The gas and offshore oil industry has urged the UK government to raise incentives for the North Sea exploration to recover 25 billion barrels of oil and gas. Oil and Gas UK, representing the offshore industry points out that though companies have planned to invest £21bn in the next five years for recovering 2.7 billion barrels of oil and gas in addition to 7.1bn, additional investment will be needed to recover rest of the fuel. Oil and Gas UK further states that industry’s operating costs have doubled and the cost of producing a barrel of oil has increased fivefold.
The industry spent £12.4bn on exploration, development and production. But it spared only small sum of £4.9bn for bringing new reserves into production compared to £5.5bn it spent a year ago. Malcolm Webb, Oil & Gas UK’s chief executive, considers maximising recovery of oil and gas reserves as a matter of national importance and adds that the importance is well understood by government at the highest level.
He emphasizes that barrels left in the ground do not pay tax, do not sustain jobs, do not fulfil nation’s energy needs and provide no support to country’s balance of payments. Mr. Webb is looking forward to continue dialogue with the Treasury on ways to improve competitiveness of UK oil and gas basin and how the incentives will help recovery of huge reserves of oil and gas in the North Sea.
Robert Wiseman Dairies, which supplies milk to UK’s supermarkets including Tesco and Sainsbury’s is planning to pass on its rising costs to the customers. The company’s spending on gas; diesel, electricity and packaging has increased substantially. Chairman, Alan Wiseman informed that the company intends to recover its rising costs by increasing the selling price of milk.
The dairy industry is holding round of price negotiations in autumn. After its announcement of price hike, supermarkets are also likely to recover higher prices from their shoppers. Andrew Saunders, an analyst with Panmure Gordon, confirmed that the company is focussed on the price hike and will make an announcement in due course.
Mr Wiseman explains that past few months have been the most difficult period of their business due to substantial increase in fuel and energy costs. He is however confident of regaining the company’s margins back to acceptable levels and hopes to deliver year end results as per the forecast. He points out an increase of 2 per cent in sales over same period last year.
According to Mr Wiseman, the company has won back the contract to supply 131 Netto discount supermarkets, and also commenced supplies to Martin McColl convenience stores.
BAE System’s informal offer to buy the UK’s most sought after software company Detica, is likely to hot up the bidding race. The news resulted in soaring of Detica’s shares by 22p to 303p, raising its market capitalisation to £351m.
BAE, the biggest manufacturer of defence in Europe is more interested in Detica due to its reputation as a leading independent company which provides IT services in the UK government security.
Detica did not disclose the name of the bidder.
The squeeze in military expenditures has forced the big defence companies to target homeland security and adjacent areas for growth of the business. Detica’s inclusion in the Trusted Borders consortium earlier this year, enhanced its reputation in the industry. The consortium is led by US defence group Raytheon Systems which has been awarded a contract for the UK government’s next phase of e-borders programme.
Detica was entrusted to build analytic and intelligence systems that will provide pre-screening tools to British security forces to screen immigrants. The list of potential counter bidders for Detica includes L-3 Communications, America; European defence and aerospace group’s EADS, and Italy’s Finmeccanica.
According IS Research consultant, Ian Space, Detica’s strategic importance and experience from security and defence contracts make its position so strong that bidders would go to any extent to clinch a takeover deal.
The John Lewis Partnership-owned grocer will be launching its very first grocery convenience store early next year. It has hired services of Anthony Wysome, a consultant, as the head of convenience.
Waitrose will be entering the fast-growing £27.4bn market for small shops and compete with Tesco, Sainsbury’s and Marks and Spencer.
Waitrose’s plan poses a threat to Marks and Spencer which reported a slump of 4.5 per cent in its sales of like-for-like food and also lost an able food director Steve Esom, who resigned from the company recently.
A Waitrose spokeswoman informed that it will open a shop in next six to nine months and its convenience stores will be sized between 3,000 sq ft. to 4,000 sq ft.
Andrew Kasoulis, an analyst at Credit Suisse, is anticipating that Waitrose will compete with M&S Simply Food, but will take longer to succeed and to compete with other rivals.
Waitrose launched its first market-town store in St Neots, Cambridgeshire this May. The second store was opened in Buckingham, Buckinghamshire in June and a week after the third one will be opened in Brackley, Northamptonshire. These stores sell fresh food and locally sourced produce.According to the grocery expert IGD, sales in the UK convenience sector grew by 5.1 per cent to £27.4bn in 2007, much faster than the overall grocery market.
The camera retailer Jessop, reeling under tough trading conditions, saw its share prices crashing down to 30 per cent. The high-street retailer issued fourth profit warning yesterday saying that its like-for-like sales of 41 weeks, ending 13 July, were down by 5.7 per cent.
Jessop had earlier announced fall of 5.0 per cent in its six months’ sales up to 30 March, 2008. The performance has since then gone from bad to worse.
The board is apprehending big losses which will be worse than £7.5m registered last year. Yesterday’s profit warning was the fourth since beginning of the last year when its shares were priced at 150p. The shares closed at 5.68p on 15 July, down by 2.27p.
David Adams, executive chairman, who was entrusted with restructuring of the group in May, 2007, attributed the present woes to uncertainties in the market. He explained that until restructuring last year, the company had lost sight of its customers and pursued crazy policies.
According to Mr. Adams, the company has undertaken various measures including reduction of stocks, closure of 81 stores and abandoned sale of satellite navigation systems. He however expects strong sales during Christmas shopping period.
The latest sales figures, despite good weather, indicate fall of 11 per cent in the last 3 weeks. Jessop’s fall is much worse than average 0.4 per cent of general retail sales of June, reported by British Retail Consortium on 15th July.
The economic slow down and rising oil prices have not diminished public’s spirit for enjoying weekend holidays on low-cost airlines. EasyJet witnessed huge traffic on budget flights last month. Nearly 38 million passengers travelled by Europe’s second largest carrier last year. It reported a rise of 19.5 per cent in travellers in June to 4.1 million. The increase to some extent was due to the growing fleet and recent acquisition of GB Airways. But the main contribution came from passenger load factor which was much higher in the short-haul flight market. The load factor was 86.9 per cent in June.
Increased demand is blessing in disguise to the airline industry which is already reeling under the pressure of soaring oil prices which threaten to push the sector into a whopping loss of more than £3bn this year.
According to analyst’s estimates, EasyJet and RyanAir, currently the most profitable carriers in the world cannot continue making profit if the oil prices do not come down below the existing levels.
EasyJet’s director of communications, Toby Nicol, informs that fuel costs have gone up from £10 a passenger last year to £20 today. He feels that despite generating good revenues in next few months, airlines will not be able to cover the rising costs.
Gert Zonnefeld, analyst at stockbroker Panmure Gordon, says that load factor is the important factor in the performance of low-fare airlines. Budget carriers fly as much as possible while filling them with maximum number of passengers. He adds that EasyJet will not be able to sustain higher fuel costs once the peak summer season is over and its profits will suffer badly.
Vodafone clinched second major deal in Africa by buying 70 per cent stake in Ghana Telecom for $900m (£454m). The Ghana government is likely to retain 30 per cent stake. The Ghanaian group has been valued at $1.3bn. Ghana Telecom is country’s third largest mobile operator. It holds 90 per cent of retail broadband market and is the biggest provider of fixed line in Ghana.
Vodafone is pursuing its policy of expansion in emerging economies. The domestic mobile market has already saturated. The low penetration of mobile in Ghana will provide very good prospects of business growth for Vodafone. 50% of Ghana’s 24 million population is below 25 years of age. It recorded an impressive GDP growth of 6.3 per cent and the recent oil field discoveries have provided impetus to its development activities.
Ghana Telecom will expand its network with investment of $500m in infrastructure in next five years, while targeting an increase of 8 per cent in mobile market share from existing 17 per cent.
Arun Sarin, chief executive of Vodafone, described Ghana as the most attractive market in Africa and hoped that Vodafone’s investment will generate substantial benefits for Ghanaian economy and Vodafone. He is delighted to work in partnership with the government of Ghana. Vodafone has the vast base of 37 million customers across eight countries in Africa.
British Airways has improved punctuality of its services significantly. The improvement is attributed mainly to the commissioning of Terminal 5 at Heathrow 2 months ago. Though still lagging behind European rivals, the gap in performance with Lufthansa, Iberia and Air France-KLM has narrowed considerably.
Last year BA’s reputation nose dived with unprecedented flight delays and misplaced luggage incidences. Performance was at its worst towards March end on the occasion of disastrous opening of Terminal 5 when BA had to cancel 500 flights and more than 20,000 bags were lost.
Willie Walsh, BA chief executive is the most relieved person after weathering severe criticism over fiasco of T5 opening. He proudly declared that BA’s punctuality and baggage performance has shown significant improvement and the check-in queues at the Terminal have considerably shortened.
BA’s services will be tested for sustenance in the summer in July and August when passenger traffic will be at its peak. It will also face the challenging task of moving long-haul flights from Terminal 4 to Terminal 5 during September, October.
Since April, 75 per cent of BA flights departed within 15 minutes of scheduled time, compared to 69 per cent April 2007. Fifteen minutes is the aviation industry standard for punctuality. In June, 72 per cent of flights departed as per schedule compared to 55 per cent last year. Performance could have been better than 72 per cent, but for the delays caused by US president George Bush’s trip to London that resulted in the cancellation of 53 flights. BA has set a target of 80 per cent as service standard from June onwards, specifically at Terminal 5.
Customers undeterred by the broader consumer downturn have raised the new Asprey chief’s confidence of taking the perennially loss-making company into profit in next 12 months. Robert Procop, quit rival jewellery company Garrard to join Asprey as the new chief executive. He will take over day to day functions from John Rigas who is the chairman of Asprey and head of Sciens Capital, US.
Mr Rigas’s main task was to achieve turnaround for Asprey by cutting down £20m ($39.6m) of costs from the business, through partial closure of unviable stores. Having completed the task he decided to step back from the business. According to Mr. Rigas, Asprey has been able to increase its like-for-like sales by 15 percent with the help of affluent shoppers in adverse conditions when mass market retailers Marks and Spencer and John Lewis were struggling to sale.
He informs that Asprey’s average transaction value has risen and confidently states that its products will have value for several generations and protect it from economic slowdown. Mr. Robert Procop had briefly headed the combined Asprey and Garrad luxury business before the split of brands.
Mr. Rigas acknowledged that it was Mr Procop who fixed and stabilised Asprey & Garrard in 1999 when it was in a very bad shape. Procop’s departure in 2000 led to the near collapse two years ago. Mr. Procop will be focussed on increasing sales and market share and would not bring Asprey into the mass market with new products and opening of expensive stores. He is not interested in selling socks or sun glasses.
Vodafone has won the battle with UK government on payment of extra corporation tax on its Luxembourg-based subsidiary. Mr. Justice Edward Evans-Lumbe ruling in High Court saved the mobile phone group a whopping 2.2 billion pounds. The honourable court allowed UK government to appeal against the ruling.
The judges ruled not to hold Vodafone liable for tax on the profits of its wholly owned subsidiary, Vodafone Investments Luxembourg Sarl (VIL). Vodafone bought German company Mannesmann AG in March 2000. VIL is the intermediate holding company of Mannesmann in addition to other European telecommunications companies in which Vodafone has interests.
VIL is confirmed as the resident of Luxembourg for tax purposes as per the certificate of tax residency issued by the Luxembourg tax authorities. But the UK government, citing the Controlled Foreign Companies (CFC) legislation of 1998, claimed that VIL’s profits will have to be subjected to corporation tax in Britain.
Way back in 2006, the European Court of Justice had ruled that CFC rules could only be applicable in cases where subsidiaries were set up solely to get the tax advantage.
Vodafone spokesman expressed pleasure over the ruling in its favour adding that Honourable Court has granted permission to HMRC (Her Majesty’s Revenue and Customs) to appeal against it.