Recognized for Customer Growth and Innovation
But Centrica says it will try to avoid more price rises for ‘as long as possible’ as it faces protests at its annual meeting on Mondayx
British Gas-owner Centrica enjoyed a huge boost from the cold snap, as consumers turned up the heating, driving consumption up by almost a fifth compared with last year.
The company, which raised prices by 6% shortly before the harsh winter set in, said any benefit from the “exceptionally cold weather” would be used to prevent further price rises “for as long as possible”.
Finance director Nick Luff said: “The fact is we make a margin selling gas. We will have made a higher margin because of the extra volume and we will use that to keep prices down during the rest of the year.”
But he said the cost of implementing the government’s energy efficiency scheme and higher transport costs would hit profits, while the gas price remains unpredictable – meaning there may be little extra to invest in keeping prices low.
Energy comparison and switching service uSwitch.com still welcomed the news at a time when consumers are struggling to pay bills. Ann Robinson, director of consumer policy at uSwitch.com, says: “British Gas has recognised the pressure facing customers and is using the financial gain from the extended cold weather to maintain its competitiveness. In plain English, this means that British Gas customers should expect no further increase in prices at least for the foreseeable future.”
Centrica faces protests at its annual meeting in London on Monday afternoon, as campaigners gather to challenge the company on price hikes, multimillion pound payouts to British Gas bosses, and plans for a new generation of gas power stations instead of cheaper, clean renewable energy.
Households’ average gas consumption was 18% higher in the first four months of 2013, compared with the same period last year, while electricity consumption was 3% higher. Residential customers in the UK also rose by 28,000 in the first four months of the year, which Centrica put down to competitive pricing and good customer service.
The company said this “strong performance” put it on course to meet expectations and deliver full-year profits before tax of £602m, down 1% on last year.
As an oil and gas producer, Centrica also benefited from higher commodity prices, and the group’s full-year earnings after tax are expected to be 2% higher at £1.4bn.
Betting group says full year revenues and earnings beat expectations while cost savings rise
Online gaming group Betfair has issued an upbeat trading statement in an attempt to fend off an unwanted £920m bid from private equity group CVC Capital Partners.
Its shares added 16.5p to 861.5p. This is still below the 880p on offer from CVC, although some nonetheless believe the price will have to be raised to win the day.
Betfair said full year estimated earnings were likely to come in at around £73m, at the top end of its previous forecasts. Revenues had reached around £387m while it had £138m of cash on the balance sheet. It reported record new UK customers, and cut 500 staff as part of a restructuring.
Cost savings have been raised from £20m to £30m. But there was no mention of any cash return to investors, which some had been expecting.
Chief executive Breon Corcoran said the company’s new management team had successfully completed the shake-up ahead of schedule, and its new sportsbook was doing well in combination with its existing exchange business. Having bought Blue Square it is planning further targeted acquisitions. In a buy note Simon French at Panmure Gordon said:
The key thrust on strategy is that early indications are that the exchange and sportsbook products are more complimentary than originally envisaged and that “Exchange plus Sportsbook” can deliver a sustainable competitive advantage.
Some investors may be disappointed there is no commitment to return cash to shareholders but the group is looking to accelerate growth through international opportunities and balance sheet flexibility. [We] reiterate our buy recommendation and 1000p target price.
Nick Batram at Peel Hunt kept his hold recommendation but also welcomed the update:
As an initial defence, beating expectations and raising cost savings shouldn’t really surprise anyone, but it is nonetheless a good start for Betfair’s management.
There are three key positives from today’s announcement that suggest to us that CVC will have to significantly up its bid if it wants to secure Betfair. Firstly, while it is early days, the increased focus on the UK appears to be delivering strong customer acquisition numbers. Secondly, what might have been a back-foot defence now firmly looks like a business being positioned on the front foot. Finally, we are glad to see that returning cash to shareholders is not an option at this stage. In a rapidly evolving market and with the strategic opportunities open to Betfair, we believe the cash is better off being deployed in growing the company.
Last week a panel of experts answered your questions on starting up in the food industry. Here are the highlights
Monique Borst is a food business development expert
How can you check if your food business idea is viable?: In my experience, people often mistake their aptitude for cooking or passion for food as a shoo-in for business success. Rather than write a full business plan, one quick and easy way to determine whether your food business idea is potentially viable is to run through this checklist:
1. Do I have a market for it?
2. Do I know how to reach the people who might want this?
3. Do I have the resources, skills and time to do this?
4. Is this something people will pay for?
5. How sustainable is this business?
6. Is the business marketable?
Paul Bray is an associate director at Smith & Williamson
Be sensible when financing your food business: The key message has to be not to over-stretch yourself in the early periods. Start small and grow at a sensible pace, otherwise you will be running around chasing your tail – get a sound start underway and then progress in time, rather than rush.
Jean Edwards is the managing director at Deli Farm Charcuterie
Farmers’ markets are a good way to test your product when starting up: When I started just over seven years ago my only sales were through a regular weekly farmers’ market; it was a brilliant way of getting to market and meeting people, getting feedback and so on. By the end of our first summer I was too busy to attend the market on a regular basis, but would never look back on the contacts that I made from there.
What sort of environmental health regulations arise when starting a food business from home? A lot depends on what type of business you are thinking of starting and where you see your customer base. All food premises have to be passed by environmental health, so I would suggest you have a preliminary meeting with your local environmental health officer (EHO), explain exactly what you are intending to do and they will advise you. Remember your EHO is a source of free information – use them as a resource and not the enemy!
Miranda Ballard is the co-founder at Muddy Boots, a beef burger company
What to think about in terms of location: You’ll know where you should be by doing research into the market and your demographic. Go where your customers are so that you’re surrounded by them and you can start selling to them. Remember to be where you want to be too – no point living where you’re not happy. There’s no point taking all the risks and stresses of having your own business if you’re not happy with where you’re living. What’s best for the business is also what’s best for you – there’s more chance the company will survive if you’re happy.
You can still be a British brand with ingredients sourced elsewhere: We’re a British food brand, from a marketing and content perspective. Some of our ingredients (tomato puree, garlic, black pepper) are imported. We’ve seen all those prices go up in the past 18 months because of transport, labour and production. The idea that all food produced in Britain will stay in Britain doesn’t acknowledge the foods that can’t be grown or produced here – our taste buds will have to revert after these glory years!
Think carefully about how you use social media: In the past month, I’ve been really thinking about social media for small businesses. I think there’s a danger that the massive national or global platform that it brilliantly provides can actually sometimes be too wide a marketing spread for the small business. What I mean is, we all know that we’re meant to find our demographic and then target them, to the point of excluding everyone else. I worry that small businesses can get distracted with the cross-demographic appeal of social media. It’s important to remember you have to work hard to find and appeal to your own demographic – a like or a retweet from someone in your demographic is much, much more valuable than 100 from those outside it.
Roopa Rawal is the co-founder at Devnaa, a luxury Indian-inspired confectionery company
Know your brand: Be really passionate about your products and do everything you can to build a good reputation for your brand – interact with consumers as much as possible. Customer care is really important especially with food, as even though ingredients are all written down people will want to be assured of the taste, quality of ingredients, allergy information and so on. The best part is that if they like it they will definitely go out and tell everybody they know about it.
Quality of food is paramount at the moment: I think more so than with healthy eating, consumers are becoming more aware of the quality of what they eat and drink. As people have become more health conscious they’ve also realised that the quality of what they consume plays just as big a part in maintaining their health – even if they want a treat.
Philippa Taylor works at Grand Union PR, a food PR company
Think about how you portray yourself online: Make sure that you have a domain name which is unique to you for a hosted website which you can customise yourself, and that your website is set-up to either sell online, act as a brochure or both. Drive traffic to your site by regularly updating it with seasonal and limited edition products, newsletters, competitions, recipes and testimonials and so on. Link all your promotion together on the social media channels you use and push customers towards your website. Set up Google Analytics so that you can see what works and what doesn’t.
Offline, think about taking information and images from your website and using them in leaflets at markets, on pop-up banners at events, and as press releases for journalists.
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Customers who have to use prepayment meters are often offered only the most expensive tariffs
Millions of mostly poor UK households are paying up to £300 a year more than customers on the cheapest fuel tariffs, with thousands barred from switching to better deals.
People on standard meters have a choice of online, fixed, green, dual fuel and discounted tariffs, as well as often receiving a discount for paying by direct debit. But energy firms tend to offer just one tariff to prepayment customers, and it is usually much more expensive than the best buys.
How much extra prepayment customers pay depends on which expert you ask. Comparison site Confused.com puts the figure as high as £300 a year, Moneysupermarket just over £200 and uSwitch at about £163.
But it’s not just bigger bills prepayment customers face; there are plenty of other downsides. For starters, if you run out of energy unexpectedly, your supply will be switched off until you press the emergency credit button which gives you time to pop out and top up the card or key.
“With the exception of British Gas, which offers an online top-up service, you have to make sure you are near a shop that offers a PayPoint,” says Clare Francis of moneysupermarket.com. “You will also need to ensure you have enough credit on your meter to carry you through holiday periods such as bank holidays and Christmas when many shops where you can top up are likely to be closed.”
Although energy companies claim many people prefer a prepayment meter as it helps them to budget, paying for energy this way is not always the customer’s choice. In many cases if a new customer fails a provider’s credit check, necessary to be accepted for monthly or quarterly billing, the supplier will insist on a prepayment meter.
Suppliers can also force existing customers on to prepayment meters if they have a significant debt on their account and have not attempted to pay it off or agree a repayment plan. Not letting them in your home won’t stop this happening – they can get a warrant to force entry, and charge you for it too.
Figures from uSwitch show that more than five million households(20%) are in debt to their energy supplier, 6% more than last year. This is not surprising when you consider the average household energy bill is £1,353 a year, almost £100 more than a year ago and £831 more than at the start of 2004.
Once an indebted customer has been switched to a prepayment meter, credit added will go partly towards the existing debt and partly towards the energy they are going to use.
The exact amount customers in debt have to repay each week needs to be negotiated with the supplier. If you receive benefits, the debt recovery rate would not normally be set above the minimum Fuel Direct level of £3.55 a week (Fuel Direct is a support service for those on benefits or low income, who struggle to pay for their energy).
If you have a prepayment meter, and are not in debt to your supplier, you’ll be able to save money by switching to a credit, or post-pay, meter and shopping around for the best deal.
Kate Rose, head of energy at Confused.com, says: “If you are living in a property with a prepayment meter you can ask to have it replaced for a credit meter. However, you will need to pass credit checks and meet criteria such as being over 18, having no outstanding or recent debts to an energy company and be willing to set up a fixed direct debit for future payment.”
If someone has a poor credit history or is struggling financially, switching from prepay can be tricky. At the very least you will need to pay any energy debts before a supplier will switch you over to a post-pay tariff.
Who your supplier is plays a part when it comes to paying for new meters. British Gas, EDF Energy and E.ON all carry out the procedure free, while SSE and Scottish Power charge upwards of £45 per fuel to switch you over. Npower will remove prepayment meters free, but only if the meter has been inherited due to a house move.
If you’re a tenant you’ll need to ask your landlord’s permission before getting the meter changed.
However, prepayment customers can switch to a rival provider’s prepay tariff and transfer any existing debt to the new provider. Last November Ofgem upped the amount of debt that can be transferred from £200 to £500.
While in theory providers compete on price for prepay customers, there’s little in it. Moneysupermarket says the cheapest tariff is from EDF Energy at £1,332 a year and the most expensive, from Scottish Power, is £1,368.
Your editorial comments (13 April) were well made. There are a number of areas that urgently need to be addressed. First, how is it that none of these banking issues appear to have been identified by the auditors, in their “going concern” assessments. Is it reasonable to expect regulators to know more about what is going on inside an organisation than an auditor? Regulators can help protect consumer interests through pricing regulation but, if they are really involved with detailed internal process assessment, what are the auditors doing? Perhaps the auditing function should also have a formal responsibility to customers, as well as to shareholders.
Second, there is scope for a major investigation into how banks actually add value to society. In essence, the sectors’ profits and bonuses are ultimately paid for by their customers.
Third, there is a need to investigate the extent to which “selling” is, almost by definition, unprofessional. The concept of being professional should mean that the interests of the customer/client come first. Where the seller operates within an incentive structure that benefits both the seller and others in their organisation, the net result will almost inevitably be defined as mis-selling.
The horrific consequences that have arisen in such areas as PPI etc, probably also apply to much of the pay-day loan industry, as well as a significant part of international lending. A major inquiry into the nature and future of the finance sector is long overdue, but there are also many important questions urgently in need of further research.
Emeritus professor Bruce Lloyd
South Bank University
• It is obvious many of the top executives of the failed banks had no actual financial expertise; they are like someone pretending to be a doctor, or a fake architect whose buildings collapse, guilty of misrepresentation. The regulator may be surprised no bank bosses have faced charges – we all are.
• As a research and advocacy group that has for years called attention to the murky world of tax havens, we welcome your report (Leaks reveal secrets of the rich who hide cash offshore, 4 April). But you should also have dispelled the myth advocated by some proponents that tax havens promote greater tax efficiency through competition; the evidence in economic literature is scanty at best. What is clear is that this benefit has not been enough to prevent tax havens from going bankrupt.
In September 2009, the Cayman Islands, one of the largest, faced bankruptcy and was unable to pay its government employees. Britain, which oversees the territory, was forced to bail out the Cayman authorities. Recently, Cyprus went belly up and had to be rescued by the EU, ECB, and IMF.
Investors need to realise that the lack of prudential regulations and oversight allows tax havens to pass on the cost-savings to them as higher returns. But with higher returns come higher risks. They implicitly accepted those risks when they invested in tax havens. In the event the financial risks pile up – as they inevitably must – and the house of cards comes crashing down, investors should not expect taxpayers to foot the bill.
Lead economist, Global Financial Integrity, Washington DC
Last week a panel of experts advised readers on how to expand their small businesses. Here are the best bits from our live Q&A
Jemma Wilson, founder of Crumbs and Doilies, a cupcake baking business which launched in 2006
Sourcing supplies at wholesale prices: Finding wholesale suppliers can be difficult. Some wholesalers are a little bit stuck in the past (I have one supplier who still supplies the catalogue on a CD-rom). Also, you would be surprised how much price can vary between companies supplying similar products. Make sure you get a few prices before choosing a supplier and try and use as few suppliers as possible. This will cut down on delivery charges and staggered supplies. It’ll probably cut carbon emissions too.
Use the phone to get in touch with potential suppliers. In my experience I have received the best service when dealing with a real person. You can build up a relationship with your supplier which can help down the line with cost cutting and problems.
Personalising packaging: There are lots of things you can do to regular stock packaging to make it yours. Stickers are a perfect example. We now have all of our packaging custom-made, but in the early days and until not so long ago, we used boxes and other types of packaging that were held in stock with our suppliers and we simply pasted our flyers or stickers on to them. Sounds ropey but it actually looked really great. Getting custom packaging made can be incredibly expensive so make sure you shop around for the best prices.
Andy Lopata, expert on networking strategy the author of three books on networking
Getting the word out: The golden rule with all social networks is to ‘engage rather than broadcast’. People don’t want to be sold to on social networks. They want you to listen to them, share useful information and get to know you. Frustratingly, this takes time but you sow the seeds to reap the rewards over time. Use Twitter or Facebook to get know your audience and position yourself as an expert and resource for your potential clients and the people who influence them.
James Gill, partner at The Pen Company, a family business which sells upmarket stationery
Ensuring good cashflow: A potentially sound and successful business can fail due to poor cashflow management. For someone starting out I would recommend:
• Get hold of an accounting package. Your accountant will probably have a favourite that he or she likes to work with and will recommend.
• Enter all of your invoices, payments and income regularly – once a week is good. Reconcile your bank statement as soon as it arrives. This way you will know exactly how you stand and will be able to see your commitments at least one month ahead. Estimate future income realistically.
• Negotiate with your suppliers: once you have a relationship with them, many suppliers will give extended terms to customers they trust. They may also be prepared to supply in smaller volume more regularly if you ask, although you will incur more delivery charges.
• Be realistic: don’t assume things will automatically go well, just because you want them to.
• If you see a problem looming, confront it. Contact the other parties that may be affected and explain the situation, what you are doing about it and ask for their co-operation. Knowledge is power and the more information you have the better decisions you will make and the more accurate your planning will be. Keep on top of the stats.
Simon Calderbank, client director for Acquire New Business
Recognising the importance of your brand: Branding is so much more than a logo. Your brand is the emotional reaction someone has when they say your company name – it’s everything they think and feel about your organisation. Think of your brand as a symbolic representation of your company, from the way you deliver your service and the advice you give to the way you answer the phone. It’s the sum total of everything you do to interact with your customers, colleagues, suppliers and market.
Imran Merza, co-founder of Jealous Sweets
Knowing what help is available: Depending on the type of business there are a few options, such as the enterprise capital funds. They are government-backed venture capital funds that aim to invest in fast-growing small businesses. I think getting a business mentor is probably the best way to move forward, someone who can give you tailored advice.
Alex Cohen, founder of Xander Marketing with more than a decade of experience in the field
Recognising the best marketing channels: WIth any marketing channel it’s worth asking ‘What is the purpose?’ first. Just because other people are on Facebook or other businesses are on LinkedIn, it doesn’t necessarily mean you should be there. You could try going door to door? What about sending an email with a free white paper? Maybe send a gimmick through the post or advertise in a trade magazine? There are lots of options and sometimes with marketing it’s a case of trying a few and seeing what sticks. I would try a few channels and see what works.
Annette Du Bois, co-founder of Smangel (Social Media Angel) and author of Big Profit Thinking To Stop Your Small Business Sinking
Having a good mix of strategies: The most important thing is to know who your customer is and what you’re really selling to help you maximise your efforts. Most of these are about sowing seeds to farm in the future. One of the gems that a lot of business owners miss is in the ‘follow up’ process, think of it as relationship marketing that continues to build the trust and credibility to make it easier for people to buy from you.
Gillian Harris, managing director of Gilliangladrag
Working with freelances: I employ quite a lot of freelances and tutors at the shop. Always make sure it’s kept business-like. They are indeed your employee, as you are paying their wages, but that doesn’t mean you can’t be friendly. It’s just important to establish the working relationship from the offset – to make sure they are working for you in the way you want them to.
Taking on employees: Sometimes it’s really difficult to let go and not be a control freak. But unless you can give your employees a degree of responsibility they won’t work to their potential. So sometimes it pays off to let go of things you really shouldn’t be doing. This allows you to move forward yourself and expand your business.
It is risky taking on employees – and all the associated hassles that that brings. But sometimes companies can’t move forward until they do. The most important thing is to find the right people, so keep looking until you do.
It’s worrying to think that your employees might run off with your customers and go and do their own thing, but you need to remain confident in what you do, and try and find staff who just want a job and aren’t entrepreneurial themselves. It’s just a question of advertising and interviewing until you find the right person.
Click here to read the full Q&A
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Category : Stocks
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