Jessops, the 230-store camera specialist, is going to breach its lending agreements as it is incurring heavy losses and auditors are raising doubts over its future.
Jessops is holding talks with banks asking to put in place a new covenant test and restructuring of £57.4m debt. It is considering swapping its debt for equity with HSBC, which has 15% stake in retailer’s shares.
According to Jessop’s executive chairman, David Adams, it is not worth carrying £57m of debt when business was generating only £4m. He informed that company was actively seeking help from HSBC and its advisers for putting future business on stable footing and it was highly likely that this would involve restructuring of debt.
That Jessops was faced with very difficult situation was evident from auditors’ statement that restructuring conditions of bank facilities were indicator of material-uncertainty which would put big question mark on company’s and group’s ability to run business.
When questioned whether company was at risk over the next year, Adams replied that there was good possibility but was not very sure about it. He warned that company had good market position and a viable business model, but its priority task was to address the balance sheet.
Jessops registered loss of £19.1m before tax for the year ending September 2008, compared to £9.3m in 2007. Its total loss after tax touched £50.2m.
Orders for organic food are being cancelled and tap water is getting preference over bottled water as cash strapped shoppers are observing austerity to combat the severe credit crunch.
Shoppers who had been considering frozen food as a downmarket ghastly option and preferred fresh food as best are now turning back to frozen food to cut back waste and save money for other essentials as well. Read the rest of this entry »
Poor performance results from Britain’s manufacturers are putting the Bank of England under heavy pressure to make further cuts in interest rates.
Drop in domestic orders, collapse of investment plans and job losses have posed serious threat to survival of British manufacturing, said the industry organisation EEF. Read the rest of this entry »
The sportswear retailer, JD Sports extended timely help to the rival JJB Sports in wiping out debts by taking 10% stake.
JD Sports had to spend £8.1m on buying 25 million shares of JJB, according to JD’s statement over the deal. JJB later announced that it was negotiating with an unnamed bidder for the sale of its Fitness Club business with an offer for chain of 50 gyms. Read the rest of this entry »
Two UK companies in the drink and food industry provided glimpse of hope for the UK business with their stunning performance for the year ending September.
Compass, the biggest catering group in the world, recorded phenomenal rise in profits and acknowledged that its UK arm overhaul had started giving benefits. Read the rest of this entry »
Britain’s biggest private company, struggling with £6.1bn debt, has sought the help of restructuring specialists to tide over the crisis. Chemical manufacturer Ineos’s chairman, also the 25th richest person of the UK, Jim Ratcliffe, has asked PricewaterhouseCoopers (PWC) to suggest a business plan and revised repayment terms for its debt by end of March 2009. This is in the hope of stopping the debt collection agencies moving in and the inevitable need for administration.
The investment bank, Lazard, is holding negotiations with lenders with request to wave covenants over next two quarters. Ineos is faced with possibility of failing to honour its loan conditions due to steep fall in petrochemical prices. The group will have to secure support of two-third of lenders, who are members of 230-strong syndicate that includes hedge funds and banks, for the approval of deal. Core banks, Barclays and Merrill Lynch have agreed to back the deal.
Petrochemicals consultant CMAI is preparing ‘state of the industry’ report which is likely to be used for justifying PWC’s plan. Lenders are also seeking help of restructuring specialists to get best possible terms from Ineos.
Ineos, claiming to be the third-biggest chemicals company in the world, announced that its earnings before taxes, interest amortisation and depreciation were €1.3bn in first three quarters, down €400m from same period last year.
According to chief finance officer John Reece, group has already started cash flow optimisation by cutting fixed costs, improving working capital ratio and curtailing capital expenditure.
Who will be axed? This is the big question which is worrying 12,000 UK workers this week as the Wall Street giant goes deep into the crisis. According to the Citigroup’s bankers, at least 1,250 jobs are likely to be cut from Canary Wharf London base, and additional jobs at the Egg credit card business and at subsidiary Schroders.
It is learnt that a very large number of staff has offered to accept voluntary redundancy, fearing that they would lose everything in continuing with Citi if conditions worsened further.
Citi’s share prices fell 20% after losing more than 60% last week. The world’s biggest bank that was worth $250bn in 2006 is now worth just $20bn.
Wall Street analyst Meredith Whitney termed chief executive Vikram Pandit ‘naive’ for his belief that unprecedented share price declines could be shrugged off by the bank. She added that Pandit was wrong. It is not possible for Citi to stay in current form and suggested that the group should break up and reduce size by selling off parts to raise capital. The mess is so big that Stephen Hawking also failed to turn around the company, she remarked.
Citi group’s seniors were trying to boost investors’ confidence amidst mounting speculations that it was heading towards bankruptcy like Lehman Brothers and Bear Stearns.
The managements of Britain’s biggest companies are losing confidence as they find capital investment and employment retention becoming riskier due to the unabated financial crisis which has threatened the global economy.
According to the accounting company Deloitte, the optimism levels of the finance directors of big companies about the financial outlook fell at the fastest rate during the third quarter of the current year. The survey revealed that most companies are planning to cut investments in business and reduce employee strength amid credit crunch and rising costs. Most of the finance directors were found favouring drastic cuts in the dividends.
The survey pointed out pessimism among respondents towards the possibility of improvements in credit conditions until the second half of 2009. A large number of companies were thinking to move their corporate base to cheaper tax regimes outside the UK in order to minimise costs.
According to Margaret Ewing, partner and vice chairman of Deloitte, financial officers are gearing up for a longer period of distress in credit markets, by initiating measures such as cash preservation and cost-cuts.
Another survey pointed out that sectors other than financial services were also facing slump in confidence. Activities in eastern England, Wales, the South-east and North-east and West Midlands had biggest fall in business for the 10th consecutive month, with exception of London which recorded modest growth.
The effect of credit crunch is spreading like a virus. Insurance companies are faced with a surge of claims by the companies holding policies of credit insurance. The surge is almost 30%, as per a report by the Association of British Insurers (ABI).
ABI data to be released this week indicated 31% rise in claims in the second quarter of 2008. Company insolvencies were likely to add to the number of claims in the third quarter.
Credit insurance policies are meant to protect suppliers from financial losses by the companies if they fail to pay on time for the material or services provided by the suppliers. According to ABI’s director of general insurance Nick Starling, trade credit insurance claims are the barometer of the economic condition and its impact on the UK businesses. He remarked that increasing number of claims was a pointer to the pinch being felt by the UK businesses.
Credit insurers had been ignored when businesses were doing well and the economy was quite strong. The pulling of credit insurance cover has affected many big companies including sports retailers JJB and Woolworths in the last two months. Starling recalled that ABI had witnessed a surge in claims and bad debts during the bust in 2000.
First Minister Mr. Alex Salmond expressed that there is a possibility of a positive result for Scotland after Llyods TSB’s takeover of Scotland-based HBOS. Mr. Salmond was on his way to make a presentation to Llyods TSB top brass and highlighting the advantages that Scotland could offer as a business hub.
A meeting of the Council of Economic Advisers of Scotland was held last Friday for discussing the £12.2bn takeover of HBOS. Efforts are being made both by the government as well as business leaders to keep as many jobs as possible in Scotland along with the decision making powers.
Scotland is second only to London when it comes to being a financial hub in the UK. It has more than 50% of the 20 leading financial companies having important operations over there. Besides the existing workforce, there are more than sixty thousand students pursuing higher and further education in the field of business and finance.
The merger proposed of Lloyds TSB with HBOS depicts an important and major change and also provides an opportunity to put forward a strong case for securing jobs and decision making functions for Scotland.
Scotland has been the best place in the UK for attracting jobs in the financial services sector during the past years with lower operating costs without compromising on the quality of work or service.