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The Scotsman: Browne’s future could overshadow BP show

EXTRACT: Rising oil prices should still mean profits for the full year rise to more than £12bn this year, up from just over £11bn last time. BG Group is due to post figures today, while Royal Dutch Shell will deliver its second quarter update on Thursday.


Mon 24 Jul 2006

THE half-year earnings season will start in earnest this week with figures from the likes of BP and Northern Rock while the retirement date of BP chief executive Lord Browne could overshadow another round of strong quarterly results from the oil sector.

Merrill Lynch oil analyst Mark Iannotti opened up the succession debate in a note this week, asking whether the mandatory retirement of Browne at age 60 in February 2008 represented a medium-term risk for shareholders.

Browne became an executive director of BP in 1991 and took over from David Simon four years later. He must stand down in 2008 in accordance with BP’s rules on mandatory retirement for executive directors.

Iannotti said: “Our conclusion is quite simply that, given the legislative developments in age discrimination, Browne’s apparent desire to remain in active business life beyond 60 and his position as one of Europe’s leading industrialists, it is right to question on behalf of shareholders – before it is too late – BP’s imposed retirement of an executive of Browne’s calibre.”

Browne is expected to announce another record set of results for BP tomorrow, with profits forecast to be between $5.8 billion (£3.14bn) and $6.3bn in the second quarter.

However, such figures could sit awkwardly with recent headlines of refinery accidents, trading scandals and the group’s retreat from refinery business in the UK. Last week it closed 12 oil wells on Alaska’s North Slope as a precaution after whistleblowers alleged more than 50 were leaking.

Among those recent developments, BP is facing legal action over allegations that it cornered the propane market in the United States to drive up prices. BP’s falling production levels will also be on the agenda tomorrow, as it continues to feel the aftermath of last summer’s brutal hurricane season. Rising oil prices should still mean profits for the full year rise to more than £12bn this year, up from just over £11bn last time. BG Group is due to post figures today, while Royal Dutch Shell will deliver its second quarter update on Thursday.

Any discontent regarding Vodafone’s recent share price performance could be given an airing at the company’s annual meeting tomorrow.

Various newspaper reports have speculated that a group of shareholders planned to vote against the re-election of chief executive Arun Sarin and up to four other directors at the meeting.

They were said to be unhappy at the recent performance of the share price after almost three years under Sarin.

Overall, Barclays Stockbrokers expects revenues growth to be within Vodafone’s target range of between 5 per cent and 6.5 per cent, although uncertainties remain because of aggressive pricing from T-Mobile in Germany and the possible beneficial impact from higher roaming minutes used by customers visiting the World Cup.

While Northern Rock may be one of the smaller UK banks, it will play an important role on Wednesday in setting the tone for the banking sector’s forthcoming half-year results season.

As always, the main interest will be on any change in the number of households getting into arrears, which in Northern’s case should be towards the bottom end of industry averages. The Newcastle-based group should also have benefited from an improved lending performance as market conditions improve.

Another area of interest could be the plight of first-time buyers, after Northern reported a “small but encouraging increase” in the number of people trying to get on to the property ladder in April.

For the full year, profits are expected to rise to £581 million, from £494m a year earlier.

Sky still rising despite fears over churn
BSKYB is expected to report the addition of another 60,000 subscribers when it reports figures for the final quarter of its financial year on Friday. Helped by the launch of high definition television, the figure should give Sky a customer base well in excess of eight million.

The level of churn should also be interesting as Sky fights rivals such as NTL, which recently threw down the gauntlet by buying Virgin Mobile and pledging to offer a “fourplay” service of pay TV, internet access, mobile phone calls and fixed-line telephony. Sky hit back last week by announcing its own broadband offer, although the cost of the strategy caused some concern in the City. Analysts forecast annual revenues due to hit £4.2 billion and full-year profits in the region of £764 million.

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