B&Q owner Kingfisher has recorded a third successive year of declining annual profits and the company has made predictions of a worsening situation.
Annual profits have fallen 2.8%, with pre-tax profits coming in at £386 million in the year ending on 2nd Feb 2008, down from £397 million in the previous year. A lot of the loss in profits can be accounted of due to the expenditure made on revamping and modernising stores and product ranges.
Kingfisher is moving away from its traditional aisle-based format to a more contemporary layout that fully displays their kitchen and bathroom ranges. Although retail profits fell nearly 20% to £113 million after expenses made to refurbish the new stores, Kingfisher claims that early trading figures make them optimistic. The Company states that the new format stores delivered on an average nearly 13% higher than the old-format stores.
Out of the 117 large B&Q stores, 38 are trading on the new format, while nearly 151 of the 206 medium sized stores have been brought up-to-date.
Kingfisher states that sales performances have been better outside the UK; Castorama and Brico Stores in Poland have made profit 42% higher and profits were 13% higher in France. In the UK, the Kingfisher Group operates as Screwfix and Trade Depot and has noticed that the home improvement market has weakened in the second half of the year due to the poor overall performance of the housing market.
In an effort to keep costs low, Kingfisher has decided to cut dividends to shareholders by half to 3.4 pence and may also reduce its six-monthly dividend.
The Ministry of Defence (MoD) has been forced to reconsider proceeding with the Nimrod programme, after it has grossly overshot both its budget and its required time deadline.
The Nimrod MRA4 maritime patrol aircraft has been plagued by technical snags and is already eight years late with nearly one billion already spent above the established budget. MPs now find themselves in a situation where they may consider it wiser to quit now and reduce further losses which may run up to 100 million pounds in 2007/8, bringing the total expenditure to 800 million pounds.
The Nimrod MRA4 was announced in 1992 to replace the Nimrod MR2; the programme has however still not taken off due to technical problems. The most disappointing aspect will be the lack of these new Joint Strike Fighter Aircrafts when the navy’s two new aircraft carriers will enter service in 2014, due to the delays that have already been encountered.
MPs believe that the MoD should resort o more radical alterations such as scrapping entire programmes that seem to be troubled or unaffordable to start with, rather than just making minor changes such as delaying orders or reducing the number of platforms ordered. They believe that a more realistic equipment programme will bolster the confidence of the Armed Forces as such programmes can be executed on time and within the allocated budget.
Following the Comprehensive Spending Review, the Defence Budget for 2008/09 has been fixed to approximately 34 billion pounds.
Bob Diamond, the Head of Investment Banking for Barclays bank took home a fat pay cheque of ₤21 million pounds, for the year 2007, albeit a shade lower than the year before. Still one of Europe’s highest paid bankers of 2007, Diamond’s salary break up consisted of 6.8 million pounds in cash and shares worth 11.4 million pounds under an executive share award scheme. The scheme requires executives to stay at the bank for at least five years for the full amount.
An additional amount of 3 million pounds could be added on later, according to a performance share plan depending on how well Barclay’s shares perform in the following three years.
Although Bob Diamond’s basic salary has remained at 250,000 pounds for the last eight years, his bonus structure is radically different from the other directors, in keeping with the practice common in investment banking.
In actual figures, Diamond’s salary is down one million pounds since 2006, but the ₤22 million he drew for 2006 was split almost right through the middle in cash and shares. However in 2007, he received almost 64% of his bonus in shares.
Bob Diamond’s salary was a lot higher than even that of Chief Executive John Varley and also that of Frit Seegers who is the head of retail and commercial banking. Bob Diamond is group president and manages the investment banking, wealth management and asset management divisions of Barclays and though his division called Barclays Capital (BarCap) has had decreased profit growth this year, down to 5% from 55% in 2006, BarCap has still managed to rake in nearly a third of the profits Barclays made in 2007.
Barclays’ 2007 pretax profit has hit a plateau at 7.1 billion pounds following a grave loss of 1.6 billion pounds on the value of risky assets and retarded growth due to financial crises. Despite all this, Barclays writedowns was a lot lower than rival banks.
Mervyn King, the Governor, Bank of England, has warned MPs of the full extent of the effect that the credit crunch is expected to have on the UK economy. He in turn has promised to push more money into the markets to bolster confidence in the UK financial system.
About the housing and realty sector, he prophesized that it will remain more or less stable. Houses will become more affordable for first time buyers due to the slowdown and the return of the ratio of wages to house prices to normal values.
He stated that although all over the world, the confidence in the financial sector is weakening; at least the banks in the UK have not given out loans to an extent that may lead to unsustainable losses.
Although a lot of cash flow has occurred into the money markets, the Libor Rate, which is the rate at which banks loan money to each other, has remained high. What is more worrying is that all efforts from central banks have failed to contain these rates. Mr. King said that long term solutions to this problem are being worked out.
Mr. King also told Mps that inflation was still likely to rise, probably over the 3% mark, pushed up by rising fuel prices. This will cause an increase in essential commodities such as oil, food and energy. He however was certain that in the long run, inflation may come down to the Government’s target of 2%.
He also denied the likelihood of following the American example of aggressively cutting interest rates after assuring that the UK economy, with all its pitfalls, was not nearly as bad as the American economy, especially in the labour and housing markets.
Northern Rock, one of the biggest employers in the North East, has announced that they will cut nearly 2000 jobs, amounting to a staggering one-third of its current employees, and to reduce its mortgage lending by half. The bank has been terribly under the weather and will be forced to make these cuts by 2011 if they are to have any hope of turning things around.
Recent troubles, due to the credit crisis, led to the bank having to seek a Bank of England lifeline, and the Northern Rock was nationalised in February to fund its mortgage loan book. It now owes the Bank of England about ₤25 billion.
Northern Rock’s rescue operation will be put under scrutiny by the European Union Commission to ensure that the aid it has received, to prevent it from going bankrupt, does not jeopardize its competitors. Even EU officials are certain that in order to be viable, Northern Rock has no alterative but to shrink.
In the meanwhile, a task force called the Northern Rock Response Group, has been formed to help the affected employees a new job. A Regional Development Agency One NorthEast is heading this response group. While acknowledging the huge blow to the dedicated task force at Northern Rock, the response group reassured affected employees stating that the skills that these employees possess are in great demand in the North East, and they hope to retain as many of them in the region as possible. They also want to make sure that no employee is made to compulsorily quit and that all the reductions in workforce will be voluntary.
The UK Shareholders Association is also due to announce legal action by Northern Rock shareholders that want compensation for the compulsory purchase of their shares by the Government.
One of the most exciting additions to the aviation industry, the Airbus A380, better known as the “Super-Jumbo”, is all set to make its maiden European commercial voyage. This is scheduled to occur when a flight from Singapore SQ308 lands at London’s Heathrow airport on Tuesday 1505 hours.
Singapore Airlines was the first airline in the world to include this double-decker aircraft on revenue –earning services. British Airways has placed 12 orders of the airlines, due to be delivered by 2012 while Virgin has ordered six and will be expecting them in 2013.
The 480 passengers on the Tuesday Singapore Airlines flight will all be issued a certificate to commemorate their journey on this historic flight.
Heathrow Airport operators BAA have made provisions for the accommodations for the A380. A special pier at Terminal 3 has been constructed which will house not only this flight but another which will be flown in by Emirates Airlines subsequently. This is termed Pier 6 and was constructed in 2006 to accommodate four A380s and cost ₤105 million. Other expenses to make this landing possible include a ₤340 million modification to the airfields. The upgrades included a resurfacing of runways, lighting improvements, and modified taxiways.
The swanky new Terminal 5 that was inaugurated by the Queen just last week also has the capability of handling this massive Airbus when it begins to operate for British Airways.
Singapore Airlines sat that they believe that the start of commercial A380 services to London is a “proud moment” for them.
Inflation is rising steadily above the Bank of England target of 2%, with a steep rise in February, due to the increased gas and electricity prices. Consumer prices have risen by 0.8% and are at the 2.5% inflation level, which is the worst since last May.
Changes in utility bills are generally gradual and spread out over several months. However, there has been a sudden rise right now due to the change in the Office for National Statistics’ Calculation. This has led to the gas rates going up a mind –numbing 13% and electricity is up 9.5% in February.
In the meanwhile, the central bank may have to change its usual method of methodical and slow interest rate cuts if it wants to prevent the credit crisis from worsening. With the worsening of prices for essential commodities such as oil, gas, electricity and food, there seems to be no respite in sight as most policymakers believe that the situation may just get worse before it has any chance of looking up again.
The trend seems to indicate that inflation may rise up above the dreaded 3% mark and this will force the Bank Governor Mervyn King to write a letter of explanation to the government to justify the overshooting of the target 2%. Economists however hope that inflation would peak at 2.9%.
In this messy situation, the only consolation is that conditions are similar all over the developing world if not worse. The Euro Zone has indicated inflation of an astounding 3.3% in February.
According to the research conducted by The Experian, people in Richmond-upon-Thames area were found to be the most indebted. Northern Ireland showed the biggest change in total debt - up 23 per cent in the last one year. At the other end of the spectrum, the smallest rises in debt were reported from Aldershot, Dartford, Bishops Stortford, Newport on the Isle of Wight, and Ilford stated Experian. The least indebted area was found to be Dumfries.
The Citizen’s Advice Bureau (CAB) stated people in debt should inform their creditors without delay if they were facing problems in paying. In that case, bureau staff could definitely help them in putting up emergency payment plans, brief about the options available, and also make sure any entitled benefits were actually being claimed. The bureau, for instance, gave advice to a man with multiple debts. He faced fuel bills alone amounting to over 20 per cent of his income. Another case was of a disabled woman. She was spending £30 of her £70 cash every week just on electricity. CAB director of policy, Teresa Perchard, informed that the survey drew a rather worrying picture of many households struggling a bit to meet their basic day-to-day living costs like utility, telephone as well as council tax bills.
Businesses in the UK, especially those based in London have been found to be missing out on projected financial gains worth a whopping £21bn. This is because they are still to take advantage of the opportunities offered by the 2012 London Olympics, a new report has revealed.
About 63 per cent of firms think the 2012 Olympics Games will have a significant positive impact. On other hand, 64 per cent of them have not still looked into the lucrative opportunities that can be tapped. The report released by Lloyds TSB stated the Olympic Delivery Authority has so far awarded contracts - worth more than £1bn; nearly half of these have been won by firms outside London. In spite of this, the report stated only 31 per cent firms plan to take any steps within the next one year.
The research also found that nearly 43 per cent of respondents believe they need further back-up and guidance on how to draw full advantage and leverage the business opportunities offered by the London Olympics.
Leaders in plumbing, Wolseley, have reported a sharp decline in half yearly trading profits as a result of the slowing of the economy.
The Group has reported a drop in profits from ₤390 million in the half year ending 31st January 2007, to a mere ₤300 million as on the half year ending 31st January 2008, effectively down 23%. The firm has attributed most of these losses on the rising stock of unsold goods.
The company plans to achieve a turnaround by focusing on increasing the cash flow, reducing costs and growing the market share. In the face of expectations of further deterioration of the US housing market, the company expects further pressure on the “repair, renovate and improvement market”. Wolseley has already given 3,000 jobs the axe in the US and the company’s chief executive has issued warnings of additional job cuts.
In the UK however, Wolseley claims, that they are already beginning to show benefits in trading profits despite an acknowledged slowing economy.
Early trade on Monday already had the company’s stocks down 4.5%