French and Spanish banks lock horns in battle for Alliance and Leicester
French bank Credit Agricole has made an informal bid for the Alliance and Leicester. At the moment, it’s all just rumour and speculation since the bid was informal. The UK bank does not have to make an official announcement.
But while the French suitor licks its wounds and no doubt prepares for stage 2, the talk is the Spanish Bank, Santander, is also mooting a possible offer. If the bank from Span is successful, then it will mean the Abbey and Alliance and Leicester are both under the same roof.
It’s understood the Agricole offer valued A&L around £5.8bn
Commodity prices set to drop
We all know commodities are expensive these days. The high price of steel has seen profits at the likes of Mittal rocket; even the UK’s Corus has made profits recently. The mining sector has seen a big lift in profitability with companies such as Antofagasta, BHB Billiton and Rio Tinto often topping the weekly risers charts. And of course the oil companies are booming too, with the price of oil up there at record levels.
But according to Homi Kharas, chief economist at the World Bank, commodity prices have peaked. He said “From what we have been able to pick up from commodity markets and futures prices, things are at their peak and are starting to decline, and we’ll see more significant declines in 2007. Oil prices are already starting to decline.”
NASDAQ drops out of LSE battle
The London Stock Exchange just doesn’t seem to want to be taken over. This morning NASDAQ announced that it was withdrawing from the battle to own the LSE, after the LSE turned down its offer.
The NASDAQ move leaves Euronext - which recently gained regulatory approval for an LSE bid, and the New York Stock Exchange in the running
And yet we could see good reasons why the combination of NASDAQ and LSE could have created a formidable team. In the short term, the LSE might have gained more, but in the long term, as the global economy continues to grow with new economic superpowers emerging, we can’t help the feeling that the NASDAQ LSE combo could have created a force that would have sat in the middle of this new vast global market.
Sainsbury’s homes in on Asda
When Justin King became the new chief executive at Sainsbury’s it seemed as if he had about as much chance of stemming the tide against the retailer as that other king, Canute did of stemming the actual tide.
But cost cutting, the initiation of the “Making Sainsbury’s Great Again” programme, and an effort to improve stock control - and the store is seeing some real improvement.
Sainsbury’s has been blighted with poor product availability, with stores often seeing empty shelves. King has tried to change that.
And the result;: the store has now enjoyed five quarters of successive like for like sales growth and in the period just gone, like for like sales were up 5.3%. Mr King said: “We had 15 million customers six months ago, now we have 16m”. He added: “Customers are noticing the many improvements we have been making to our business”
According to TNS, there are now just 0.4 percentage points between the Sainsbury’s and Asda market share. Asda has 16.6% market share, Sainsbury’s 16.2%. Last summer Sainsbury’s had just 15.7% of the market.
High Street malaise set to continue
The March round up of retail reports was kicked off yesterday with the CBI distributive trades survey.
And yes, it was bad news- again, but at least there is some hope.
The CBI index- that’s the balance between retailers who said trade was up with those who said it was down was -16, a slight improvement on February’s reading of -18.
Furniture and carpet retailers were celebrating, however, with the index for that sector scoring plus seven.
But the reason why there is some promise lurking is as follows. Firstly the period the CBI surveyed didn’t include Easter- and secondly, the pick up in weather, which normally prompts a move to the High Street with sales of Spring wear selling, also started after the period.
Then, this morning, Boots released its latest trading update, and it had good news. In the recent three month period, same store sales were up 2.2%. It’s the first increase of this type in five quarters.
But then, just as there are signs of an improvement, albeit slight, the Bank of England comes along and spoils it all. The UK’s central bank released its February report on mortgage approvals, and the bad news: they were down in the month, the first fall since the end of 2004.
The High Street remained sluggish, even when the housing market showed a modest pick up. If the housing market is about to go through a quiet period, as recent reports are suggesting, then hopes of a High Street recovery must be fading
Internet advertising set to eclipse national newspapers
Here’s the stat that really counts. Back in 2001, in the first year after the dot com crash, online advertising in the UK was worth just £165mn. At the time some talked about the Internet as if it was yesterday’s hot story. Clichés were bandied about such as the “Internet has a great future behind it.” Now forward wind five years, and take a look at 2005. According to the Interactive Advertising Bureau, in the year just ended, UK Internet advertising was worth £1,366mn,and grew by 65% on last year. And the industry is set to see continued growth in 2006, with the Interactive Advertising Bureau’s chief executive, Guy Phillipson, saying that the sales could hit the £2bn mark, and that says Mr Phillipson “would make online bigger than national press.”
Internet advertising now makes up 7.8% of the entire UK advertising cake, and so rapid was its growth that the industry as a whole expanded last year, and that despite falls in the other main advertising areas
To put the figures in perspective, last year national newspaper advertising was worth £1.9bn, radio advertising £614mn, and consumer magazines £827mn.
Recruitment was the top sector with the online, representing 22.1% of the total market. Finance and Automotive followed accounting for 17.4% and 12.4% respectively. But it was the Entertainment sector, driven by broadband powered video-streaming and sophisticated rich media that recorded the most significant growth in the second half of last year - worth 10.2% of spend in 2005 compared to 6.2% in 2004.
2005 saw a big pick up in brand advertising, but it still lags behind search-based sponsorship. Apparently, online brand advertising is a lot more successful in the US.
One of the big differences between online and traditional paper media is that the barriers to entry are much lower in the online field. So while advertising revenues increase, the variety of online media seems to go up with it.
Sources
2005 online advertising spend rockets towards £1.4 billion
IAB
Online adspend rockets 65% and heads for £2bn mark
Brand Republic
Online Ad Spend Skyrockets
ClickZNews
UK needs to get fitter
Deloitte may have the answer to the UK’s low productivity. Apparently, only 48% of the UK’s working population exercise for 150 minutes a week or more. If this level could be increased to 70%, then Blightey’s healthier populace would take less sickies, and work 2,783,808 more days a year saving the UK £487mn. The Deloitte report found that from its survey of 10,000, people who exercise less than 150 minutes a week tend to be take 3.5 days more days a year off for sickness.
Deloitte partner Adrian Balcombe said: “”The benefits of a fitter population would be felt throughout the economy. Population more motivated to exercise could boost revenues for health clubs and leisure centre operators; employers would see increased productivity through reduced absenteeism and people would enjoy a healthier lifestyle with reduced risk of illness.”
Of course the UK’s abysmal public transport, coupled with road congestion of high stress inducing heights, has got to be another factor behind the UK’s low productivity.
Maybe if more people walked to work, the government could kill two birds with one stone. So all it needs to do is make it permanently sunny, and the problem is solved.
The BEEB’s rivals don’t like it.
In the UK, competition in the TV market is not played on a level playing field. One organisation is funded by a compulsory fee, which all viewers have to pay, even if they only watch competitive channels. We are of course referring to the license fee.
Competition should of course be encouraged, if it serves the interests of the consumer, and while one may criticise the BBC’s output, it still seems to us that its content is still world class. The British consumer, we would argue, gets a good deal. The market might not operate freely, but Joe public is still the winner.
You can understand rivals griping; you can understand their resentment, for example, over the BBC’s Internet might - its UK web site receives 2.1bn hits a month. But the free market is supposed to work for the customer’s benefit, not for the producers.
But now, say its rivals, the BEEB has gone too far. It plans to sell - and prepare for a shock - it plans to sell advertising on its web sites aimed at international visitors. Apparently, BBC.com receives 1 billion hits a month, with the visiting traffic largely coming from the US.
The future for the BBC is less certain. Its charter is safe until 2016. But in the brave new world of Internet TV, web sites will be the homes of TV programmes, and Google and co the front end for TV viewing. How this will affect the TV license is uncertain, - but clearly from 2016 onwards, big changes will be afoot in the way the BEEB is funded. So it’s right to start exploring new ideas now.
And in the short term, if the BBC finds other ways of bringing in money, then surely the British viewing public will be the winner. Rivals won’t like it, but as Greg Dyke talks about reducing costs at ITV and showing more repeats if his bid is successful, we should be grateful for one paragon of quality.
It’s just a shame that the license fee can’t be extended to Investment and Business News
Not even Harry Potter can bring magic to Ottakar’s results
If you are in the book trade, here’s the good news. According to Ottakar’s boss, James Heneage, the market is growing 2 to 3% a year at the moment, and with the latest Harry Potter book published last year, the UK public went out and read more than ever.
Yet despite those promising fundamentals, Ottakar’s lost £4.6mn last year, after making £6.9mn a year earlier. And in the last 8 weeks, like for like sales were down 8.1%, although the fact that last year the period included Easter was responsible for at least some of the fall.
And while the store made a loss last year, this was largely due to one off factors.
But why does little Ottakar’s struggle so when the market is growing?. No prizes for guessing the answer.
As Mr Heneage said: “There is a structural shift towards supermarkets and the internet.”
He talked about price pressure, giving Harry Potter’s latest book as an example. “We had some supermarkets selling it for as low as £4.99, well below the price at which we could buy it. In this climate of aggressive price discounting, we chose not to follow others and at least kept margins intact, but sales suffered,” he said.
Mr Heneage did give reasons for shareholders to hope, however. “Supermarkets are never going to be specialist retailers and the internet does not have the service we offer. People still want to browse” and that the shift in power to supermarkets and the Internet “will be finite.”
Ottakar’s expect things to improve this year. The holy grail of the book trade at the moment is Dan brown’s latest book. Talk is, it could be launched this year.
Ottakar’s itself has attracted the attention of Waterstone’s owner HMV. That retailer itself has shaken off its predators and is likely to renew interest in the specialist book store, meaning that Ottakar’s could be heading towards its last chapter.
Authors are against the idea, and last year signed a petition to keep the two companies separate.
But, however this story unfolds, it seems likely the price offered for Ottakar’s will be lower than the level first discussed.
Sources
Price war forces Ottakar’s into a £4.6m loss
Independent