OFT – Office of Fair Trading would probably impose few million pounds fines on some 150 construction companies because of their unfair practices adopted in bidding of local council contracts. OFT started its investigation in 2005 and it analyzed over 3000 contracts in England. If the companies are found guilty, a fine of up to 10 percent of their international turnover can be levied against these companies. Balfour Beatty, the company that cooperates with OFT in their investigations may have to shell out 600 million pounds as fine and the directors could also be jailed for at least five years.
More than 38 companies have submitted an application for leniency, though many bigger organizations are in the offing to see what evidence the regulator has. OFT is mainly focusing on ‘cover pricing’ in which the companies bid for a higher amount after consulting with other bidders so that they don’t get the contract and at the same time they are on the bidding list of their clients. OFT may have evidence of closures, agreements to cover bid costs for other contractors and division of contracts between companies. It is also said that OFT closed the investigation when the total number of companies caught up reached 150 as it lack the resources required to carry the investigation further.
HSBC published the agenda of its annual meeting to be held on May 30 which also enclosed decisions on changes to the continuing incentive scheme for its executives. The bank bowed down to its shareholder pressure on its executive pay plan even though it rejected the controversial proposals to recompense top bosses with cash bonuses which is equal to four times of their actual salaries. HSBC stated that it would continue to reward executives with 700 percent of the salary in the form of shares as a bonus. But it also stated that the bank had accepted the investors’ demands to shift to a trouble-free method of manipulating total shareholder returns (TSR), a yardstick used to set executive bonuses.
Mike Geoghegan, the chief executive of HSBC received about 3.5 million pounds as salary and bonus during the last year and his salary was around 2.8 million pounds during 2006. Stephen Green, the chairman of the bank got 3 million pound as salary and 1 million pound from shares vesting. HSBC has also set up five promising markets banks and is reviewing its performance against other banks such as the Industrial and Commercial Bank of China and Bank of China.
Woolworths share prices dropped further, causing new speculation of a break-up. It is also expected that when the group discloses its full year results, it may slash its dividend. Woolworths opened its first store on the high street during 1909 and it promised a retail revolution at that time. It vowed to offer good quality goods that everybody could afford. The store offered all the things that it had promised and its fine mahogany counters were filled with all sorts of luggage, photo frames, bowls, buckets and stationery when it opened its another store at Liverpool in 1923. Now, this once powerful retail giant has collapsed and the annual report due this week would make the picture clear.
The price of Woolworths shares has fallen by two thirds when it had separated from its parent company Kingfisher during 2001. The collapse also attracted many value investors like the Apax private equity group which tried a takeover in 2005 but afterward walked away. Woolworths is well-known for its 825 chain of uk shops. However, the media and distribution business that Woolworths own is generating most of the profits to the company. Since the last year, rumors of a break-up have been approaching thick and fast.
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The fall of annual house price growth for the sixth month consecutively confirmed fears of a weakening housing market. During 2006, the average cost of a house in Wales and England rose by 9.4 percent and now it stands at about 6.4 percent and further decrease in the growth rate of prices is expected. The overall price of houses had not changed from January and it is estimated that house prices fell in almost 70 percent regions of UK. Wales was the worst affected region with average home prices dropping by almost 1.1 percent. South East had also seen prices dropping by about 0.4 percent in spite of the fact that the annual housing prices growth of London remains high at 10.6 percent.
If we look at the stronger price growth regions then West Midlands comes first. It had seen a rise of about 1.3 percent and Yorkshire, Humber and East Midlands also had seen some price gains with percentages ranging between 0.5 to 0.1 percent. Also, the number of homes sold continued to fall as the average number of properties sold is about 90,880 in the period between September and December which is much less than what it was during last year.
Tesco, Britain’s biggest supermarket dropped its plan of selling clothes online yesterday. It has started the online sales during October 2007 and displayed nearly 200 lines of men’s and women’s clothing. A spokeswoman of Tesco stated that they wanted to sell clothing online only for a trial period and they would again start selling online after upgrading the offers provided by the supermarket. The decision of ending the online sales came days after Tesco has stopped the opening of more Fresh & Easy stores in US after opening about sixty stores since November. It is said that the stores generate only 30,200 pounds of sales a week which is nearly half the target set for these stores.
Tesco started its cost-cutting techniques last month and it made the initial cut in its Tesco.com dealings. Tesco is now facing tougher times after being successful for more than a decade. It is estimated that Tesco gets only 1 pound back out of 7 pounds spent on the business. Due to the huge size of the business, it is suffering from inflexible trading conditions and the food sales of the retailer in the UK are also rising very slowly. It is said that its Big Four grocers is facing tough competition from its rival grocers Asda, Wm Morrison and J Sainsbury.
A 7.8 billion pound takeover of Scottish & Newcastle had taken place after its shareholders accepted the deal this month. S&N, the UK’s largest brewer own many popular brands like Newcastle Brown Ale, Fosters, Kronenbourg 1664 and John Smith and the takeover has resulted in the splitting up of S&N. UK operations of S&N would be carried out by Netherlands based Heineken and Carlsberg would take care of the other operations. While speaking on the occasion, the chairman of S&A told his shareholders that it was a historic and momentous day for Scottish & Newcastle.
Due to the unprecedented poor weather in the western markets, the business of S&A was severely affected and as a result the takeover became necessary. With this deal, the Danish Carlsberg would assume control of the Scottish & Newcastle’s overseas businesses which includes the existing “Baltic Beerage Holdings (BBH)”, a joint venture with S&N. It is said that Carlberg wanted to take full hold of the profitable BBH venture and hence the takeover had happened. Carlsberg chief executive feels that the increased raw material prices would make 2008 a challenging year and so it is important to pay attention on competence and value growth of the organization.
Today, lenders are becoming more cautious due to the lack of confidence in the mortgage-backed reserves and also they are thoroughly examining the financial status of the borrower before lending. They are also trying to pull out the best deals at short notice once they become popular. Since the New Year the banks are issuing lesser mortgages as they do not have access to the money markets. On the other hand, it is estimated that over million fixed rate deals would expire in 2008.
People who want to buy a home are also facing more questions from the estate agents as they want to make sure that the individual can afford the property he/she is intended to buy. Also, some people are worried about their fixed rate deals and some others are becoming physically ill due to the financial worries. Experts feel that the customers should understand the plan they are signing in and they should consult some financial advisor to know exactly the current market situation. Earlier lenders offered huge mortgages even when it exceeds the value of the property which has now completely disappeared. Moneyfacts, the financial information services states that there are some 14 lenders in the UK market that are prepared to offer 100% mortgage which is less than the number of lenders during December. Also, many lenders are silently raising the minimum amount to be deposited to get the mortgage which is causing barriers to the first-time home buyers.
AIG – Amercian International Group, the world’s leading insurance firm, has sued its ex- chief executive Maurice ‘Hank’ Greenberg declaring that he siphoned off 9.9 pounds of its shares. The lawsuit was filed against Mr Greenberg and six other ex-employees of AIG alleging that during 2005 they have misappropriated a particular block of AIG shares. Besides these allegations, it is also stated that Mr Greenberg who at present controls the company Starr International, has planned to hinder or sell the shares to start a private equity company to make investments in Europe. Actually the shares were seized by Starr, an affiliate of AIG to protect them against hostile bids.
It is also stated that the shares were kept aside to reward the staff of AIG and hence the suit claims that it was Mr Greenberg’s duty to protect and preserve the Starr stock block to the advantage of AIG. But, the suit alleges that the ex-employees had put their names on Starr’s board and misappropriated the shares which also caused the removal of AIG managers from the Starr’s board. This has also resulted in the removal of nine AIG directors and now the six ex-employees are in full control of the Starr board.
Many banks are forcing their customers to secure their debts on credit cards and personal loans against their properties. The banks are even taking their customers to court to fulfill its demands and it is said that there has been a tremendous increase in the number of orders passed by the court against such cases. Mainstream lenders like Nationwide, Natwest and Egg are also filing applications on court to secure personal debt of their clients against properties. During 2006, the court received 92,933 applications which are nearly sevenfold when compared to the applications received during 2000.
According to Consumer Credit Counselling Service (CCCS), the practice is increasing day by day even among big lenders as they are nervous about the risk involved in the huge unsecured personal loans they have granted to their customers. It is said that the borrowers who have just missed a single payment of a credit card or a loan could face the procedure. Several debt advice charities reported that the number of calls from worried borrowers have increased considerably as they are receiving letters intimidating them with action. Solicitors are also agreeing the fact that the number of such cases have increased and these law firms are also making considerable profit out of the frantic clients that approach them to file their case in the courts.
Patrick Cescau, the chief executive of Unilever got an increase in his pay equivalent to half of his last year remuneration which has made his present salary equal to €4 million. The pay package was increased after the sales of the consumer goods rose by about 5.5 percent. According to the annual report of Persil and Lipton Tea, Mr Cescau has got a basic salary of €1.4 million and a bonus amount of €2.3 million during the year 2007. In 2006, his salary was around €2.7 million and the bonus amount raised his salary to €3.94 in 2007.
On the other hand, it goes unstated that the company is on the look out of a replacement for Mr Cescau who is 59 years old and joined Unilever in the year 2005. Mr Cescau has been engaged for a three-year period for the group and the company had seen the sell off its various popular brands. But, the company is still behind its margin target which is about 15 percent. During the year 2007, the operating margins were around 13.1 percent and it is less than the 13.6 percent achieved during 2006. Even though Unilever has improved its profits considerably during the last three years, many feel that it is still behind its biggest opponent Procter and Gamble and Colgate Palmolive in the health and beauty sector.