UK tax regimes are finally taking a toll on various companies, and United Business Media, the specialist publishing and events group is the perfect example. After 90 years UBM is abandoning the UK market. They plan on moving operations to Ireland that offers favourable tax regimes. Corporation tax rates in Ireland stand at only 12.5% compared with 28% in the UK. On the other hand, the UK tax system imposes tax on all companies. UBM has a strong hold in its respective industry with operations in more than 30 countries worldwide and with over 85% of profits coming from outside the UK. From Techweb and PR Newswire to the Publican and Property Week, UBM has been growing tremendously with acquisition. Considering its worldwide operations, UBM will profit tremendously from the uncomplicated tax regime in Ireland.
But UBM is not the only company that is taking such a drastic step. Drug Company Shire who moved back to Ireland, this month itself, and Glaxo SmithKline would consider the same unless UK’s business environment undergoes a changes. At present many companies believe that UK market conditions are not conducive to their staying registered here.
UBM’s decision will come as a rude shock to the UK government as one of the Government’s advisors is a part of the UBM board as a non-executive director. UBM aims at creating a new holding Company, based in Jersey that will have its tax center in Ireland. UBM is currently in the midst of a legal face-off with HM revenue & Customs over a £80 million tax bill pertaining to the company’s disposal of its British reginal paper, way back in 1998. The legal battle has been on now for 10 years.
The dark cloud created by the “global credit crunch” lurks around, in turn affecting the value of investments and threatening profitability for banks in the UK. And recent developments at HBOS are a case in point. In a recent announcement, HBOS, owners of Halifax and Bank of Scotland, shared its plans to raise £4bn of extra funding from its existing shareholders. This move comes in with their plans to create “a more challenging environment ahead”. Through the rights issue HBOS plans on writing off £2.8bn from the value of its investments. These investments are even related to the US sub-prime mortgage market.
The HBOS Rights issue was highly anticipated, being one of the two banks, the other being Barclays most expected to follow in the footsteps of The Royal Bank of Scotland, which announced its Rights Issue last week.
HBOS has invited its two million shareholders to invest in fresh shares. They plan to offer two new HBOS shares for every five existent shares. The shares are priced at 275 pence, which is a 46% discount on the opening price on Wednesday- 495 pence.
The rights issue will not only help HBOS raise its capital but will also provide it the much required liquidity, essential in these times. Other than global growth HBOS would invest the extra funds in residential mortgage and savings business. It will even act as a troubleshooter for any future economic challenges. This move should surely save them from hitting the iceberg in case of a fall in the economy. With the current state of affairs an economic downfall seems near.
HBOS should come out with a prospectus by End-June, which will subsequently be subjected to approval by shareholders, who will vote for or against the proposal at the Extraordinary General Meeting.
The French government proposed radical measures for raising the number of older people in the country’s workforce, in an effort to tackle its fast ageing population. Firms could be slapped with stiff penalties if they fail to increase their number of staff in the age group of 55 to 64. The most controversial reform suggested is for employees to work till 41 - not 40 years - to qualify for a full state pension. Union leaders met Xavier Bertrand, the Labour Minister, but there are already calls being made for strikes on May 15.
France has one of the abysmally lowest rates of employment of workers in the age group of 55 to 64 in the European Union. However, the country also boasts one of the best rates of life expectancy, at 77.6 for men and 84.5 for women, which only compounds the problem. Although the government under President Nicolas Sarkozy has decided not to push for firms to have a quota of ageing workers, it does want businesses that have not signed an agreement by 2010 to face additional pension contributions. According to an estimate, around 400,000 people aged 57 or above are out of work. They are receiving unemployment benefit.
The oil producing cartel Opec has sent out a warning that the crude price could keep increasing and could well reach $200 a barrel. Chakib Khelil, the Opec president passed the blame on the US dollar’s falling value that makes other assets, comprising oil, far more attractive for foreign investors. His remarks came as oil prices were just a tad below $120 a barrel. Oil prices were further lifted by an UK refinery strike, which disrupted North Sea production, plus supply problems in Nigeria owing to pipeline attacks.
BP shut down its key North Sea pipeline after staff walked out of the Grangemouth refinery in Scotland at the weekend in a two-day strike over pensions. Providing for almost a third of UK oil output, the shutting down of the Forties pipeline further raised fears about impending supply shortages. The BP-run pipeline from the North Sea’s Forties oil fields heavily relies on electricity and steam from Grangemouth’s Ineos refinery. US light crude reached $119.93 a barrel before finishing at $118.79 in the beginning of the week, passing the previous record mark of $119.90 a barrel achieved last week.
Exports of Scotch whisky have reached new record levels for the one year period under survey, according to latest figures made available by an industry body. The Scotch Whisky Association (SWA) declared the value of exports managed to reach a new high of almost £2.8bn, earning £90 every second for the country’s balance of trade.
According to details released, the value of Scotch Whisky exports to India grew by 36 per cent to £33m, whereas exports to the European Union went up by 27 per cent. The SWA mentioned that export volume was also significantly up - with the equivalent of 1,135 million bottles of whisky exported.
SWA chairman, Paul Walsh, stated the performance ‘well underscores just how important Scotch Whisky is to the UK economy.’ He added: “This is indeed all the more impressive considering the economic difficulties that have been encountered in certain markets in the second half of 2007.”
Top ten export markets in 2007 by value are: USA £419.2m; Spain £307.5m; France £294.2m; Singapore £158.1m; South Korea £139.3m; Greece £103.5m; Germany £96.3m; South Africa £90.9m; Taiwan £81.8m and Portugal £48.3m.
UK energy firm BG Group, according to media reports, has offered almost 13bn Australian dollars ($12.1bn or £6.2bn) for Australia’s second biggest power retailer, Origin Energy. Analysts state that the Australian firm is attractive to BG owing to its valuable oil and gas production resources. These will certainly help it boost profit levels, especially at a time when margins in the traditional retail business are rather tight, observers point out.
BG has also announced a 78 per cent jump in profits for the first three months of the year 2008. The earnings were boosted by high oil and gas prices. Net profit for the quarter increased to £767m, smartly beating analysts’ forecasts. On Tuesday, oil giant Royal Dutch Shell had reported a 12 per cent rise in its first-quarter profits, whereas those at rival BP climbed 48 per cent. Shares in Origin jumped by almost 40 per cent on news of the offer! The Australian firm stated that it was yet to consider the bid. However, analysts stated it was unlikely that any other company would come up with a rival bid.
Riding on a staggering, forecast-beating 78% leap in profits, BG, UK-based gas producer has made a bid for up and coming Australian power retailer- Origin Energy.
Origin Energy is the largest holder of coal seam gas resources in Queensland and holds the distinction of being Australia’s only vertically integrated energy company. It has effectively negated any losses in its traditional retail energy business with its oil and gas production, which makes up a quarter of its revenue. Already established as Australia’s second largest power retailer, the company holds 4,578 petajoules of proven, possible and possible gas reserves. This makes the acquisition perfect for UK’s BG as its helps BG take advantage of this fast growing Pacific LNG market.
BG has made a £6.2 billion offer to acquire Origin Energy. BG has explained that it will fund this amount with cash and debt. BG made 767 million pounds in the first quarter itself, buoyed by a tripling in profits due to LNG trade in Asia.
Shares in Origin Energy jumped nearly 40% post this announcement. The company is still to contemplate on this offer. The offer seems to be pretty on point and it remains unlikely that a competing offer will come up any time soon.
This purchase, if it works out, will greatly aid BG’s expansion plans. BG and partner Queensland Gas Co have planned to build a 3.8 billion pound single train LNG plant near the Queensland port of Gladstone and Origin’s resources could provide the infrastructure for a second plant.
Goldman Sachs and Gresham Partners are advisers to BG while Macquarie is adviser to Origin.
Various new measures designed to improve choice for consumers and curb the power of major supermarkets have just been announced by the UK’s Competition Commission.
Among the measures announced is the appointment of a new independent ombudsman for resolving any disputes arising between suppliers and retailers. Recommended changes envisaged in the planning system will also make it tougher for one chain to totally dominate a local area.
The measures come at the end of a couple of years of investigation into the country’s supermarket sector. The supermarket ombudsman will oversee implementation of a stronger code of practice, which will cover all grocery retailers having a turnover over £1bn. It will investigate any complaints from suppliers against supermarkets.
The Competition Commission has recommended that it should enjoy the power for levying significant financial penalties on retailers if they fail to comply with the ombudsman’s findings. Importantly from suppliers’ point of view, it will accept confidential information about retailers from producers and suppliers.
Royal Bank of Scotland, Britain’s second largest bank, is to approach shareholders for nearly £10bn of extra cash for improving its financial position.
Royal Bank of Scotland (RBS) is looking to raise the money from its existing investors through probably the biggest ever rights issue in the country’s corporate history. The global credit crunch has forced banks worldwide to shore up their crumbling capital positions, and it is believed that others may well follow suit.
RBS, owner of NatWest, insurer Direct Line and Ulster Bank, has not commented. In a statement released, it has merely confirmed that it would provide a trading update, which is due ahead of its annual meeting next week. Analysts are certain that the bank will announce a big rights issue (a demand for new cash from the shareholders) next week. According to a BBC News report, RBS will also go for about £5bn of write-downs when it actually launches its rights issue.
The rights issue is considered to be a prudent measure for providing a capital cushion for the amount of risk on the bank’s balance sheet after it played a major role in last year’s takeover of ABN Amro, the Dutch bank.
The Royal Bank of Scotland, England’s second largest bank, unveiled its Rights Issue, to a mixed response. The £12 billion rights issue is the highest ever in England’s history. This capital building exercise was considered a must by RBS after falling prey to the global financial turmoil. The RBS has been forced to make large writedowns on toxic assets, the latest of which is a £5.9 billion pre-tax one in addition to the £2.4 billion one made in February. RBS’s tally sheets have already been stretched to the limit, especially affected by the 71 billion Euros it spent last year, during the takeover of the Dutch bank ABN AMRO.
The rights issue will help the RBS build capital. The issue offers shareholders 11 new shares for every 18 existing shares at a heavily discounted rate of 200 pence per share. This is nearly a 46% discount from the price of the RBS shares on Monday’s closing- which was roughly around 373 pence. The rights issue also marks a radical u-turn in RBS’ policy as they had outright shot down similar proposals on several previous occasions, as late as just two months ago.
The rights issue will be fully underwritten by Merrill Lynch, Goldman Sachs and UBS. The three will be paid £180 million with an additional bonus of £30 million if all goes as scheduled.
In addition to the rights issue, RBS is also contemplating selling off a few of its assets in a bid to raise £6 bllion. It aims to do this by selling its insurance arms such as Churchill and Direct Line and a few others. It has also announced a reduction in dividends, with a decision that it will pay interim dividends in shares rather than in cash. RDS stated that the dividend would be paid in keeping with the 49pc ratio to underlying earnings excluding exceptional terms.
The RBS held its annual general meeting on Wednesday and will have the rights issue Okayed by shareholders in mid-May. The bank believes that the sheer enormity of the Rights Issue should reassure shareholders but it doesn’t seem to be going that way. Shares for RBS have been dropping at the markets and fell 2.5% on Monday itself.
A lot of other banks are expected to follow suit and release rights issues. Most analysts expect Barclays and HBOS to figure prominently on that list. All this will probably depend on the success of RBS’ rights issue. The RBS has 200,000 shareholders, 93% of which are major investors, such as pension funds, while 7% are made up by private individuals.