News

RETAIL - Mid-market still in fashion
Europe’s largest clothing retailer Inditex, the Spanish owner of Zara and seven other brands, reported a 25% rise in profits for the year to the end of January, with a net profit of €1.26bn, and like-for-like sales up by 5%. Despite the consumer downturn, Inditex, which has 3,691 stores in 68 countries, hopes to open 640 stores in 2008, including shops in Korea and Egypt. H&M, the Swedish fashion giant, has also bucked the trend, with profits up 19% and its strongest sales growth for five months.

FINANCE - Bank floats as oil gushes
Al Inma Bank has launched a €1.78bn initial public offering, the largest Saudi flotation and the latest regional IPO spurred by surging oil prices. The government-backed bank will offload 70% of its equity and focus on retail, commercial, treasury and investment banking operations. So far this year the Middle East has raised more than €2.54bn from IPOs, four times as much as the same period last year, according to Zawya.com. Meanwhile, Aldar, Abu Dhabi’s biggest property company, is thought to be hovering around big FTSE 100 developers, Hammerson, Land Securities and British Land. City analysts believe Hammerson the more likely to be bought.

PHARMACUTALS - Big pharma’s drug problem
Cheaper medicines could soon become widely available throughout the EU if the European Court of Justice upholds a preliminary legal opinion. A senior adviser at the European Court of Justice found that GlaxoSmithKline had breached European competition law when it refused fully to fill orders from a group of wholesalers in Greece where drug prices are among the lowest in Europe. GSK’s lawyers argued that the wholesalers had been placing larger orders for certain drugs, mainly so they could export them and enjoy the benefit of higher prices in other EU states. This parallel trade is thought to total €5bn a year, or 3% of European pharmaceutical sales. GSK says it will review the advocate-general’s opinion but that any final decision would be made by the Court of Justice.

HOSPITALITY - Dollar gloom, room boom
Ernst & Young’s annual hotel report suggests that the weak US dollar will shore up the US hospitality sector in 2008. The firm says the growing number of international tourists are spending more money, often upgrading to high-end accommodation because their local currency can buy, in some cases, more than twice what it did just a few years ago. Arrivals in the US have ballooned since April 2006, according to the Department of Commerce, and in the first 11 months of 2007 international visitors spent $111.6bn, up 13% during the same period in 2006. The current euro exchange rate means foreign business travellers are now able to take longer stays in US hotels, says the report. While vacationing Americans are less likely to travel beyond their own borders, the US’ economic slump has meant some hotel projects have been mothballed. A supply-demand imbalance – created by free-spending Europeans – could result in higher room rates in cities such as New York. The report also highlights the influx of foreign capital into the sector from private equity, high-net-worth individuals and sovereign funds.

DRINKS - Pernod gulps down Absolut
Pernod Ricard is to pay €5.7bn for Swedish vodka brand Absolut – over €1bn more than expected – which strengthens the French drinks giant’s presence in the US and closes the gap on of the world’s leading spirits group Diageo. Pernod plans to finance the deal entirely with debt, doubling its debt load to more than €11.45bn. Absolut is being sold by the Swedish government, which owns the vodka maker known officially as Vin & Sprit. Absolut represented “a tremendous opportunity” for Pernod, said chief executive Patrick Ricard announcing the deal in Paris. The Swedish vodka reinforces Pernod’s dominance in the more recession-proof premium spirits market. Pernod already owns high-end Chivas Regal cognac and Glenlivet whisky. In 2001, the company doubled its size overnight by acquiring more than one-third of the Seagram’s drinks business. In 2005 it bought rival Allied Domecq for $14bn.

PROPERTY - Demand for London’s offices crumble
Office rentals in central London fell by almost a third over the past six months because of economic uncertainty. Office take-up in the City of London fell 40% in the six months to March, compared with the six months previously, and 60% in the Docklands area as the effects of the credit crisis hit financial occupiers. There have been predictions of more than 10,000 job losses in the City in the wake of the sub-prime crisis. The sharp falls were disclosed in a quarterly update from Jones Lang LaSalle, which also showed the City office market was facing the first downward pressure on rents since 2004. It also predicts a 2% drop in prime rents in 2008, and a bigger fall for larger office lettings. Previous forecasts predicted growth. The fall in demand in the City could be a problem for developers of the 7.3m ft2 of office space under construction in the area due be completed in 2008 and 2009.

TELECOMS - North leads penetration
Denmark, Finland, Sweden and the Netherlands achieved broadband penetration rates of more than 30% by the end of 2007, according to European Commission figures. The UK, Belgium, Luxembourg and France, are hot on the top four’s heels, each of that will penetration rates above those of the US or Japan. At the bottom of the league table of broadband penetration in Europe sit Poland (8.4%) and Bulgaria (7.6%). The commissioner is concerned that incumbent telecommunication companies such as BT and France Telecom still dominate the telecoms market. Current operators hold more than 46% of broadband lines across Europe, and in seven member states control more than 60% of broadband connections, reads the press release announcing the figures. Incumbents still provide landlines to 87% of customers in the EU. In 12 countries, this figure rises to 95%. The European telecoms sector is worth around €300bn a year, or 2% of GDP, growing 1.9% last year. The mobile sector was worth €137bn last year, up 3.8% on 2006.