Holfords, the car accessories-to-bike retailer, is an expansion mode. The management is encouraged by rising demand from UK’s consumers for bikes and car maintenance products, and has plans to open more stores in Europe. The retailer has registered a jump of 11 per cent in its pre-tax profits despite global slowdown in economy. Total sales were £797.4m, up 7.2 per cent.
Nick Wharton, joint managing director of Holfords, states that company is prompted by the impressive performance of its stores in Czech Republic to expand and open first store in Wroclaw in Poland this autumn. Having opened three stores in Czech Republic last year, Holford is planning to open up in Hungary and Slovakia.
According to Wharton, ageing of cars in central Europe is creating a boom for its car maintenance products. He also intends to enter lucrative Russian market, but would be mainly focussed on central Europe for the foreseeable future. Holford operates 17 stores in republic of Ireland.
The average transaction value of Holfords in stores is meagre £20. According to Wharton, this protects the company against credit crunch and consumer downturn. He sees large growth potential in satellite navigation market since only 15 per cent of 33 million cars in UK are equipped with the navigation device till date.
Aviva, one of the UK’s biggest insurers, is restructuring its sprawling operations with the cutting of 1,800 British jobs at its Norwich Union business. The plan includes closing 15 of its 22 customer service and back office centres for general insurance by 2010.
Igal Mayer, the chief executive of Norwich Union, has undertaken massive restructuring, due since merger of Norwich Union and CGU to form Aviva. He claimed that Aviva is a very strong business organisation and its goal is to deliver excellent and consistent services to its customers.
Group chief executive Andrew Moss has initiated several measures like cost cutting, dropping the Norwich Union brand and amalgamating businesses. The idea is to to present Aviva as more dynamic company to its investors.
The company is also revamping its operations to meet customer and brokers’ demand for online purchases. Aviva would be closing administration centres in Dundee, Leeds and Southampton by moving some of its staff to small premises. It has promised to help the retrenched staffer in getting alternate jobs.
Hornby, the owner of Airfix and Scalextric, posted a 17 per cent jump in pre-tax profits for the year ending March 31. It is now planning a quick turnaround for car firm Corgi, which the model group bought for £7.5 million.
Corgi had sold millions of cars at its peak, but could not post any profit last year. Hornby’s chief executive Frank Martin is confident of rebuilding sales, market share and profits and informs that Corgi’s retailers and collectors are most delighted with the takeover.
Hornby’s sales were up by 19 per cent at £55.7 million, and profits rose by 17% at £9 million. Chairman Neil Johnson is anticipating another good year of high performance not withstanding downtrend in the markets and slowdown of economy. According to Mr.
Martin, Hornby will mainly focus on retailing of Corgi’s range of products and supplies of inventory, during the current financial year. Corgi’s products include Eddie Stobart trucks, London buses and heritage models like MGB Roadster. According to Martin, Corgi’s new products will include Formula One racing cars and earth moving and agricultural models.
Morrisons, the UK’s fourth-biggest supermarket, is luring its cash-strapped customers by offering price cuts on 2,000 items this month. The price cut covers a broad range of products in addition to ongoing promotions.
The Bradford-based grocer’s sales, excluding fuel, were up by 8.6 per cent. The rise, comparatively lower than jump of 9.5% during Christmas and January, still keeps the firm ahead of its rivals. According to Morrisons’ chief executive, Marc Bolland, some commodities like milk and bread are succumbing to an increasing inflation but prices of items like fish are deflationary. Mr Bolland highlighted that the growth was significant despite lower level of celebrity-led TV advertising. He acknowledged uncertainty in the trading environment and stated that consumer confidence was at its lowest.
Tim Attenborough, an analyst at Exane BNP Paribas is, impressed with Morrison’s results. However, the Oriel Securities analyst Jonathan Pritchard sees pressure on Morrison’s gross margins owing to inflation and rising input costs. According to him, the company will not be able to pass on the hike in input costs of many products to consumers, denting its profit margins.
In the pursuit of boosting its presence in the continent, Vodafone has offered £1.2bn deal to take over Vodacom, the largest mobile phone operator of South Africa. Vodafone has 50 per cent stake in Vodacom and wants to increase its shareholding in the venture by 12.5 per cent.
Vodafone has been planning to expand its business in the African market where mobile phone is the only means of communication for the large population. Its attempt for the de-merger of Vodacom did not meet with success due to the failure of takeover talks last year, between Telkom and MTN, the largest mobile phone operator of the continent.
Vodafone’s chief executive, Arun Sarin, at the announcement of annual results, made it clear that Vodafone does not agree with the estimated £19bn price tag set by MTN’s advisers. He also expressed Vodafone’s resolve to increase its exposure in Africa.
Sarin is confident of bulking up its African assets through a number of smaller deals. Increase in Vodacom stake would give control of operations in Tanzania, central Africa, Mozambique and Lesotho. Vodafone could buy out the whole business subject to diluting its stakes as per South Africa’s black ownership law. Vodafone would announce its plans to comply with the law, this month.
Happy days are here again for the UK banking customers after a long time. Their waits for three-day clearing would be cut short. As per the information from APACS, the UK payments association, the high street banks had been testing the ‘faster payment service’ system last week. It went live on 27th May.
The service would speed up one-off payments made over Internet or by phone. The clearing would take place within hours. Customers will be able to make payments all day every day. Regular standing order payments on working days will also be cleared within hours.
Paul Smee, chief executive of APACS, informs that the new system was subjected to testing in live environment. Participating banks made hundreds of penny payments between them successfully.
The ‘faster payment service’ will be made available to the customers gradually. The customers will be posted about the date of commencement.
Campaigns policy manager Pula Houghton was happy to see that the payment transfer black hole, which according to him was one of the mysteries of banking world, is set to disappear at last. He hoped, banks would strive quickly to make the service a reality for everyone. The banks have set limits of £10,000 for internet / phone payments, and £100,000 for standing orders, under the faster payment service. Some banks will operate with lower limits initially.
An announcement from Tom Alexander, the new chief executive of Orange, about the revival of mobile phone and broadband company is likely to cost several hundred UK jobs. The announcement will expose how false was the slogan ‘the future is bright, the future is Orange’ given by the company in the past 20 years.
Once the most popular company in the mobile industry under founder Hans Snook, it has gone down as the smallest UK network under France Telecom. Alexander, who left Virgin Mobile as the boss to join Orange last year, wants to axe several hundred managers to cut costs and instead plans to recruit staff at call-centres to improve customer service. Orange’s current strength of employees is 12,500.
Alexander addressed his staff on email to apprise them of new plan and termed it as ‘The Agenda.’ He explained that the change is aimed at regaining top position for company in the game. The company has been suffering mainly due to loss of customers in the broadband business. Despite the boom in broadband market it lost customers to new players like BSkyB and the existing competitor TalkTalk. Its customer base has shrunk from 1.142 million in September, 2007 to 1.107 million in March, 2008. Rival companies O2 and Vodafone are likely to erode its base further with their fierce marketing thrust during the year.
John Lewis partnership outlets are the biggest casualty of the business slowdown. The weekly sales report presents a grim picture. The data reveals that all the outlets including those located at the most popular malls in UK are showing sharp falls in the yearly sales, with the exception of its flagship Oxford Street store and internet site johnlewis.com, which recorded strong sales. Two more stores Aberdeen and Edinburgh have shown marginal rise of 3.0 per cent and 0.6 per cent in the sales in the region lifted by the sale of North Sea oil proceeds.
The economists look at John Lewis as a barometer of financial health of UK’s middle class. The sector is now buffeted by the wider economic forces. The data, which was released last Friday, is adding to the already grim picture painted in the last week’s survey by CBI/GVA. It was pointed out that 90 per cent of retailers had too much of property on their hands.
The overall growth in sales at John Lewis in the 16 weeks to May 17, though marginally higher by 2.3 per cent, had been much slower than in the same period in 2007. The big shopping malls are losing the pull they once enjoyed.
Bill Gates, the third richest man in the world, perhaps knows very well knows about the British addiction of home improvement. He has acquired a stake in the largest carpet retailer, Carpetright, despite the gloomy picture of retail in the UK.
Cascade Investment, the investment company of the Microsoft founder, acquired 3 per cent stake in company and became the 15th biggest share holder of Carpetright. It was not clear how much did Cascade pay to Carpetright for the stake. Both refrained from disclosing the details. But a fair estimate, on the basis of last price before the announcement, the cost of more than 2m ordinary shares purchased by Gates works out to £15.6m which is a fraction of his fortune estimated to be £29.4bn by Forbes. Carpetright’s shares rose 12½p before closing at 793½p.
Lord Harris of Peckham, founder of Carpetright, owns 23 per cent of the shares. His son Martin Harris will take over as the new chief after he steps down next year. Mr. Gates stakes in Carpetright are not likely boost the already sagging business of the sector in the backdrop of falling consumer spending and crashing of housing market. Carpetright, headquartered at Purfleet in Essex, has 675 stores across the UK, Ireland, Belgium, Netherlands and Poland.
To counter the adverse effects of economy, businesses are exploring all possible means. Though a slowdown normally affects the households and companies adversely, it provides opportunities for some to win new customers or acquire cheaper assets or start consultancy for those in trouble.
For example, a crisis in banking provides opportunities to help troubled institutions in dealing with regulators. Supermarkets spruce up economy ranges, house buyers reap the biggest advantage of falling prices to own up properties at favourable rates, despite facing difficulties in borrowing money.
Data from the Council of Mortgage Lenders indicates substantial rise in the borrowings by the first-time buyers in the last six months. Consumer-facing companies, badly affected by the slowdown, try to win cost-conscious households who look for cheaper alternatives.
According to Eithne O’Leary, retail analyst at Oriel Securities, supermarkets are compensating their loss of sales in other products by concentrating more on sale of top-end products, as majority of people are opting to cook food rather than eating out.
Ken Baird, head of restructuring at the law firm Freshfields, considers business volatility as the mother of opportunity and trains lawyers on helping their clients in the times of downturn.