Shell profit dips to lowest in more than a decade

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Royal Dutch Covering PLC’s yearly earnings toppled in 2016 to its lowest level in over a years, however the oil titan claimed it had actually transformed an essential edge, reporting a rise in cash money in spite of reduced crude rates.

The British-Dutch company claimed Thursday its earnings for 2016 on present cost-of-supplies basis– a step much like the take-home pay that UNITED STATE oil firms report– was $3.5 billion, below $3.8 billion a year previously. Revenue for the 4th quarter was up to $1 billion from $1.8 billion a year previously.

The results reflected a tough year for the industry during which oil prices sank as low as $27 a barrel and remained mired in the mid-$40s for months. American energy-industry rivals Exxon Mobil Corp. and Chevron Corp. posted disappointing earnings this week and last.

But there were also signs that Shell, the world’s second largest oil company, was starting to find its footing as the benefits from its roughly $50 billion acquisition of BG Group PLC last year kicked into gear.

“We are really making good progress in reshaping Shell to a world class investment case,” CEO Ben van Beurden said in a media briefing. “2016 has been a transition year for us; 2017 will be the year that we follow through on the strategy.”

Cash flow from operations jumped nearly 70% in the fourth quarter compared with a year earlier, rising to $9.2 billion — enough to cover Shell’s cash dividend payments for the period. Its debt levels also came down record amounts earlier in the year, when the company turned to financing to pay for the BG deal and maintain hefty investor payouts.

The company said that bet on BG is already paying off. Oil and gas production rose 28% in the fourth quarter compared with a year earlier, with BG assets adding 824,000 barrels of oil equivalent a day.

By 2018, new projects from BG and Shell’s existing portfolio are expected to add 1 million barrels a day of new production compared with 2014, or $10 billion of cash generation with oil prices at around $60 a barrel, Shell’s Chief Financial Officer Simon Henry said.

Cash-flow generation in the fourth quarter already came in well above analysts expectations, buoying Shell’s share price despite the dismal profit numbers. Shell’s share price went up 1.7% in London trading on Thursday morning.

“We emerged clearly stronger by the end of 2016,” Mr. Henry said, hitting back at critics who early on in the oil price downturn complained that the company wasn’t vocal enough in setting out a strategy.

“The next couple of days will indicate who really got it and who acted most efficiently,” Mr. Henry said. “You should just go compare.”

Shell rival BP PLC is set to report its quarterly and annual financial results on Tuesday.

Like many of its peers, Shell has responded to the challenging operating environment with tough measures, and is continuing to trim costs and spending as it pursues more progress in efforts to rebalance its finances.

It has already laid off thousands of workers, slashed costs and spending, and embarked on a $30 billion divestment plan to pay down debt and enable it to finance its spending and dividend payments from free cash flow.

Last month, it announced asset sales in the North Sea, Thailand and Saudi Arabia amounting to close to $6 billion. Mr. van Beurden said in Shell’s results announcement that the company had completed, announced or was progressing divestments worth $15 billion.

Shell said it is planning its business around oil prices at $50 a barrel this year and expects capital spending to $25 billion or lower, at the bottom range of its guidance for spending of $25-$30 billion a year out to 2020.

The company’s net debt fell to $73 billion at the end of the fourth quarter, down from $78 billion in September, and operating costs declined $10 billion from Shell and BG’s combined level two years ago.

source: marketwatch.com 

 

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Bank of England hikes UK economic growth forecast from 1.4% to 2.0% as Brexit blues fail to materialise

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The Bank has actually likewise enhanced its projections for 2018 and also 2019, with financial development anticipated ahead in at 1.6 percent as well as 1.7 percent specifically.

The UK economy will certainly expand considerably faster compared to devalued projections following last June’s EU vote, the Bank of England confessed today.

As it held rates of interest at 0.25 percent, the Bank increased its development projection for 2017 to 2 percent – well up from November’s price quote of 1.4 percent.

The upgrades will certainly humiliate the bank as they reveal as unneeded its alarming cautions of serious financial damages from the Brexit ballot.

Bank of England

In August, the Bank cut interest rates for the first time since 2009, when they were reduced to 0.5 per cent in the heat of the financial crisis.

The Bank said a more gradual slowdown in consumer spending, measures announced by the Chancellor in the Autumn Statement, and stronger outlook for the global economy would all support UK output over the next few years.

On what’s been dubbed ‘Super Thursday’, the Bank of England also said its inflation forecast remains broadly unchanged for this year, at around 2.7 per cent.

The Bank said the weaker pound would lead inflation to rise to 2.8 per cent in the first half of 2018 and fall back ‘gradually’ to 2.4 per cent in three years time.

It added: ‘The value of sterling remains 18% below its peak in November 2015, reflecting investors’ perceptions that a lower real exchange rate will be required following the UK’s withdrawal from the EU.

‘Over the next few years, a consequence of weaker sterling is that the higher imported costs resulting from it will boost consumer prices and cause inflation to overshoot the 2% target.’

Consumer price inflation rose to a two-year-high of 1.6 per cent in December, primarily because of a slump in value of the pound, which has lost over 14 per cent of its value since June’s referendum.

On the back of the Bank’s report, sterling is down 0.36 per cent to $1.2610, after reaching a seven-week high against the dollar this morning.

Against the euro, sterling is down 0.80 per cent to €1.1664.

Neil Wilson, a senior market analyst at ETX Capital, said: ‘Despite the upgrade to growth, the market sees this as a bit doveish as inflation is not expected to run away as much as thought and we are seeing sterling hand back earlier gains.’

He added that the upgrade was ‘a touch of humble pie for the Bank, as it’s been made abundantly clear that the economic Armageddon it expected in the event of Brexit has just not materialised.

The upgrade is a “touch of humble pie” for the Bank

‘The UK remains the fastest growing G7 economy – not bad for a nation that some think has committed an act of self-mutilation in choosing to leave the EU.’

The FTSE 100 is up 0.33 per cent or 23.68 points to 7,131.33.

Minutes of the Bank’s Monetary Policy Committee showed some policymakers believe it is becoming harder to justify keeping rates at record lows, with growth showing surprising resilience and inflation rising.

The Bank said: ‘The more time that passed without a noticeable reduction in economic growth, the more difficult it would become to tolerate the extent of the inflation overshoot.’

Financial markets are factoring in a rate rise in 2018 and for borrowing costs to be hiked twice over the next three years, although economists are not expecting an increase until 2019.

The Bank said it would continue to balance the trade-off between higher inflation and growth in ‘such exceptional circumstances’ and cautioned that the consumer spending spree boosting the economy is set to come to an end, which would weigh on growth.

It said a consumer spending slowdown is ‘highly likely given the scale of the depreciation of sterling and the consequent effect that higher import prices would have on real income growth.’

Tom Stevenson, investment director for personal investing at Fidelity International, said: ‘With the Old Lady of Threadneedle Street prepared to keep sitting on its hands when it comes to raising rates and with inflation expected to breach the central bank’s 2% target this year, anyone with savings still sitting in cash will struggle to generate real returns.

‘One alternative is to look to the stock market. History shows there has been a sweet spot in the inflation range that suits equities well – normally at around 2% to 2.5%.

‘Shares tend to perform particularly well if the rise in inflation reflects higher growth expectations rather than a wage spiral. This is the Goldilocks scenario for equities and it may well apply for much of this year and next.’

Suren Thiru, Head of Economics at the British Chambers of Commerce, said: ‘The Bank of England’s latest forecasts paint a much more optimistic picture of the UK’s growth prospects compared to their previous post-EU referendum predictions.

‘Although the central bank is slightly less concerned over price growth, inflation is still expected to breach the 2% target for a prolonged period. This means that MPC’s attempts to combat rising inflation and support growth is likely to remain a challenging balancing act through the forecast period.’

Meanwhile, Yael Selfin, KPMG Chief Economist said: ‘Less pressure on the pound, as the focus of markets’ attention turns elsewhere, is providing a backstop for any further deterioration in the inflation outlook.

‘Given the volatility expected in the first half of 2019, as the UK exits the EU, we could see rates beginning to rise later than markets are currently indicating.

‘The MPC may decide to start its tightening cycle only after the UK is safely out of the EU, despite a short to medium term peak in inflation above the MPC target of 2%.’

The latest forecasts come after the Bank’s chief economist Andy Haldane admitted last month the Bank had suffered a ‘Michael Fish moment’ in making overly gloomy predictions last year over the impact of a Brexit vote.

The Bank’s Canadian Governor Mark Carney controversially warned that a Brexit vote could trigger a UK recession ahead of last June’s referendum.

In August, less than two months after the EU referendum, the Bank downgraded its UK annual growth forecasts for 2017 from 2.3 per cent to just 0.8 per cent.

But, in November, the Bank raised its forecast to 1.4 per cent after data showed the economy hadn’t weakened as it feared.

The UK’s economy grew by 2 per cent last year, with growth of 0.6 per cent in each of the last three quarters.

Today, the construction purchasing managers’ index hit a five-month low of 52.2 in January after December’s nine-month high of 54.2, a steeper decline than forecast in a Reuters poll, though still indicating modest growth.

The latest PMI reading for the key services sector, which accounts for almost 80 per cent of the UK economy, has shown five consecutive months of growth, and unemployment also has remained at an 11-year low.

On Wednesday, figures from Markit revealed the UK manufacturing sector showed signs of a ‘strong start’ last month, but remains under pressures as the cost of imports rise.

source here: thisismoney.co.uk 

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Tax returns could soon be a thing of the past as HMRC reveals plans to overhaul nightmare system

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HMRC has actually exposed strategies to modernise its difficult tax returns system by changing it with a “electronic paper” that taxpayers could upgrade on a quarterly basis.

The overhaul, which will certainly work in 2020, will certainly permit employees to send their numbers online throughout the year, in a proposal to ditch the extensive paper variation.

The body says the move will help crack down on late penalty fees, and minuscule errors costing employees as much as £8 billion a year.

In a statement, the government’s tax arm acknowledged that at present, too many people “find the system hard” and vowed to make life simpler for Britain’s workers.

The current paper document is to be replaced with a digital version that can be updated quarterly, instead of annually.

This means that most businesses, landlords and the self-employed will record and pay all their taxes online.

Under the government’s proposals, the Making Tax Digital project will save the taxman £8 billion a year, it said, because taxpayers will be getting their tax bills right first time.

At present, those who file late or make errors on their submission are typically subject to a fine, which starts at £100.

In line with the new system, charities will no longer have to submit their returns, HMRC said.

When will the changes take effect?

HMRC is aiming to have the new scheme in place by 2020.

It will pilot digital systems with hundreds of thousands of businesses before rolling them out across the board, to ensure the software is user friendly, and to give businesses and landlords time to prepare and adapt.

It added that taxpayers would have 12-months to get used to the new system before any late submission fines would be applied.

Jim Harra of HMRC said: “We know that the majority of businesses want to get their tax right first time, but the latest tax gap figures show that too many find this hard, with more than £8 billion a year lost in tax as a result of avoidable taxpayer error by small businesses.

“Making Tax Digital will help businesses to get their tax right first time; it will help reduce the likelihood of errors, lower the chance of unwelcome compliance checks and give them greater certainty that they are getting things right.

“The appetite for digital services is growing and traditional paper-based processes make no sense in the 21st century where the vast majority use digital services.”

The current system

More than 10 million tax returns are submitted to HM Revenue and Customs (HMRC) each year, but 19% of those who have filled a self-assessment in the past two years think they may have lost out financially because they had made an error or not understood the document.

Making a mistake on your tax return could end up costing money; whether it’s an additional tax bill or a penalty for a miscalculation, HMRC’s system of penalties could be as much as 70% of the tax owed.

The deadline for sending 2015-16 self-assessment tax returns online to HM Revenue and Customs (HMRC) has now passed. The final date was 11:59pm January 31.

Those who miss the deadline could be subject to a minimum £100 fine, even if there is no tax to pay. This can rise to as much as £1,600 if there are further delays.

If you’ve made a mistake, the best thing to do is to get in touch with HMRC and explain you’ve made a genuine error.

It says it will treat those with genuine excuses for late returns leniently and focus its penalties on those who persistently fail to complete their tax returns and deliberate tax-evaders. These are the numbers to call if you’ve made a mistake .

An HMRC spokesman said: “Taxpayers can amend their returns within 12 months of the original deadline. There is lots of help available online. Anyone who needs help should get in touch with us.”

If you believe you may have made a mistake on your tax return, you can follow these steps to correct your submission and avoid a penalty fine .

Do I need to submit a tax return?

If you meet any of the following criteria, you are advised to get in touch with HMRC to submit your form.

  • You’re an employee or pensioner with an annual income of £100,000 or more.
  • You have a pre-tax investment income of £10,000 or more.
  • You are self-employed, a business partner, or director of a limited company.
  • You’re a trustee or representative of someone who has died.

    – source: mirror.co.uk

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TalkTalk founder Dunstone takes reins from Harding

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After 7 years as chief executive, Dido Harding steps down makes Charles Dunstone TalkTalk founder and chairman take over the post.

With Harding’s departure, TalkTalk reported a 5 percent drop in earnings and said it had lost approximately 42, 500 broadband subscribers in the third quarter, but stored its full-year earnings estimate unchanged.

LONDON (Reuters) – TalkTalk founder and chairman Charles Dunstone will take over the running of the British telecoms operator when chief executive Dido Harding steps down in May after seven years in charge, the company said on Wednesday.

Harding’s departure came as TalkTalk reported a 5 percent drop in revenue and said it had lost a net 42,000 broadband subscribers in its third quarter, but kept its full-year earnings forecast unchanged.

Shares in TalkTalk, which competes with Sky, Virgin Media and industry leader BT, were trading up 8.5 percent at 170 pence at 1231 GMT.

Dogged for years by a reputation for poor customer service, largely as a result of merging several companies, TalkTalk’s shares had fallen 23 percent in the last 12 months after a high-profile cyber attack in October 2015.

“I’ve always been a firm believer that CEOs should not overstay their welcome,” Harding, who will be replaced by company insider Tristia Harrison, said.

Dunstone, who created TalkTalk in 2003 as an offshoot of his Carphone Warehouse group, will take on executive duties following the exit of Harding, who he appointed when he separately listed the telecoms firm in 2010.

Analysts at Jefferies said Dunstone’s move raised hopes TalkTalk would focus on regaining its “value” credentials.

Dunstone, a 52-year-old sailing enthusiast who owns a 31 percent stake in TalkTalk worth about 500 million pounds, said he would support the new management team by taking an executive role as well as chairing the board.

Doing both jobs is not considered corporate best practice.

“There are very, very strong successors within the business, but they don’t have the experience of running a public company and the investors relations and all that kind of stuff, so I said I’ll become executive chairman and support them in that role,” Dunstone said in an interview.

He will step down as chairman of Dixons Carphone and be replaced by former BT chief executive Ian Livingston.

CYBER ATTACK

Harding, who has been a consistent thorn in the side of BT, said she would focus on public service, including her role in the upper house of the British parliament.

The 49-year-old, a member of the Jockey Club whose horse Cool Dawn won the Cheltenham Gold Cup in 1998, was a contemporary of former prime minister David Cameron at Oxford University, and sits on the Conservative benches in the Lords.

She was “incredibly proud” of improvements delivered to TalkTalk’s clients, although there was “still work to do”.

A low point was the cyber attack, which put the data of 157,000 customers at risk and cost around 60 million pounds, including a 400,000 pound fine for security failings.

Harding went on television to warn 4 million customers about the breach, a strategy she said had improved trust in the brand.

TalkTalk relaunched its packages last year, aiming to offer simpler deals and re-establish a reputation for value.

The number of customers leaving had risen as a result of TalkTalk’s new tariffs, while revenue was hit by re-pricing.

But net additions would return to growth in the fourth quarter and churn would come down markedly, Harding said.

Moving to fixed price plans had been vindicated by price hikes by BT and Sky, Dunstone said.

“We zig when the market zags. We just need to be true to our challenger values.”

TalkTalk’s group revenue fell 5 percent to 459 million pounds ($577 million) in the quarter, with revenue on its own network down 5.4 percent to 332 million pounds.

Earnings for the year are forecast to be towards the bottom of a 320 million to 360 million pound range.

($1 = 0.7955 pounds)

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UK manufacturing’s strong January is dented by spike in import costs

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Despite record rise in costs, sector posts 6th month of expanding output which are anticipated to increase further over this year 2017.

A record rise in the cost of imports in January has taken the shine off a strong performance by the manufacturing sector, which has rebounded since the Brexitvote to record its sixth consecutive months of expanding output.

Manufacturers were forced to hike the cost of their goods by one of the widest margins in one month after the slump in the pound triggered a record rise in the cost of imports, according to the Markit/Cips purchasing managers survey.

The rising cost of imports is expected to push up the price of UK-made goods over the coming year and send inflation from 1.6% to nearer 4%.

Bank of England policymakers are expected to highlight in their quarterly inflation report on Thursday that price pressures in the economy are growing, especially in the manufacturing industry because the sector relies heavily on raw materials and components brought in from overseas.

Car firms have warned the government that the fall in sterling against the dollar and the euro might not be enough to persuade them to continue investing in the UK if they face tariffs and higher regulatory costs on imports and exports to the European Union. Other industries with overseas suppliers are also known to be lobbying to stay inside the single market and maintain access to EU markets tariff free.

Nevertheless, UK manufacturing enjoyed an increase in new orders and the fastest rise in activity since May 2014.

The purchasing managers’ index (PMI) slipped below December’s two-and-a-half-year high of 56.1, but the small dip still left overall figure, at 55.9. A reading above 50 indicates expansion.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said it was worrying that manufacturers were increasingly reliant on domestic demand, which could fade away once price rises feed into the supply chain.

“The recovery in the manufacturing sector lost a little pace and narrowed to become almost exclusively dependent on domestic demand in January,” he said.

“The new export orders balance collapsed to 50.9 in January – its lowest level since May – from 58.5 in December. This emphatically shows that the benefits to manufacturers from sterling’s depreciation remain far too modest to outweigh the costs for the rest of the economy in terms of high inflation.”

Tombs warned that the recent strong figures could prove to be a high watermark. “Domestic demand faltered the last time producers increased prices this quickly in 2011, and we doubt that this time will be different,” he said.

Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said the survey told “a positive story about the sector”, with the all the important output and orders components remaining firmly in positive territory.

She said inflationary pressures represented a cloud on the horizon and “presented some risks to the resilience of the UK market later this year”.

But Hopley was more upbeat about the industry’s immediate prospects. “Rather than this being a case of the PMI defying gravity, the expansion in activity is being driven by more upbeat conditions at home and [by] demand in global markets [being] on a more stable footing than businesses have seen for some time. Additionally, there’s some extra help fromsterling’s depreciation,” she said.

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