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Thursday, 11 July 2013

Burberry beats forecasts after 'standout' spring/summer season

Growth strongest in Asia as British luxury group reports 18% first-quarter sales rise

Strong sales of men's clothing, large leather bags and coats during dismal spring weather in Europe helped British luxury brand Burberry to a better than expected performance in the first quarter of its financial year.

Angela Ahrendts, the chief executive, said: "Spring/summer 2013 was a standout season driven by innovative marketing, cohesive monthly fashion groups and exceptional execution."

The company, which recently signed actress Sienna Miller and her fiancé Tom Sturridge to front its advertising campaign, recorded an 18% rise in sales, at constant exchange rates, to £339m, well ahead of analysts' expectations.

When the impact of new store sales were stripped out, sales rose 13%, up from 8% growth in the previous three months.

The number of staff making Burberry's signature raincoat at its British factory in Castleford, West Yorkshire, has been doubled since 2011 amid high demand, with sales of outerwear and large leather goods such as its Blaze and Orchard bags accounting for half the brand's sales growth.

A Burberry store in Beijing – the brand saw double-digit underlying sales growth in ChinaMenswear sales rose 25% over the quarter as the label brought its men's catwalk show back to London this year. One customer was tennis ace Andy Murray who wore a Burberry suit for his visit to Downing Street after his Wimbledon triumph.

Menswear now accounts for nearly a quarter of the company's sales and Carol Fairweather, chief financial officer, said it was a "significant growth opportunity" for the future.

Growth was strongest in Asia with Burberry outperforming rivals in the all-important Chinese market by harnessing the power of social media to raise the profile of the brand and by opening more large and glamorous stores. It saw double-digit underlying sales growth in the country over the quarter.

Fairweather said: "We've got a lot of self-help measures and quite a long way to go in China compared to some of our peers."

Two shops were opened in Shanghai during the quarter and another flagship store is planned to open in China later this year. The group has bounced back from a profit warning last September after sales in China had slowed.

The company said "soft" trading at its high street stores was offset by strong growth online, partly helped by the use of iPads by shopfloor staff to help customers order goods that were not immediately available.

Burberry is also experimenting with allowing shoppers to pick up goods ordered via the internet at flagship stores including outlets in London in Knightsbridge and Regent Street.

But Ahrendts, who topped the UK's pay league with a total package of £16.9m last year, almost £5m more than the next highest paid chief executive, warned that the macroeconomic outlook remained "uncertain" and that first half profits would fall below those of last year, partly because of the cost of bringing Burberry's fragrance and beauty business back in-house.

Article Source : http://www.guardian.co.uk

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Royal Mail privatisation will not affect postal delivery – Vince Cable

Business secretary says postal service sell-off will not threaten universal service obligation to deliver to 29m UK homes

The Royal Mail's duty to deliver to all 29m homes in the UK will survive privatisation, the government has said, as it unveiled plans for the most significant state sell-off since the railways in the 1990s .

The pledge came as business secretary Vince Cable announced long-awaited plans to float the Royal Mail on the London Stock Exchange this year, and confirmed that postmen and women would be entitled to free shares in the business.

Critics argued that the privatisation of an institution first opened to the public 378 years ago would mean post office closures, the erosion of six-day delivery in rural areas and worse pay and conditions for postal workers. Speaking in the House of Commons, Cable said privatisation was "an irreversible course" that would secure the future of Royal Mail in the face of competition.

"The government's decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail's future on a long-term sustainable business. It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services," he said. "Now the time has come for government to step back from Royal Mail, and allow its management to focus wholeheartedly on growing the business."

The Communication Workers Union (CWU), which represents two-thirds of the Royal Mail's 150,000 workforce, vowed to fight the sell-off and accused the government of ignoring the views of the public.

The Labour party, which attempted to part-privatise the service in 2009, accused ministers of pushing ahead with the sale to dig the chancellor out of a financial hole caused by a rise in government borrowing. Market analysts expect Royal Mail will be valued at £3bn when it floats later this year. The public will be able to apply for shares, although Royal Mail workers will be allowed first in the queue if they want extra shares on top of the 10% share guaranteed to them.

Cable said the "overarching objective" of privatisation was to secure the universal service obligation that requires mail deliveries to any UK home six days a week, which has been threatened by a slump in profits in the wake of a 25% decline in letters over the last decade.

But Dave Ward, the CWU's deputy general secretary, said the business secretary was "off the pace" on the economic reality of the six-day universal service, which he predicted would not survive in rural areas and remote regions under privatisation.

Warning that privately-owned companies will seek a relaxation of the obligation if they offer their own doorstep delivery services around the UK, he said: "We are talking about an economic reality. These [delivery] companies will lobby against the six-day service. It simply will not make the money to secure their investment."

The national network of 11,780 Post Offices, a separate company from Royal Mail, will remain in public hands, a promise that failed to reassure the National Federation of SubPostmasters', who accused the government of taking "a reckless gamble" with the network that would lead to post office closures.

"If privatisation goes ahead, we have very real fears that the Royal Mail will rip up its the current agreement with Post Office Ltd [to provide Royal Mail products and services] in an aggressive bid to maximise profits for its shareholders," said NFSP general secretary George Thomson.

Chuka Umunna, shadow business minister, said the recent doubling in profits at Royal Mail to £403m also called into question the assumptions behind the "fire sale". "They now want to privatise the profits at the time it is making money. How can this policy make sense?"

Cable pledged that private ownership would not trigger any change in post office workers' terms and conditions, while the Royal Mail promised "a legally-binding and enforceable contract with the CWU" to enshrine these rights.

Dave Ward at the CWU said Cable's guarantees "are not worth the paper they are written on", while existing agreements with were "completely inadequate". Strike action was inevitable, he said.But the government hopes that giving away shares to employees – the largest worker share offer in nearly 30 years – will soften opposition to the sale. Under the scheme, eligible employees would be entitled to free shares, but would be unable to sell them for at least three years.

Moya Greene, Royal Mail's chief executive, who has been courting potential investors in the UK, North America and continental Europe, said the sale would give employees "a meaningful stake in the company" and the public "the opportunity to invest in a great British institution".

British Petroleum, October 1979

Now a publicly traded company with a large number of US shareholders and institutional investors including BlackRock

British Aerospace, February 1981

Now BAE Systems, the company is traded on the FTSE 100 and major institutional investors include Invesco and AXA

British Telecom, December 1984

Now a publicly traded company with institutional investors including Invesco, BlackRock and Legal & General, and more than a million small shareholders

British Gas, December 1986

Following a demerger in 1997, British Gas became part of the newly formed Centrica, which is publicly listed and whose shareholders include Invesco and Legal & General

British Airways, February 1987

A listed business, merged with Spain's Iberia and owned by International Airlines Group

BAA, July 1987

Now called Heathrow Airports Limited and owned by a consortium including Spain's Ferrovial and China's sovereign wealth fund

British Steel, December 1988

After it merged with a Dutch steel producer and became Corus, it was bought by India's Tata Steel

Water (10 regional companies), December 1989

Thames Water is part of Kemble, which is owned by a number of institutional investors and pension funds, including China's sovereign wealth fund and funds managed by Australian group Macquarie. Southern Water is owned by Greensands Investments, a consortium of pension and infrastructure funds

Vince Cable issues his Commons statement on the Royal Mail privatisation plans. He said this was 'an irreversible course' that would secure the future of Royal Mail in the face of rising competition

British Coal, 1994

Its administrative functions were transferred to the government's Coal Authority, while its mines were transferred to UK Coal, which went into administration this week.

British Energy, 1996

Part of French state-owned group EDF

Stage in process: a 10-year contract has been awarded to US-based company Bristow, which will take over duties from the RAF and Royal Navy from April 2015

Student loan book/Student Loans Company

Stage in process: Vince Cable has already announced the sale of a £900m book of loans. It is possible that the rest of the £45.9bn loan book could follow. Bidders could include banks, funds and financial institutions

Urenco

Stage in process: the government put its one-third stake up for sale in April, after securing agreement from its Dutch and German partners. Bidders could include consortia of financial buyers – most likely infrastructure investors and sovereign wealth funds – and trade buyers

Plasma Resources UK

Stage in process: the government announced in January it was examining a partial or whole sale of its blood plasma business. Possible bidders include bioscience and healthcare companies, as well as private equity firms

Lloyds Banking Group and Royal Bank of Scotland

The bailed-out banks will be fully privatised, but the government has not indicated when. It is likely to sell its shares to investors on a phased basis, starting with Lloyds. The government would like to see them fully returned to the private sector by the next election in 2015

Article Source : http://www.guardian.co.uk

GlaxoSmithKline executives in China 'confess to bribery and tax violations'

China's security ministry says GSK suspected of trying to bribe officials, hospitals and doctors to boost sales and prices

Executives of British drug maker GlaxoSmithKline in China have confessed to charges of bribery and tax law violations after initial questioning by Chinese police, according to the country's security ministry.

The company is suspected of offering bribes to government officials, medical associations, hospitals and doctors to boost sales and prices, China's security ministry said in a statement on its website on Thursday.

GSK is also suspected of using fake receipts in unspecified tax law violations, the ministry added.

"After initial questioning the suspects have admitted to the crimes, and the investigation is ongoing," the statement said.

The statement did not give details on the number of executives questioned, their identities or when the questioning took place.

A pharmacist checks stocks of medicine at a hospital in Hefei, central ChinaGSK said it would co-operate with the authorities but said Thursday's announcement was the first official communication it has received about the investigation.

"Corruption has no place in our business," said a company statement. "If evidence of such activity is provided we would of course act swiftly on it."

In recent months China has targeted foreign firms on multiple fronts including alleged price-fixing, quality controls and consumer rights, forcing companies to defend their reputations in a country where international brands often have a valuable edge over local competitors in terms of public trust.

Police in the south-central Chinese city of Changsha said last week they were investigating high-level Chinese staff at GSK on suspicion of unspecified economic crimes.

GSK said on Monday it was investigating new allegations that its staff had used improper tactics to market Botox in China, but had so far found no evidence of bribery or corruption.

GSK, Merck and other foreign and domestic drugmakers were also being investigated by China's top economic planning agency on cost and pricing issues.

China is an increasingly important market for international pharmaceutical companies, which are relying on growth in emerging markets to offset slower sales in western markets where many former blockbuster drugs have lost patent protection.

Article Source : http://www.guardian.co.uk

Wednesday, 10 July 2013

NYSE body to run Libor as City attempts to put scandal behind it

Move follows decision to strip BBA of its association with benchmark rate, which will be run by a London-based subsidiary

Libor might stand for the London interbank offered rate, but from next year the scandal-hit benchmark rate will be set by the body that runs the New York Stock Exchange in the latest attempt to clean up the City.

Libor, which is used to price $300tn (£192tn) of financial products around the world, has been overseen until now by the British Bankers' Association (BBA). But its integrity has been questioned after banks and other financial firms were found to have rigged the rate.

The contract to run the process of setting the rate was put out to tender in April after Martin Wheatley, the boss of new City regulator the Financial Conduct Authority (FCA), concluded in a report that the BBA should be stripped of its long-running association with Libor. It is not clear if the Libor name will survive in the long term.

NYSE Euronext, which runs the New York Stock exchange and the London futures exchange and is itself in the throes of being taken over by a rival, is setting up a new London-based subsidiary to run Libor. NYSE Euronext Rate Administration Ltd will be regulated by the FCA, which is being given formal oversight of the rate amid the ongoing investigation into the way Libor was rigged in the past. It is thought to have paid £1 to take over the rate-setting function.

NYSE Euronext runs the New York Stock exchange and the London futures exchangeA year ago, Barclays became the first bank to be fined for Libor rigging by US and UK regulators, and forced to pay a total of £290m. Since then Swiss bank UBS and bailed-out Royal Bank of Scotland have been fined larger amounts. The FCA said it still had four other firms under investigation.

Wheatley said the selection of NYSE Euronext, which is thought to have seen off competition from data provider Thomson Reuters and the London Stock Exchange, was "an important step in enhancing the integrity of Libor".

NYSE Euronext runs stock market indices including the Cac 40 in France.

Certain changes to Libor have already been implemented. It was originally set by a panel of banks being asked the price at which they expect to borrow over 15 periods, from overnight to 12 months, in 10 currencies. The number of currencies has been reduced to five and rates published over seven borrowing periods. From this month the rates the banks submit are no longer published instantly but with a three-month delay. The data was collected by Thomson Reuters, which will no longer be involved, and published by the BBA.

The BBA will work with the new administrator, selected by a panel led by Lady Hogg, who chairs the Financial Reporting Council, until 2014 when the handover is expected to take place.

The government, which is under fire for watering down other aspects ofbanking reform, said the appointment of NYSE Euronext was part of its commitment to "developing a safer and strong banking sector".

"We want a financial sector that serves the interests of business and helps to drive economic growth. That is why since the Libor scandal last summer we have worked hard to reform this major international benchmark. For the first time it is under the scope of regulation and we have introduced a new criminal offence for the manipulation of Libor," said Greg Clark, financial secretary to the Treasury.

He was criticised on Monday by Andrew Tyrie, the Conservative MP who chaired the parliamentary commission on banking standards, also sparked by the Libor crisis, for introducing "virtually useless" reforms of the banking sector.

Article Source : http://www.guardian.co.uk

Shell names Ben van Beurden as new chief executive

Dutch executive will replace Peter Voser, who is leaving to spend more time with his family and a 'change in lifestyle'

Royal Dutch Shell has named Ben van Beurden as its next chief executive from 1 January 2014.

He will succeed Peter Voser, who will leave at the end of March next year after 29 years with the Anglo-Dutch energy giant.

Van Beurden, 55, joined Shell in 1983 and has held a number of technical and commercial roles, working for the company in the Netherlands, Africa, Malaysia, the US and most recently the UK.

Since January the Dutch national has been downstream director, and has regional responsibility for Europe and Turkey.

Ben van Beurden joined Shell in 1983 and has held a number of technical and commercial rolesShell's chairman, Jorma Ollila, said: "Ben has deep knowledge of the industry and proven executive experience across a range of Shell businesses.

"Ben will continue to drive and further develop the strategic agenda that we have set out, to generate competitive returns for our shareholders."

Ollila added that the appointment had been made after a "comprehensive assessment" of both internal and external candidates.

Shell said in May that Voser would retire in the first half of 2014. Voser, 54, said that he was leaving to spend more time with his family, and for a "change in lifestyle".

Article Source : http://www.guardian.co.uk

UK Coal's long-anticipated entry into administration hits pension scheme

Pension Protection Fund, the government-sponsored pensions lifeboat scheme, takes over responsibility for partially honouring pension promises

The retirement savings of 7,000 past and present mine workers at UK Coal, Britain's largest coal mining business, took a hit on Tuesday as the pit operating group responsible for repairing the pension scheme's deficit of at least £450m sank into a long-anticipated administration.

But in a complex deal between the government, the Pension Protection Fund (PPF) and two sets of administrators, some 2,000 jobs have been saved, largely at two of the mining group's three deep pits.

The third pit, Daw Mill, the site of a devastating fire in February, is to be permanently closed, the company confirmed, with 350 workers made redundant. Before the fire, a restructuring deal at Daw Mill had been expected to generate £100m in cashflows by the middle of next year for the group's struggling pension scheme.

Despite years of financial woes, UK Coal still generates 6% of the nation's electricity by supplying Drax in North Yorkshire and three other power stations in Nottingham shire. Accounting for more than half the coal mined in the UK, the mines are still seen by many in Westminster as fulfilling an important role in near-term energy security requirements for Britain.

One source involved in the restructuring said the company had been "overwhelmed at how helpful government had been at every turn". However, early plans to involve the Shareholder Executive investment quango in a rescue of UK Coal were ultimately ditched. The quango is already responsible for taxpayer holdings in such businesses as Royal Mail, Channel 4, Eurostar and the Royal Mint.

Meanwhile, the PPF, the government-sponsored pensions lifeboat scheme, has taken over responsibility for partially honouring the pension promises made by UK Coal before its demise.

After taking into account the value of brownfield development land, the likely hit to the PPF is estimated to be between £450m and £500m, according to independent pensions expert John Ralfe. That makes it the biggest ever deficit taken on by the lifeboat scheme, more than the £333m hit from the UK administration of telecoms equipment maker Nortel in 2009.

A coalface at Daw Mill, a UK Coal owned pit that suffered a devastating fire in February and is to be closed, with 350 workers made redundantUK Coal pension scheme members who have not yet reached retirement will now have 10% wiped off the retirement value of the pension they have accrued. Meanwhile, weak inflation protection within the PPF means all scheme members can expect to see the value of their retirement savings further eroded over time.

In a highly unusual arrangement, the continuing operations of UK Coal will rapidly pass through the hands of administrators, re-emerging under a new company called UK Coal Production.

Although the new business will not technically be owned by the PPF, administrators from Price water house Coopers said the lifeboat scheme would "retain economic benefit through substitute debt instruments". The size and maturity of these new obligations are not disclosed.

Among the assets in the UK Coal pension schemes – inherited now by the PPF – is a 75% interest in Harworth Estates, which owns brownfield land previously used for mining operations. The minority interest is held by stock market listed company, Coalfield Resources. This was, until a complex restructuring deal last year, an enlarged operation encompassing the mining operations of UK Coal as well as these property interests. At that time it went by the name UK Coal.

Article Source : http://www.guardian.co.uk

Co-operative Bank rescue deal 'could result in nationalisation'

Bondholders accuse the City regulator of taking a punitive and arbitrary approach to firm's capital requirements

The Co-operative Bank's £1.5bn rescue package faced sharp criticism on Tuesday from bondholders who are accusing the City regulator of taking a punitive and arbitrary approach to the Manchester-based bank's capital requirements.

Bondholders facing losses have written to Andrew Bailey, the chief executive of the Prudential Regulation Authority (PRA), to warn that the bank could face nationalisation as result of the demands to raise fresh capital. They are also concerned about the damage being caused to the wider Co-operative Group, which includes pharmacies, funeral homes and grocers, and allege that a false market was created in the bank's bonds by the failure to disclose that the bank has needed to find extra capital since 2011.

Mark Taber, who fought a campaign against Bank of Ireland on behalf on bondholders, said 1,300 holders of Co-op bonds had contacted him after learning they were required to take losses to help find the extra capital. "Not only are the PRA's actions causing great distress, they also threaten to cause an avoidable standoff which could result in unnecessary nationalisation of the bank and massive damage to the Co-operative Group and mutual sector," Taber said in the letter copied to the new Bank of England governor Mark Carney and chancellor George Osborne.

£1bn is being put up by the Co-op group to prop up its bank after demands were made to raise fresh capital.The Co-op needs the support of bondholders for its plan to raise the extra capital. Co-op group is putting up £1bn to prop up the bank and bondholders will receive shares. The bank, currently a plc wholly-owned by the mutual group, will be listed on the stock exchange for the first time.

The Co-op took issue with an assertion by Tabor that the traditional hierarchy of capital structures was being ignored by requiring bondholders to take a loss before the shareholders were wiped out. The Co-op group insisted that its shareholding in the bank was being wiped out. "The group is therefore fully respecting the current capital hierarchy," Co-op said.

Many of the Co-op's bad loan losses stem from its takeover of Britannia Building Society in 2009 and Taber said the PRA's predecessor, the Financial Services Authority, had approved this deal.

Taber noted that Bailey had told the Treasury select committee that there gulators had known of the Co-op's capital position since 2011 but that this was never disclosed. He took issue with the government endorsing the now aborted deal to take over 631 Lloyds Banking Group group branches as a "virtuous model" for banks.

Taber also accused the PRA, which would not comment beyond acknowledging receipt the letter, of setting an "arbitrary" capital ratio, although the additional capital is thought to be needed to cover yet-to-be-revealed losses on loans. The Co-op Bank will reveal more about the terms of the so-called "bail-in" of bondholders after its results next month.

In a speech to the insurance industry on Tuesday, Bailey warned that insurers could be required to hold additional "add ons" of capital. The PRA is using what Bailey described as an early warning system to establish if the insurers will need to hold extra capital.

Article Source : http://www.guardian.co.uk
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