The Times - UK (2020-08-28)

the times | Friday August 28 2020 2GM 45

Business

The Swedish online payments com-
pany intent on shaking up online
shopping with its “buy now, pay later”
service has suffered a near-sevenfold
increase in its losses in the first half.
Klarna, which courts millennial
shoppers with its short-term credit
product, unveiled a SwKr552 million
(£47.8 million) deficit, compared with a
loss of SwKr84 million at the same time
last year. It attributed the reverses to
heavy investment in its expansion and
a rise in provisions for potential soured
loans.
The company, which was founded in
Stockholm in 2005, has enjoyed a surge
in new customers during the lockdown,
with net operating income rising by
37 per cent to SwKr4.6 billion. How-
ever, it has had to put more money aside
to cover potential losses owing to the
worsening economic backdrop.
Klarna is one of Europe’s most valu-

Simon Duke

Klarna racks up losses with

its buy now, pay later model

able privately held financial technology

companies, alongside Revolut, the neo-

bank, and Checkout.com, the payments

software maker. All three are valued at

$5.5 billion. It has about 9.5 million

customers in the UK, who receive

interest-free credit when they buy

goods online from retail partners

including Asos, H&M and River Island.

Klarna charges large merchants

between 4 per cent and 5.5 per cent on

the overall volume of transactions that

use its service and from late payment

fees.

The company has been criticised for

making it too easy for consumers to buy

items that they cannot afford and lead-

ing young shoppers into a debt trap.

Its investors include Sequoia Capital,

the Silicon Valley venture fund, H&M

and Snoop Dogg, the rapper and actor.

In the United States, where it is

expected to list its shares in a year or

two, Klarna is growing rapidly, having

grown its customer base sixfold.

Britain’s biggest energy supplier has

agreed to pay out £1.73 million after

failing to inform hundreds of thou-

sands of customers that it had changed

their top-up payment provider.

British Gas will avoid a fine from the

energy regulator as it compensates

those affected. Ofgem said that the

bungled switch, which took place last

winter, had hit vulnerable customers

particularly hard.

About 270,000 pre-payment cus-

tomers were not told when the com-

pany swapped its top-up provider from

Paypoint to Payzone on January 1.

British Gas acknowledged that the

process “was not as smooth as it should

have been”. A consumer watchdog

called the case “unacceptable,” saying

that all suppliers could learn lessons

from it.

While most customers were

informed of the change in December,

Ofgem concluded that this had left

them with “insufficient time” to switch

suppliers. “When such a fundamental

change is being made, such as where

meters can be topped up, energy suppli-

ers need to communicate with their

customers in plenty of time,” Philippa

Pickford, the regulator’s director of

retail, said.

“British Gas should have informed all

of their prepayment customers, many

of whom are in vulnerable situations, of

the change to how to top-up their

meters during the winter period.”

The errors may have left people with-

out energy at the turn of the year,

Ofgem said, and had caused customers

unaware of the change to make “wasted

journeys” to shops that no longer

offered the services they required.

British Gas, which is owned by

Centrica, the FTSE 250 energy busi-

ness, supplies about seven million

The Ohio-based
retailer was listed on
the New York Stock
Exchange in 1996. It
opened its first
European store on
Savile Row, in central
London, in 2007 and
has a stock market
capitalisation of
$750 million.
The retailer has
increased investments
in its online platforms
and has teamed up
with Charli and Dixie
D’Amelio, the TikTok

stars, to attract

younger shoppers.

Sales have been

supported by

demand for its

Gilly Hicks

activewear

range, as well as

its loungewear,

as customers

opted for

comfortable

clothing while

being stuck at

home. It has cut

costs by furloughing

staff, halting share

buybacks and cutting

executive salaries.

The company said

yesterday that store

and distribution

expenses had fallen by

nearly 18 per cent,

while marketing costs

were down by 16 per

cent. Almost 90 per

cent of its 758 stores

around the world are

open.

It forecast a drop in

sales in the present

quarter of between

15 per cent and 20 per

cent compared with

last year. However, it

was unable to give

further financial

guidance, given the

uncertainty around

the impact of Covid-19

on its operations,

including the duration

and impact on overall

customer demand.

Fran Horowitz, chief

executive, said: “We

are proud of our

recent execution,

although cognisant

and humbled by the

many unknowns we

as individuals and as a

company face.”

O

t

s

HOLLISTER CO.; ABERCROMBIE & FITCH

British Gas pays

out £1.7m to

customers over

bungled change

households, down from about ten mil-

lion a decade ago. It is paying £1.48 mil-

lion in compensation to affected cus-

tomers and has agreed to give £250,000

to Ofgem’s voluntary redress fund,

which supports vulnerable consumers.

“We recognise this transition was not

as smooth as it should have been and we

would like to apologise again to any

customer impacted,” the company said,

adding that its new top-up provider

offered pre-payment customers the

“best and most flexible” service.

A spokeswoman added: “We know

that some prepayment customers are

vulnerable and we take our respon-

sibilities to them very seriously. We

ensured that anyone who contacted us

had heating and hot water — this

included sending an engineer to manu-

ally add credit to the meter if the cus-

tomer was unable to get to their nearest

working top-up point.”

Ofgem noted that British Gas had

opted to close its general enquiries

helpline on New Year’s Day, the day on

which it switched pre-payment

providers. Customers who did receive a

notification in December were also

supplied online links only, rather than a

telephone number, which the regulator

warned was likely to have left those

without internet access struggling to

contact the company.

Dame Gillian Guy, chief executive of

Citizens Advice, the consumer charity,

said: “It is unacceptable that poor

communications put people at risk of

being cut off from their energy supply

in the middle of winter. Households

with pre-payment meters are dispro-

portionately likely to be on lower in-

comes, have children or include people

with health conditions, so it’s critical

that suppliers take extra care and make

sure changes like this don’t put people

at risk.”

Centrica shares were flat at 44p.

Callum Jones

Nearly 3,000 pilots are set to lose their

jobs at United Airlines if the carrier

does not receive further support from

the US government.

The Chicago-based airline, by some

measures the world’s third biggest,

warned last night that 2,850 pilots, or

21 per cent of its total, would be put on

involuntary furlough among potent-

ially tens of thousands of workers

across the company that could be axed

this autumn.

It follows the rival American Airlines

in warning of widespread job losses if

the government does not repeat a

$25 billion support package that is due

to expire at the end of September. That

deal prohibits job losses in US airlines

until October 1, but talks in Washington

on further federal funding to last until

March have stalled.

Airlines worldwide have been dealt a

devastating blow by the pandemic,

United Airlines to cut 2,850

pilots without more US aid

which has prompted lockdowns world-

wide, the grounding of aircraft fleets

and travel and flight restrictions.

United, with its international focus, has

been affected more heavily than many.

Its planned cut to pilot numbers

would run from early October to the

end of November. The figure is higher

than the 1,900 announced this week by

Delta Air Lines, while American said

on Tuesday that it was putting 1,600

pilots on involuntary furlough in a

wider programme of 19,000 job cuts.

“While other airlines have chosen to

reduce manpower through voluntary

means, it is tragic that United has in-

stead has chosen to furlough more

pilots than ever before,” the Air Line

Pilots Association, the union, said.

United, which has warned that

36,000 jobs are on the line across the

company, has not provided final num-

bers for other work groups.

Shares in United edged up 0.4 per

cent to $36.37 in after-hours trading.

Robert Miller

Hunterston B

set to close

down early

EDF will begin decommissioning its

Hunterston B nuclear power plant in

Scotland by January 2022.

The plant, which began operations in

1976, has two reactors, called 3 and 4,

capable together of generating enough

electricity to power 1.7 million homes.

It had regulatory approval to operate

until March 2023, but both reactors

were taken offline in 2018 after cracks

were found in the graphite bricks that

form the reactor core.

“EDF has decided that Hunterston B

will move into the defuelling phase no

later than January 7, 2022,” EDF said

yesterday.

The Office for Nuclear Regulation

gave permission for reactor 3 to restart

for six months, after which time more

checks will be carried out.

Reactor 4 has been in operation for

six months since its closure in 2018, but

has not operated this year.

Shares in the retailer

were up, driven by a rise

in online sales. Boss

Fran Horowitz, below,

was “proud”

of the performance