RSS Feed     Twitter     Facebook
Blog > Archive by tag 'Travel & leisure'

Posts Tagged ‘Travel & leisure’

Stagecoach eyes National Express

July 27th, 2009 | No Comments

Group opens discussions with private equity firm CVC and large shareholder the Cosmen family about acquiring some National Express businesses in the event of a successful takeover

Stagecoach joined the bidding fray for National Express this morning as it confirmed it is in talks to join a Spanish-led consortium stalking the public transport group.

The Perth-based bus, rail and coach group has opened discussions with private equity firm CVC and the Cosmen family, the largest shareholder in National Express, about acquiring some of the group’s businesses in the event of a successful takeover offer.

“Stagecoach confirms that it is in exclusive discussions with the consortium regarding the possible acquisition by Stagecoach of certain businesses and assets of National Express in the event that the consortium acquires National Express,” said the company. It is believed Stagecoach is interested in the UK rail, bus and coach operations of National Express, although it could combine both companies’ US bus operations as well.

National Express confirmed this afternoon that it is considering the cash offer from the Cosmen consortium. It said the proposal was subject to several preconditions, including that National Express continues running the East Anglia and c2c rail franchises. Some MPs have called for the company to lose both franchises following its decision to abandon the east coast main line.

National Express also said it would “seek to clarify the status of Stagecoach’s discussions”, to see whether it would help the consortium achieve its aim.

It is understood that the National Express executive chairman, John Devaney, is minded to concentrate on restoring the debt-laden group’s financial health rather than accept a bid to take it private. Investors, though, may put pressure on directors to accept a proposal that reportedly values National Express at 400p a share – or just over £600m.

Stagecoach added that it will consider “all other options” regarding National Express, having appointed Deutsche Bank to advise on a potential all-share offer for the group.

National Express has become a takeover target after building up debts of £1.2bn that are threatening to breach loan covenants. A row with the government over its £1.4bn east coast rail franchise, which it expects to abandon later this year, has also weakened its hand strategically after the transport secretary, Lord Adonis, pledged to bar National Express from bidding for rail contracts in the future. Devaney has also launched the process to recruit a new boss following the surprise resignation of Richard Bowker, National Express chief executive, on the eve of the announcement that the group is stepping away from its east coast contract.

Some analysts argue that the east coast row could make the group a more attractive takeover target because without the onerous London-to-Edinburgh contract the business generates strong profits. According to research by Astaire Securities, National Express will generate cash flow of about £150m a year if it loses its rail franchises. Lord Adonis is determined to strip the company of its c2c and National Express East Anglia contracts if it abandons the east coast contract. National Express wants to retain its remaining contracts, which produce healthy profits, and is willing to take the dispute to the high court. The dispute is expected to loom over any takeover battle for the group, whose shares rose 4.7% to 362p this morning, valuing National Express at £529m.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

Takeover bid for National Express

July 24th, 2009 | No Comments

Approach follows swiftly on from the rejection of an offer from rival FirstGroup, which walked away on Wednesday but could potentially now return to the fray

National Express, the embattled bus and rail company, has received a takeover offer from its largest shareholder, the Cosmen family of Spain, with backing from private equity firm CVC Capital Partners.

In a brief statement, CVC confirmed today that it had made an “indicative” all-cash offer for the company in partnership with the Cosmens, one of Spain’s wealthiest business dynasties. The bid is said to be worth around £500m.

The approach follows swiftly on from the rejection of an offer from rival FirstGroup, which walked away on Wednesday but could potentially now return to the fray.

National Express has been in disarray since chief executive Richard Bowker abruptly quit last month and the company admitted it would quit the loss-making east coast rail franchise, after failing to meet ambitious growth targets. The company had committed to pay the government £1.4bn over the course of eight years.

Transport secretary Lord Adonis has since warned that he might have cause to strip the company of its other two, profitable, rail franchises, East Anglia and c2c, the London to Tilbury and Southend operation. The company is also struggling under the weight of £1.2bn debt.

CVC and the Cosmens are understood to have sent a letter to the board of National Express four days ago.

The Cosmen family sold the Spanish bus and coach company, Alsa, to National Express in 2005 in return for a 9.9% stake in the British company and £149m in cash. Since then, the family has quietly built its stake to 18.5%. Jorge Cosmen is deputy chairman at National Express.

But any bidder for National Express faces considerable uncertainty over the rail business, with Lord Adonis playing a key role in any outcome. As well as the existing threat to pull the profitable franchises from National Express, the Department for Transport would need to approve any change in control. Analysts have warned the company could also face a ban on bidding for new rail franchises.

First Group initially approached National Express in June with proposals for an all-share merger of the two businesses. It withdrew after National Express asked the City’s Takeover Panel to issue a “put up or shut up” deadline for it to make a formal offer. At the time, Sir Moir Lockhead, the First Group chief executive said it was “inappropriate” to table a formal offer “at this time” because of the lack of clarity surrounding the rail business.

Under Takeover Panel rules, First Group is now banned for bidding for six months, unless a rival offer emerges.

National Express confirmed earlier this week that it had received a second offer, although it did not at the time disclose the identity of the Cosmen family and CVC. The board is said to be holding out for an offer of around 400p a share, which would value the firm at £620m. The company had no further comment today.

Analysts said others could make a play for National Express, including another rival operator Stagecoach. “The key question is how other players in the industry react,” said Douglas McNeill at Astaire stockbrokers. “CVC looks like a serious approach”. Shares in National Express leapt 7% yesterday to close at 346p.

National Express is expected to hand back its east coast franchise later this year after failing to renegotiate the terms of the agreement. It is the second time in just three years that the owner of the franchise has walked away from its contract. GNER gave it up in 2006 after admitting that its promise to pay £1.3bn over 10 years was too much.

Among its portfolio, CVC owns a controlling stake in Formula One and is behind Debenhams, the high street department store chain. It was also the only bidder on the table for a stake in Royal Mail.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

£1bn to electrify 300-mile Great Western rail line

July 23rd, 2009 | No Comments

Electrification will reduce carbon dioxide emissions and will mean faster and more reliable services for millions of passengers

Network Rail will electrify nearly 300 miles of Britain’s busiest railway track over the next decade after the government today gave its approval to a £1.1bn programme.

The plans, announced by Gordon Brown this morning, will transform the Great Western mainline, which runs from London to Oxford, Newbury and Cardiff, via Reading.

Electrification will reduce carbon dioxide emissions and will mean faster and more reliable services for millions of passengers.

The prime minister travelled on one of the routes to benefit from the scheme this morning, arriving at Paddington station in London to journey on the Great Western line to Cardiff for a cabinet meeting.

The Great Western route from London to Swansea is to be electrified over the next eight years at a cost of £1bn.

The government is also spending £100m on electrifying lines between Liverpool and Manchester, with the work taking four years.

At Paddington, Brown said: “This is the future. It is green, it is faster and it’s more reliable. This is about making the railways fit for the 21st century.”

Asked if the government could afford such a scheme now, Brown replied: “We have set aside money for this. It’s an important priority for us.”

Only about one third of the rail network is electrified at the moment, with the Great Western route the last of the major routes to be still predominantly using diesel trains.

The electrification will include the lines to Oxford and to Newbury in Berkshire and will also make possible the direct replacement of the ageing InterCity 125 fleet by electric Super Express trains.

Electrification will shorten the London to Swansea journey time – currently just over three hours – by about 20 minutes. The plans will involve installing hundreds of miles of electric cables as well as alterations to tunnels, bridges and stations on one of Britain’s oldest rail routes.

Travelling with the prime minister today was the transport secretary, Lord Adonis, who said: “We are electrifying 300 miles of track and we are also looking to extend electrification to other lines.

“There will be some disruptions while the work is going on but Network Rail plans to keep disruption to a minimum, with much of the work being done overnight.”

Lord Adonis went on: “Electrification will mean faster, quieter and more efficient trains, which break down far less often.”

Mark Hopwood, managing director of First Great Western, said: “We are really delighted with this news. It’s going to transform our route and provide cleaner and more environmentally friendly travel.”

The electrification announcement follows Network Rail’s consultation document on electrification earlier this year, which also made the case for electrifying the Midland mainline route.

Lord Adonis said today that the government did consider Midland mainline and would continue to consider it.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

UK sees first fall in tourists for seven years

July 16th, 2009 | No Comments

Number of visits from overseas drops 2.7% to 31.9m, as Britain’s tourism spending deficit widens to a record £20.5bn

The number of overseas visitors travelling to the UK on holiday or on business has fallen for the first time in seven years – although in a boost for the tourism industry, they are spending at record levels.

British tourists also made fewer visits abroad last year, confirming the trend of “staycationing”, or holidaying at home, as a result of the credit crunch. Britons venturing overseas in the recession are choosing to visit the perennial favourites Spain and France, followed by the US, the Irish Republic and Italy.

The figures for 2008, published today in the annual Travel Trends report from the Office for National Statistics, showed there were 31.9m foreign visits to Britain last year, a 2.7% fall on the previous year.

This was the first drop since 2001, when a combination of the outbreak of foot and mouth disease and the September 11 attacks in the US led to a dramatic slump.

The figures are compiled from the ongoing international passenger survey, involving interviews with more than 250,000 people a year travelling to and from the UK via major airports, ports and tunnel routes.

Tourism chiefs blamed the global economic crisis, which started to bite in earnest in the autumn, as a factor for the fall. The decline was most severe in the last quarter of 2008, when visits fell by 13%.

Overseas visitors spent a record £16.3bn in Britain in 2008. UK residents made 69m visits abroad, down 0.6% on 2007, with the downturn most marked in the last quarter, when the figure fell by 9%. At the same time, UK visitors spent a record £36bn overseas, leading to a record tourism deficit of £20.5bn.

David Savage, a co-author of the report, said: “Spending in the UK is holding up very well. The increase in spending is due to the exchange rate. People will come here with a budget and the difference works in our favour.”

London remained by far the top destination for overseas visitors, with 14.8m trips to the capital last year. Edinburgh had 1.2m visits, Manchester 900,000, Birmingham 800,000 and Glasgow 600,000. Visits to the UK were divided evenly between those on holiday, those visiting friends and family, and people on business trips.

After a sharp drop in visits from the US (3m, down from 3.6m in 2007), France took first place in the table of countries whose residents made the most visits to the UK. The Irish Republic rose to second. But the big spenders were the Americans – who splashed out a total of £2.2bn, representing 14% of all spending by visitors.

Sandie Dawe, the chief executive of Visit Britain, the national tourism agency, said: “The decline in visitor numbers in 2008 was certainly not unexpected. The figures illustrate the continuing challenges of maintaining Britain’s popularity as a destination as the global economic downturn began to bite and in the face of increasing competition from rival destinations.”

She said there were positive signs for the start of 2009, with a weak pound bringing “value for money that other countries cannot match”.

She added: “However, we still expect 2009 to be equally challenging and will be doing all we can to remind international visitors of the many quality experiences they can enjoy here.”

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds



Read More »

Eurostar passenger numbers fall

July 15th, 2009 | No Comments

As number of business class travellers falls, train operator pins hopes on visitors from Belgium, France, Germany and the Netherlands

The cross-channel high-speed train company Eurostar today reported a 6% dip in passengers in the first part of this year.

The company carried 4.34 million passengers in the first three months of 2009, down from 4.63 million in January to March 2008.

Leisure passenger ticket sales rose 4% but a dip in business class travellers led to an overall fall of 7% to £342.2m in ticket sales for the first three months of this year.

The Eurostar chief executive, Richard Brown, said: “As with all businesses in the transport sector, we have long acknowledged that we would face challenging times this year. Also, for the first seven weeks of this year we operated a reduced service as a direct result of a fire on a shuttle in the Channel tunnel in September 2008.

“The fact is that some of our biggest business clients are from the financial and banking sectors. As they tighten their travel budgets, we, like the airlines, feel the effects. We continue to seek ways to reduce costs and increase efficiency.

“Despite market conditions, we still have good reason to be optimistic. We are benefiting from the strong euro and seeing substantial increases in travellers from Belgium, France, Germany and the Netherlands, which is also helping the UK economy.

“In addition, there is growing evidence of travellers switching from plane to high-speed train for longer, connecting journeys.”

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

Coffee Republic collapses into administration

July 7th, 2009 | No Comments

High street coffee chain blames downturn in consumer spending for failure to move into profit

High street coffee chain Coffee Republic has collapsed into administration, blaming the downturn in consumer spending.

Richard Hill and David Crawshaw of KPMG have been appointed joint administrators. The chain had previously called in restructuring adviser Osborne Clarke, while management tried to improve rental terms for the outlets. It could now buy back a rump of the profitable cafes from the administrators.

Hill said: “The recession is hitting discretionary spending on the high street and some of the less profitable bars with expensive leases have suffered. However, Coffee Republic has a strong brand and I expect considerable interest in the profitable parts of the business. We will be doing whatever we can to find a buyer.”

Chief executive Steve Bartlett has stepped down, replaced for the time being by executive chairman Peter Breach.

The administrator is assessing the viability of individual Coffee Republic outlets and said it expected to close loss-making bars with inevitable job losses. The business has 187 sites, including 10 overseas, many of which are franchises. It directly employs 153 staff.

The chain was the brainchild of brother and sister Bobby and Sahar Hashemi, but they were ousted two years ago by Bartlett, who led an investor revolt.

The group, which has continually struggled to make money against competition from Starbucks and Costa, was founded in 1995 in a single outlet in South Molton Street, in London’s West End.

It has grown rapidly in recent years as a result of selling franchises, but it is thought that these outlets are the source of Coffee Republic’s problems. In December, the company said it had made a loss of £527,000 in the six months to 28 September 2008, but had no debts. At that time, Breach said the company would be in the black for the first time in its history by the end of this year.

However, the market has been under severe pressure as consumers around the world cut back on treats such as the morning latte. In the year to September 2008, Starbucks profits halved to $350m. In the past year, it has announced more than 10,000 job cuts around the world and nearly 1,000 store closures.

Coffee Republic’s shares were suspended yesterday at 22p. They were worth 160p when the founders departed.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

British Airways staff reject cost-cutting plan

July 6th, 2009 | No Comments

Cabin crew, baggage handlers and check-in workers refuse to accept plans to axe thousands of jobs and freeze pay

British Airways workers have rejected management plans to cut costs through thousands of job losses and a two-year pay freeze.

A union spokesman said feelings among the airline workers were “running high” at a meeting held today of more than 2,000 employees, close to Heathrow airport. “They have sent a very clear message that they don’t want us to make any further concessions that would lead to an assault on their terms and conditions,” he said.

BA is struggling to cope with the downturn in air travel and in May reported losses of £401m.

It has already stirred controversy by asking staff to take unpaid leave, reduce hours or even work for nothing for up to a month to conserve cash, a request that unions branded “insulting”.

Fresh talks with BA are due to be held on Wednesday.

There is no threat of strike action but disruption over the summer is a clear possibility. BA was hit by an unofficial strike in 2003 over terms and conditions and was grounded again in 2005 by a dispute over catering staff.

BA pilots reached a deal last month that will see them taking a 2.6% pay cut and save the airline £26m. The current talks cover other workers including cabin crew, baggage handlers and check-in staff. It is believed there are still wide differences between the management and unions.

The carrier had hoped to reach a deal by a self-imposed deadline of the end of last month, but has now called in the arbitration service Acas.

BA said last month that 7,000 staff had applied for voluntary pay cuts, including 800 who agreed to work for nothing for up to a month. BA chief executive, Willie Walsh, who has given up his pay for July, said it had been a “fantastic” response. Unions, though, have accused the airline’s managers of putting workers under pressure to accept a cut, which the airline denies.

Unions have also noted that Walsh is far better placed to work without pay for a month – his monthly earnings of £61,000 are twice the average annual salary for cabin crew.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

Train firms stand to receive £400m

July 3rd, 2009 | No Comments

Under ‘cap and collar’ arrangements in their contracts, operators of all major rail franchises could qualify for state aid

The taxpayer could have to subsidise the rail network to the tune of a further £400m over the next two years, as a swath of expensive franchises head for an increase in government support that might prevent further defaults. This follows the debacle at National Express, which said this week that it will hand back its east coast mainline franchise.

Under the terms of so-called “cap and collar” arrangements that kick in about four years into major rail contracts, the Department for Transport (DfT) is obliged to cover the majority of any serious shortfall in revenues. Britain’s third most costly rail contract, the £1.1bn First Great Western (FGW) franchise, received £50m last year from those provisions. The franchise, which runs trains to the south-west, is now receiving maximum revenue support, alongside its sister franchise First Capital Connect (FCC), which is also owned by FirstGroup.

However, the payment of the highest possible subsidies under cap and collar arrangements indicates a serious shortfall in revenue targets as the recession bites. In the most pessimistic scenario, the government covers 80% of any shortfall that is greater than 6% – the situation that FGW and FCC now find themselves in.

National Express East Anglia, Virgin Trains and Northern Rail also qualified for revenue support last year. National Express East Coast, which agreed to pay the government a record £1.4bn but will relinquish the contract this year after admitting it could not afford it, did not qualify for support until the end of 2011.

The supported franchises could be joined by the remaining major routes over the next two-and-a-half years. Stagecoach’s South West Trains (SWT), which owes the government £1.2bn, will qualify for revenue support from next year if it wins a legal battle with the DfT. By the end of 2011 the list could include: East Midland Trains, also owned by Stagecoach; Arriva’s CrossCountry; Northern Rail; and Southeastern and London Midland, which are both owned by Go-Ahead.

According to analysis by the stockbroker Astaire Securities, FGW, FCC and National Express East Anglia could receive a total of £100m from the government this year. In 2010 that could rise to £200m-£300m if SWT wins its legal case, bringing the total over the next two years alone as high as £400m. Douglas McNeill, an Astaire Securities analyst, said the chances of further defaults were “very slim”. He added: “The advent of revenue support softens the blow of falling passenger numbers and all of the other operators have stronger balance sheets.”

Stephen Glaister, professor of transport and infrastructure at Imperial College London, said the cap and collar system will at least keep the train operating system on track during an economic downturn. “It allows the system to continue in the face of these unexpected economic circumstances. That makes cap and collar a success.” Glaister added that the taxpayer would have to increase support for companies, but the alternative of assuming control of failed franchises could be more expensive. “The alternative is that the franchises could default, which leaves the taxpayer holding the baby.”

A DfT spokesperson said: “Revenue sharing is an important part of rail franchising, which allows the department and [train operating companies] to share both the risks of declining revenue and the benefits of higher than predicted profits.”

Meanwhile, National Express and the DfT were preparing for legal action over the future of the public transport group’s remaining franchises, c2c and National Express East Anglia. Lord Adonis, the transport secretary, wants to enforce guidelines that allow the DfT to terminate contracts to which the “franchisee or an affiliate of the franchisee is a party”. Even sympathisers with the National Express argument acknowledge that East Anglia and c2c qualify as affiliates, although their owner claims that the east coast route is a standalone entity.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

National Express may lose contracts

July 2nd, 2009 | No Comments

Lord Adonis, transport secretary, wants to bring East Anglia and c2c routes under state control

The government has a strong legal case for nationalising the c2c and National Express East Anglia franchises after the announcement by National Express that it will hand back its £1.4bn east coast contract, according to a respected rail industry lawyer.

National Express is refusing to relinquish its two remaining rail contracts when it walks away from the London-to-Edinburgh route, as it is expected to do later this year. Lord Adonis, the transport secretary, is determined to strip the group of its other franchises under cross-default guidelines. If he is successful, the state will be the owner of Britain’s most prestigious rail route and two of its busiest commuter franchises by the end of the year.

Nick Olley, a partner at Burges Salmon, said the government’s franchise terms appeared to provide no loopholes. An expert on complex rail contracts, which run into hundreds of pages and lengthy appendices, Olley said that the standard contract, which applies to the east coast, contains a provision which allows: “Termination, as a result of an event of default, of any other franchise agreement to which the franchisee or an affiliate of the franchisee is a party.”

According to Olley, that clause undermines the National Express argument that franchises are standalone entities that have no recourse to their parents. He said: “In the absence of a bespoke amendment I would expect the Department [for Transport, DfT] to be entitled to default the East Anglia or c2c franchises as and when the east coast franchise is terminated as a result of the franchisee’s default. This is because the East Anglia/c2c franchisees will be affiliates of the east coast franchisee.”

today National Express stood by its “clear and detailed” legal advice that it had a strong case. The group said: “National Express believes that the secretary of state would not be permitted … to execute the right of cross-default contained in the franchise agreements for National Express East Anglia and c2c.”

Adonis has warned that National Express will be banished from the rail franchise market if it abandons the east coast line because it will not be able to meet the pre-qualifying criteria for contract bids. However, he has refused to discuss the government’s legal right to cross-default in detail, telling the Guardian that the DfT has “got to take legal advice” before deciding how to proceed.

One rail industry source cautioned that the DfT might need to hire more personnel in order to cope with the demands of running three busy franchises. The DfT announced on Wednesday that it had drafted in Elaine Holt, the former head of the First Capital Connect franchise, to run the east coast route on behalf of the government.

“Has the DfT got the bodies to run three franchises? There are not that many rail executives just hanging around at the moment,” said the source.

Nonetheless, the transport secretary’s refusal to renegotiate the east coast deal, forcing National Express to hand back the keys, is receiving support from senior figures in the transport industry. “Lord Adonis did the right thing. It would have penalised successful franchises otherwise,” said David Begg, a former adviser to the government on transport.

Backers of rail nationalisation, who were out in force on Wednesday, again put pressure on the government to keep the east coast franchise in state hands today. Bob Crow, general secretary of the RMT union, warned of industrial action if Adonis proceeds with plans to return the route to the private sector next year.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

National Express may lose contracts

July 2nd, 2009 | No Comments

Lord Adonis, transport secretary, wants to bring East Anglia and c2c routes under state control

The government has a strong legal case for nationalising the c2c and National Express East Anglia franchises after the announcement by National Express that it will hand back its £1.4bn east coast contract, according to a respected rail industry lawyer.

National Express is refusing to relinquish its two remaining rail contracts when it walks away from the London-to-Edinburgh route, as it is expected to do later this year. Lord Adonis, the transport secretary, is determined to strip the group of its other franchises under cross-default guidelines. If he is successful, the state will be the owner of Britain’s most prestigious rail route and two of its busiest commuter franchises by the end of the year.

Nick Olley, a partner at Burges Salmon, said the government’s franchise terms appeared to provide no loopholes. An expert on complex rail contracts, which run into hundreds of pages and lengthy appendices, Olley said that the standard contract, which applies to the east coast, contains a provision which allows: “Termination, as a result of an event of default, of any other franchise agreement to which the franchisee or an affiliate of the franchisee is a party.”

According to Olley, that clause undermines the National Express argument that franchises are standalone entities that have no recourse to their parents. He said: “In the absence of a bespoke amendment I would expect the Department [for Transport, DfT] to be entitled to default the East Anglia or c2c franchises as and when the east coast franchise is terminated as a result of the franchisee’s default. This is because the East Anglia/c2c franchisees will be affiliates of the east coast franchisee.”

today National Express stood by its “clear and detailed” legal advice that it had a strong case. The group said: “National Express believes that the secretary of state would not be permitted … to execute the right of cross-default contained in the franchise agreements for National Express East Anglia and c2c.”

Adonis has warned that National Express will be banished from the rail franchise market if it abandons the east coast line because it will not be able to meet the pre-qualifying criteria for contract bids. However, he has refused to discuss the government’s legal right to cross-default in detail, telling the Guardian that the DfT has “got to take legal advice” before deciding how to proceed.

One rail industry source cautioned that the DfT might need to hire more personnel in order to cope with the demands of running three busy franchises. The DfT announced on Wednesday that it had drafted in Elaine Holt, the former head of the First Capital Connect franchise, to run the east coast route on behalf of the government.

“Has the DfT got the bodies to run three franchises? There are not that many rail executives just hanging around at the moment,” said the source.

Nonetheless, the transport secretary’s refusal to renegotiate the east coast deal, forcing National Express to hand back the keys, is receiving support from senior figures in the transport industry. “Lord Adonis did the right thing. It would have penalised successful franchises otherwise,” said David Begg, a former adviser to the government on transport.

Backers of rail nationalisation, who were out in force on Wednesday, again put pressure on the government to keep the east coast franchise in state hands today. Bob Crow, general secretary of the RMT union, warned of industrial action if Adonis proceeds with plans to return the route to the private sector next year.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

Ramsay suffers huge fall in profits

July 2nd, 2009 | No Comments

• Celebrity chef sells Ferrari to inject funds into business
• Pretax profits tumble from £3.05m to £383,325

Profits at Gordon Ramsay’s UK restaurants have plunged by nearly 90% and the celebrity chef has been forced to pump his own money into the business.

Ramsay’s latest company accounts show the restaurant chain came close to the brink as revenues collapsed while debt and tax bills mounted up.

The precarious situation caused the TV chef and Chris Hutcheson, his father-in-law and business partner, to inject the business with £5m. Ramsay had to sell his Ferrari to help fund the move.

Ramsay’s business problems were blamed on ambitious expansion as well as the closure of key London restaurants such as the Savoy Grill, as pretax profits tumbled from £3.05m in 2007 to £383,325.

The Savoy Grill was shut because of refurbishment at its host hotel, while the Connaught lease expired. The two restaurants alone accounted for a £9.5m reduction in revenues.

The firm said a restructuring of operations meant the group had “successfully undergone change for the better” and was now “well placed to grow its operation with a more stable capital base and a more manageable overall structure”.

Ramsay’s restaurant business expanded significantly in 2007 and 2008 but, in the year to August 2008, turnover dropped to £35m from £41.6m the previous year. Net debt soared from £4.06m to £9.48m.

A full review of operations was instigated in December as part of a refinancing deal with the Royal Bank of Scotland and to help the business get through the troubled economic times.

The cash injection from Ramsay and Hutcheson came after the firm had to pay £8m in VAT, corporation tax and PAYE. This has now mostly been repaid and will be completely settled by the end of this month.

Hutcheson said: “2008 brought its own challenges, not just for our group, but for the industry as a whole and the broader economy.

“Whilst the restructuring has benefited the group, the significant contribution and commitment of all 750 staff to the business has been integral to moving us to a position of strength.”

The firm said 25 staff were sacked as part of the restructuring efforts.

Of Ramsay’s 11 London venues, the Boxwood Café and his restaurants in Royal Hospital Road and at Claridges emerged as the star performers.

The restaurant at the Connaught hotel was closed after its lease expired, but two further ventures were opened in the capital: Murano in Mayfair and York and Albany in Camden.

The Narrow has had extra seating installed, Petrus is due to move to Knightsbridge later this year after closing last September, Maze has been fully refurbished and the Savoy Grill is set to reopen with the hotel in early 2010.

But La Noisette in Knightsbridge ceased trading in January this year and was described as a consistently underperforming site.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

£30bn shortfall hits transport plans

July 2nd, 2009 | No Comments

Leak reveals transport funding crisis as east coast mainline nationalised

The full scale of the funding crisis facing Britain’s transport system was exposed today as the country’s most expensive rail contract was nationalised, while details emerged of a potential £30bn spending gap.

A leaked industry memo seen by the Guardian warned of “looming spending cuts” on major transport projects after Department for Transport officials described the consequences of restoring order to public finances. There are now fears that major schemes could be delayed, reduced or scrapped in an expenditure freeze. They include:

• The £16bn Crossrail scheme linking Heathrow airport to Canary Wharf and Essex, which could be delayed.

• A £6bn road building programme including the extension of the hard shoulder on Britain’s motorways, which could be cut.

• A proposed high-speed rail route could be pushed back by a decade.

• The rail fare cap of inflation plus 1% could be lifted, raising fares.

The DfT’s financial constraints were exacerbated as National Express announced it will hand back its £1.4bn east coast contract at the end of the year, the second time in three years that a company has bid more than £1bn for the route and then quit after admitting that it could not afford it. GNER gave up its £1.3bn contract in 2006, only for National Express to place a higher bid less than a year later.

The east coast withdrawal marked a new low in the tense relationship between struggling train operators, who are battling to honour expensive contracts signed before the recession, and the transport secretary, Lord Adonis. He warned that National Express would be barred from the rail market amid uproar that the company was preparing to avoid fulfilling its £1.4bn pledge.

“It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging,” he said. The heavily indebted group also rejected claims by Adonis that it had financial problems and that they had contributed to the sudden departure of its chief executive, Richard Bowker, who shocked colleagues with his resignation shortly before announcement.

It also emerged that the DfT is braced for a reduction in its capital expenditure plans that could total £28.9bn over the next decade. The permanent secretary to the DfT, Robert Devereux, told a private industry conference recently that the chancellor, Alistair Darling, expected the public finances to be brought into line over the next 10 years.

In a presentation described as “very stark” by one person familiar with its contents, Devereux indicated that future growth in capital expenditure would be flat and would no longer include a 1.25% annual increase, limiting the outlay on new projects to £7.4bn per year. A transport industry memo produced after the seminar calculated that without the 1.25% escalator, the DfT would have £28.9bn less to spend than expected on new projects over the next 10 years.

The memo added: “We have been expressing concern for sometime now that spending cuts post-2010 could be significant. What was said at this meeting confirms our worst fears.”

Transport experts said the constraints on capital expenditure could force the government to delay the completion of the £16bn Crossrail project, which will build twin rail tunnels under London, and also to consider road pricing as a means of funding new road schemes.

Stephen Glaister, professor of transport and infrastructure at Imperial College London, said: “Transport is always the department that tends to get the tough end of the cuts because it is capital intensive and you can do short-term cuts without the results being visible for quite a while. And that’s against the picture of a growing market in road and rail. Just to stand still we have to spend a lot of money and that is looking quite unlikely.”

The Office of Rail Regulation, which monitors expenditure on Britain’s rail networks, has admitted that putting together the next five-year budget for the railways will be “tough” due to the state of the public finances.

There is also speculation within the industry that the £3bn-a-year rail budget will have to be propped up by an increase in rail fares above the current regulated limit of inflation plus 1%.

The DfT said the calculations in the memo referred to the department’s “long-term funding guideline” and not to actual budgets, which will be set in the next comprehensive spending review.

“These calculations in no way represent final budgets for the periods referred to and therefore it would be misleading to make assumptions about future spending based on them in isolation,” said a DfT spokesperson. The department added that its £6bn roads programme was “progressing”.

The industry memo warned, however, that a new comprehensive spending review by a Labour or Conservative government will almost certainly target the DfT. It said: “It has historically often seemed less painful to target transport spending, rather than more ‘sensitive’ programmes such as health, education and social security.”

There is widespread speculation within the rail industry that a legal row between the DfT and one of the largest operators, Stagecoach, is driven by the need to conserve funding within the department. Stagecoach is claiming that it is owed at least £200m from its South West Trains contract and has accused officials of behaving inconsistently over the dispute.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »

East coast trains to be nationalised

July 1st, 2009 | No Comments

National Express relinquishes east coast franchise and announces departure of chief executive Richard Bowker

The government is to nationalise Britain’s largest rail franchise after National Express confirmed that it can no longer afford the £1.4bn east coast contract.

In a serious blow to franchise policy, the Department for Transport will take the London-to-Edinburgh route into public ownership at the end of the year. The transport secretary, Lord Adonis, said the contract will be put back up for auction to private companies at the end of next year but it is expected to fetch much less than £1.4bn, leaving the state with a gap in its rail budget.

“It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging,” said Adonis.

National Express confirmed this morning that it would hand back the £1.4bn east coast rail franchise as it announced the departure of Richard Bowker, the chief executive who sanctioned the ill-fated bid for the route in 2007. It is the second time in three years that the owner of the east coast contract has walked away from its contract. GNER gave up the franchise in 2006 after admitting that its promise to pay the Department for Transport (DfT) £1.3bn over 10 years was too much. Undeterred, National Express bid £1.4bn for a seven-and-a-half year contract less than 12 months later.

There had been speculation in the City for months that National Express would walk away if it failed to renegotiate the contract.

National Express said it would work with the DfT “to ensure an orderly handover and ensure that passengers, services and employees are unaffected”.

The shadow transport secretary, Theresa Villiers, said the east coast failure showed that the government “clearly learned nothing when the GNER franchise collapsed”.

National Express expects to relinquish the contract over the next six months, once a £40m loan runs out. It also set up a confrontation with Adonis by rejecting government warnings that it might have to hand back its c2c London to Essex service and National Express East Anglia franchises under cross-default guidelines. The group said a default on its east coast (NXEC) franchise would have no material effect on the other franchises and therefore would not qualify for cross-default.

“National Express has taken and received clear and detailed advice from leading legal counsel upon its, and its subsidiaries’, positions under the east coast and other franchise agreements and is confident that the implication of any NXEC default should be confined to the NXEC franchise. The group would oppose any attempt by the DfT to cross default, in order to protect shareholder value.”

Adonis warned that the government “may have grounds” to take back the remaining franchises and put National Express, until recently the UK’s largest train operator, on notice that it will be banished from the franchise market.

“A company which had defaulted in the way National Express now intends would not have pre-qualifed for any previous franchises let by the department. I note that the parent groups of previous franchise failures are no longer in the UK rail business,” he said. Adonis and his officials are already embroiled in a legal dispute with Stagecoach, the owner of the £1.2bn South West Trains franchise, over the terms of its biggest rail contract.

A long-term solution?

The RMT union, Britain’s largest railway union, said the government should keep the east coast route in public ownership and also reclaim the remaining National Express contracts. “RMT welcome’s this renationalisation of the east coast route but this shouldn’t be a short-term, crisis measure. It should be a long-term solution to the chaos that privatisation has brought to the UK’s most lucrative rail franchise,” said Bob Crow, RMT general secretary.

Adonis and National Express reassured passengers that services would not be affected by the looming nationalisation. The DfT has established a private company that will operate the route for one year. Adonis added: “I can assure the travelling public that services will continue without disruption and all tickets will be honoured.”

National Express said Bowker resigned to take up the chief executive post at the Union Railway in the United Arab Emirates. His position became increasingly precarious in recent weeks as the government rebuffed attempts to renegotiate Britain’s most expensive rail contract.

Financial millstone

Ahead of this morning’s announcement, analysts said the deal would have to be renegotiated or returned to the DfT by the end of the month when the group faced a test on its banking covenants. National Express requires a rights issue of about £400m to pay down its £1.2bn debt burden, according to market watchers, and investors are understood to be against the move unless the east coast situation is resolved.

Bowker oversaw the record £1.4bn bid for the London-to-Edinburgh route, which committed the group to annual payments that rise from £85m in 2008 to £395m by 2015, leading to industry speculation that his departure would also be a precondition to a rights issue.

The contract has become a financial millstone that is expected to lose the company £90m over the next two years. In order to meet its targets, the franchise requires passenger revenue growth of about 10% per year, but the latest figures showed a 1% increase in turnover as the recession hits demand and forces business passengers – a key earner for the route – to trade down to standard class tickets.

The group is also a takeover target, having announced the rejection of a nil-premium approach from rival FirstGroup earlier this week. National Express said it did not consider it appropriate to enter into talks with FirstGroup while it dealt with its borrowings and the east coast contract.

guardian.co.uk © Guardian News & Media Limited 2009 | Use of this content is subject to our Terms & Conditions | More Feeds


Read More »
Page 1 of 11