News in Brief: Shell, growth forecast dips, lorry driver shortage, E.ON, cost reduction

News in Brief

Shell's profits dive ahead of shareholder vote

Shell has reported a sharp drop in profits just a week before shareholders vote on its planned takeover of smaller rival BG Group.

For 2016’s fourth quarter the Dutch company expects profits of £1.1bn to £1.3 ($1.6bn to $1.9bn), less than half the £2.9bn ($4.2bn) it made in 2015.

Shell International expects full year profits of £7.3bn to £7.5bn ($10.4bn to $10.7bn), below its £7.6bn ($10.8bn) guidance, reported the BBC.

The oil firm has issued the preliminary results to enable investors to have up-to-date information on its performance ahead of the vote on 27 January.

Its shares fell 3.7% in early trading yesterday (20 January).

But chief executive Ben van Beurden said he was “pleased” with the results.

He added: “The completion of the BG transaction, which we are expecting in a matter of weeks, will mark the start of a new chapter in Shell, to rejuvenate the company, and improve shareholder returns.”

Execs ‘pessimistic’ about growth

Global chief executives are more pessimistic about growth compared to the start 2015, according to a survey.

The report by consultants PwC revealed only 27% of those interviewed thought growth would improve in 2016 against 37% the year before.

Business leaders are increasingly worried about geopolitical risks as well as China’s economic slowdown and the falling oil price, reported the BBC.

The findings chime with a report by the International Monetary Fund (IMF) that downgraded global growth forecasts.

The IMF said that it predicts economic activity to expand by 3.4% in 2016, down from an estimate of 3.6% in October 2015.

PwC’s survey, released ahead of the annual World Economic Forum, held at Davos in the Swiss Alps, interviewed more than 1,400 chief executives across 83 countries.

Lack of fresh blood causes lorry driver shortage

Only one-in-five young motorists are willing to consider lorry driving as a career, according to a survey.

A study carried out by training course specialists found 18 to 24 years old are among the least likely age group to consider the profession. Among the reasons cited for not wanting to work in trucking were a perceived lack of career progression, boredom and the training costs to become a driver, which are around £3,000 for the CPC professional driver qualification.

HGV training expert Gary Benardout believes the looming logistical crisis can only be addressed by enticing young drivers to the sector.

The chronic lorry driver shortage is set to worsen, with 50,000 drivers already needed by 2020, as revealed by the Road Haulage Association (RHA).

Benardout of is leading the push to bring young drivers to the profession. The government announced it had agreed to a HGV Driver Trailblazer Apprenticeship, although the full details, including the financial aspect of this, are yet to emerge.

“The UK is utterly reliant on road haulage, and commerce will take a huge hit if this issue isn’t addressed immediately,” says Benardout. “It won’t just be the logistics industry that suffers, but all businesses who in any way rely on road freight, which is to say, pretty much all of them. That means delayed deliveries, frustrated customers, higher costs and lost revenue.”

The 600,000 HGV-licensed drivers currently registered in the UK have an average age of 57, with around a quarter set to retire in the coming decade.

E.ON cuts gas prices

E.ON is set to cut the price of gas by 5.1% for two million customers on its standard tariff as of 1 February.

The energy firm, which is the first of the big six to announce a price cut, said the average annual bill for direct debit customers would fall by £32 to £1,047, saving customers the equivalent of three weeks of gas use.

The UK’s largest energy providers have come under increasing pressure to cut bills against a backdrop of falling wholesale costs, reported The Guardian.

The energy regulator Ofgem joined the chorus, as chief executive Dermot Nolan said: “I think they are overcharging in many cases.”

E.ON said that the price cut was in response to a fall in the costs it faced for buying energy, but insisted there were good reasons why the drop did not fully reflect the decrease in wholesale prices.

Execs prioritise cost reduction

Executives believe strategic objective to reduce costs is a main priority for 2016, according to research.

A survey by finance consultants Barcanet found three-quarters of the CEOs, CFOs and directors surveyed are not looking at growth, but cost reduction activities to protect their margins and retain cash, with a quarter requiring savings more than 10%.

The study asked 50 leading businesses, each with a turnover ranging from £300m to £5bn, to share their thoughts on their strategy and challenges for the year ahead (2016).

One-third of responders said lack of good quality data is the biggest obstacle to cost control.

Barcanet founder Ian Yates said: “Whilst identifying cost reduction is a great first step, businesses need to ask themselves how they are going to achieve this.”

Almost two-thirds of those surveyed have the responsibility of cost control and work with the CFO, while only 5% of companies look to all other employees to control costs.

Yates believes attitudes towards accountability and a company-wide approach to cost reduction is necessary. He said: “Many businesses are looking solely to the CFO and finance department to control costs, but to truly make an impact the whole organisation should be looking to become more efficient and drive costs down.”