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Commercial Awareness Update - January 2020
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<blockquote data-quote="Curtley Bale" data-source="post: 18926" data-attributes="member: 4422"><p><strong>The story of retail in 2019 </strong>(By Heerim Hwang)</p><p></p><p><u>The story</u></p><p></p><p>According to the British Retail Consortium (BRC) and KPMG, 2019 saw the worst year in sales for retail with total sales decreasing by 0.1%.</p><p></p><p>Helen Dickinson, the chief executive of the BRC, stated that 2019 was the first year “to show an overall decline in retail sales”. This was reflected in the 2,750 jobs lost per week, the rising number of companies entering administration, and the greater use of Company Voluntary Arrangements (CVAs) as companies attempted to continue operating in the midst of immense debt in 2019.</p><p></p><p>The decline is considered to be down to the total sales of November and December weakening by 0.9%, a crucial period where retailers often generate the majority of their annual profits. Total sales in December alone increased by 1.9%, however, this is a distorted figure due to Black Friday sales taking place later than in 2018. </p><p><u></u></p><p><u>Impact on Businesses and Law Firms</u></p><p></p><p>In addition to political instability dampening consumer confidence, a greater awareness of sustainability and eco-friendliness, an increasing shift to e-commerce, and decreasing High Street footfall have contributed.</p><p></p><p>However, the BRC’s figures have not included online-retailers, such as Amazon, which some experts consider being responsible for an estimated 20% of online sales. This is particularly important as non-food online penetration (a measure of how many users there are for non-food products online) increased by 1.8%.</p><p></p><p>With consumers spending one in every £5 online, retailers will be forced to adapt and it is likely we will see more closures as companies, such as Debenhams, have been forced to centralise and downsize to survive.</p><p></p><p>In light of this, law firms are likely to be busy in advising clients undergoing a restructure or insolvency with matters such as arranging repayment agreements with creditors (CVAs), redundancies, and, potentially, litigation as companies seek to recoup their losses as much as possible.</p><p></p><p><strong>Aston Martin’s profitability warning </strong>(By Brian Chiu)</p><p></p><p><u>The story</u></p><p></p><p>Aston Martin Lagonda, a 105-year-old British luxury carmaker, has given investors a rough ride, expecting an almost 50% fall in its annual earnings of between £130m and £140m, compared to the £247.3m it reported last year. On the same day, Rolls Royce Motor Cars, a rival British luxury car brand, announced that it had had its best year ever in 2019.</p><p></p><p><u>Impact on Businesses and Law Firms</u></p><p></p><p>Aston Martin has been in a parlous financial state since it went public in October 2018. Its shares were priced at £19 each but are now about £4.50 each and the current market capitalisation is less than a third of its debut price. Its net debt stood at £800m, part of which was a £150m debt at a rate of 12%. The debt is to subsidise the production of the new DBX SUV model, which the company hopes will bring salvation after a "very disappointing year" as it reportedly cancelled the production of its first electric vehicle RapidE.</p><p></p><p>However, Aston Martin which has long been targeting the premium segment and never dabbled in the SUV market may no longer win the battle by brand reputation alone. Pioneering autonomous technologies, increasing consumer expectations and the trade war threatening its supply chains and sales in Asia all worsen the situation. Even after recovering from the current situation, it would need more capital to reinvent itself.</p><p></p><p>Geely, a Chinese firm, is in talks with Aston Martin on an equity financing deal. Lawyers will conduct due diligence to draft the shares purchase agreement. Its existing liabilities and parts’ supplier contracts will all affect its drafting. For example, Aston Martin's partnership with Redbull in the Formula One race will be renewed at the end of the 2020 season. Lawyers will review the articles of association to check if there is any restriction on shares sale.</p><p></p><p><strong>The ongoing US-Iran tensions</strong> (By Ayah Reza)</p><p><u></u></p><p><u>The story</u></p><p></p><p>The start of the year saw the killing of Iranian general Qasem Soleimani by the United States in Iraq, bringing tensions between the two countries to boiling point. Since then, the heated exchange of war rhetoric has been scaled back significantly, reducing the possibility of an all-out conflict.</p><p></p><p>With the Iranian regime having recently admitted to unintentionally downing the Ukrainian flight killing 176 people, it is likely their attention will be refocused on containing domestic dissent.</p><p></p><p><u>Impact on Businesses and Law Firms</u></p><p></p><p>Due to the downing of the Ukrainian plane, many airlines have now followed the Federal Aviation Administration (FAA) in treating Iraqi and Iranian airspace as a no-fly zone. The third-longest passenger flight operated by Qantas from London to Perth is just one example of flights being made even longer because of rerouting.</p><p></p><p>When conflicts brew In the Middle East, the first thing observers look to is oil. So, what has the impact been on oil prices? Oil prices saw an initial jump of nearly 5%, but that was quickly subsided by a return to prices seen before the assassination of Soleimani within a matter of days. It is important to note that whilst oil supplies itself were not hit, investors are demonstrating an extremely cautious approach.</p><p></p><p>Although the physical retaliations may be over, President Donald Trump has spoken of his intention to impose further sanctions on Iran, in addition to new financial sanctions on Iraq. If the sanctions go forward, law firms must be prepared to offer clients updated advice on how to navigate their way around them.</p><p></p><p>Given that Iran has explicitly threatened to attack Dubai, if the conflict shows signs of persisting, it is expected that many commercial firms will scale back their outposts in the UAE. However, if the markets are anything to go by, such escalation remains unlikely.</p></blockquote><p></p>
[QUOTE="Curtley Bale, post: 18926, member: 4422"] [B]The story of retail in 2019 [/B](By Heerim Hwang) [U]The story[/U] According to the British Retail Consortium (BRC) and KPMG, 2019 saw the worst year in sales for retail with total sales decreasing by 0.1%. Helen Dickinson, the chief executive of the BRC, stated that 2019 was the first year “to show an overall decline in retail sales”. This was reflected in the 2,750 jobs lost per week, the rising number of companies entering administration, and the greater use of Company Voluntary Arrangements (CVAs) as companies attempted to continue operating in the midst of immense debt in 2019. The decline is considered to be down to the total sales of November and December weakening by 0.9%, a crucial period where retailers often generate the majority of their annual profits. Total sales in December alone increased by 1.9%, however, this is a distorted figure due to Black Friday sales taking place later than in 2018. [U] Impact on Businesses and Law Firms[/U] In addition to political instability dampening consumer confidence, a greater awareness of sustainability and eco-friendliness, an increasing shift to e-commerce, and decreasing High Street footfall have contributed. However, the BRC’s figures have not included online-retailers, such as Amazon, which some experts consider being responsible for an estimated 20% of online sales. This is particularly important as non-food online penetration (a measure of how many users there are for non-food products online) increased by 1.8%. With consumers spending one in every £5 online, retailers will be forced to adapt and it is likely we will see more closures as companies, such as Debenhams, have been forced to centralise and downsize to survive. In light of this, law firms are likely to be busy in advising clients undergoing a restructure or insolvency with matters such as arranging repayment agreements with creditors (CVAs), redundancies, and, potentially, litigation as companies seek to recoup their losses as much as possible. [B]Aston Martin’s profitability warning [/B](By Brian Chiu) [U]The story[/U] Aston Martin Lagonda, a 105-year-old British luxury carmaker, has given investors a rough ride, expecting an almost 50% fall in its annual earnings of between £130m and £140m, compared to the £247.3m it reported last year. On the same day, Rolls Royce Motor Cars, a rival British luxury car brand, announced that it had had its best year ever in 2019. [U]Impact on Businesses and Law Firms[/U] Aston Martin has been in a parlous financial state since it went public in October 2018. Its shares were priced at £19 each but are now about £4.50 each and the current market capitalisation is less than a third of its debut price. Its net debt stood at £800m, part of which was a £150m debt at a rate of 12%. The debt is to subsidise the production of the new DBX SUV model, which the company hopes will bring salvation after a "very disappointing year" as it reportedly cancelled the production of its first electric vehicle RapidE. However, Aston Martin which has long been targeting the premium segment and never dabbled in the SUV market may no longer win the battle by brand reputation alone. Pioneering autonomous technologies, increasing consumer expectations and the trade war threatening its supply chains and sales in Asia all worsen the situation. Even after recovering from the current situation, it would need more capital to reinvent itself. Geely, a Chinese firm, is in talks with Aston Martin on an equity financing deal. Lawyers will conduct due diligence to draft the shares purchase agreement. Its existing liabilities and parts’ supplier contracts will all affect its drafting. For example, Aston Martin's partnership with Redbull in the Formula One race will be renewed at the end of the 2020 season. Lawyers will review the articles of association to check if there is any restriction on shares sale. [B]The ongoing US-Iran tensions[/B] (By Ayah Reza) [U] The story[/U] The start of the year saw the killing of Iranian general Qasem Soleimani by the United States in Iraq, bringing tensions between the two countries to boiling point. Since then, the heated exchange of war rhetoric has been scaled back significantly, reducing the possibility of an all-out conflict. With the Iranian regime having recently admitted to unintentionally downing the Ukrainian flight killing 176 people, it is likely their attention will be refocused on containing domestic dissent. [U]Impact on Businesses and Law Firms[/U] Due to the downing of the Ukrainian plane, many airlines have now followed the Federal Aviation Administration (FAA) in treating Iraqi and Iranian airspace as a no-fly zone. The third-longest passenger flight operated by Qantas from London to Perth is just one example of flights being made even longer because of rerouting. When conflicts brew In the Middle East, the first thing observers look to is oil. So, what has the impact been on oil prices? Oil prices saw an initial jump of nearly 5%, but that was quickly subsided by a return to prices seen before the assassination of Soleimani within a matter of days. It is important to note that whilst oil supplies itself were not hit, investors are demonstrating an extremely cautious approach. Although the physical retaliations may be over, President Donald Trump has spoken of his intention to impose further sanctions on Iran, in addition to new financial sanctions on Iraq. If the sanctions go forward, law firms must be prepared to offer clients updated advice on how to navigate their way around them. Given that Iran has explicitly threatened to attack Dubai, if the conflict shows signs of persisting, it is expected that many commercial firms will scale back their outposts in the UAE. However, if the markets are anything to go by, such escalation remains unlikely. [/QUOTE]
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