Will Apple decide to come to the UK after EU orders Ireland to claw back £11Bn? I really don’t think so and here’s why…
Regulators in Europe have sent a mixed message to the market, “Europe wants to attract you, and offers low tax incentives, yet if you do make a pile of cash, we’ll attempt to claw back the gifts”. Although I don’t believe it will materially impact on Apples phenomenal business performance I do think this presents an eye watering gift for the UK government. They have promised to attract inward investment to the UK Northern Powerhouse and this could be the catalyst...
Apple employs 115,000 staff globally and about 6,000 in Cork Ireland. Strategically it now faces the opportunity to enter the UK following the Brexit decision. If the Brussels action retroactively creates a tax rate greater than the UK extant 20% it would make sense for Apple to transfer at least the greater part of its operations to a low cost UK hub.
It is the most populous city in the United Kingdom, with a metropolitan area of over 13 million inhabitants
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Regulators Bite the Big Apple! .
Uncertainty is the problem – It is unlikely to effect younger talent, who could easily up sticks if push comes to shove but older folk would likely bare the brunt of any Apple Exodus. Much will really hinge on the ability of British Prime Minister Mrs May to secure effective open EU market access for Britain.
If we look at Apples Financial Performance, the first thing we notice is that they are incredibly profitable and cash generative. Most of their liquidity resides in securities in fact not cash, that would be crazy as it is about $200 Bn. This means the stock market will dent Apple far more than Brussels ever could. We’ll examine that a little later.
Contrary to what the headlines might lead you to believe, Apple does pay tax. Its accounts show a consistent 26% Tax Charge, resulting in an average $ 15 Billion in each of the past three years according to their official 2015 10K accounts.
Apples tax charge has risen over the last three years from $13.1 Bn in 2013 to whopping $19 Bn in 2015. An estimated Deferred Tax shelter from between $4 and $6 Bn resides on its balance sheet.
Apple is a Dream of a Business for Investors – But it is a Behemoth and subject to the latest regulatory trend in Global Markets “Tax Contraction” – Regulators are Truly Changing the World
Apples Mark Up is phenomenal. It has risen from 60% to 67% . A 7% absolute or just 10.8% relative increase in three years. This suggests a highly efficient operating model with increasing product demand. But all is not rosy!
Net sales have grown a massive 36.75% since 2013 from $170.1 Bn to $233.7o Bn. Not bad, but particularly good when compared to costs of sales which have only increased a correspondingly 31.41% or $33.4 Bn over the course.
Gross Margin has thus taken a leap from a healthy 37.6% in 2013 to 40.1% in 2015 an incremental improvement of 6.47% or an absolute gain of 45.6% which translates to $29.3 Bn greater than two years ago.
Is it a Cautionary Warning for the Future Revenue Generating Capability of Apple as It Scales Back R&D?
Paris is the capital of France.
The Paris area is one of the largest population centers in Europe, with more than 12 million inhabitants.
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Tokyo is the capital of Japan.
It is the center of the Greater Tokyo Area, and the most populous metropolitan area in the world.