Another week, another fine for KPMG. Last week the Big Four accountancy firm was fined £6m and issued with a severe reprimand by the UK accounting watchdog for its audit of an insurer more than a decade ago. Today, the Financial Reporting Council has fined the luckless firm £5m (discounted to £4m because KPMG settled) for misconduct linked to its audit of the Co-op Bank's 2009 accounts.
The problems related to the Co-op's disastrous acquisition of Britannia. The building society's bad loans played a significant part in taking the Co-op to the brink of collapse, contributing to a £1.5bn capital hole and prompting a bailout by bondholders. KPMG's audit partner admitted the firm's scrutiny of the deal did not extend to assessing the corporate lending portfolio, the source of many of the problems. The firm failed to obtain sufficient audit evidence, to exercise sufficient professional scepticism and to inform the Co-op that the disclosures in relation to some loans was inadequate, according to the FRC.
Two fines in two weeks is a bad look at the best of times. But the fines come as audit firms ready for even greater scrutiny (and the potential for even greater fines) under a new watchdog. Under the latest settlement with the FRC, all KPMG's audits with credit institutions for 2019, 2020 and 2021 have to be reviewed by an audit quality team, albeit an internal one. The Big Four must be bracing for when life gets really tough.
According to ITV's chief exec Carolyn McCall, the broadcaster's first-quarter was “very much as we expected”. In a dire advertising market, that's still not pretty. Ad revenues were down 7 per cent year-on-year, and are expected to be 6 per cent lower over the first half. ITV lists a host of headwinds to earnings: Brexit uncertainty, no World Cup, pre-launch costs of its new joint streaming service with the BBC and the timing of shows produced in-house. Its studios business is helping (up 1 per cent), as are online streaming revenues. But they only limited the year-on-year revenue fall to 4 per cent.
Imperial Brands, the tobacco giant, reported first-half revenues up 2.3 per cent (pre-tax profits up by more than a third) driven by “pleasing tobacco performance” which was “enhanced” by the growing contribution of its so-called next generation products aka vaping. Revenues from that segment were up almost 245 per cent to £148m, after £94m extra investment. Apparently its myblu brand is a hit. A starter kit costs just £9.99.
Also reporting today were Direct Line, Wetherspoons and Travis Perkins. And Provident Financial has another statement out in its battle with Non-Standard Finance. For more go to https://www.ft.com/fastft
Andrew Duff, the chair at Severn Trent is to stand down. He'd served as chair for nine years at the water utility —the recommended term limit under corporate governance rules. The board has kicked off the search for a successor, but Duff will stay in post until one has been found.
Jeep has poached Christian Meunier from Nissan’s Infiniti brand to be its new president, marking the latest exit of a senior western executive from the Japanese carmaker. He had only been in post at Nissan’s premium nameplate for four months, our Global Motor Correspondent Peter Campbell reports. Nissan's sales and marketing boss, its chief performance officer and Meunier's predecessor at Infiniti have all also left this year.
European stocks held their nerve on Wednesday after worries about darkening trade relations between the US and China sparked heavy selling in Asia and on Wall Street. Frankfurt’s Xetra Dax 30 and London’s FTSE 100 slipped 0.1 per cent, with the Europe-wide Stoxx 600 down 0.2 per cent. Futures trade pointed to a steady start for Wall Street’s S&P 500, after it fell 1.7 per cent over the previous session.
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Beyond the Square Mile
Facebook has chosen London as the centre for a push into payments on its WhatsApp messaging service. The app, which has 1.5bn users globally, will expand its workforce by a quarter with the hiring of about 100 people.
Losses at ride-hailing company Lyft jumped to more than $1bn in the first company, due to costs stemming from its March listing. In its first set of results as a public company it also warned revenue growth would slow this year after doubling last year.
Siemens is to spin-off its struggling gas and power division to create a new company with 80,000 employees and €30bn of revenue as it aims to make savings of more than €2bn and reduce its workforce by 10,000. The German conglomerate plans to list the new company in September 2020 and give up its majority stake.
Organisers of the world’s biggest football tournaments like the World Cup and Spain’s La Liga are exploring sponsorship deals worth up to £100m for match breaks created by new video assistant referee — or VAR — technology.
Closing quote — essential comment before you go
The bid by Canada’s GardaWorld for G4S's Cash Solutions may not have worked out but it has flushed out additional interest in the business and increased its valuation.
Purplebricks’ credibility as a digital disrupter has suffered devastating subsidence. It messed up with a hell-for-leather dash into the US and had to issue a grovelling apology about its failure in Australia. Now, it must focus on its core UK market.
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