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Friday 23 November 2007

De Beers sold historic Cullinan Mine

The world’s biggest diamond producer, De Beers (45% owned by Anglo American), said yesterday it had sold its historic Cullinan mine to the Petra Diamonds Cullinan Consortium (PDCC), consisting of Petra and Saudi investment firm Al Rajhi Holdings for R1 billion (£71 million) in cash. The PDCC consortium will each buy 37% stakes, with black-owned Thembinkosi Mining Investments getting 26%. De Beers Managing Director, Gareth Penny said “PDCC emerged as best bidder in a long selection process.”

Asked how the transaction would be funded, Penny said the money had been raised through a special purpose vehicle. The deal is expected to be concluded in April or June, depending on Competition Commission approval and the successful conversion of De Beers's mining right from old order to new order, and the transfer of that mining right to Petra and Thembinkosi.

The deal brought a major resource to the group. The sale was in the economy's interests as Cullinan mining would continue. The new players have studied Cullinan's cost structure and they have a plan in place to turn it around, it is understood. The 3106-carat Cullinan Diamond was found at the mine. This is the third mine De Beers has sold to Petra, regarding them as unprofitable; the others were the Koffiefontein and Kimberley underground mines. In the year to December, De Beers produced 1,15-million carats at Cullinan, with a market value of R505 million (£36 million). (source: Business Day)

TomorrowNow, the SAP unit at the centre of corporate spying scandal, is being eyed by US-based provider of software support, Rimini Street. Chief Executive of Rimini Street, Seth Raving, said “we are interested, but we are proceeding cautiously and need to analyse it first." AP, the German software group, revealed at the beginning of the week that it was exploring options for the troubled unit, including selling it.

Mr Ravin was among the founders of the Texas-based TomorrowNow and sold the company to SAP almost three years ago. He declined to say whether talks were going on with SAP. Oracle, SAP’s arch-rival, filed a lawsuit earlier this year accusing SAP or corporate espionage. In the wake of the scandal, TomorrowNow's chief executive and several senior member of management resigned on Monday.

SAP is under pressure to announce a swift solution for TomorrowNow in order to avoid further damage to its image. Mr Ravin said “Since SAP's announcement, Rimini Street had received a dozen enquiries from TomorrowNow customers, exploring a possible transition.” Customers were uncertain since SAP had not been clear about "what they are doing with TomorrowNow," he added. (source: msnbc)

Airbus is under life-threatening circumstances as the weakness of the dollar is threatening the survival of the European planemaker. Airbus chief executive Tom Enders has told employees in Germany, “the dollar’s rapid decline is life-threatening for Airbus. The dollar exchange rate has gone beyond the pain barrier.”

Mr Enders made the claim as he gave warning that European production plants would have to face major cost cuts to help them counter the impact of the currency. The calls from the head of Europe's biggest manufacturer will increase the pressure on European ministers and the European Central Bank to take action against the continually weakening dollar.

The weak dollar is favouring Airbus's arch rival Boeing, the company claimed. The dollar hit a new low against the euro yesterday. In the year to date, the euro has gained about 12.5% against the US currency.

This gives Boeing a massive advantage over Airbus, which is struggling to win back the lead position in aeroplane sales from the American group after it was destabilised and pushed into losses by delays to production of the new aircraft. (source: Timesonline)

Thursday 22 November 2007

Silverjet gets new lifeline

Silverjet, the business class only airline founded by Lawrence Hun, has secured a funding lifeline from a group of wealthy private investors including the billionaire property tycoons the Reuben brothers (Simon & David). The AIM-listed airline, flying from Luton to New York and also Dubai, postponed its results this week, triggering a wave of speculation over its future.

The Sunday Times has learned that the delay was to accommodate negotiations over a new funding package. The airline has raised £12 million from a placing of new shares, and £10 million in a loan from a company controlled by the Reubens. The loan can be converted to shares at a later date.

The Bombay-born Reuben brothers have amassed a fortune estimated at £2.5 billion, and are best known in the UK for a string of big property deals. Details of the deal are expected to be announced tomorrow when the company publishes its results.

Silverjet raised £25 million from a float in 2005 and in April this year it raised another £24.6 million by issuing new shares at a slight discount to the market price. Silverjet is likely to use the new funds to buy two new aircraft and expand services.

The business-class only airline has a luxurious private terminal at Luton, and flies 100-seat Boeing 767s twice a day to New York and daily to Dubai. (source: Timesonline)

The co-founder of Hotmail, the web-based e-mail service bought by Microsoft for $400 million a decade ago, is challenging the American software giant’s core $20 billion (£9.7 billion) office desktop business. Yesterday Sabeer Bhatia released a free online rival to the bestselling Office suite of applications that will allow users to view, share and edit documents from any computer.

The Indian-born Stanford graduate said that Live Documents would pose a “significant” challenge to Microsoft’s propriety software business, which eventually would be made redundant by the evolving internet applications industry. Office, bundling the Word word-processing, Excel spreadsheet and PowerPoint presentation tools, accounted for a third of Microsoft’s total revenues last year. It is forecast to top $20 billion (£9.7 billion) this year.

Mr Bhatia said “We are just a few years away from the end of the shrink-wrapped software business. By 2010, people will not be buying software. This is a significant challenge to a proportion of Microsoft’s revenues.”

Live Documents is similar to Google Apps, launched in February and used by companies including Proctor & Gamble, General Electric and Capgemini as a cheaper alternative to Microsoft. However, Mr Bhatia claims that his product is superior to Google’s in its range and quality, most crucially because it mimics Office 2007. Most of Office’s estimated 500 million customers have yet to upgrade from the 2003 version, while it is not available for Apple computers.

He said. “This will do for documents what Hotmail did for e-mail. Why spend $400 on an upgrade when you can get it for free?” Mr Bhatia and Jack Smith devised Hotmail, named after HTML, the language of the web, soon after leaving Apple in the mid1990s. Today it has more than 450 million users. (source: Timesonline)

Wednesday 21 November 2007

BAA must halve queueing times to avoid fines

The Civil Aviation Authority (CAA) has told BAA that they must halve queueing times at Heathrow and Gatwick or face annual fines of up to £75 million. In a move that would increase the financial pressure on Britain's largest airport operator, the new regime will add hundreds of millions to BAA's security bill. The CAA plans to punish the group if security queues are more than five minutes for 95% of the time, with a maximum queueing time of 10 minutes at Heathrow and 15 minutes at Gatwick. Harry Bush, the CAA's director of economic regulation, said the airports' performance this year would have triggered heavy fines under the new regime, due to come into force next April.

BAA has been fined £2 million this year for missing performance targets, including the current guideline that passengers should queue for no longer than 10 minutes in security areas. But it is not all bad news as the CAA is also offering a bonus of up to £32 million to BAA if it outperforms. Bush admitted that the airport owner would struggle to bring down queueing times sufficiently and said "these are quite difficult targets."

The CAA also outlined plans that could reduce BAA's annual cashflows by £150 million between 2008 and 2013. The regulator, which sets landing charges and the return on investment at BAA's largest airports, said it planned to cut the return on capital at Heathrow from 7.75% to 6.2% and at Gatwick from 7.75% to 6.5%. BAA said that would endanger projects such as the £3.5 billion redevelopment of Heathrow's central terminals and did not accommodate the cost of a tougher security regime.

Airlines criticised CAA proposals to increase landing charges at Heathrow by 15.6% to £11.97 a passenger, with annual price rises capped at 7.5% above inflation. British Airways, BAA's largest customer, said service standards could be improved without an "excessive" rise in landing charges. BAA has warned the regulator that the landing charges would not be high enough to compensate for the reduced return on capital. (source: The Guardian)

It appears as if there are fresh interest in Northern Rock as the ailing bank said it has received further "indicative expressions of interest" from firms which might be considering a buyout or investment. Northern Rock said that one interested party may make an offer for the bank below its closing share price of 97p on Tuesday.

On Tuesday, US buyout firm JC Flowers submitted a bid that included an offer to shareholders of a "nominal value". And a second bid emerged on Tuesday from American private equity firm Cerberus. Shares in Northern Rock were down 15% at 82.60p in early London trade today.

The Bank of England has lent the bank an estimated £24 billion in emergency funding, a move defended by Chancellor Alistair Darling in the Commons on Monday. Northern Rock, which has about 6 000 staff, is keen to secure the bank's future as soon as it can. In a statement it said: "The company's advisors have begun discussions with a number of selected interested parties to clarify their proposals. The bank said: "These guarantee arrangements will protect all retail deposits held with Northern Rock regardless of the amount deposited and apply to all existing, re-opened and new retail accounts". (source BBC News)

In the battle for Apple’s iPhone, Vodafone has claimed a partial victory in a legal challenge to block a German rival from selling Apple’s iPhone exclusively. The German unit of the British mobile giant secured a temporary injunction yesterday against T-Mobile Deutschland after claiming that its deal with Apple breached local competition laws.

Vodafone said that the German operator should be forced to make the phone available over other networks, including its own. Success by Vodafone could force Apple to rethink its controversial business model for the phone.

T-Mobile will release a statement today detailing its full response to the injunction, which was granted by a court in Hamburg. It intended to appeal against the decision and threatened to sue Vodafone for damages.

The iPhone, which has amassed more than one million sales in the United States, went on sale in Germany this month. Buyers must sign a two-year contract with T-Mobile and the phone cannot be used on other mobile networks.

T-Mobile said yesterday: “We have spent months thoroughly testing the iPhone to ensure it works properly on our network. Given the approach adopted by the competitor Vodafone, which lost out to T-Mobile in the contest to distribute the Apple iPhone in Germany, T-Mobile reserves the right to examine the option of suing for maximum damages.”

Despite a fierce battle in the UK, Vodafone lost out to O2 , and in France, to Orange. However, Apple’s approach has already been tested in France, where local laws have forced Orange to open up the phone to other networks.

German analysts said that they expected the operator to comply with Vodafone’s demands and stock “unlocked” iPhones, which work over other networks. However, the injunction does not force T-Mobile to take any immediate action. A full hearing is scheduled for two weeks’ time. (source: Timesonline)

Tuesday 20 November 2007

SAB Miller to buy Royal Grolsch

The world’s second largest brewer, SABMiller, has agreed to buy Royal Grolsch, the Dutch rival behind Grolsch lager. In its second major move on the international market in as many months, after agreeing to combine its American operations with those of Molson Coors, SABMiller is offering 48.25 euro per share, 84.3% above Grolsch's average closing price over the past month.

SABMiller, said that the management of Grolsch supported the offer, which values the Dutch company at 816 million euro (£582 million). As with earlier deals, SABMiller is paying a premium, offering almost 15 times the reported 2006 earnings before interest, tax, depreciation and amortisation.

SABMiller hopes to employ the Grolsch Premium Pilsner brand across Africa and Latin America, using it to tap into the lucrative premium segment of the market in those regions. In South Africa in particular, analysts expect the new member of the SABMiller family to help plug the gap after Heineken terminated SABMiller-subsidiary South African Breweries' licence to manufacture and distribute Amstel lager beer.

Yesterday's announcement also raised questions about SABMiller's position as a potential bidder for Scottish and Newcastle. Trevor Stirling, a beverages analyst at Sanford C. Bernstein, said “although I was almost certain SABMiller was interested in S&N, the balance of probability was against them making a bid. Scottish and Newcastle doesn't really have a well-known exportable brand like Grolsch. If SABMiller were to bid, it would be for the Russian assets and the 50% in BBH (Baltic Beverage Holdings)." (source: Google News)

Shares in Northern Rock plunged below £1 to an all-time low after Cerberus, the US private equity fund, walked away from making a rescue bid for the troubled mortgage lender as the market reacted to Chancellor Alistair Darling statement to the Commons yesterday. The Newcastle-based bank's shares fell 8 %t to 95.8p in early trading, valuing the group at £404 million. Just nine months ago, Northern Rock was valued at £5.2 billion when its shares reached a peak of £12.12 per share.

It emerged last night that Cerberus, one of four parties thought to be considering serious offers for the bank, has been put off making a concrete bid by continued turmoil in global financial markets. Its interest is also thought to have been affected by credit-related losses at GMAC, the former financing arm of General Motors that is now 51% owned by Cerberus. GMAC was expected to part-fund a Cerberus offer for Northern Rock.

The Government said yesterday that the line of credit that the Bank of England had extended to Northern Rock could not continue beyond February, because it would then contravene European rules on state aid.

Speaking before the Commons yesterday, Alistair Darling refused to give a guarantee that the £24 billion the Bank of England has so far lent Northern Rock will ever be fully repaid, leaving tax payers to foot the bill for the crisis. (source: Timesonline)

Luton Based low-cost airline, Easyjet, has seen annual pre-tax profits rise after carrying 37.2 million passengers in the year to 30 September. The Luton-based carrier said profits were up by 56% to £201.9 million ($431 million; 294 million euros), with its load factor, which shows how full flights are, at 84%.

In the past year Easyjet added eight destinations and 46 routes, bringing its network to 289 routes, using 77 airports in 21 countries. But it said rising oil prices meant the "fuel environment remains challenging".

Andy Harrison, Easyjet chief executive, said: "Despite challenging conditions, revenue, profit and return on equity have all shown strong improvements reflecting the success of our focus on low cost with care and convenience. At the same time as driving the financial performance of the business, our now well established management has also expanded Easyjet's network and fleet, which carried over 37 million passengers in the year, making the airline the fourth largest in Europe."

Easyjet said it expected to complete the £103.5 million purchase GB Airway by 31 January 2008. (source: BBC News)

Monday 19 November 2007

Northern Rock offers below value

It is understood that the two suitors, Virgin Group an Olivant Advisers, for Northern Rock have made offers for the takeover of Northern Rock that is "materially below" the stricken bank's share price. The bank said that it expected further expressions of interest to emerge.

Separately, the government has said there is no certainty that any bidder for the Rock will have access to £24 billion of emergency loans after February, but it added that it was "willing to discuss" any proposals that envisaged a continuing role for the Bank of England, the Treasury and the Financial Services Authority. The Treasury has also warned that the support it has provided to Northern Rock represents state aid under EU rules and may therefore turn out to be illegal.

Chief Executive at Northern Rock who resigned on Friday, Adam Applegarth, said that “while it would still analyse and discuss proposals it had received the value to shareholders from any of the proposals remains highly uncertain. They would depend on factors including an improvement in market conditions such as access to liquidity.”

Northern Rock shares fell 2% in early trading to 129p. They had hit a high of £12.58 in February. (source: BBC News) - Final bids for Northern Rock today, New player in Northern Rock bid, Virgin pushes forward in takeover, It is all about Virgin

Google is on the verge of becoming a mobile phone operator. The company is secretly testing a wireless network at the Googleplex in Mountain View, California, as it tries to gain valuable technological experience before a decision on whether to bid for part of the US mobile telecoms spectrum.

Google has made so much money from its computer based search that it has $13.1 billion (£6.3 billion) sitting in its bank accounts, and it has been spending heavily on new ideas to help it move into the search business on mobile devices. Analysts believe the market for placing ads alongside search queries on smartphones may eventually eclipse PC-based revenues.

While Google could still hitch up with a more experienced telecoms partner to make its pitch, it is believed to be leaning towards a go-it-alone bid that could cost it $4.6 billion (£2.2 billion) or more. A bid for a part of the telecoms spectrum would be an audacious way of circumventing the existing US mobile carriers – AT&T, Sprint, Verizon and T-Mobile – with whom Google is frustrated because they restrict which handsets and internet services can be used over their networks. Sandeep Aggarwal, analyst at Oppenheimer, said that the existing carriers are the biggest obstacle to Google getting into search-based advertising on mobile phones. However, he said: "We think that Google's bidding in the spectrum auction in the US makes sense only if it can materially subsidise or offer free wireless services without losing money, can run wireless services better than the existing wireless carriers, and find more uses for the spectrum bandwidth to drive additional economic value." (source: The Independent)

Saturday 17 November 2007

He's got the bug for Business

He’s got the bug for business – At university when, with fellow trainee doctor and subsequent City enfant terrible and onetime colleague, Hugh Osmond, he ran clubs for students. “I thought that if you work for yourself the freedom it gives you is compelling, and that was the attraction. I happen to believe that entrepreneurs and people who build businesses are a lifeforce – be they Phillip Green or Bill Gates, who ever. Someone has to take the risk. To create a shop, newspaper, whatever its about making things happen.”

Until Mr Johnson was 27, he worked for other people, for Johnathan Aitken, the businessman and former Tory MP, for Grieveson Grant, the stockbroker, as an equity analyst, and at an advertising agency as account director. Then, in 1989, he broke away, buying a theatre scenery business. “It was a terrible business to be in. One minute the staff were working full-time on an Andrew Lloyd Webber. Next they could be doing nothing but you still had to pay them. Not long after I’d bought it we went into a recession which most of us have forgotten. That was very tough.”

Mr Johnson has never done an MBA. He thinks business is common sense. If you run out of money, you go bust – it’s simple. Business is ruthless and mathematical but simple. “I always make sure I have partners who are industry experts, who know what they’re doing. I believe in properly motivating people, in aligning businesses in the same industry. I’m not clever enough to judge economic cycles and make those sorts of plays – I’m always out there, involved with various things which I believe will be good enough, in good or bad times. It helps as well if you like the business you’re in – like restaurants and bookshops.”

Mr Johnson’s transformational deal was with Osmond, when they acquired Pizza Express in a £20 million reverse takeover in 1992. Their timing was immaculate. The downturn was ending, people were eating out again and pizzas were the all the rage. They expanded like mad, taking the chain to 250 branches and to a value of £700 million.

In the City, he is regarded as some thing of a wunderkind, still young and cocky. The word “lucky” is often thrown in his direction. He has been, but most of that is luck he has made for himself. He is chairman of Channel 4, which he thinks will remain state-owned, under this government. He was given a piece of advice before he started at Channel 4, which he held dear “Leave Channel 4 in a better condition than I found it.”

Relevant articles - The owner of over 70 bookshops - Mr Luke Johnson
The owner of Borders - Businessman of the Month

Friday 16 November 2007

Final bids for Northern Rock today

All potential suitors for Northern Rock have until today to submit their proposals to rescue the failing bank. Virgin Group and US private equity firms JC Flowers and Cerberus are among those expected to come forward with offers for the beleaguered lender. With a pay back to the Bank of England of £24 billion, bids are set to be very low. Options ranging from an outright buyout to a breaking up of the ailing bank's assets are expected to be proposed.

A consortium led by Richard Branson's Virgin Group has expressed interest in buying a majority stake in the Newcastle bank, which is responsible for about 1 in 5 mortgages in the UK, and rebranding it as Virgin Money. JC Flowers, has put together a high-profile management team to make their case for taking over the bank stronger, while rival private equity firm Cerberus has also been rumoured to have been scouring Northern Rock's books. Other expressions of interest have become from the former boss of Abbey National, Luqman Arnold. Mr Arnold will make a move through his investment group Olivant and will take minority stake in Northern Rock.

BBC business editor Robert Peston has previously said that there were three possible different destinations for Northern Rock:

1. the sale of the whole company
2. the sale of the basic physical infrastructure of the business i.e. the branches, information technology and call centre, which may also include Northern Rock's £13.5 billion of retail deposits and matching assets
3. the sale of the infrastructure plus all those securitised mortgages

A private equity buyer would be a controversial choice given their reputation for buying firms on the cheap to turn a fast profit, particularly because any buyer is likely to demand that the Government continuing to guarantee savers' deposits in the bank. There have been reports that buyers would call for interest payments on the Bank of England loans to be scrapped - arguing this would enable them to save jobs. (source: BBC News)

J.C. Penney Co. the department store operator based in Texas, reported Thursday a 9.1% drop in third-quarter profit, hurt by sweeping discounts to clear unsold merchandise. The department-store operator cut forecasts for the fourth quarter and the full year, citing macroeconomic concerns.

J.C. Penney's sales have been hurt by unseasonably warm weather and softer consumer spending, forcing it to lower prices more than expected to clear increased stocks of goods. Against a backdrop of record-high oil prices and slowing housing and credit markets that have hurt mid-priced shoppers, the retailer lowered salary expenses, is reducing the size of its Big Book catalogue and will keep a tight rein on inventory and other expenses heading into the holiday season. Chief Executive, Myron Ullman said at a conference with analysts “Our focus is the moderate consumer, the consumer who has always had to make serious choices about their discretionary spending. We have to be realistic about our expectations for the balance of the year," and added that "2008 is going to continue to be a difficult environment. We are planning 2008 very conservatively on expenses."

J.C. Penney's net income fell to $261 million (£127.9 million), or $1.17 (57 pence) a share, for the third quarter ended November, 3rd, from $287 million (£140.6 million), or $1.26 (61 pence) a share, a year earlier. Sales fell 1.1% to $4.73 billion (£2.31 billion).

Many retailers last week reported their worst October results in a decade, hurt by weather and consumers' jitters about the economy. (source: Market Watch)

Black Economic Empowerment (BEE) laws in South Africa may clip Comair’s, which operates the British Airways franchise in South Africa, wings by the Government for failing to comply with laws aimed at increasing the number of black employees in its workforce.

The Department of Labour said the airline, which also runs the low-fare Kulula.com service, could become the first publicly traded company to be taken before the courts for breaching the employment equity provisions of Black Economic Empowerment (BEE) legislation. The airline confirmed that it had received notification from the department of its intention.

Comair representative said: “We don’t want to comment on the specifics of the allegations as it may jeopardise the current legal proceedings besides to reiterate the following: Over the past five years Comair has increased its representation of black employees from 29% to 55%, and employees from designated groups now represent 80% of the workforce. This is despite the general shortage of pilots in the industry, of which approximately 7% are black.”

The company is 12.9% owned by British Airways, and also allegedly failed to submit a report to the director-general on the first working day of October and submitted reports to the Department of Labour that were not based on any existing employment equity plan.

Industry sources said the charges include allegedly failing to prepare an employment equity plan and failing to appoint one or more senior managers to take responsibility for monitoring and implementing an employment equity plan from 2000 to last year. (source: Timesonline)

Starbucks is having to scrap some of its most ambitious expansion plans after figures showed that Americans are popping into the local Starbucks for their morning pick-me-up in fewer numbers. News of lower customer traffic at its 10,000 US stores and a warning of lower profit growth next year sent Starbucks shares plunging 9% in after-hours trading last night.

The company scattered the blame for the bad news saying it had scared customers away with price rises meant to compensate for rising milk prices, and many of its managers had spent too much time focusing on expanding the snacks business and failed to focus on the quality of the coffee service. Most of all, executives said, US consumers simply have less money to spend since mortgage payments, petrol prices and the cost of groceries have all gone up this year.

Wall Street analysts, though, suspected another reason, namely that the Seattle chain has expanded to such an extent that new stores are eating into the customer numbers of existing outlets, which might be as close as one block away.

Starbucks chief executive, Jim Donald said “the company would open 1 600 stores in the US next year, 100 fewer than previously suggested. This would rectify the fact that the company opened more than originally planned this year, and there was still plenty of room for growth since the company accounts for less than 10% of takeaway coffee sales in the US and less than 1% worldwide.”

In the financial year just ended, the company opened 2 571 new coffee shops, 70% of them in the US. It posted net income of $673 million (£329.9 million), up from $574 million (£281.3 million) last time, on sales up 21%. Mr Donald revealed that Starbucks would this morning begin its first nationwide television advertising campaign to promote its special Christmas coffees. (source: The Independent)

Thursday 15 November 2007

Merger would not affect ArcelorMittal

The world’s largest steelmaker’s major shareholder & chief executive officer, Lakshmi Mittal, said yesterday that the prospect of a £166 billion merger between Rio Tinto and BHP Billiton would not affect his company. Mr Mittal said that “any merger was an endorsement for ArcelorMittal’s strategy of vertical integration. About 45% of our iron ore supplies comes from our own mines; by 2012 we want that figure to be about 75%. If it happens, this merger just reinforces that that strategy is the correct one. We haven’t seen a formal offer yet and we are keeping an eye on this, but so far no one from BHP Billiton has had any communication with us.”

A merger between the rival mining groups would give the new company about 27% of the world market for iron ore and has excited concern in the steel industry, particularly in China, a leading consumer of steel and other natural resources. The world’s largest steelmaker was formed through a mega-merger of the world’s largest and second-largest steel companies last year, although the legal merger of the two entities was completed only yesterday. It is worth £50.5 billion and is three times bigger than Nippon Steel, its nearest rival.

Earnings for the nine months to September 30 were 30% higher than they were in 2006, at $14.6 billion (£29.7 billion). The increase to earnings has enabled the company to raise its dividend by 20 cents increasing quarterly payments to 37.5 cents a share. ArcelorMittal pledged at the time of the merger to return 30 per cent of net income to shareholders every year, through an annual dividend and share buybacks. (source: The Times)

Official figures yesterday showed that UK retail sales fell during October for the first time in nine months, according to The Office for National Statistics (ONS). Sales slid 0.1% in October, compared with a 0.3% rise in September.

Weaker demand for clothing and footwear as a result of the wet summer kept shoppers at home, while higher interest rates also dented sales. The numbers are likely to reinforce the calls for the Bank of England to cut interest rates and help stoke demand.

Alson Clarke at BNP Paribas said "Retail sales have been surprisingly elevated for some time now and today's data shows that this is starting to unwind," Sales over the three months to October were up 5.1% from the same period a year ago. An increase of 1.4% from the previous three month period from May to July was also observed. (source: BBC News)

Wednesday 14 November 2007

Sainsbury's reported pre-tax profits

Following on from the “price war” between supermarkets, J Sainsbury (the third largest supermarket in the UK) has beaten City forecasts in its first results since Delta Two, the Qatari investment, walked away from a takeover bid, with pre-tax profit growing by 20% during the first six months of the year. The supermarket group reported pre-tax profit up from £194 million to £232 million for the six months to October 26.

Like-for-like sales at the supermarket, which excludes gains from new stores opened in the first half of the year, rose by 4% after Sainsbury's reported a 5.1% rise in the first quarter of the year which slowed to 3% in the 16 weeks to October 6. Overall sales increased by 2.8% to £9.9 billion. (source: Timesonline)

Although this might seem like a new idea, it has actually been born earlier this year but is opening for service today. The newest addition to Sir Stelios Haji-Ioannou's (easy Group founder) (pictured) stable of bright orange and white brands opens its door today, offering cut-price office space in the upmarket Kensington area of London. Sir Stelios, is aiming easyOffice at the growing number of young entrepreneurs.

According to research by Barclays, more than a quarter of a million new businesses were set up in the first half of 2007, up 7% from last year and Sir Stelios wants to capitalise on that. Sir Stelios's target market, the under-25s, grew the fastest, setting up 20,000 businesses in the past 12 months, up 15% year on year.

In a statement, the easyJet founder said “the idea was to get people with business ideas on their feet. Over the years I have met many people who start their business from their bedroom or kitchen table. They reach a stage where they need three things: an address which is not residential; a place to meet clients, other than the local Starbucks – and once they are ready to hire staff, they can't really tell them to start reporting for work at their own home."

Sir Stelios was quick to dismiss suggestions that this was a venture into commercial real-estate, saying: "We are a booking engine, not a property company ... In fact, I am just using the upstairs of the easyInternetCafe site in Kensington for the pilot phase." The Kensington High Street site will have offices available for as little as £99 a week. (The Independent)

Tuesday 13 November 2007

Increase in British Airways fuel surcharges

Higher oil prices forced British Airways to increase fuel surcharges for the third time this year as it admitted that its fuel bill this year will top £2 billion. Analysts warned that all airline passengers could be affected with other carriers expected to follow suit and drive up ticket prices.

Robert Boyle, BA commercial director, said: "The cost of oil has reached record levels, rising by more than $20 (£9.68) a barrel since we last increased our fuel surcharge in June 2007." From Thursday, the surcharge on flights lasting more than nine hours will rise by £30 to £116 for a return ticket, while the levy for sub-nine-hour long haul flights to destinations such as New York will increase by £20 to £96. The surcharge on return short-haul flights will increase by £4 to £20.

KLM, the Dutch arm of Air France, also announced an increase in surcharges yesterday, which followed recent increases by Ireland's Aer Lingus and Virgin Atlantic.

Yesterday's announcement is the airline's first surcharge increase since it was fined a total of £270 million in August by the US department of justice and the Office of Fair Trading for colluding with Virgin Atlantic over the setting of fuel levies. British Airways admitted that members of staff had breached competition law by discussing planned surcharge increases with the airline's arch rival. (source: Google News)

Vodafone today raised its forecasts for annual revenue growth but sounded a note of caution for the second half of the financial year due to "competitive" pricing in the European market. Vodafone expects full-year revenues to reach between £34.5 billion and £35.1 billion, against a previous range of between £33.1 billion and £34.1 billion. Shares in Vodafone rose 2.86%, up 5.2p, to 187.2p in early trading.

Analysts had been expecting the operator to increase its forecasts after upbeat statements from rivals, France Telecom and Spain's Telefonica in recent weeks. Vodafone has been focusing on revitalising the business after it reported a £14.9 billion loss two years ago, the biggest loss ever made by a European company.

Today, the company reported sales for the six months to September 30, 2007, up 9% to £17 billion, with organic growth up 4.4%. Pre-tax profit over the first half of the year rose to £4.5 billion from a £3.3 billion loss in the comparable period.

On further expansion, Arun Sarin, chief executive at Vodafone, said “the group will wait for the end of a strategic review at Vodacom, its South African joint venture with local fixed-line incumbent Telkom, before increasing its 50% stake.”

The review is expected to take “a couple of months” and Mr Sarin said: "At the point we will have a better idea of what is available at Vodacom, if there is a stake available at the right price."

Mr Sarin declined to say by how much it will raise its stake in Vodacom but said: "The remainder of the shares will be listed, we will not take the whole 50 per cent." (source: Timesonline)

Monday 12 November 2007

Facebook to enter Chinese market

In a bid to grow its presence in the business intelligence software market, computer giant IBM is to buy software firm Cognos for $5 billion (£2.4 billion). Business intelligence software is aimed at helping large companies analyse information for complicated issues such as strategy or staffing. IBM proposes to pay $58 (27.6) for every share of Canadian-based Cognos, with other firms also growing their business intelligence software such as SAP, which is set to buy Business Objects.

IBM and Cognos, which employs 4,000 people worldwide, already have an existing business relationship. The purchase is expected to close in the first quarter of 2008 and needs approval from Cognos shareholders. Steve Mills, senior vice president at the IBM Software Group said "we chose Cognos because of its industry-leading technology that is based on open standards."
IBM shares rose 1% to $101.27 (£48.22) on the news. (source: BBC News)

Speculation is growing that Facebook is preparing a foray into China, with the social network being linked to a number of possible acquisition targets in the world’s second-largest internet market. Zhanzuo.com, a Chinese social networking site is reportedly in sight by Facebook. According to the Chinese press, Facebook has maintained an interest in Zhanzuo.com despite the Chinese group rebuffing an offer of up to $100 million (£48 million).

A spokesman for Facebook (who today denied the reports) said: “Facebook has no plans to acquire any company in China. In the coming months, internationalisation of the Facebook website is priority and those efforts will support multiple markets around the world.”

However, Facebook, itself the centre of takeover speculation in recent months, has also been linked to Tianwang, a Chinese search engine, and Xiaonei.com (meaning on campus), the leading social network in China, which has an appearance similar to Facebook and claims to have 8 million active users in almost 8,000 colleges and universities in China. Xiaonei.com was acquired last year by Oak Pacific Interactive, the Chinese new media conglomerate.

It is estimated that China has some 162 million internet users, placing it second only to the US. According to a recent poll, the average Chinese user spends between 14 and 19 hours a week online, compared with between seven and ten hours in the US.

In 2005, Yahoo! announced it would merge its Chinese arm with Alibaba.com, a domestic rival, drawing a line under years of losses in the country. EBay, the world’s largest online auction house, has struggled to compete with China’s Taobao.com, despite the American company making its entry into China through the acquisition of EachNet.com, at the time China’s largest auction site. (source: Timesonline) - Facebook valued at $15 billion

O2 sought to dismiss reports that the Apple iPhone is selling at a slower than expected pace claiming the device was its "fastest-selling” ever. Peter Erskine, the chief executive of O2, which is Apple’s chosen network partner in the UK, said: “It has been the fastest-selling device we have ever seen. The phone had sold in the tens of thousands since its launch on Friday”

Britain’s biggest mobile operator also raised speculation about the potential hit to rivals such as Vodafone and Orange from its exclusive deal with Apple. Two thirds of customers buying the iPhone were new customers to O2. IPhone buyers must sign up to an O2 contract costing from £35 to £55 a month for a minimum of 18 months.

However the refusal of both O2 and Carphone Warehouse, the only independent retailer to sell the phone, to reveal exact sales figures, has raised speculation that the gadget a combined iPod music player, mobile phone and internet browser, is not living up to expectations. Carphone Warehouse had said that it hoped to sell 10 000 of the devices when the iPhone launched on Friday, while O2 said last week that it had ordered several hundred thousand units to sell over the next couple of months. (source: Timesonline)

An A380 superjumbo VIP order has been made by the world's 13th richest man, Saudi prince Alwaleed bin Talal. He has invested a small piece of his estimated $20.3 billion (£9.8 billion) fortune in an Airbus "Flying Palace", which is priced out of most tycoons' range with a retail price of $310 million (£147.6 million).

The passenger version of the A380 has already raised the bar in luxurious air travel, with inaugural customer Singapore Airlines fitting its business class section with double-bed cabins. However, private buyers will have much more leeway to indulge their whims, because the lack of hundreds of economy class seats leaves ample room for a kitchen, boardroom, cocktail bar, gymnasium, jacuzzi and giant plasma TV screens. Virgin Atlantic, one of the biggest investors in innovative airline products and a prospective A380 buyer, has considered installing a swimming pool and creche in its planes.

The plane will be delivered around 2010 and will take about two years to fit. Asked if the prince had chosen the layout of his new jet, Velupillai said his customer had "not decided yet". He said: "In general terms, the VIP A380s will have lots of bedrooms, plus lounges where up to 20 people can be seated." (source: The Guardian) - Battle for the Jets

New player in Northern Rock bid

A group led by former Abbey boss, Luqman Arnold (pictured), has emerged as a fourth potential bidder for troubled bank Northern Rock. It is understood that Olivant, a private equity firm run by Arnold want 20% of the business and effective control with the promise that his expertise from stints at Abbey and investment bank UBS Warburg will be enough to transform Northern Rock's prospects. Olivant, which has so far made only a couple of significant investments, including a 10% stake in a Russian bank, is considering a proposal that does not involve the sale or break-up of the lender's business. Last night the Northern Rock board was considering the bid as a fall-back option in case the other proposals fail.

The Olivant team would not receive any remuneration, with their reward coming from any revival in Northern Rock's share price. They have spent the past month preparing a detailed plan to take control and keep the bank going as a viable business. Arnold came to prominence when he was parachuted into Abbey five years ago after it revealed large losses from its wholesale banking operations. He stabilised its performance before the business was sold to Spanish bank Santander.

So far three groups - a consortium led by Virgin Group and private equity firms Cerberus and JC Flowers have expressed an interest in Northern Rock. They all plan to inject billions to shore up the bank's mortgages, but want full control of its share capital in return, leaving investors with only a small share of the business.

In the summer, Olivant raised £750m to support bids for under-performing finance companies. Its Northern Rock scheme is thought to involve acquiring an equity stake of between 10% and 20%. Arnold would become interim chief executive, replacing Adam Applegarth. The bank's chairman Bryan Sanderson is believed to welcome Arnold's interest, but is waiting until an informal deadline for bids, set for this Friday, has passed before assessing its merits. (source: The Guardian) - Virgin pushes forward in takeover & It is all about Virgin (Articles on Northern Rock takeover)

Dubai-based airline, Emirates Airline gave European based group, Airbus a significant victory over Boeing yesterday with the largest-ever single-aircraft order or the A350 over Boeing’s rival 787 in a purchase worth $35 billion (£16.7 billion). Emirates was already Airbus’s biggest customer for the massive A380, with 55 aircraft on order.

Boeing was left in the shadows, despite sealing several deals of its own: a $3.2 billion (£1.5 billion) order from Emirates for 12 of its 777-300s and a $6.1 billion (£2.9 billion) deal with Qatar Airways for 30 787 Dreamliners and five 777 cargo aircraft.

The deal was a huge boost for Airbus, whose sales had been lagging behind Boeing this year. Now industry analysts predict that the European manufacturer will pull ahead of its American rival by the end of the year.

Analysts said that Emirates rapid expansion plans hinge on the region’s economic success, with more tourists filling its fleet to capacity. Dubai is also building a new airport to handle a potential 150 million passengers a year, more than twice the capacity of Heathrow.

Emirates will retire 56 to 58 aircraft from its existing fleet as it incorporates planes from the new order, which are not scheduled for delivery until 2014. The fleet’s capacity will increase by only 15%, slightly below its current rate of expansion of 20% a year. Robert Ziegler, a Dubai-based aero-space analyst, said: “Emirates are building the highest-capacity network in the world. No other airline has ever tried anything like that before. Everybody is asking the question: what on earth are they going to do with so many planes? And more importantly: will it work?” (source: Timesonline) - Global News (source: Wall Street Journal) (Emirates public offering), Further delays for 787 Dreamliner & BP fined for a record amount (Delays on 787 Dreamliner)

Virgin founder, Sir Richard Branson, is keeping up the pressure on the chancellor, Alistair Darling, to modify his controversial plans for capital-gains tax. He is proposing the qualifying period for 10% taper relief be extended from two years to perhaps five years. His views follow consultation with the Sunday Times Fast Track 100 companies and several other entrepreneurs.

After a recent meeting with Darling and Gordon Brown, the prime minister, Branson wrote: “I believe this would encourage longer-term investment in private businesses — as five years is a more reasonable time frame to build and grow a business. “It would also have the advantage of excluding the majority of the private-equity professionals who make a living out of buying and selling businesses from this taper-relief bracket.”

Darling’s attempts last month to simplify the tax regime and catch more private-equity executives in his net backfired. They will increase the effective tax rate on the sale of privately owned companies from 10% to 18%. As a result, many entrepreneurs are considering selling up before the rules come into play next April.

However, Darling has let it be known he could alter his plan to ease the burden on small-business bosses. Sir Richard Branson added that business owners “applaud your attempts to simplify the capital-gains-tax structure but they also feel that some further consultation would be beneficial to form a fair and equitable solution”. (source: Timesonline)

The Formula One debutant this year, Lewis Hamilton, is close to signing a clutch of endorsement deals that will put him on track to become the world's first $1 billion sportsman. It is believed that Hamilton has held discussions with his financial advisers about a range of options to maximise his earning potential, including listing himself on the London stock market.

The innovative move could see the racing driver list a minority stake in a company in which he would be the main asset and remain the major shareholder. Several US sports stars are considering similar proposals, including Derek Jeter, the star batsman at the New York Yankees baseball team.

Hamilton's multimillion pound salary from McLaren, his F1 team, is set to be dwarfed by the sums earned from endorsing and promoting products. If he chose to pursue a listing on the AIM market in London, he could, for example, sell a 10% stake in Lewis Hamilton plc, for $100 million (£47.6 million). Investors in the company would be paid a dividend equivalent to 10% of Hamilton's total future earnings. The company would be structured like any other listed vehicle with a board of executive and non-executive directors.

Earlier this month, Hamilton announced he was leaving the UK to live in Switzerland, where he could live anonymously and not be mobbed in the street. It is believed that he will also save up to $40 million (£19 million) in tax per year from the move. (source: The Independent)

BRIEF NEWS
A study estimates that online shopping in the UK is due to hit £40 billion ($84 billion) this year. The figure comes from price comparison website, Uswitch, which says the boom is being fuelled by cheaper broadband deals and faster connection speeds, whilst a separate study from Forrester Research predicts that online Christmas shopping will reach £13.8 billion ($28.98 billion) this year, a 42% increase on 2006.

Uswitch's 2007 figure is based on data pulled from official Office for National Statistics retail numbers. It predicts that the UK's online spending will further rise to £162 billion ($340.2 billion) by 2020, when it will make up 40% of total retail sales. (source: BBC News)

Sunday 11 November 2007

The owner of over 70 bookshops - Mr Luke Johnson

Mr Johnson does not conform to the public’s notion of the roles he fills. He is 45, with a youthful, ageing rock star haircut. His father is Paul Johnson, the historian and polemicist. He isn’t at all plumy. His accent is ordinary bloke rather than posh public school – the result, presumably, of his parents insisting he went to a state grammar school.

He has a rumpled, mischievous air. Intelligent and quick, he’s someone who revels in challenging convention rather than going with the flow. He is rich, well over £100 million, married to Liza, a pharmacist, with two children. They have a house in Little Venice and other homes in Paris and New York. What is amazing from Mr Johnson is how he has done it. He studied medicine at Oxford, and to then land one of the best jobs in broadcasting with a medicine degree is unbelievable.

“I’ve been in business for over 20 years and I’ve a good team of partners working with me who are clever young men” Mr Johnsons says. “But there has been more to it. I look for an opportunity where I can add value and make a difference. Ok, I am a bargain hunter, I’m always looking for things that are cheap and are under-exploited.”

Patisserie Valerie is a good example of this. It is a good name with a wonderful proposition. It wasn’t being managed anywhere near its potential, so Mr Johnson opened a new one in Marble Arch and another in Queensway (both in London). They sell homemade, good quality pastries, good coffee and ice cream. That sort of authenticity is very rare and it’s that point of differentiation that attracted Mr Luke Johnson to Patisserie Valerie.

Together with his partners in his private-equity firm Risk Capital, he owns East, the fashion chain, Giraffe restaurants, Patisserie Valerie, the cakes and coffee shops, and GRA dog track. Plus in the past, Whittard of Chelsea, Punch Taverns, Belgo, Strada and Signature Restaurants, owner of The Ivy et al, have all passed through his hands. Lately he bought Borders books and is now also the owner of a bookshop chain with over 70 shops to his collection.

Please visit the entrepreneur again soon for some more updates on our businessman of the month, Mr Luke Johnson.

Friday 9 November 2007

BHP Billiton's offer rejected

An offer from BHP Billiton for Rio Tinto has been rejected for the merge of the two Anglo-Australian companies to create an iron giant valued at some $350 billion (£166.6 billion). A merger would create a base metals colossus with powerful positions in coking coal, iron ore, copper and aluminium. Rio shares gained 946p, or 22%, to £52.96 ($111.2) in response to news of BHP’s interest, while BHP fell 100p, or 5.%, to £16.56 ($34.77).

In rejecting the proposal, Rio said it had given it careful consideration but “concluded that it significantly undervalues Rio Tinto and its prospects”. A merger between Rio and BHP could provoke a political storm and push the mining sector to the fore-front of government concern about the emergence of cartels in strategic commodities. The price of iron ore and coal, key ingredients in the production of steel, has soared over the past two years and a combined BHP-Rio group would have more than a third of the market in both iron ore and coking coal.

Instead, demand for iron ore has continued to soar and a price leap of as much as 50% is expected in 2008. Queues of bulk carriers are creating bottlenecks at terminals operated by BHP and Rio in Western Australia. Pricing is negotiated annually by three producers, BHP, Rio and CVRD, the Brazilian miner. BHP and Rio set prices in Asia in bench-mark deals with Japanese steelmakers while CVRD negotiates with European steel mills. (source: Timesonline)

Savers had withdrawn £10.5 billion from the stricken bank, Northern Rock, causing shares to fall as much as 12% in early London trade. This is almost half the £25 billion it had in its deposit accounts before approaching the Bank of England for emergency cash. Shares in the troubled bank were trading down almost 2% at 149p.

Northern Rock's savings business is small fry compared with its mortgage operations, which generated the bulk of the bank's earnings. But now, the money in its saving accounts represents a key asset to the troubled lender which, could end up borrowing as much as £30 billion by the end of this year to finance its mortgage operations. The rapid pace at which customers are closing their accounts and switching to other High Street banks and building societies could represent another difficulty for possible bidders.

US private equity firm JC Flowers is likely to bid, having put together a high-profile management team to take charge if it is successful, while Virgin has strongly indicated its interest. Asian investors, including Industrial and Commercial Bank of China, are also being targeted by the bank's advisors in an effort to get the best deal, according to the Financial Times. It is unlikely any will be interested without a guarantee that the government-backed loan will remain in place. (source: BBC News) - Virgin pushes forward in takeover & It is all about Virgin

Thursday 8 November 2007

Carphone to take on US market

Charles Dunstone's group, Carphone Warehouse, is to enter into a joint venture with Best Buy, the American electrical retail giant, as a possible takeover. Carphone Warehouse said it will roll-out 1 000 stores in the US in the next two years. Best Buy recently bought a 3% stake in Carphone Warehouse, with some analysts suggesting it was the first stage in a takeover campaign. Some 70 stores have been piloted in the US, both as stand-alone Best Buy shops and mobile units within general Best Buy stores.

Mr Dunstone, the chief executive who founded Carphone Warehouse with £6 000 in 1989 said: "We have made good progress across the Group in the first half. The Retail business continues to prosper across Europe, and we are announcing today a major roll-out of our US venture. Our US trial has continued to go well, giving us the confidence to pursue a roll-out to 1 000 Best Buy stores over the next two years. In addition, we are exploring opportunities to expand the venture into other markets where Best Buy has a presence." Canada has been earmarked as a possible area of expansion.

A rise in pre-tax profit of £14 million ($29.4 million) last year to £56 million ($117 million) for the first half of the year to September 29, in line with expectations were announced yesterday. Revenue, at £2.14 billion ($4.5 billion), was slightly below analysts' forecasts. Carphone Warehouse said it expected a strong second half, buoyed by the release of the iPhone, which it stocks exclusively. (souce: Timesonline)

Facebook are to introduce plans to use “you” as ad-executives to advertise products on behalf of companies in a move that will increase significantly the number of corporate messages on the site. Users of the social networking site will be given the opportunity to alert people they know when, for instance, they buy a product from another website, in which case their friends will receive a message with an advertisement attached.

Facebook users will not be paid for their role as “brand ambassadors” but the adverts will tie into one of the site’s main features, a stream of messages known as a “newsfeed” that constantly updates friends about one another’s activities.

Advertisers will pay for the privilege of having their product referred by one user to another, which will be akin to word-of-mouth marketing. If Facebook users download a film from Sony’s website, they will be given the option of letting their friends know in their messages, which will include a Sony advert.

More than 60 companies, including Coca-Cola, Blockbuster, Microsoft, Sony, Verizon and The New York Times, have signed up to take part in the new advertising platform, which is scheduled to start this week.

Advertisers will be able to set up profiles on Facebook that will enable customers to interact with them. They will also be able to take advantage of the rich trove of personal information that Facebook has gathered about its users, who number more than 50 million, to pinpoint their commercial messages. (source: Timesonline & Google News)

It appears as if Virgin Media, the pay-television and broadband group is fighting back against rival BSkyB after adding 13 000 new customers in its third quarter. The communications giant, which has struggled to fulfill its aim of becoming Britain’s top communications provider, had been expected to continue to lose customers.

Analysts had forecast a decline in the Nasdaq listed group’s total base of around 31 000 compared to its actual gain of 13 000 new customers. Last quarter the group lost 70,000 customers. Virgin’s results for the quarter to the end of September revealed it had added 20 400 new television customers and 115 800 new broadband customers. Its residential telephony customer base declined though by 1 300.

Operating income in the quarter was £46.7 million ($98 million), up from £3 million ($6.3 million) in the previous quarter and a loss of £9.6 million ($20.16) a year ago.

A poor performance left investors continually disappointed with one publicly castigated the group after an expected $23 billion (£10.9 billion) private equity sale was canned amid the global credit crunch. In an embarrassing U-turn Virgin Media, in which Sir Richard has a 10.5% stake, has now abandoned the quadruple play strategy and is instead seeking to win customers by focusing on its broadband service. Virgin is further struggling with issues including a bitter legal wrangle with BSkyB, a search for a new chief executive, the distraction of a potential sale once the markets have recovered and fierce competition on the broadband market with BskyB & Carphone Warehouse. (source: Metro & Timesonline) - Virgin Lost 40 000 customers & Sainsbury's Bid dropped (includes Virgin)
Charles Dunstone's group, Carphone Warehouse, is to enter into a joint venture with Best Buy, the American electrical retail giant, as a possible takeover. Carphone Warehouse said it will roll-out 1 000 stores in the US in the next two years. Best Buy recently bought a 3% stake in Carphone Warehouse, with some analysts suggesting it was the first stage in a takeover campaign. Some 70 stores have been piloted in the US, both as stand-alone Best Buy shops and mobile units within general Best Buy stores.

Mr Dunstone, the chief executive who founded Carphone Warehouse with £6 000 in 1989 said: "We have made good progress across the Group in the first half. The Retail business continues to prosper across Europe, and we are announcing today a major roll-out of our US venture. Our US trial has continued to go well, giving us the confidence to pursue a roll-out to 1 000 Best Buy stores over the next two years. In addition, we are exploring opportunities to expand the venture into other markets where Best Buy has a presence." Canada has been earmarked as a possible area of expansion.

A rise in pre-tax profit of £14 million ($29.4 million) last year to £56 million ($117 million) for the first half of the year to September 29, in line with expectations were announced yesterday. Revenue, at £2.14 billion ($4.5 billion), was slightly below analysts' forecasts. Carphone Warehouse said it expected a strong second half, buoyed by the release of the iPhone, which it stocks exclusively. (souce: Timesonline)

Facebook are to introduce plans to use “you” as ad-executives to advertise products on behalf of companies in a move that will increase significantly the number of corporate messages on the site. Users of the social networking site will be given the opportunity to alert people they know when, for instance, they buy a product from another website, in which case their friends will receive a message with an advertisement attached.

Facebook users will not be paid for their role as “brand ambassadors” but the adverts will tie into one of the site’s main features, a stream of messages known as a “newsfeed” that constantly updates friends about one another’s activities.

Advertisers will pay for the privilege of having their product referred by one user to another, which will be akin to word-of-mouth marketing. If Facebook users download a film from Sony’s website, they will be given the option of letting their friends know in their messages, which will include a Sony advert.

More than 60 companies, including Coca-Cola, Blockbuster, Microsoft, Sony, Verizon and The New York Times, have signed up to take part in the new advertising platform, which is scheduled to start this week.

Advertisers will be able to set up profiles on Facebook that will enable customers to interact with them. They will also be able to take advantage of the rich trove of personal information that Facebook has gathered about its users, who number more than 50 million, to pinpoint their commercial messages. (source: Timesonline & Google News)

It appears as if Virgin Media, the pay-television and broadband group is fighting back against rival BSkyB after adding 13 000 new customers in its third quarter. The communications giant, which has struggled to fulfill its aim of becoming Britain’s top communications provider, had been expected to continue to lose customers.

Analysts had forecast a decline in the Nasdaq listed group’s total base of around 31 000 compared to its actual gain of 13 000 new customers. Last quarter the group lost 70,000 customers. Virgin’s results for the quarter to the end of September revealed it had added 20 400 new television customers and 115 800 new broadband customers. Its residential telephony customer base declined though by 1 300.

Operating income in the quarter was £46.7 million ($98 million), up from £3 million ($6.3 million) in the previous quarter and a loss of £9.6 million ($20.16) a year ago.

A poor performance left investors continually disappointed with one publicly castigated the group after an expected $23 billion (£10.9 billion) private equity sale was canned amid the global credit crunch. In an embarrassing U-turn Virgin Media, in which Sir Richard has a 10.5% stake, has now abandoned the quadruple play strategy and is instead seeking to win customers by focusing on its broadband service. Virgin is further struggling with issues including a bitter legal wrangle with BSkyB, a search for a new chief executive, the distraction of a potential sale once the markets have recovered and fierce competition on the broadband market with BskyB & Carphone Warehouse. (source: Metro & Timesonline)

Wednesday 7 November 2007

Next blame rising mortgage repayment for performance

Next, today said that like-for-like sales for the 14 weeks to November 3 rose just 0.4% as it cited customers' rising mortgage repayments as contributing to poor performance over the last three and a half months. In its retail business, like-for-like revenue fell by 2.9% but in its Next Directory catalogue business sales rose by 1.2%. Shares in Next fell by 2.49% to £20.01. In the six weeks to September 8, total sales had fallen more sharply by 2.9%, with like-for-like retail revenue declining by 4.8% and sales from Next's directory business declining by 2.9%.

Simon Wolfson (pictured), Next’s chief executive warned in September that the increased interest rate, which has risen five times since August 2006, would begin to significantly impact shoppers’ spending by the end of the year, coinciding with the important Christmas period. Mr Wolfson said today: “Whilst we are happy that we have made significant improvements to our product ranges, marketing and stores we remain cautious about the consumer environment, with many customers now experiencing considerable year on year increases in their mortgage repayments.”

Next said that whilst "the outlook is uncertain", it still expects to meet market expectations. Next like-for-like retail sales will fall between 1% and 3.5% while the directory business will show flat sales or rise by 2%. (source: Timesonline)

Marks & Spencer to take on Chinese and Indian Market

Marks & Spencer has decided to take on the Chinese and Indian market as it is stepping up investment to £1.1 billion for the move next year, despite a lacklustre sales performance. Mr Stuart Rose, chief executive of Marks & Spencer, said: “To get to where we are going, we have to make investments. If I said we are cutting back on capital expenditure you would say we have no bottle and the business is going nowhere.”

Underlying sales rose by 1.2%, below the 2% analysts had hoped for and the worst growth for nine quarters. In the six months to September 29, gross margins remained at the same levels as a year before. Mr Rose said: “I did say that weather is for wimps and I had to pretty much eat my words a few months ago. It is pretty tough out there and how much tougher it is going to get I don’t really know. I think it depends on the offer you’ve got.”

Apart from the weather, Mr Rose blamed disruption from store renovations for difficult sales in the past six months, revealing that underlying sales slid 4.2% in those stores affected, compared with a 5.6% rise in modernised stores and a 0.4% rise in the rest of the chain. Despite the slower than hoped for underlying trading, first-half profits rose by 11.5% to £451.8 million, ahead of expectations, as Marks & Spencer controlled staffing costs over the summer, and allocated 46% less cash for bonuses. The company is on track to top £1 billion in full-year profits for the first time since 1998.

M&S said that market share rose in all categories, with food sales benefiting from extra space despite a disappointing 0.5 per cent rise in underlying sales. Market share in clothing rose to 11 per cent from 10.7 per cent a year before and to 4.3 per cent from 4.1 per cent in food. In the years ahead, M&S said growth would come from stepping up expansion in the UK and overseas, broadening the range of merchandise sold in its stores, and improving efficiency by modernising IT and infrastructure.

On international growth, Mr Rose said: “We have to go faster and more boldly.” In the near term, the focus will be on Ireland, where Marks & Spencer intends to open up to 40% more space in the next five years. A £35 million distribution centre is expected to open in Bradford in 2010 to reduce the number of M&S warehouses. Mr Rose said that online sales had risen by 60% over the half year and the retailer plans to push for growth in this area. Marks & Spencer shares closed up 21p at 653p. (source: Timesonline)

Tuesday 6 November 2007

PetroChina the Richest

Following on from the article on the richest companies in the world. China’s bid for global domination took another step forward yesterday as its state energy company, PetroChina, became the worlds most valuable business with a value of £480 billion ($1 trillion). Shares in oil and gas producer PetroChina almost tripled in value when they floated on the Shanghai stock market. They overtook the biggest firm, US oil group Exxon Mobil, which has a market value of £234 billion ($470 billion). Shares floated in the morning at £1.07 but sold at £2.83 after lunch. PetroChina is worth more than Britain’s energy companies, BP and Royal Dutch Shell combined. (source: Metro News) - The Richest

Time Warner, the media and owner of AOL, Time Warner Cable, Home Box Office, Turner Broadcasting System, New Line Cinema, Warner Bros. Entertainment, Time Inc. & Time Warner Investments, announced the elevation of Jeff Bewkes to the chief executive’s job, after expectations that the new leader will radically reshape the company behind the Harry Potter films and the CNN news network and will take this position beginning of next year.

Mr Dick Parsons, currently CEO and first African-American to run a major media company, is staying on as chairman for an unspecified period, although it is likely that Mr Bewkes will succeed to that role in due course. His departure was agreed in outline at a board meeting in London a fortnight ago. At the time, that prospect was enough to lift Time Warner’s shares by 3% and yesterday the shares gained as much as 3.2% early in the day after the appointment was confirmed but ended slightly lower at $17.81 (£8.90). Time Warner earned $2.27 billion (£1.13 billion) in the first half, on revenues of $22.16 billion (£11.8 billion). (source: Timesonline)

Ryanair's, reported a 23% rise in pre-tax profits to €459.5 million (£319.7 million) in the six months to the end of September and showed that charging passengers for extras, such as food, car hire and excess baggage, has boosted revenues at the budget airline. Passenger numbers rose 20% to 26.6 million.

The chief executive Michael O'Leary said “Ryanair was raising its profits guidance for the year and the average fare per passenger, were only likely to drop by 5% over the winter period, instead of the 10% previously forecast.”

He also took the opportunity to criticise the Government's plans to reform air passenger duty (APD), announced in last month's pre-Budget report. The proposed shift from taxing passengers to taxing flights was "modern highway robbery", he said. Ancillary revenues, from all the add-ons the airline charges, rose 54% to €252 million and now account for more than 16% of total revenues but are targeted to grow to 20%”. To that end, Ryanair is to test its in-flight mobile phone service on 25 planes before the end of March next year with a view to charging passengers to make calls and send texts. The company charges £2 to check in at the airport rather than online and £5.50 per kilo for excess baggage and £5 to check a bag into the hold. (source: The Independent)

Monday 5 November 2007

Sainsbury's Bid dropped

It appears as if the Qatari-backed investment fund has abandoned its takeover bid for supermarket chain Sainsbury's. Delta Two, which approached the UK firm in July with the offer, said it was withdrawing the bid because of turmoil in global credit markets and also said that concerns about funding Sainsbury's employee pension schemes had led to the move.

The UK Takeover Panel had given Delta Two until Thursday to decide whether or not to press ahead with the bid. There were worries about how the bid, worth about £10.6 billion, would be funded, with Delta Two being urged by some Sainsbury's shareholders to stump up more cash. Speculation had grown in recent weeks that the Delta Two bid, backed by the foreign investment arm of the gas-rich gulf state Qatar, was in trouble.

In a statement to the Stock Exchange, Delta Two said its decision to pull out was due to concerns about the "deterioration of credit markets", which made it more difficult and expensive to raise the debt needed to fund the huge transaction. It also highlighted concerns about "arrangements for the future funding" of the firm's pension commitments. Shares in Sainsbury's, which had yet to back the offer, fell nearly 19% in response to the news.

Despite the bid's collapse, Delta Two still owns more than a quarter of Sainsbury's shares and must now decide what to do with them. Sainsbury's shares were down 19%, or 105 pence, at 450p in early trading in London. (source: Bloomberg & BBC News) - Sainsbury's takeover enters final stages, Sainsbury's Bid continues

The pay-TV and broadband group, Virgin Media formed last year from the merger of the former NTL/Telewest, whose hoped-for sale collapsed amid the global credit crunch, is expected to reveal a decline of about 31,000 customers in the third quarter, compared to a loss of 70,000 in the previous one. It will also stress to investors that a sale of the business will now not happen until next year at the earliest.

Virgin Media had hoped to shake up the home communications market by becoming the first “quadruple play” provider of pay-TV, broadband, fixed-line telephone and mobile services. However, the group struggled to fulfill its potential and in May found itself under attack from investors, including Franklin Mutual Advisers, over its management and strategy.

A turbulent period has since seen a proposed $10 billion (£4.8 billion) sale fall through and its chief executive, Steve Burch, replaced. The company has also become embroiled in a messy legal spat with BSkyB, the satellite broadcaster which is 39.1% owned by News Corporation.

Analysts at Citigroup are forecasting a decline of around 31,000 in the group’s customer base in the third quarter, followed by growth of around 45,000 customers in the fourth quarter. Instead of fighting for premium pay-TV customers, the group will unveil plans to focus on the cable operator’s broadband service as its core product for luring in customers.

However, the cable group is still facing fierce competition. Sky recently revealed that its broadband service had signed its one millionth customer just 14 months after launching the service. New players, including O2 , are also still entering the broadband market. (source: Timesonline) - Virgin Lost 40 000 customers

Virgin Active is understood to become a public company soon as Sir Richard Branson is planning to float his Virgin Active fitness centres in a move that could see the 167-strong chain valued at £1b billion. Virgin Active, which added 72 sites through its acquisition of Holmes Place a year ago, has begun a beauty parade of investment banks to carry out the initial public offering.

It is believed profits have doubled since the merger with Holmes Place. Private equity firms Permira and Bridgepoint Capital both have a minority stake in Virgin due to their previous ownership of Holmes Place, with Sir Richard maintaining the majority share in the listed company, understood to be more than 50%

The business with 85% currently owned by Sir Richard, has been highly successful the largest membership in South Africa, but Italy and Spain are also growing markets. Overall, the group has around 900 000 members. (source: The Independent & Metro)

Friday 2 November 2007

Rise in Profits for British Airways

Despite Heathrow being named as the worst airport, which is home to the British Flag carrier, British Airways, BA has reported a big rise in its six month profits, as it continues its cost-cutting programme. British Airways reported pre-tax profits of £593 million ($1.18 billion) for the six months to the end of September, up 26% on the same period of last year.

Costs were down 4% even with predictions that its fuel bill will top £2 billion ($4billion) this year for the first time. British Airways also predicts that the restrictions on hand baggage will be removed soon. The airline gave an update on the development of its new home in Terminal 5 at Heathrow Airport, which is due to open on 27 March 2008 and the first trials involving volunteers will begin this weekend.

British Airways profitability rose slightly due to more passengers paying premium rates, but that was largely offset by currency effects, especially the weakness of the US dollar. Despite the rising price of oil, the airline has lowered its prediction for fuel costs by £20 million ($40 million), but that still means they will be £100 million ($200 million) higher than in the previous year. That should be offset by a predicted fall in non-fuel costs of £100 million ($200 million) in the full year. (source: BBC News)

With the competition still strong between Virgin Media and BSkyB, the latter added 83 000 new customers to its pay-TV service in the first quarter, slightly above expectations, and posted an 11% rise in revenues to £1.18 billion ($2.36 billion). Adjusted operating profit was below expectations, at £150 million ($300 million), due to increased programming and broadband investment, or the percentage of customers who dropped their subscription, which was 11.3%.

Analysts had been expecting adjusted operating profit of £166 million ($332 million), revenues of £1.17 billion ($2.34 billion), netto additions of 81 000 and churn of 11.7%. These predictions are by 11 Reuters Analysts. (source: Reuters)

The unlikely fashion sensation and sought after plastic shoe maker, Crocs, posted a drop by almost a third yesterday after the maker of bright plastic clogs acknowledged that it had missed key Wall Street expectations. The drop represented the biggest one-day decline for the company, whose shares were listed in New York at the beginning of last year. The Colorado-based firm does not only produce lightweight footwear with a “turbo strap” across the heel and featuring an “orthotic foot bed”, but it also produces clothing.

For the third quarter to September 30, the company reported a 130% rise in sales to $256.3 million (£123 million), compared with the same period the year before. Earnings after tax for the three months more than doubled to $56.5 million (£28.25), against $21.5 million (£10.75) for the corresponding period in 2006. That increase was less than some analysts on Wall Street had been hoping for, with revenue growth hindered by the group’s switch to a larger distribution centre in Europe. By lunchtime yesterday the shares had fallen 31% to $51.36 (£25.68) on Wall Street, valuing the company at about $4 billion (£2 billion). The stock was worth about $20 (£10) a share at the beginning of the year. (source: Timesonline) - Crocs wins claim

After losing the bid for Facebook to rival Microsoft, Google fought back and has signed on MySpace (owned by News Corp.), the world’s largest online social network, to its Open Social platform that allows outside developers to write programs for social networking websites. Adding MySpace will give Google a platform and greater strength against fast-growing Facebook, which opened up its site to outside developers in May and has since seen its user base grow to more than 48 million people. Google shares closed at $703.21 (£351.60) last night after reaching a record $707 (£353.5) on Wednesday. (source: Timesonline) - Google surpass Wall Street expectations

Thursday 1 November 2007

The owner of Borders - Businessman of the Month

Our month of October featuring Mr Peter Jones came to an end. You can read all about him in the featured articles, by clicking on the links below.

Creating "my own" TV shows - Mr Peter Jones
Month End for Mr David Gold (featuring start for Mr Peter Jones month)

Businessman of November - The chairman of PizzaExpress who took control of the latter took this well know chain from 12 restaurants to over 250 with the share price from 40p to over 900p. Mr Luke Johnson studied medicine at Oxford University graduating in 1983 after which he then worked as media analyst at stockbroker Grieveson Grant (subsequently Kleinwort Benson Securities).

He sold out in 1999 and started Signature Restaurants, which owned The Ivy and Le Caprice, as well as the Belgo chain which he sold in 2005. Mr Johnson then started the Strada restaurant concept from scratch and took the chain to 30 units which he also sold in late 2005. The total proceeds from these two disposals were in excess of £90 million ($180 million). In the period 1993 to date he has been involved as director/owner of various quoted companies in retailing, pubs and bars, parcel delivery and maritime commerce, including Whittard of Chelsea, My Kinda Town, Nightfreight and American Port Services.

Luke founded Integrated Dental Holdings with partners in 1996 and grew it to the largest UK chain of dental surgeries with over 500 dentists. This was sold in 2006 for over £100 million ($200 million). He is Non-executive Director of Elderstreet VCT plc, and founder/owner and Director of InterQuest Group plc, a quoted recruitment business. From 2004 to 2006 he was Director of Dollar Financial Group Inc, a US NASDAQ traded corporation with $80 million ($160 million) EBITDA. Since 2000 Luke has run Risk Capital Partners Ltd., focusing on private equity deals. He was principal owner of Mayfair Gaming, the group of Riva bingo clubs, since 2004, which he sold in 2006 for IRR of over 40%.

He is also the owner/Chairman of private firms in directory publishing (Superbrands), restaurants - Giraffe and Patisserie Valerie - and between 2003-2006 advertising/design (Loewy Group). Loewy investment was successfully sold in late 2006. He is a major owner and Director of the market leader in car park equipment, APT Controls, since early 2007.

Please stay put this month for our businessman of the month, Mr Luke Johnson, also owner of Borders, the bookstore chain which he bought in 2007. He is worth more than £100 million ($200 million) and has been voted the 1000 most influential people of 2007 by the Evening Standard.

Starbucks to enter ready-to-drink market

The worlds biggest coffee-shop chain, Starbucks Corporation, is aiming to enter a new market for ready-to-drink coffee in China, where the company's business is still at an embryonic stage. This has been confirmed by chairman and founder Howard Schultz. Starbucks and PepsiCo Inc. have started selling bottled Frappuccinos coffee drinks through retail stores in China, aiming to replicate their results in North America, where the business grew to $1 billion (£500 million) from nothing a decade ago. Shultz said in an interview today in China “We want to build a new profit centre around ready-to-drink coffee (in China)."

Starbucks will also add at least 80 coffee shops each year in China, where annual sales growth is significantly higher than the company's 18% global target. Although China has more than 5,000 years of tea-drinking culture and consumes 700,000 tonnes of tea every year, more and more Chinese, especially young people, are drinking coffee, which has become a symbol of western culture.

The initial idea for Starbucks is to first sell bottled coffee in Shanghai, Beijing and Hong Kong, before expanding to other Chinese cities. Chairman, Mr Schultz expected the new business would boost brand awareness and attract more customers to its shops, which currently total 540 in China, Hong Kong and Taiwan. (source: Google News)

Sony Corporation may sell stakes in its animated film division, Sony Pictures Animation, and a unit that creates special effects for movies. The company hired investment bank Houlihan Lokey Howard & Zukin to explore the possible sale of about a 50% stake in Sony Pictures Animation and a larger stake in Sony Pictures Imageworks, Jim Kennedy, spokesman for Sony Pictures Entertainment said. Sony Pictures Animation produced the movies ``Surf's Up'' and ``Open Season.'' and competes with the very successful DreamWorks Animation SKG Inc., creator of the ``Shrek'' series, and Walt Disney Co.'s Pixar unit, which made ``Cars.'' Imageworks has created effects for films including Sony's ``Spider-Man'' as well as movies for other studios.

The two divisions are probably worth a total of about $500 million (£250 million), said a person, who requested anonymity because any discussions about selling stakes are preliminary. Revenue for Sony's movie and television unit increased 6.4% to $1.6 billion (£800 million) in the fiscal second quarter ended September, 30. The movie that took in the most revenue in the quarter was ``Superbad,'' Tokyo-based Sony said in its earnings statement last week. (source: Bloomberg)

Travel company Thomas Cook confirmed that full-year earnings would be in line with its expectations and said it “had seen strong early bookings in the UK for next year's summer season.” Thomas Cook, Europe's second-largest travel firm, created from the tie-up of KarstadtQuelle's travel unit and MyTravel, also said it was increasingly confident it would top the 140 million euros (£97 million) of cost savings it had originally expected from the deal.

The firm, sells around 6 million holidays a year, and said “it had seen a significant improvement in margins over the last eight weeks helped by its decision to cut back the number of holidays on offer and a dismal summer sparking demand.” It added winter bookings in the booming Scandinavian market were up 13% with summer holidays set to go on sale soon.

Shares in Thomas Cook rose 1.5% in opening trade to 300 pence, valuing the business at around £3 billion ($6 billion). (source: Reuters)