BHS Death: Who is to Blame?

Image: The Herald, Scotland https://goo.gl/X59KeM

British Home Store (BHS) was born in 1928 with steady expansion growth and increasing competition with rival stores that bring excitements to the British workforce and customers. In pursuit of survival, BHS has undergone several successful surgical operations in the post-war era such as expansion across the UK, merging and franchising its brand. Many feared that BHS survival chances would diminish in 2000 when Sir Philip Green took charge of the company health affairs, but he dismissed the fears. However, sickness symptoms were confirmed in 2005 when BHS announced its losing customers to rivals. After several attempts to revive BHS, the health continued to deteriorate. This continued until 2015 when it was transferred to Dominic Chappell, unfortunately for BHS its health has gone beyond resuscitation. In 2016, the once healthy and competitive BHS was in coma without a chance of survival.

Losers

Although all BHS stakeholders were disappointed in the news of its death, this has different implications for different stakeholders. During its heyday, BHS had 163 stores, 11,000 British workforce that comprised direct and indirect staff, servicing 22,000 pensioners, tax-payer, and 1.2m British loyal customers. These were the biggest losers as the death of BHS significantly changed their way of life and in some cases, it threatened their survival as well.

Image: Drapers, https://goo.gl/vDGG41

Companies Act 2006

The Companies Act 2006 s830 specifies that companies should only distribute a dividend to the shareholders from the profit available or accumulated profits. This profit should be after deducting its accumulation losses. Also, Companies Act 2006 s172 specifies the duties of company’s directors to act in good faith with the aim of promoting the company’s success for all its members. In the case of BHS, members include all the stakeholders such as employees, pensioners, customers, suppliers, creditors, government, UK taxpayers, and shareholders.

Many commentators argued that Sir Philip Green and his family members along with other shareholders did not regard corporate governance or Companies Act 2006; and they made decisions on the BHS activities in their personal interest to the detriment of the other BHS members. Other commentators believed that The Green family and other shareholders enjoyed unfettered access in the heart of BHS; that was cleverly done with a complex company structure and inter-company transactions that include £422m dividend pay-out against £208m profit, £10m loan interest, £151m rent received from sales and lease-back, £250m management charges and £3m ground rent, all received from BHS. As a result, between 2000 and 2015, the pension fund has fallen from £5m surplus to 571m deficits and BHS survival and going concern was set on a slope.

Structure of Taveta Group (Controlled by the Green Family): Source from HC Committee Reports, https://goo.gl/reA7Er


International Standards on Auditing

The International Standards on Auditing (UK) specifies that the objective of the audit work on the financial statement is to give reasonable assurance. This assurance should be included in the auditor’s report to highlight whether the financial statement is free of error or fraud. Although, it is not a guarantee that material misstatement due to error and fraud will always be detected when audit work complies with ISA (UK). However, the ISA (UK) requires that auditor should exercise professional judgment in identifying and assessing the material risks in the financial statements. Auditors are required to design and perform audit procedures that are responsive to material risks, and to obtain appropriate, and sufficient evidence regarding the business activities from audit procedures upon which audit opinion will be formed. In this regard, PricewaterhouseCoopers (PwC) audit design and procedures failed to detect or raise going concern issue during 2015 audit when BHS was sold for £1.

PwC Leeds firm audited BHS Group Ltd financial accounts for the 74 weeks to 29 August 2009 and since then they continued to audit BHS financial account till 2015. They are also the auditing firm for other Green Family companies such as Taveta Investment Limited and Taveta Investment (No.2) Limited, the parent companies of BHS. Commentators believe that this could have created threats to their objectivity due to possible close or personal relationship with the Green family and non-audit fee (audit fee ratio of up to 8:1). These threats include familiarity, intimidation, and self-interest as the audit firm and senior partner may not be necessarily sceptical and may be sympathetic towards the directors and employee with whom they have a relationship.

Image: Accountancy Age, https://goo.gl/ZVN1Yu

On the 13 June 2018, the Financial Reporting Council (FRC) halted the over 30 years career of Steve Denison a senior partner with a 15-year ban and £325,000 fine. PwC accounting firm was fined £6.5m and FRC will be monitoring their practice over the next three years.

Blame

In my opinion, the directors of BHS acted unethically and with total disregard for the Companies Act 2006 and corporate governance in discharging their duties between 2000 and 2015. Considering the consequences of their actions, the innocent pensioners, direct and indirect employees and taxpayers will pick up the bill for the BHS pension deficit. It is unfortunate that those directors got away with just over £363m fines without a ban from serving as company directors in the future or possibly jail terms.

However, as much I would like to agree with  PwC that their failure could not have contributed to BHS death, from a professional viewpoint, they have the duty not only to advise the BHS board of directors, but the 2015 Audit Report should have explicitly raised going concern issues. This would have raised other stakeholder’s awareness as the Audit Report would have been available to the public through Company House.

Mayowa Akinbote ACCA, MA, PGCHP, FHEA, BSc.                                                Lecturer in Accounting and Finance                                                                        Staffordshire Business School

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8 Trends To Keep Your Eyes On In 2018

1. Instagram Stories Drive Upcoming Instagram Trends

Instagram Stories is a big deal and they’re not going away. Daily viewers of Instagram Stories surpassed daily SnapChat viewers just one year after launch, and the growth isn’t stopping.

Instagram Stories was likely the biggest single change in the Instagram UX, and its marketing implications are huge.

A huge deal with Instagram Stories is this: accounts with over 10,000 followers can now add a link within the feature. Considering the fact that the only other place you can put a link on Instagram is just the one buried on your profile page, this is a huge deal, as it multiplies buying or inquiry opportunities by orders of magnitude.

Instagram Stories in particular will be relevant from a marketing perspective because, compared to other transitory video platforms, Instagram metrics are eminently trackable.

A final note on Instagram Stories: Their foundation is social media engagement gold. Video drastically outperforms all other forms of content on every test.

2. Influencer Marketing Makes Major Contributions to Social Media Engagement

Influencer marketing is big business — a billion dollar industry by some counts. There is an exhaustive list of micro-celebrities who earn six figure incomes. And this isn’t a fluke. Influencer marketing is uniquely keyed to exploit certain facts about a growing number of buyers.
As Millennials advance their careers, and Generation Z starts theirs, an enormous population’s purchasing power is increasing swiftly. These two groups — who, combined, literally comprise most of the world’s population — are uniquely influenced by this marketing method.

3. Generation Z to Decide Social Media Trends

We’ve mentioned Generation Z in both of the previous topics for good reason.

RetailDive had this to say about Generation Z and their associated social media trends:

“Gen Z is two- to three times more likely to be influenced by social media than by sales or discounts — the only generation to value social media over price when it comes to making purchase decisions…”

Furthermore, 81% report watching at least one hour of online video per day, or more, according to a study by Fluent, covered by AdWeek. Combine these facts and realize that droves of Generation Z will graduate college and/or start careers next year, and you start to see the powder keg.

4. Messaging Platforms Make Companies Accessible

 

What do you know about WeChat? They’re a wee little Chinese messaging company . . . errr, one that’s looking to cross 1 billion users this quarter. WeChat and WhatsApp are absolutely ubiquitous across either ocean, reaching across many different functions to dominate social media, direct messaging, and even purchasing and commerce.

Every year more and more buyers are Millennials and Gen Z, and fewer and fewer are older. In case you’re not aware of these people’s overwhelming preferences when it comes to talking to a company, we’ll illustrate in their native language:

top-social-media-trends-20185. Live Streaming Explodes

Live streaming isn’t about live streaming. At least not in the way we’re going to be talking about it. You’re going to see a lot more of it in 2018, and the people who do it well will be fully with the times and accelerating. Its prevalence will increase because it works.

But there’s something more at work here.

It’s actually about technology. We get better phones every year. Does that mean that we’re running the same apps better? Sometimes. But once the technological baseline of the average user has clearly moved up a notch, it becomes about making more robust apps that do more and fully take advantage of that new technology.

The smartphones of today are better than what we used to have by orders of magnitude. Furthermore, our data speeds are better, and are poised to make yet another insane leap in the next few years when 5G becomes the standard.

Live streaming is a medium or implementation of social technology that’s uniquely positioned to take advantage of hardware improvements for the next several years. The resolution of an image the size of a phone screen can only get so good before you have to zoom in to see a difference.

But better video processing across the board means all devices involved can handle more streaming at a better quality across more channels at the same time. This is such a huge change that it’s possibly unclear that anyone is even capable of fully understanding the ramifications.

6. Twitter is Going to Change

And they themselves might not even know how just yet.

Twitter has been slowly circling the drain, in some respects, for a long time now. 2017 pulled no punches with the social network, either. Twitter needs to make some big changes to stay relevant, as its growth is the slowest of all the major social media platforms.

7. Online Hangouts Become the Norm

Online hangouts go hand-in-hand with the live streaming trend, and with Generation Z. Consider Houseparty — an app for multiple friends to essentially FaceTime with each other in a group setting.

Houseparty made quite a wave in 2017 with rapid growth, and hit its stride well enough to inspire copycats, including perhaps an effort on the way coming from (no surprise here) Facebook.

The online hangouts trend is also going to intersect with VR. Sure, everyone promised everything this year with VR and AR, and all that ultimately came of it was two weeks of Pokemon GO.

But this year actually has the potential to be different. Many promising programs have another year of beta testing still left under their belts, but the technologies are improving in exciting ways. Once again, Facebook is at the epicentre, with Facebook Spaces.

8. Social Platforms See More Hardcore Moderation

The last year or so has forced the hand of several tech and social media titans to intervene and play a more active role in content moderation. Those manoeuvres, in retrospect, felt more like damage control than any sort of final solution.

We’re likely going to see companies revisit this in a more significant or longer-lasting way, and definitely more proactive than reactive.

As leveraging social media outlets for marketing first took flight, some were dubious of their staying power. The years since have changed sceptic’s into believers, and what’s on the forefront will clearly and easily amplify the channels’ relevance even further.

2018 is here… but were you prepared?

2018 social media trends predict that time on social media platforms will increase. This means you will need to improve your online presence in the year to come.

 

By Richard Holland – MSc Digital Marketing Student

 

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The Economic and Social Impact of Stoke City FC

The English Premier League is a global brand. Stories abound of travellers from Stoke-on-Trent travelling to far flung corners of the earth, getting into a cab, pub, or conversation and being asked; “Where are you from?” the traveller responds; “I am from Stoke” only to be told; “I know Stoke FC!”, a list of players is usually reeled out including Peter Crouch and co, and from then onward, the conversation takes on a new dimension of familiarity and friendliness.

Peter Crouch Goal Celebration

 

English Premiership Clubs have fans in all corners of the world. Jerseys are sold in Africa, Asia, the Americas, Europe and Australia. Matches are watched on all sorts of devices and football players are household names with kids dreaming of growing up to be like their heroes or even just meeting them someday.

 

Beyond the pitch however, there is another dimension that is closer to home. Football clubs are generating huge revenues and investing these in a variety of ways with a huge impact to their local economies. For example, Stoke FC’s revenue was £11 million in the 2007/2008 football season and then Championship promotion boosted the Club’s revenue even more from commercial, match day and broadcast streams. In the 2015/2016 Stoke FC’s total revenues rose to £119 million, making them the 9th in the Premier League. The growth in the Club’s income since joining the Premier League has enabled it to significantly increase its investment in the region and grow the profile of the Club and the city at home and abroad.  Some key regional and social impact statistics for Stoke FC for the 2015/2016 season are shown in Table 1.

 

Table 1: Key Regional Economic and Social Impact of Stoke City FC Statistics (2015/2016 Season)
2,391 international visits
119,000+ domestic tourists
£7 million visitor spending
301 direct Club employees (FTEs)
£1.3 million spent on local community initiatives
£29 million spent on Club supply chains (some local)

 

In addition to the impact highlighted in Table 1, the Club has also expanded its stadium to boost match day attendance and attract more visitors to the region, invested in players from the UK and abroad to extend the reach of its fan base to other areas of the globe, invested around £4million into its academy providing local young people with opportunities to develop their football careers at the Club, and invested in the Community Trust to work with the wider community to target individuals who want to get back into education, employment or generally improve their health or mental well-being.

 

Not only does success on the pitch attract visitors to the region who spend on travel, accommodation and food and drink, there is the indirect effect from the supply chain and the induced impact from increased employee spending. Analysis from Ernst & Young LLP shows that Stoke City FC generated a total Gross Value Added contribution of 132 million to the region during the 2015/2016 season. £108 million was directly contributed via the club and its tourism, a further £13 million was generated via indirect effects in local supply chains and £10 million was generated via induced effects. This activity also attracts businesses to locate their operations within the area.

Staffordshire University students and staff with Tony Scholes (CEO of Stoke FC)

 

Granted that a lot of the players might not live in the region, the activities of Stoke City FC resulted in an estimated £66million total liability to the Exchequer in 2015/2016. The presence of Stoke City FC also supported many FTE jobs in the regional economy during that period. 301 people were directly employed by the club, 853 people were employed by relevant supply chains, 401 people were employed via tourism to watch Stoke FC, and a further 682 were employed because of induced effects.

 

Beyond these, the Club supports a variety of initiatives to improve the lives of individuals and communities, working with a number of stakeholders including schools, local government and wider supporting organisations (e.g. the premier league). Community activities are delivered by Stoke City FC’s Community Trust (SCCT) which was founded in 1989 and became a registered charity in 2004. Ernst & Young LLP estimate that around 10,900 people have participated in community and charitable programmes in 2015/2016. 119,600 day trips were organised and 304 people have gained at least one qualification as a result of the Clubs initiatives. During the period under review, 10,246 hours of volunteering community work was done with the result of £8.7 million savings for the local community on physical wellbeing and £2.9 million savings on mental well being from increased physical activity.

 

With these key statistics, it is not hard to cheer for our local team. The sporting and commercial success of the Club in recent years, which includes breaking their transfer record twice in the 2015/2016 season, has allowed Stoke FC to further embed itself as a key member of our local economy. We at Staffordshire University will continue to cheer for the club. You should do the same too 😊😊😊!!!