although, the small size of the purchases made by customers typically make the economics of ecommerce difficult. Nevertheless, the company may be forced to come to a solution on how shopping online could work for their customers, otherwise risk being left behind in this technology-booming era.
Photo: REUTERS/Phil Nobl
4. Debenhams final closures
Following the sale of Debenhams’ online only presence to Boohoo for £55 million in January, Debenhams will shut down all of its remaining stores next week after two centuries of high street trading. Consequently, 12,000 workers will lose their jobs.
Despite once being the biggest department store in the UK, the chain struggled to cope in recent years as more shopping moved online. In the year to September 2018, the store posted a record £491.5 million loss and went into administration in 2019. Ultimately, though, it was the pandemic that saw to be the final blow for Debenhams.
THOUGHTS AND IMPLICATIONS
As a consequence of the pandemic, online shopping now accounts for 14% of the market, doubling in the last year. The sale of such an iconic high street store to an online only platform highlights how the online sector will continue to grow. Boohoo chief executive John Lyttle said: “The acquisition of the Debenhams brand is an important development for the group, as we seek to capture incremental growth opportunities arising from the accelerating shift to online retail.”
Debenhams traditionally has an older customer base. The move online raises questions as to whether their customer base will now change, or whether the older generation will begin shopping online more, or go elsewhere.
In any event, towns and city centres will definitely look much emptier as the pandemic trading restrictions continue to be eased. High street stores seem to be at a crossroads: adapt to trading largely online, or suffer the consequences.
Read more about the Boohoo-Debenhams deal in a previous weekly news roundup here.
Photograph: Getty Images
5. NEW TRAVEL RULES REVEALED
A new traffic light system of rules have been put into place regarding travel, meaning international travel will no longer be illegal. From 17th May, people in England and Scotland can take holidays abroad in 12 “green” countries without having to quarantine on their return. Green countries include New Zealand, Singapore, Falkland Islands, Iceland and Australia. Although New Zealand and Australia have been put on the green list, they are currently not allowing any foreign visitors.
Red list countries are those with higher infection rates and will require travellers to self-isolate in a government hotel for 10 days upon return. Only UK residents will be allowed to travel from these countries to the UK. So far, 43 countries have been red listed, including Brazil, the Maldives, Pakistan, India and Turkey. EasyJet have announced that they will not be operating any holidays to destinations on the ‘red’ list. However, Tui and EasyJet are still going to push ahead with their plans to offer holidays to “amber list” countries, which have less stringent quarantine rules.
The government have defended their decision as to which country’s are assigned to which list, stressing that most countries have not had a successful vaccination programme and it would therefore not be safe to allow significant foreign travel.
Travellers must also take a private covid test before returning to England or Scotland, fill in a passenger locator form online before their return, and take a private PCR test on or before day two of their arrival in England, and again on day eight. Breaking the rules will cost you £10,000.
Online travel agent On The Beach has announced they will be stopping all holidays for this summer due to Covid uncertainty, even to countries on the green list. They are expecting to resume sales in September.
THOUGHTS AND IMPLICATIONS
Many have argued that this system is unfair to those from poorer backgrounds. If you travel from a red list country you must stay in a managed facility which for 10 days, which will cost one adult £1,750. Although, people who receive income-related benefits can apply for a deferred repayment plan when booking into the quarantine hotel. This splits the fee into 12 monthly instalments, so it’s more manageable. See more about hotel quarantining here.
Photo: Getty Images
6. AMAZON PAYS NO EU TAX
Despite sales generating a record €44 billion in revenue across Europe in 2020, tech giant and online retailer Amazon did not pay any tax. Its European entity based in Luxembourg, Amazon EU Sarl, posted a €1.2 billion loss last year, which meant it was not eligible to pay tax. Amazon channels most of its European sales, including the UK, through this European entity.
The tech giant insists, however, it pays all the tax it is required to pay. They also argue that they have invested over €75 billion across Europe over the past 10 years and have created thousands of jobs. The Fair Tax Foundation found that Amazon paid just $3.4 billion in tax on nearly $1 trillion of revenue and $26 billion of profit last decade.
Photograph: Bloomberg/Getty Images
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