British Airways has put the blame on doubled fuel costs for a sharp decline in profits, stating the airline industry is now facing the ‘worst trading environment ever’. The carrier reported pre-tax profit of £37m in the latest quarter compared with a whopping £298m profit made in the corresponding quarter a year earlier. This means there is a huge 88 per cent drop in profits.
British Airways added it would cut 3 per cent of flights this winter for reducing overheads. BA earlier this week announced it was holding merger talks with Spanish airline Iberia.
BA stated its fuel bill was slated to be close to £3bn in the year (to the end of March), the equivalent of around £8m per day. It insisted it was ‘well prepared’ to deal with the crisis with a focus on controlling operational costs. BA chief executive Willie Walsh stated, “We are operating in the worst trading environment that the industry has ever faced. The combination of economic slowdown, weaker consumer confidence and unprecedented oil prices has led to substantially lower first quarter profits.”
British Energy has rejected a deal that would have resulted in eight of Britain’s nuclear power stations sold off to a leading French state-owned energy company. EDF was expected to make announcement of a £12bn deal to take over British Energy.
However, it is learnt that shareholders of British Energy argued the soaring price of energy could lead to a higher offer. The rejection is being perceived as a major setback to Britain’s plans to cut down greenhouse gases by generating more on nuclear energy.
The government holds a 35 per cent stake in BE and is believed to have supported the deal that would have raised nearly £4bn for the chancellor. But Investec and Prudential, the firms that together own about 22 per cent, felt the 765 pence-per-share bid was too low.
EDF stated it was still hopeful ‘to be a major actor in the nuclear rebirth of the UK.’
Although the deal could still be revived, the latest development has come as a major disappointment for the UK government, looking to get the construction of new nuclear power stations going at the earliest to replace the ageing Magnox reactors.
Burberry, the British luxury goods group is going strong in its sales despite worsening trading conditions in the market. Widely known for its camel, black and red check, the firm is showing strong performance on the basis of increased demand for its classic trench coats and funky shoe styles. The firm has registered a phenomenal rise of 26 per cent in its revenues during the first quarter of the year.
The impressive performance was made possible due to advanced shipments of autumn and winter range of wholesale products. According to Stacey Cartwright, Chief Financial Officer, sales at shops which were open for minimum one year increased by 4.5 per cent, in last three months, ending June 30. She informs that Burberry benefitted from its geographic diversity despite volatility in weekly retail sales. Demands from South Korea, United States, Germany and France were substantially high.
Fears of sales getting affected due to slowdown in consumer spending had resulted in loss of 20 per cent in Burberry’s share value. But the luxury goods group is banking on its rich customers whose buying appetite remains unaffected by the downturn.
Cartwright informs that the group’s classic trench coats, new variations in lighter-weight fabrics and funky shoes were in great demand. Sales in Britain, accounting for nearly 7 per cent of the total, were also up to the mark. JP Morgan analysts are however not changing their full-year forecast for Burberry in the backdrop of tough trading conditions.
The Spanish banking giant Santander has announced that it has struck a deal worth £1.3bn to takeover UK’s Alliance & Leicester. Santander will merge A&L with Abbey, which it had taken over in 2004. The deal which will shake up the UK high street is likely to be closed by October. Analysts do not see any resistance since A&L is reeling under severe credit crunch.
A&L’s shares which fell by more than 80% last year, jumped from 219.5p to 325p overnight after Santander’s announcement. Santander has also announced plan for cost savings of £180m a year by 2011. This may result in major job cuts for A&L’s existing work force of 7,000 employees in the UK. Santander had axed 4,000 jobs after taking over Abbey National for £8bn in 2004.
According to acting chairman Roy Brown of A&L, company had to accept Santander’s offer due to the worsening economic conditions. He adds that the board took acute note of external risks posed by the deteriorating economy and remarked that Santander’s UK operations fit excellently with those of A&L.
Santander revealed its plan of reducing the “combined treasury assets” of Abbey and A&L by £20bn to £30bn in the next two years, resulting in minimum exposure to the mortgage markets.
Speaking on a conference call, David Bennett, A&L chief executive, did not rule out job cuts, or deletion of its brand name from high street. With A&L’s 250 branches in UK, the combined total of Abbey and A&L branches will be 950.
Hitachi, Japan, has successfully pre-qualified to bid for an order for 1,100 carriages for the cross-London Thames link route. Hitachi has realised its potential to challenge Europe’s major train makers Bombardir Transportation, Siemens and Alstom Transport. It had previously bagged only one order for 250kph high-speed trains in the UK for services between London and Kent. Hitachi is also bidding for new 200kph trains for Britain, being constructed under the InterCity Express programme.
The UK’s Department for Transport is entrusted to run the Thameslink tender as the government has taken over procurement of key passenger rolling stock from private sector. Government is trying to minimise costs through control on buying. Several Asian manufacturers from China, Korea along with Hitachi are trying to enter into world’s largest market for passenger rolling stocks in Europe. Rotem of Hyundai group could not qualify for the bid though it had bagged a big order in the Irish Republic and supplied metro cars to Athens previously.
Rupert Brennan Brown, a veteran UK rail industry observer informs that trains are needed to meet the expected demand on network during London Olympic Games in July 2012. It is therefore necessary to ready the trains for testing in the autumn 2011. Meeting this time schedule, according to Brown, is going to be a very challenging task. The short timescale may brighten Bombardier’s chances of clinching the order since it has already built a suitable train for UK. However Hitachi is keen to beat the competitors on price considerations.
Imperial Energy, the UK based oil and gas company in Leeds, has attracted attention of global oil companies ever since its announcement of making the biggest exploration strike. The company, a member of FTSE 250, in its statement informed that it has received an offer for its business. Immediately after the announcement, company’s shares registered a jump of 23 per cent and were priced at 947p in the early trading.
It is reported that India’s state-controlled Oil and Natural Gas Corporation of India (ONGC) is holding negotiations over the takeover bid with the board of Imperial Energy, having its head office in London.
India is particularly interested in having a stake in Imperial Energy because of its recoverable reserves which are estimated to be at 900,000 barrels, and its growing oil and gas portfolio in West Siberia. Imperial’s current oil stream is 10,000 barrels per day.
The potential value of the company and its reserve base enhanced further when it made the biggest exploration strike last month. The rapid industrialisation in China and India has caused surge in domestic demand and forced the respective governments to ask their state-owned oil and gas companies to tap newer energy sources across the globe.
The Times of India has reported that ONGC was holding talks with Imperial for an equity stake; but the company has not confirmed the news so far. Gazprombank, the Russian gas exporter Gazprom’s banking-arm, had approached Imperial Energy last year to buy 25 per cent of its stock at a discount price but the talks did not succeed.
Managers and directors might have never imagined that the time they are wasting in searching files is costing millions to the UK small and medium sized firms everyday. Bad filing is making the dream of paperless office an illusion.
Findings of a survey commissioned by document management firm Invu and conducted by YouGov make a shocking revelation that managers and directors of many SMEs are wasting valuable time trying to locate documents which they might have moved, misfiled or lost.
The estimate of £42.2m loss per day is based on the fact that 80 per cent of managers and directors of 4.5 million SMEs in the UK, waste up to one hour of their time per day, worth £88 on average, in searching files.
The biggest contributor to this loss is paper. The survey points out that a meagre 7 per cent of SMEs use electronic documentation and the rest still rely on paper work.
George Derbyshire, chief executive of the National Federation of Enterprise Agencies describes the research results as very frightening, adding that findings have revealed the grave damaging effect of everyday inefficiency on the small businesses. While acknowledging the importance of prioritisation on daily basis, he emphasizes that managers must spare time for reviewing processes and systems. David Morgan, chief executive at Invu, remarks.,the fact that SMEs managers and directors waste valuable time in file search instead of spending it on developing their business is quite shocking.
Tata group’s newly owned Jaguar and Land Rover are planning to take both the brands in to £100,000 plus luxury car market, currently dominated by players like Bentley and Aston Martin. David Smith, who was recently appointed as the permanent chief executive of Jaguar and Land Rover, informed that both the brands would produce highly credible products which will attract most people in the market. Mr. Smith was speaking after the second visit of Indian group’s chairman Mr. Ratan Tata, who bought both the companies for $2bn in April.
Mr. Tata had supported the business plan presented to him in April. The plan for next 30 months included the launch of a new model as a replacement to the XJ saloon next year. After going through the prospective projects during his second visit, Mr. Tata got very enthusiastic about group’s long-term business potential.
According to Mr. Smith, it will take some time to enter in to the £100,000 plus car market which has proved quite fertile for Bentley and Aston Martin. Bentley sold 10,000 units last year and Aston proposes to sell similar quantity next year. According to the executives at Land Rover and Jaguar, China, Russia and Middle East are the potential markets for the sale of £100,000 plus price cars.
BT Directories has purchased Ufindus, an online classified advertising company for £20m. Ufindus, which generated revenue of £14m last year, has 1.9 million listings in its portfolio and more than 20,000 small and medium sized business customers. The £20m acquisition from Iomart Group is aimed at expanding BT Directories’ business in community based services. The company recently launched BT Exchanges service to enable consumers to find, share and communicate with local businesses instead of just providing contact details of a company. Companies can make use of three main sites viz. SmileLocal, MoreUK and Ufindus and nearly 100 niche directories of specific trade sectors.
According to David Benjamin, the chief executive of BT Directories, Ufindus will play major role in development of BT Directories’ online portfolio. Its expertise and experience in online classified advertising will be exploited to access local classified product offerings, search traffic and new customers for BT’s fast growing business.
BT’s directories business was reduced by more than £2bn in 2001 due to sale of Yellow Pages by Yell. But with the introduction of a social-networking type model, the company is confident of significant growth in business. Ufindus offers business customers a website design service and its combined portfolio receives more than 9 million searches every month.
Redrow and Bovis Homes, the two house-buliders of UK, finally resorted to cutting of 850 jobs and reviewing dividend policies as the property market continued to reel under the worst ever slump.
Redrow is cutting 450 jobs while Bovis Homes is asking 400 of its staff to quit. Nearly 40 per cent of workforce of both the house-buliders will be losing their only means of earning.
The worst slowdown has compelled Bovis to slash its dividend to 5p, down 20p from last year. Redrow has decided to review its dividend policy in order to cope up with dwindling revenues. In the past one week, more than 5,000 people working in Barratt, Persimmon, Taylor Wimpey and other construction companies, lost their jobs.
Bovis and Redrow reported sharp falls in their sales in the first six months of the year. Bovis’s sales were down by 32 per cent and the average price of homes fell to £167,500 from to £187,600. Redrow recorded fall of 19 per cent in sales and average price slumped to £157,000 from £159,900.
Neil Fitzsimmons, Redrow’s chief executive, was surprised at the rapid decline of the market for new and old homes, which according to him, was not experienced for very many years. The Bovis chief executive, David Ritchie, warned that fast emerging trends in the market will make it most difficult to estimate the likely net pricing of the group. Property analysts warned investors of further bad news from house-builders in the next few weeks.