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The most valuable car company is…

Which of the following two motor manufacturers would you say is the most valuable?

The first one produced 2.4 million cars whilst the second one produced 103,000.

This isn’t a trick question but an illustration of how market valuation is very much based on expectations of future rather than historical performance.

The car manufacturer who produced 2.4 million cars was Toyota and up until yesterday was the highest valued motor manufacturer in the world.

The company that only produced 103,000 cars was Tesla and yesterday it’s shares increased to above $1,000 for the first time. This valued the company at £207 billion which was over $6 billion more than Toyota was valued by its investors.

So, despite only producing approximately 4% of Toyota’s production, Tesla is currently the most valuable motoring manufacturer in the world.

There are views that the market sees Toyota as a lumbering giant who is being slow to get into full electric vehicles whilst Tesla is leading the way in terms of the future of driving and electric vehicles in particular.

Tesla certainly seems to have turned the corner. After years of making losses, Tesla has reported 3 straight quarters of profits and is now worth more than Ford, General Motors, Honda and Fiat Chrysler combined.

As well as being pretty innovative in terms of their car designs, Tesla have come up with an impressive idea for their car names.

Earlier this year, Tesla’s Senior Director of Artificial Intelligence Andrej Karpathy gave a presentation on the use of artificial intelligence for full self driving.

During the presentation it became clear that the names of the cars spelt out a nice marketing message.

Their current car models are the Models S, 3, X and Y which near enough spells out SEXY (they couldn’t have the Model E as Ford had already trademarked that so Tesla called it the Model 3 but stylised the 3 so that it looked like E).

They also have 4 vehicles in the pipeline.

Namely, the Cybertruck, the All-Terrain Vehicle, the Roadster and the Semi.

The first letters from the names of the 8 Tesla vehicles spell out SEXY CARS…

Flying high with creativity.

Sometimes a little bit of creative thinking can go a long way. This bit of creativity though went a very long way indeed.

Creativity can add value to all types of businesses and this particular project involved technology and one of the largest sea birds.

There are 22 species of the albatross bird. With a wingspan of up to 3.5 metres, the wandering albatross species has the largest wingspan of any living flying bird. Importantly for this project though, they are also capable of flying long distances out to sea.

Illegal fishing by trawlers can seriously impact on fish levels. Organisations tasked with protecting fish levels can find it almost impossible to prevent this illegal fishing. In simple terms, the ocean is very large and the boats are pretty small so keeping track of them and what they are fishing for is very difficult.

In an innovative project led by the French National Centre for Scientific Research, 169 Albatrosses have been equipped with sensors. If the birds are in the vicinity of a boat, these sensors are able to tell whether the boat’s Automatic Identification Systems (AIS) are switched off.

Having the AIS systems switched off on a boat is common when the boat is fishing illegally.

The beauty of this project is that the albatrosses can cover huge areas and when the sensors identify boats with their AIS switched off, the enforcement boats can head to that location to investigate further.

The initiative is currently being trialled off the coast of New Zealand and over the last 6 months the birds have located 353 boats, 37% of which were not emitting the AIS signal.

KPMG partners cheated in exams.

Ethics are pretty important if you’re a partner in an accounting firm. Unfortunately for these guys though they weren’t the most ethical of people as they were involved in cheating in exams.

The cheating was uncovered by the SEC (Securities and Exchange Commission) in the US. They were initially investigating claims that KPMG had altered previously completed audit work after receiving stolen information about what inspections would be conducted by the Public Company Accounting Oversight Board.

During that investigation however they also found that numerous KPMG audit professionals cheated on internal training exams by sharing answers.

Cheating at exams by sharing answers? Surely that would be a junior member?

Actually, no.

The key people involved were (now former) KPMG audit partners.

The investigation stated that former partners Timothy Daly, Michael Bellach, and John Donovan were involved in the cheating.

They had obtained images of questions and answers to the tests from subordinates and then shared them with members of their team.

The tests which were taking place were in connection with ensuring that KPMG audit staff understood certain accounting and auditing principles.

KPMG themselves became aware of potential cheating on the exams and began an investigation. They sent a document preservation notice to all KPMG staff (this basically means not to delete or destroy any potential evidence).

The ex-partners however ignored this preservation notice. They deleted various text messages and denied any wrongdoing to KPMG investigators.

KPMG were obviously not happy with the situation when the truth emerged and the partners soon became ex-partners of KPMG.

The three individuals were also suspended from appearing or practicing as an accountant before the SEC (although they can apply for reinstatement in the future).

KPMG had a pretty bad time of it last year in terms of the stolen PCAOB information and the exam cheating and had to pay a penalty of $50 million.

Steven Peikin, co-director of the SEC’s division of enforcement, said: “Audit professionals play a critical role in the integrity of the financial reporting process and the protection of investors. These actions reflect our commitment to hold these gatekeepers responsible for breaches of their professional obligations.”

A KPMG spokesperson said “We are a stronger firm as a result of the actions we are taking to strengthen our culture, governance and compliance program.”

Time up for Swiss watches?

Switzerland has a reputation for being the home of some of the most prestigious watch manufacturers.

Omega, Tag Heuer and Breitling are just three if the many famous brands of Swiss watches that produce extremely high-quality timepieces.

But things are changing though and there’s a modern-day challenger to their dominance.

That modern-day challenger is Apple.

Last year Apple sold more watched than the entire Swiss watch industry.

A recent report by Strategy Analytics estimated that Apple sold 30.7 million smartwatches last year (an increase of 36% on the 2018 figure).

Estimates for the entire Swiss watch industry showed sales of 21.1 million units last year (a 13% fall on the 2018 figures).

This is a difficult time for the Swiss watch industry as they face a number of challenges.

The younger generation especially are keen on the tech side of watches and these are very much in fashion.

Although some Swiss watch brands such as Swatch and Tissot are launching their own smart watches, their competencies and skills are very much based around the mechanical engineering of watches compared to software engineering which is needed for smart watches.

Another major challenge is their distribution channels and where they are sold.

Swiss watches are typically sold in jewellery shops whereas smart watches such as the Apple watch are sold in phone shops and Apple stores.

Certainly a challenging time for the Swiss watch industry.

Will these Swiss watch brands survive?

Only time will tell…

How much for a speech?

The salary of Boris Johnson, the current UK prime minister is just over £150,000. I’m sure that most Prime Minsters don’t do the job for the money but there can be some pretty significant financial benefits when they move on from being the prime minister.

As the PM, Mr Johnson can’t do any other work whilst in his job but other MPs can. Theresa May was Boris Johnson’s predecessor but now is back to being a standard MP.

According to the government’s register of interests though she’s doing quite nicely on the financial side of things.

PwC for example paid Mrs May in January to do a speech. The total time involved including preparation and travel was 12 hours.

So, how much do you think PwC paid Mrs May for this?

Go on, have a guess.

She received approximately £96,000 for the speech.

Now, that’s not bad for 12 hours work.

As well as receiving £96,000 from PwC she also received money from other organisations for speeches delivered during the first quarter of 2020. These were:

Approximately £115,000 from Dubai Women Establishment for a speech in February (19 hours, including preparation and travel).

Approximately £115,000 from the Structured Finance Association for a speech in February (25 hours, including preparation and travel).

Approximately £115,000 from Brown University, Rhode Island, USA. (14 hours, including preparation and travel).

Approximately £115,000 from Trinity University, Texas, USA. (14 hours, including preparation and travel).

Over £500,000 for 5 speeches in 3 months.

Not bad work if you can get it.

According to a statement by Mrs May in the Register of Members’ Financial Interests, these payments “are made to the Office of Theresa May Limited and used to pay employees, maintain my ongoing involvement in public life and support my charitable work.”

Manchester Utd and Deloitte

Deloitte has stated that Manchester United are better than Liverpool.

Now before anyone starts getting concerned that Deloitte are moving away from finance and becoming football pundits, I should stress that I’m referring to the Deloitte Football Money League.

Deloitte has been compiling the Football Money League since 1996/97 and the League lists the top 20 clubs in the world for revenue in a football season. They have recently released the figures relating to the 2018/19 season and a few records were broken.

The combined revenue for the 20 richest clubs in the world grew by 11% and reached a new high of €9.3bn (£8.2bn).

It’s a Spanish top two for the second consecutive year. This time though the positions are reversed with Barcelona taking top spot and Real Madrid dropping to second place.

In terms of the fortunes of the eight English Premier League clubs in the table, Manchester United remains in third with revenue of €712m.

United’s closest Premier League rivals, Manchester City and Liverpool, generated revenues of €611m and €605m respectively.

The Deloitte Football Money League measures a club’s earnings from match day revenue, broadcast rights and commercial sources, and ranks them on that basis. The study doesn’t include player transfer fees though.

More details on the report can be found here and the top 10 in the league are:

1 Barcelona €841m
2 Real Madrid €757m
3 Manchester United €712m
4 Bayern Munich €660m
5 Paris Saint-Germain €636m
6 Manchester City €611m
7 Liverpool €605m
8 Tottenham Hotspur €521m
9  Chelsea €513m
10 Juventus €460m

Fancy working for the Queen?

I’m not sure where you work or what your office is like but my guess is that it’s not as historic as where you would work if you were successful in applying for this job.

The Royal Family has advertised for a new Management Accountant to look after the “Privy Purse” (the British sovereign’s private income). The job is based at Buckingham Palace.

Candidates for the job need to be qualified and should have “outstanding problem-solving skills”. They will need to produce management information and financial accounts and the advert promises that “no two days will be the same and the deadlines we work to will stretch you. Yet in all that you do, you’ll rise to the challenge and deliver faultless accuracy and a first-class service to this unique organisation”.

It’s not just a solid knowledge of figures that they require as the advert goes on to say that candidates need to demonstrate that they are “as good with people as you are with numbers, which is crucial given the customer focussed nature of this role”.

Now let’s get down to the exciting part and how much are they prepared to pay for this position?

According to leading recruiter Robert Half, the average salary for a Management Accountant in London is currently £58,100.

The salary that is being offered for the Royal job is £40,000.

Cashless or cash?

Over 1 billion consumers are forecast to use cashless payment methods in 2020. Contactless cards and smartphone payments can make payments very easy for an individual and for the retailer it avoids security issues dealing with cash.

A number of shops are moving to “cashless” shops where all the payments have to be made by contactless cards or smartphone apps such as Apple Pay.

Not everyone is happy though as to make a cashless payment you need one important thing.

Namely, a bank account.

Globally, 1.7 billion adults do not have a bank account and whilst you may be thinking that these people without bank accounts are in the emerging markets around the world, that’s not always the case.

New York City, is one of the most famous cities in the world.

According to a recent report by the New York City Department of Consumer and Worker Protection (DCWP), 354,100 households (11.2 percent) have no bank account (unbanked) and another 689,000 households (21.8 percent) have a bank account but use alternative financial products for some banking needs (underbanked).

In other words, 33% of the New York City households are either unbanked or underbanked.

That’s a pretty big proportion and as a result, the New York City Council has voted to require shops and restaurants to accept cash for payments of USD 20 or less.

The law is expected to be in place by the end of 2020.

New York won’t be the first city in the States to ban cashless stores as last year Philadelphia and San Francisco banned them.

Whilst several retail organisations have appeared to be championing cashless shops it’s looking like it won’t be possible in a number of locations around the world.

These organisations may be initially frustrated at being prevented from being cashless but in reality, this isn’t necessarily a bad thing. As well as the ethical debate about refusing to accept people who can only pay in cash, if they did go cashless they would be missing out on a significant part of the population who want to spend their cash, albeit “cash” and not “cashless cash”.

Rolling in it…

Here’s a question for you – what do you think the average age is of somebody who buys a new Rolls-Royce?

Perhaps surprisingly the average age has dropped significantly over the last decade.

The company has just reported their sales for 2019. Despite the majority of the global car market facing falling sales, Rolls-Royce have bucked the trend.

They have reported their best ever sales with a 25% increase in cars sold compared to the previous year.

In terms of Michael Porter’s generic strategy model, their strategy is a clear differentiation approach. In the words of chief executive Torsten Muller-Otvos, the brand is “rare and exclusive”.

They have also made a concerted effort to appeal to younger drivers (it’s fair to say that these are younger extremely wealthy drivers with their bestselling model the Cullinan starting at £264,000).

The Cullinan was launched in 2018 and it was a radical change for the company. Rolls-Royce had a history of luxury saloon models and the Cullinan was their first SUV 4×4 off-road car.

Mr Muller-Otvos said the increase in sales was in part down to the introduction of “black badge” versions of its cars, where the car was black inside and out.

He was quoted as saying

“This is a cooler, darker, more menacing, edgy proposition, [aimed] especially towards younger clients.”

“Many smart kids around the world building platforms or whatever making a fortune early in their life are coming to us to start investing in a Rolls-Royce”

In total Rolls-Royce sold 5,125 new cars in 2019 of which the Cullinan amounted to 40% (nearly 2,000 cars).

Oh, and in case you are interested the average age of a Rolls-Royce buyer is now 43.

An unexpected ending…

A lot of you may have been on business trips but I bet your trip wasn’t as exciting (and tragic) as this gentlemen’s trip was.

What was also surprising was that his employer was found liable for his death as it was classified as an industrial accident.

The exact cause of death was a cardiac arrest whilst he was having sex with a stranger he had met on the business trip.

Now, whilst having a heart attack during sex with a stranger probably wouldn’t meet most people’s definition of an “industrial accident” a French court found otherwise. The court stated that the employer was responsible for any accident occurring during a business trip and ruled that his family were entitled to compensation.

The man who died on the job, named as Xavier X, was working as an engineer for TSO, a railway services company based near Paris and his employer had perhaps quite reasonably argued that he was not carrying out professional duties when he got into an extra marital relationship with a total stranger in his hotel room.

This opinion though wasn’t accepted by the court and they upheld the view that sexual activity was normal, “like taking a shower or a meal”.

As a result of it being classified as a normal activity on a business trip, the death was considered to be an industrial accident and under French law, partners or children of industrial accident victims receive up to 80 per cent of their salary until what would have been the person’s retirement age, with pension contributions paid from then on.