The former monopoly did better than most analysts expected when it reported full-year profits this week. The business has been slashing costs by, for instance, leasing vehicles instead of buying them,and renting offices instead of owning them. That, has enabled it to repair its finances and start building up the dividend again. BT has effectively given up trying to be a flashy, high growth company and has instead decided to be a boring one, but one that generates reliable returns. The strategy has left it significantly better placed than rivals in Europe, which are groaning under mountains of debt built up through heavy investment in third-generation mobile phones. BT avoided that pitfall by demerging its own mobile phone operation, which is now a separate listed company called mmO2. And this week, mmO2 announced a write-down of its investment in 3G licences of over £9bn.
Another company gradually pulling itself off the floor is British Airways, which returned to profit for the full year. Cost cutting is again the key – BA has reduced the number of seats it needs to fill on many routes, and has axed tens of thousands of staff. The good news was clouded by a poor final quarter, when it lost some £200m as SARS and war in Iraq put people off flying. BA is not doing as well as some of the no-frills carriers, in particular Ryanair, but it is in far better shape than many of its European and US rivals because it took difficult decisions earlier. That said, we wouldn’t be buying the shares until industry conditions show signs of improvement.
The latest round of sales figures from supermarket groups show that Morrisons continues to outshine its rivals. The group is generating sales growth in excess of any of its peers, especially Sainsbury’s, which has had poor sales over the past few months because it refused to cut prices. That helped it preserve its profit margins, but at the cost of market share. The company is investing huge sums in store revamps and supply chain improvements, but it’s not clear when these initiatives will bear fruit. So we prefer the shares of no-nonsense Morrisons.
Northumbrian Water is set for a return to the stock market after changing hands yet again. It was privatised in the mid-1990s, then bought by French mega-utility Suez, which has now had to sell 75 per cent of it in order to cut debt. The buyers, a group of financial institutions, want to list the group as soon as possible. But heavy regulation in the water industry has put paid to the bumper profits of yesteryear, and we would steer clear of the shares.
Does Darwin's theory apply to taxation? Colin ponders...
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Accountancy watchdog the FRC has dropped its investigation into the former chief financial officer of Tesco, nearly two years after the supermarket was engulfed in an accounting scandal
Colin imagines how Apple's logo might change in the wake of the EC's ruling over its Irish tax arrangements