Market News

Comet May Fall Into Administration – 6000 Jobs On The Line

CometComet, the electronics retailer, is on the brink of going into administration. Comet is currently owned by OpCapita, a private investment company, who paid just £2 for the company last year.

According to Andrea Felsted, reporting for the Financial Times earlier today, Comet has already spoken with Deloitte who will probably be the administrators.

Reuters also reporting that Comet has been cost cutting recently. It reduced its staff numbers from 8500 down to 7000 to “improve efficiency”.

No Credit Insurance

Comet took a huge risk last year in having no credit insurance. Christmas 2011 was a disaster for many retailers and Comet had no protection from the customer collapse that occurred.

Comet has been one of the UK’s biggest electronics retailers. It was founded in 1933 by Hull businessman George Hollingberry as Comet Battery Stores Limited.

Failure To Move Online

Comet missed out on a great opportunity to leverage its brand to move online. It continued to operate in out-of-town retail parks while new online stores grew in dominance. Also, other high street stores have made a better use of the Internet to market their business, as can be seen in the advert on our own page:

Comet Administration

Curry’s using Google Adwords to advertise in the Internet

Comet Corporate History

For a while it was owned by retail giant Kingfisher plc., a FTSE 100 company. In 2003 Kingfisher demerged Comet, forming a new arm to its retail business called Kesa (Kingfisher Electricals SA). In 2005 Comet rebranded in an attempt to position itself as the UK’s leading electrical retailer, ahread of Dixons and Currys.

On 9th November 2011 Comet was sold to OpCapita for £2, with a £50 million incentive from owners Darty (previously named Kesa).

243 stores in the UK

Comet has 243 stores in the UK and all of these are now at risk of closure. Most stores are in out-of-town retail parts. Comet stocks a wide range of brands, but focuses on its “premier collection , which includes Panasonic, Pioneer, Apple, Sony, Samsung, Philips, AEG and Miele.

2010 / 11 Loss

Comet had made a profit every year from 2000 until 2009. However, in the year 2010/11 it made a loss of £8.9 million, even with sales of £1,537.9 million.

Ongoing financial problems and poor sales has left Comet in a dire position. We are expecting to hear the official news later on Thursday that Comet will enter administration.

References

Premier Foods Sell Branston Pickle to Japan

Branston Original

Branston Original, now owned by Mizkan

Premier Foods as sold Branston Pickle to a Japanese company to help pay off its debts. Mizhan is paying £92.5 million for the brand. Mizkan UK Ltd is currently one of the biggest makers and suppliers of vinegars in the UK, so a move into the pickle market is not too surprising. This is not the first sale to Mizkan.

“Branston Sweet Pickle is an iconic brand that has established a market leading position. The Branston brand is also an excellent strategic fit with our global portfolio and adds to our solid foundation for growth in the UK.” – Kazuhide Matazaemon Nakano VIII, Chief Executive Officer, Mizkan.

Premier Foods sold Sarson’s, Haywards pickled onion and Dufrais vinegar brands to Mizkan in June 2012 for around  £41 million.

Other “power brands” owned by Premier Foods include Hovis, Oxo and Mr Kipling.

Mizkan Group

So, who now owns Branston Pickle and Sarson’s Vinegar? The Mizkan Group dates back over 200 years. It started out making vinegar from sake lees, the by-product of sake production. As well as vinegars Mizkan now produces a range of popular food compliments in Japan, such as Ajipon (citrus seasoned soy sauce), Honteri (sweet cooking rice wine) and Omusubiyama (rice ball mix).

Mizkan are not planning to take the brands off British soil. On the website they made the following statement following the purchase of Sarsons:

“In 2012, Mizkan Europe acquired the strong and iconic vinegar brands Sarson’s and Dufrais as well as the beloved pickles brand Haywards and its production facilities from Premier Foods PLC and continues to develop its business foundation for further growth in the UK.”

More stories and resources around the web:

UBS Close Fixed Income Business and Slash 10,000 Staff

UBS Liverpool Street London

UBS on Liverpool Street, London

UBS AG has announced plans to close down its fixed income (bonds investments) unit with the loss a staggering 10,000 jobs worldwide. The money and bond markets traditionally have always seen the largest daily investments, much larger than the stock and shares markets. UBS’ decision to move out of this sector is surprising, and devastating for the many thousands of fixed income professionals.

“Overall, I think it’s a good move to abandon activities which don’t earn anything and concentrate on those which create value for shareholders,” Rainer Skierka, analyst for Bank Sarasin.

UBS has decided that its future lies in servicing its private bank clients and the smaller investment bank, and not in the global money markets and bond markets. This will see most of its huge trading business closed down permanently. Both global economic slowdown and rogue traders have been cited as being the cause.

During the financial crisis UBS lost around $50 billion, and one rogue trader is thought to have lost the company a further $2.3 billion due to bad investments.

3 Year Cost Cutting Project

The closure of its fixed income investment business will take around 3 years to complete and is expected to save an additional CHF 3.4 billion.

For UBS fixed income investments are no longer a profitable area. New regulatory changes in recent years have severely reduced profit margins, making all investments risky.

Carsten Kengeter, who is currently jointly in charge of UBS’ investment bank will be managing the deconstruction of the fixed income business. Andrea Orcel will take on the role of running the remaining business which comprises of equities, foreign exchange trading, corporate advice, and precious metals trading.

15% Staff Cull

The closure of UBS’ fixed income business will result in a 15% reduction in its global staff, reducing total number of employees from 63,745 to around 54,000.

London will suffer many job losses, along with 2000 in Switzerland and the remainder in the USA.

The UBS website today is focusing on its planned future growth with the headline “UBS announces strategic acceleration from a position of strength“.

You can follow UBS shares and investment news on Reuters: http://www.reuters.com/finance/stocks/overview?symbol=UBSN.VX

Virgin Loses The West Coast Rail Contract To FirstGroup

Virgin Pendolino at EustonRichard Branson’s Virgin Trains company has lost its contract for the West Coast Rail, ending its 15 year partnership. Richard Branson is livid, saying that the coalition government’s decision is “insane” and that the bidding system is totally flawed.

FirstGroup put in a £5.5 billion bid, which Branson believes will lead to “almost certain bankruptcy”.

The End of Virgin Trains?

According to The Guardian, Virgin is now “extremely unlikely” to bid for another rail franchise. The West Coast line runs from London to Manchester and Glasgow. Virgin has invested heavily over the years in making improvements to its trains and infrastructure to provide an excellent service. However, Branson said that to spend more than £5.5 billion on renewing the contract would force Virgin to shed staff and increase fares – not good for rail users or the jobs market. He was no willing to make such sacrifices in the name of business.

Richard Branson has blogged about the process on the Virgin blog – On Virgin Trains:

“I am immensely proud of our staff for turning the West Coast line from a heavily loss-making operation into one that will return the taxpayer billions in the years to come.  Last year we paid a net premium of £160 million to the taxpayer and have created a franchise worth more than £6 billion which is hugely valuable to the country.

These achievements have counted for little – as this is the fourth time that we have been out-bid in a rail tender. On the past three occasions, the winning operator has come nowhere close to delivering their promised plans and revenue, and has let the public and country down dramatically.”

It the government simply taking the biggest bid to get more cash now without any consideration for the long-term investment opportunities in working with a company with an excellent track record? Richard Branson certain thinks so.

The West Coast mainline could well become another public liability if it is not well managed. With the increasing importance of Glasgow as a new financial hub in the UK, business cannot afford to have a shoddy and unreliable service.

Photo by Andrew Butcher.

Marks & Spencer Announce Sales Drop and Change of Management

Marks & Spencer has announced today that the last 3 months saw sales fall. In the 2nd quarter of 2012 sales fell by around 2.8%. It blames the weather with heavy rain disrupting the supply chains and keeping customers away from the high streets. However, John Lewis and Debenhams who both share the same high street market, have both reports an improvement in sales.

The reduction is sales was matched by a reduction in share price this year. As a result there will be changes in the management team to attempt to revitalise the clothing retail part of the business.

The biggest change is that Kate Bostock, the exec. director in charge of general merchandise, will be resigning from her role on the board by 1st October. There are rumours that Bostock may be going to ASOS, the online clothing retail company which has seen sales increase during the wettest Spring and Summer since records began.

Bostock will be replaced by John Dixon who currently looks after Food. He will be assisted by Belinda Earl, the newly appointed Style Director, who has been CEO at Debenhams, Jaeger and Aquascutum.

Steve Rowe will take Dixon’s place in charge of Food.

Share Price Rises Again

The news of the changes in top management has improved investor confidence and M&S saw its share price rise again today as investors try to take advantage of the low price at the moment.

From the 2012 AGM

At the annual general meeting today shareholders questioned the suitability of the management team and the board of directors. One shareholder complained about the lack of women on the board of directors, which seems to reflect on the poor choices that have been made in the women’s clothing lines in the last year. However, there are currently 5 women on the board:

  • Laura Wade-Gery – eCommerce
  • Miranda Curtis – a non-exuctive director
  • Kate Bostock – Executive Director, General Merchandise*
  • Martha Lane Fox – Non-Executive Director
  • Amanda Mellor – Group Secretary and Head of Corporate Governance
*Kate Bostock will be leaving in 2012.
The role of women in top management has been in the press recently and it seems to be a popular subject to raise in annual general meetings at the moment.

Two pensioners at the AGM were happy with the clothes, but not happy with the rising prices. They did criticise of the M&S restaurant though, saying that the quality of the food has reduced and that Waitrose is now the best place to eat on the high street.

One shareholder shouted out that Marc Bolland, the CEO, is the “Bob Diamond of retail“. A little harsh we think, but there are some unhappy shareholders.

 

 

Barclays’ Share Price Plunges 7% in the Midst of ‘Systemic Dishonesty’

by James Honnan-Mellett

Shares in Barclays Bank have plunged 7 per-cent after a rally by top politicians who are demanding answers from chief executive Bob Diamond.

In the aftermath of the 2008 global recession, where insider traders and banking  institutions toyed with market rates to produce a catastrophic financial meltdown, Barclays Bank has been accused of ‘systematic dishonesty’ after it was fined £290m for trying to manipulate interest rates.

Many other banks such as JP Morgan, Citigroup, Deutsche Bank, HSBC and RBS are now under investigation and could also face financial sanctions, as Barclays have admitted that its actions in the markets “fell well short of standards”. Many of these banks have also suffered sharp drops in their share prices this morning.

It’s been discovered that traders working for Barclays provided false information to make the bank and its financial investments look more secure throughout the course of the financial crises. Furthermore, it also appears that Barclays Bank carried out this insider rigging with staff at other banks around the world to make a profit.

Barclays Chief executive Bob Diamond and a number of other top level executives have chosen to wave their annual bonus, as his £2.7m cash bonus last year hardly reflected the bank’s stability. Martin Taylor, the former chief executive of Barclays, has revealed today that the manipulation looks like a “deliberate strategy” that has been going on for quite some time.

The Scandal

Barclays are accused of influencing Libor and Euribor, two of the most important interest rates in the global financial markets. These interest rates directly influence the value of trillions of dollars of financial deals between banking institutions all over the world.

They can also directly affect the borrowing rates to the public, in terms of mortgages and other substantial loans. However it’s not yet known if Barclays staff succeeded in influencing the interest rates, and it is yet to be determined if there has been any effect on the general public.

The Libor and Euribor rates are published every day by the British Bankers’ Association (BBA) and the European Banking Association in order to determine the strength of interbank lending rates.

However during 2005 and 2007, Barclays’ staff were lobbied by external traders and told to submit figures which would benefit Barclays’ trading influence, producing a profit for the bank. Furthermore, between 2007 and 2009 and subsequently the height of the banking crisis, Barclays staff submitted artificially low figures in the hope of deflecting attention from their financial stress. Therefore, Barclays would be allowed to borrow more as they would have been viewed in a strong financial position.

Nothing to hide

It’s been noted by insiders that staff at Barclays were very open with their attempts to lobby employees to submit false information about its financial strength, with some giving referencing to an ‘accepted culture’ of financial manipulation across the board.

There have been calls from many influential sectors of the market for Bob Diamond to resign, and for any Barclays staff involved in the scandal to face prison or at the very least a termination of employment.

The Financial Services Authority (FSA), who are conducting the on-going investigation, have revealed that there is large amount of email, text and instant message evidence that points to large scale insider rigging.

James Honnan-Mellett is an freelance writer, journalist and blogger who is currently writing on behalf of Brookson Accountants for contractors.

Churchill and Direct Line Fined £2.17 Million for Altering Client Files

RBS, and us, the taxpayers, will be having to cough up £2.17 million to pay an FSA fine incurred by Churchill Insurance and Direct Line. Both Churchill Insurance Company Limited and Direct Line are private companies, owned by the Royal Bank of Scotland Group Plc..

It was discovered that both of these companies had altered customer files to remove and downplay complaints against them.

The FSA has pointed out that overall the changes to the customer files have not affected customers, however, the act of removing or editing customer complaints is a serious breach of FSA rules and it has therefore imposed a hefty fine.

In one case a member of staff had also forged the signature of colleagues. It is a requirement that any changes to client data are checked and verified before being updated. These rules usually apply only to general administration, such as the updating of accounts and processing of corporate actions for shareholders. The fact that an individual had been forging signatures is another serious breach and highlights how easily fraud and corruption can take place in the workplace.

The FSA have also pointed out that while the managers were not aware that these alterations had taken place, they had not taken appropriate measures to ensure that staff were aware that such alterations were against company policy and FSA rules. A lack of staff training is something that the FSA takes very seriously. For example, all staff working in investments and dealing with client money must go on money laundering courses every 2 years to ensure that they are kept up to date on rule and regulations.

This news has not affected Royal Bank of Scotland Group plc  (Public, LON:RBS) share price, it is currently trading at 24.86p, up 0.04% so far today.

Peacock’s On The Brink of Administration

Peacocks, the Welsh retail giant owned by the Peacock Group that grew from very humble beginnings in a penny arcade in Chesire is on the brink of falling into administration.

It developed as a retailer of woman’s clothing and has grown in recent decades to become a more dominant brand on high streets across the UK.

Peacock’s has around 600 stores in the UK and 100 overseas stores. It employs around 10,000 staff in the UK.

It’s main problem is that it is around £240 million debt and is struggling to manage its debts. Analysts have pointed out that RBS has stopped lending to many retailers and this credit crunch is strangling cash flow and forcing retailers, large and small, out of business.

There is no news on their Twitter feed at the moment. A few days ago there were reports of problems with the Peacocks website,

“Guys and girls, we’re sorry about our website issues, we’re working really hard to get things fixed 🙁 – 14 Jan”

Peacock has filed an “intention to appoint administrators” and has 10 days to attempt to restructure its debt before it starts to go into administration.

More on Peacocks’ challenge to avoid going into administration soon.

 

Saab Automobile Files for Bankruptcy

1958 Saab 92B

1958 Saab 92B

Saab Automobile AB, maker of classic cars such as the Saab 99, Saab 900, Saab 900 S Classic Convertible and Saab Sonnet, has filed for bankruptcy.

Its former owner, General Motors, recently turned down an investment from the Chinese company Zhejiang Youngman Lotus Automobile Co. Ltd that would have provided a life-line for Saab.

Saab employs around 3400 people, many have been without pay. The bankruptcy and liquidation deal will hopefully provide a payout package for its employees, although it is not known if an emergency fund can be provided before Christmas.

Saab started out in 1944 as Svenska Aeroplan AB when its Project 92 created the first Saab car, the Saab 92001 (also known as the Ursaab). This was the most aerodynamic car ever built – Saab used its skills in the aviation industry to produce a car with a very low drag coefficient (0.30).

Saab-Scania was formed in 1969 when Saab and Scania-Vabis Am merged. A decade later Saab made a deal with Fiat and the Lancia Delta was rebranded as the Saab 600. This led to a range of cars on the same Type Four chassis, including the Saab 9000, Alfa Romeo 164, Fiat Croma and Lancia Thema.

In 1989 General Motors controlled a controlling stake in the business and launched the new Saab 900 in 1994. The success of this and the Opel Vectra that was built on the same platform, Saab made a profit in 1995, the first in 7 years. In 2000 General Motors bought the remaining Saab shares to take full ownership.

Unfortunately GM’s decision to launch the Saab 9-2X (that was based on the Subaru Impreza) and Saab 9-7X (that was based on the Chevrolet Trailblazer) resulted in a commercial disaster.

GM put Saab under review in 2008 while deciding if it could turn the business back to profit. Talks of sales and takeovers continued for several years and eventually GM agreed to allow Spyker to purchase Saab. In April 2011 Spyker announced plans to focus entirely on the Saab brand by selling off its sports car business. However, by June problems in the supply chain led to parts shortages and this had a knock-on effect, by July Saab was struggling to pay the salaries of 1600 workers.

Saab filed for bankruptcy protection on September 7, 2011 to keep the company alive until a Chinese investment could be agreed. However, the Swedish courts rejected the petition for bankruptcy protection.

Today Saab officially filed for bankruptcy.

 

Photo by Martin Bergstrand

 

Thomas Cook Loses £400 Million – To Close 200 Stores

Thomas Cook issued 3 profit warnings this year and has now announced losses of £400 million. It is planning some major restructuring to solve its cash crisis. There will be around 200 store closures with redundancies all over the country. There are 110 stores that will definitely close, although no jobs will close before Christmas. In total it is expected that around 1000 jobs will be lost over the next 2 years.

It was less than a month ago that we reported that Thomas Cook shares plummet on debt Worries and that Thomas Cook was securing more funds from its investors.

The recent merger with Co-op boosted their high street shops to around 1400, and there are now simply too many high street shops in their portfolio.

Share price has crashed by 90% this year. Thomas Cook was trading at a high of 206.8p in 2010 and is currently trading at 14.41p (9am, 14/12/11). You can follow the latest share prices at here: www.google.co.uk/finance?cid=716892.

Thomas Cook sells around 22 million holidays a year in the UK and still controls a huge part of the UK market. Like many other businesses it is selling more of its products and services online via its website. People are still using Thomas Cook to search for and book holidays (22 million is a very healthy number of sales for any business) but rather than go to the shops many people are online.

Thomas Cook Airlines will also be losing 6 of its aircraft. It got a very bad review from Which? this year, placing it below Ryan Air in terms of customer care and service.

Too Many Cheap Holidays Sold

Thomas Cook’s problem has been selling too many cheap holidays, with typical holidays sold including 2 start bed and breakfast deals to the Mediterranean and similar cheap and discount deals.

The suggestion is that for Thomas Cook to really thrive again it needs to start selling higher quality holidays which will have a larger profit margin. Some of the holidays sold may have been making them a loss, once the cost of sales is factored in.

Overall Thomas Cook’s sales are strong and it is hoped that this restructuring will result in a complete turnaround. Thomas Cook is no longer competing with other high street holiday companies, it is competing with the like of Expedia, Last Minute, Travel Supermarket and Virgin Holidays.