Daily Mail - 30.08.2019

Daily Mail, Friday, August 30, 2019

Own goal as

soccer centre

seeks buyer

after scandal

by Hannah Uttley

PwC thrust

into £637m

Watc h s tone

court battle

PWC has been dragged into
a £637m court battle involv-
ing a scandal-hit insurer.
A senior figure at the
accountant is accused of
leaking confidential infor-
mation about Quindell,
now known as Watch-
stone, to a firm to which it
was selling its professional
services division to.
Watchstone has argued
the information – allegedly
leaked via a secret ‘back
channel’ – gave buyer
Slater and Gordon (S&G)
unfair leverage in takeover
talks that allowed it to
secure a lower price.
The revelation is the lat-
est twist in the long-run-
ning High Court tussle
between S&G and Watch-
stone. S&G bought Quin-
dell’s professional services
division in 2015 for £637m.
But two years later S&G
sued Watchstone and
accused it of misrepresent-
ing the true value of the
business. That followed an
accounting scandal at
Quindell, unearthed by
PwC. S&G has since argued
it was not provided with
information about Quin-
dell’s businesses before the
takeover.
But now Watchstone has
revealed emails which
allegedly show S&G had
been receiving confidential
information about Quindell
via a PwC staff member.

GOALS Soccer Centres has

put itself up for sale after

becoming engulfed in an

accounting scandal.

The five-a-side football opera-

tor, in which Mike Ashley’s

Sports Direct is a major inves-

tor, has appointed accountant

Deloitte to find a buyer.

Ashley is likely to make a grab,

having already bought a 19pc

stake through Sports Direct.

Shares in Goals were sus-

pended earlier this year following

the discovery of an accounting

blunder which has left it owing

£12m in unpaid tax. It is set to be

delisted from the AIM junior

stock market and will miss a

September 30 deadline for pub-

lishing its full-year accounts.

The company is investigating

former chief executive Keith

Rogers and ex-finance boss Bill

Gow. The Financial Conduct

Authority is also said to be look-

ing into the issue.

Accountants at BDO are

understood to have alleged that

Gow emailed Rogers asking him

to ‘work your usual magic’ to

create fake invoices. Gow has

also been accused of deleting old

emails to clear records, while it

is claimed the pair manipulated

numbers to avoid VAT payments

and breached banking rules with

its lender, Bank of Scotland.

Goals dates to back 1987 and

was taken over by Rogers and

Gow in a management buy out

in 2000. Rogers left in 2017 with

Gow jumping ship to teacake-

maker Tunnock’s, which was

founded by his wife’s family.

Rogers has denied the claims

but Gow is yet to comment.

News of the sale came as share-

holder advisory firm ISS urged

Sports Direct investors to vote

against the re-election of Ashley

as a director, ahead of its gen-

eral meeting on September 11.

The recommendation comes

after investor advisory groups

Pirc and Glass Lewis also voiced

concerns about him.

Ashley, 54, has taken umbrage

with bosses at Goals over the

accounting scandal and has

tried and failed to oust direc-

tors from the board.

Sports Direct declined to

comment.

B

ACK in those long ago, barely
remembered days before the
referendum, companies
used to blame the weather
if their profits dropped.
Either it was too hot, too cold or too
wet. No one seemed to have told them
about the unpredictable British seasons.
Now they blame Brexit. Or as newsagent
McColl’s did when its shares fell to near
record lows yesterday, they blame the
weather and Brexit.
Amigo, a sub-prime lending business
whose shares fell dramatically yesterday,
cited the possibility of No Deal as a risk to
its bottom line: if the economy tanks, it
could mean more borrowers are unable to
pay their debts.
Software group Micro Focus, whose shares
plunged after a profit warning, said its prob-
lems are down to a ‘deteriorating macro
environment’. Translated into English, that
means they are worried about Brexit plus
Trump and his trade war, plus Germany’s
weak economy.
Recruitment company Hays, another
whose profits took a hit, was also complain-
ing that ‘macro-economic conditions’ had
become ‘increasingly difficult’.
There are, of course, other explanations.
Micro Focus has been under the cosh ever
since it took over the software business of

Hewlett Packard Enterprise a couple of

years ago in an $8.8bn deal that resulted in

a severe case of indigestion.

The interestingly named Amigo, whose

interest charges of a smidge under 50pc APR

are far from friendly, is arguably more sus-

ceptible to customer complaints and a crack-

down by regulators than it is to Brexit.

Hopes that the London Stock Exchange

might play host to the world’s biggest float

• of giant Saudi oil enterprise Aramco – have
  also been hit. It is apparently looking at a
  two-stage share offering on the Saudi and
  Tokyo exchanges instead.
  Advisers have apparently got cold feet
  about London because of uncertainty
  around Brexit. Again, there are multiple
  agendas at work, so it isn’t that simple.
  But whatever the reasons, a string of firms

with falling profits, the cold-shoulder from

Aramco, and a slide in sterling don’t add up

to a mood-enhancing tonic. Boris the Booster

wants to lift the economy by sheer force of

positivity, but not everyone got the memo.

Promises, promises

CALL me cynical, but I am not entirely

reassured that Andrea Leadsom, the Busi-

ness Secretary, has been talking to Advent

to extract reassurances over our national

interest if it takes over Cobham.

The now notorious takeover of Cadbury

by US cheese-maker Kraft a decade ago,

with its broken promises over a factory clo-

sure, woke politicians up to the fact there

are real risks to British jobs, pensions, R&D

and investment when firms are taken over.

In the case of Cobham, there is also a

national security and defence aspect.

Advent will probably offer to sign up for a

similar list of undertakings as Melrose did at

the time of its hostile bid for engineer GKN.

These included promises to keep the

headquarters here, to remain listed on the

London stock exchange, to maintain R&D

spending and to have a majority of UK-resi-

dent directors. This sounds deceptively

soothing. Any undertakings by Advent will

be presented as ‘legally binding’, but clever

lawyers can find a way round most things.

They are likely to be time-limited, possibly

for five years, which is not a long stretch in

engineering terms. And there may be other

undesirable and unforeseen eventualities

not covered by the pledges.

With Melrose, the authorities can wave big

sticks at the directors because it is a UK

listed company, whose founders are British.

Advent, however, is a US private equity firm

and so the authorities may have less lever-

age over their future behaviour.

The risk is that predators make undertak-

ings as a sop that turn out not to be worth

the paper they are written on.

Green Steel

IT’S welcome news that the Government is

spending £390m on low-carbon technology,

much of which will go to the steel industry.

But the new Clean Steel Fund will not, of

itself, reverse years of government policy

that have landed UK producers with far

heavier energy bills than competitors: the

difference between this country and Ger-

many, for example, is £55m a year. A little-

known fact is that plants are also hit by the

heavy business rates that have hurt shops

on the High Street.

Let’s not cavil. This is a step in the right

direction. Now the Government needs to

take another, and rethink its attitude

towards British Steel. Waving through a

sale to the Turkish military pension fund is

not the best way to ensure the future of

such a vital strategic industry.

Singing the Brexit blues

Pernod Beefeater boom

BEEFEATER and Jameson
owner Pernod Ricard is
cashing in on demand for
blood orange and straw-
berry flavoured gins as it
fights off pressure from vul-
ture hedge fund Elliott.
The drinks company
posted an 8pc rise in world-
wide sales of its Beefeater
gin during the year to June
30 following the launch of
its pink and blood-orange

lines. Pernod Ricard is

under pressure from Elliott

to improve profitability to

bring it more into line with

larger rival Diageo.

Total sales across the

group grew 6pc to £8.4bn

during the 12-month period.

However, it reported that

profits dipped 8pc to £1.3bn

following restructuring

costs in South Korea and

an impairment charge.

WEAKENING demand and

shake-up costs have hit

profits at Hays.

The recruitment firm

reported a 3pc fall in earn-

ings to £231m for the year

to June 30, despite fees ris-

ing 5pc to £1.1bn.

It followed a one-off

£15.1m bill comprising

£8.3m for a court ruling

over pensions and £6.8m in

costs associated with a

shake-up of its European

business. The pensions rul-

ing, originally made against

Lloyds Banking Group last

year, said pension pay-

ments for men and women

must be equal and has

forced many firms to pay

more into their schemes.

Shares in Hays fell 0.8pc,

or 1.1p, to 138p.

THE Gym Group is taking

advantage of empty stores

abandoned by retailers to

open fitness centres.

The low-cost gym chain

opened eight sites during

the first six months of the

year, five of which were pre-

viously leased by troubled

High Street chains includ-

ing Mothercare and Car-

petright. It has 165 gyms

across the UK which charge

an average monthly mem-

bership fee of £18.

Richard Darwin, chief

executive, said: ‘These sites

are really good for us because

they come with parking,

they typically have high ceil-

ings and good signage.’

Sales jumped 27pc to

£74m during the six-month

period, helping to put a

rocket under profits which

soared 81pc to £5.6m.

Hays hit by court ruling Gym firm bulking up

Page 79

Ruth

Sunderland

BUSINESS EDITOR

DEMAND FOR LULULEMON

LEGGINGS RACES AHEAD

SALES of expensive yoga leg-

gings and sports bras soared

at Lululemon, as profits

boomed in the UK.

Profits climbed to £1.8m in

the year to January 31, 2019 – a

28pc rise on a year earlier –

accounts for Lululemon’s Brit-

ish business showed. And sales

jumped 38pc to £40.8m.

Two new stores opened in

Guildford and Manchester,

along with a shop within

Selfridges’ flagship depart-

ment store on Oxford Street,

London. Lululemon employs

279 staff in the UK, compared

with 250 last year. The busi-

ness was founded in 1998 in

Vancouver, Canada. It sells

leggings for as much as £138

online.

Former chief executive Lau-

rent Potdevin quit suddenly

last year following allegations

of misconduct.

Lululemon said he had fallen

short of standards, including

respecting other employees,

but handed him a payoff worth

more than £4m.

Founder Chip Wilson was

forced to stand down as

chairman in 2013 after mak-

ing a string of comments

including that some women’s

bodies ‘just don’t work’ for

Lululemon’s leggings.