August 31, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

The move away from print to online advertising continues to take its toll at Johnston Press. The second biggest publisher of regional newspapers in the UK, with journals such as the Scotsman and Yorkshire Post in its stable, saw profits in the six months to June fall to £79.8 million from £82.2 million in the same period last year.

Revenue was up 18 percent, but only because of the acquisition of the Scotsman. Like for like sales were down 7.5 percent.

The real killer, of course, was the fall in ad revenue. With print advertising down 9.2 percent, the company faces increased competition from the Internet. Web sites such as Rightmove, for properties, the plethora of car sites, and the Internet as a medium for recruitment, means the local paper is seeing its main area for ad revenue fall.

The company, which owns 300 newspapers across the land, is seeing its internet advertising rise - up 13.4 percent, but this is still a small part of the overall business. The problem is compounded by the fact that in the online field, barriers to entry are much lower, whereas, producing and distributing a paper newspaper is hugely expensive and it’s tough for new market entrants.

Most of us appreciate our local newspaper. The push nature of its product guarantees a high viewing (The Internet is known as a pull medium because the end user selects material required - as opposed to having the choice made for them, which is the case with paper and, it has to be said, email media) but the traditional revenue model of advertising is under threat.

On the Internet, pay per click advertising is becoming more popular. This means the advertiser knows what he is getting. A greater mystery surrounds the effectiveness of paper advertising.

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August 31, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

It’s hard to believe it was over two years ago now. You may recall, the start of 2004 saw the revelation that Shell had overstated its oil reserves. Bad announcement followed bad announcement, resignations followed, and ultimately the crisis claimed the head of chairman, Sir Philip Watts. Before the dust had time to settle it emerged that the company’s head of exploration, Walter van de Vijver, had said, in an emailed statement to his boss, that he was “sick and tired about lying.”

Then the legal process began. Both friends and family of Sir Philip Watts’s must have feared the worst.

But then, not without controversy, the Financial Services Authority decided not to take further action against the former Shell head man. Aggrieved shareholders, baying for blood, then turned their hopes to the US Securities and Exchange Committee. The SEC does not tend to take prisoners. If it suspects wrongdoing, it acts like a pit bull - as soon as it has its jaws around your neck, you’re stuffed.

But yesterday, even the SEC relented, announcing that it to had decided not to take any action against Sir Philip. The former Shell man said “I am extremely pleased the US authorities have closed the investigation. As I have stated from the beginning, I have acted in good faith throughout and I had every reason to believe that Shell acted properly and in good faith when disclosing proved reserves.”

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

August 31, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Stateside, the debate over whether the Fed has permanently put interest rate rise on hold, or has merely paused for breath, rages on.

When the minutes of the last meeting, in which the Fed chose to end the run of upping rates for 17 successive meetings, were unveiled, there was one dissenter.

Fed rate setting committee member Jeffrey Lacker voted for a rise, and yesterday he told the world why. In a TV interview he said: “The risk of raising rates at that meeting for lower real growth was not appreciable and, moreover, I didn’t think real growth moderating - as it’s likely to over the next couple of quarters - was going, by itself, to bring inflation down.” He added: “I think there is a danger of inflation becoming entrenched at the level it is now.”

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

August 31, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

According to the latest data from the Bank of England, mortgage borrowing has soared. In fact July saw mortgage borrowing leap by £9.79 billion. That’s the biggest monthly rise for three years.

So does that complement the findings of the CBI in the retail sector, and show the British consumer is back, spending and in rude health?

It seems more likely the rise was, in a way, due to an opposite reason.

It would appear the surge in mortgage borrowing was largely down to buy-to-let investors, and had little to do with any new found consumer confidence.

Capital Economics explained why this is so. While the Bank of England has been recording sharp rises in mortgage borrowing, the Council Of Mortgage lenders has been telling a less bullish story. Apparently, the CML has mortgage advances up, but to a much more modest extent. Capital Economics theorises that this is because since last year, the CML has only included regulated mortgages in its figures. This means many buy-to-let mortgages are excluded from the data and hence, or so goes the argument, the discrepancy.

What’s interesting about that conclusion is that data from the Royal Institute of Chartered Surveyors (RICS) tells us that the renting market is booming.

According to RICS, the number of surveyors reporting an increase in rent costs over the three months to the end of July was 30 percentage points higher than those reporting a fall. And that, says RICS, is the highest positive differential it has ever recorded. The survey dates back to 1998.

According to RICS spokesman, Jeremy Leaf: “Economic prosperity and population migration have increased rental demand, making conditions better for property investors.”

His comment brings us back to our suggestion in the story above. That maybe it is immigrants who have been helping to boost retail sales, explaining why the CBI survey was so positive.

As for the beleaguered first time buyer, Mr Leaf added, “However, first time buyers will find it hard to enter the housing market with higher rents making it difficult to save sufficient sums for a deposit.”

Maybe there is an important point to note, one often overlooked when considering the rationale of buy-to-let investors. Why is this form of investment so popular, at a time when returns are not that good, and capital gains are likely to be relatively modest? It seems likely the reason lies in worries over pensions. For many buy-to-let investors, their investment properties are their future pension.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

August 31, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

The High street posted its best year on year growth since December 2004 in the 12 months to August, said the CBI yesterday. Maybe, at last, the High Street slowdown is well and truly over.

Every month the CBI asks its retail members whether sales are up or down. The balance forms its distributed trade index, and for August, the index stood at plus 12 compared to a reading of minus 18 this time last year.

The grocery and durable household goods sectors achieved the fastest growth in sales. Grocers recorded their strongest balance (57%) since December, while sales of durable household goods, such as flat screen TVs, also showed no sign of abating (51%).

Other sectors achieving an increase in sales included confectioners, tobacconists newsagents, who recorded their first positive balance since March.

As for the future, a balance of 10 per cent expects the overall business situation will improve over the next three months. (For most of last year the balance was in negative territory.)

If you work in retail, or have particular interest in the sector, then by all means take a sigh of relief, but don’t celebrate too much…

There is a negative side to this story. First of all the CBI data revealed that the average selling price rose in August for the first time in two years.

We are also unsure how it is that consumers can afford this pick up in activity. After all, borrowing remains heavy. Consumers were too overstretched to spend much last year, so why do they suddenly feel wealthier? Is this due to immigrants spending, perhaps?

If the British consumer still suffers from a debt burden, then he or she will presumably be vulnerable to changes in the rate of interest. And the Bank of England’s latest rate hike came too late to have a significant effect on the CBI data.

But it’s the bit about High Street prices rising that worries us. Over the last year or so, it has been High Street deflation that has saved the UK. If it wasn’t for the low prices of goods in the stores, then the impact of higher petrol and other energy costs, not to mention rising council tax, would have forced the CPI to a level that would have warranted a much higher rate of interest.

As we have warned consistently, the real danger lies in the possibility that the decade long run of NICE (that’s Non-Inflationary Consistently Expansionary) is over.

And what’s really worrying about this is that it’s completely in keeping with economic theory.

Recent years have seen unparalleled borrowing and consumer spending. The puzzle has been that inflation did not, as a result, take hold, like it would have done in any other era.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

August 30, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

It reads like a Who’s Who. The chairman is Lord ( Leon) Brittan, also on the list are the chairmen and women of many of the UK’s top companies , including Sir Nigel Rudd of Boots,;Bryan Sanderson of Standard Chartered, Sir Martin Sorrell of WPP, BP’s Peter Sutherland, Chris Gibson-Smith of the London Stock Exchange, Philip Hampton of Sainsbury, and Mike Rake of KPMG International. What all these leaders of business have in common is this: they have all put their names to a campaign run by Business for New Europe (BNE), and want the UK to open the door to immigrant workers from Bulgaria and Romania.

But, it’s not just business leaders that are behind the campaign. The Trades Union Congress supports it too

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

August 30, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

So what do you think if someone offers to buy a product off you for more than you thought it was worth? Do you say thank you very much? Or do you think, “maybe I was wrong, and the product is worth even more, so ‘no thank, you, I want more’ “? It appears that this is exactly the mentality of shareholders in some British companies.

According to research carried out by The Centre for Management Buy-Out Research, and sponsored by Deloitte and Barclays Private Equity, there has been a fall in the UK buyout market, with the value of the deals done falling from #128;19 billion in the first half of 2005 to #128;15 billion for the same period in 2006.

Tom Lamb, Co-Head of Barclays Private Equity, said that public to private buy-outs have “dried up, due to public company shareholders proving to be incredibly resilient to private equity advances.”
Mr Lamb said: “Private equity in the UK is a bit of a victim of its own success. In the UK investors now feel that a company must be undervalued if a private equity bidder shows an interest.”
Recently, Mr Lamb was quoted in the Times as saying: “As money has poured into private equity, people have been saying: ‘I know a company’s worth $80 a share, but under the circumstances we’re prepared to pay $90.’ But often somebody else has come in and paid $110.” This has led to a perception that companies can always receive a higher price, and it appears prices have been driven too high.

But while buyouts in the UK are falling, continental Europe has seen a strong upsurge. The same research found that the Continental European buy-out market reached #128;55.3 billion for the first half of 2006, an increase of 70 per cent on last year’s figures.

France is the most active market in terms of volume with 85 buy-outs just ahead of Germany with 76, although the German buy-out market is much more active than in previous years - 61 for the same period in 2005 and 121 for the whole year. Italy remains steady with 22 deals in the first half of 2006 compared to 23 in 2005.

In terms of value, France is also the largest market with #128;14.6 billion (predominantly accounted for by just one deal, the P2P of Danish firm TDC) followed by Denmark with #128;13 billion, the Netherlands with #128;12.2 billion and then Germany with #128;8.5bn. Italy coming in at #128;1.1bn is still doing well although figures suffer in comparison to 2005 which was an exceptional year recording a value of #128;17.5bn.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

August 30, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Hello, what’s going on here? Eric Schmidt, the chief executive of Google, has been appointed as a director of Apple Computers.

Mr Schmidt said of Apple that it is “one of the companies in the world that I most admire”. He has been Google CEO since 2001.

But the real question is this. What are the implications for Google and Apple working closely together? It’s not difficult to see how the two companies have technology that could be either competitive or complementary, depending on how they choose to do things. But there is one thing they really do have in common. They are both fierce competitors to Microsoft.

It’s too soon after the announcement to draw much of a conclusion. But an Apple Google partnership really would give Microsoft cause for concern.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

August 30, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

As ever the latest news from the US is, on the face of it, contradictory. According to the minutes of the Fed meeting held earlier this month when it chose to keep rates on hold, the decisions was a close call, and one member voted for another hike. In fact, the Fed’s interest rate setting committee agreed that the decision to keep rates on hold “did not necessarily mark the end of the tightening cycle”.

With a growing body of economic opinion warning that the US economic machine is about to go though a severe slowdown, with some even warning of a possible recession next year, many had felt that the Fed’s decision to leave rates unchanged marked the end of the era of rising rates. Capital Economics, for example, reckons rates will fall back to 3.5 percent next year, from the current 5.25 percent level.

But the minutes, which were released yesterday, have thrown analysts into confusion. And no one seems quite sure whether the next meeting will see another stick, or whether the Fed will raise the stakes another quarter of a percent.

The US rate of interest had risen for 17 successive meetings. But has too much heat been taken out of the economy already? The latest data from the US Conference Board got many analysts spooked. The Conference Board has the US Consumer Confidence Index falling to just 99.6, from 107 last month, and the lowest level for seven months. If things are this bad, they argue, why is the Fed still considering upping rates?

But actually the Consumer Confidence index is not performing that badly. It was much lower last Autumn, for example, and the Fed still chose to up rates.

The real problem is the threat posed by inflation. That the Consumer Confidence Index has fallen to a seven month low is hardly a sign of an economy which is seeing pressure come off the inflation pedal completely. For the Fed to conclude the time for a rate fall is upon us, the index will probably need to fall a good deal further. So, we will have to wait another month to see if things get any clearer.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link

August 30, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

It all depends on how you measure average. But by one method at least, the average US household is worse off today than in 2000. Households particularly badly hit are those in which the main income earner is under 65. Retired households have faired better, or so says the US Economic Policy Institute.

On the face of it, the findings are ridiculous. How can the US get richer while the average American gets poorer? And of course, the mean average income has risen roughly in line with GDP. But the trouble with this measure is that it can be distorted by individuals at extreme ends of the scale. And in the US, the rich are seeing their income rise, while for many others it’s falling. For example, the richest fifth of the US populace now receive 54.4 percent of all national income, the highest on record, (records go back to 1967).

The median average household, that’s the household which sits in the middle, where half of all households have higher incomes and half have lower, has seen income fall by 2.7 percent since 2000. And for working households, that’s where the head of the household is under 65, income has fallen by 5.4 percent This is despite a 12.5 percent rise in GDP over the same period, while output per hour has risen 16.6 percent.

According to the Economic Policy Institute, the middle fifth-receive 14.6% of total income-and the bottom fifth-receiving just 3.4%-are tied with recent years for the lowest share on record.

It’s common knowledge that in the US the richer tend to be very rich. But one surprising conclusion from the report is that it would appear it pays to be over 65. In 2005, for example, while the average household of working age saw income fall 0.5, retired households saw income jump 2.8 percent.

The Economic Policy Institute also said that “Other data sources, such as the national income accounts, reveal historically high growth rates of “non-labor income” such as corporate profits, suggesting growth has been eluding wage earners and flowing up the income scale to those with high levels of assets. Today’s data corroborate this dynamic, showing that the gains that did occur tended to show up among higher income households, and not among those who depend on their paychecks to get ahead.”

For further information

Income PictureEconomic Policy Institute

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. It’s free, and to subscribe: visit this link