The Bluffer's Guide

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The Independent Online
Why is it in the news?

It's the time of the annual general meeting again. Last year 6,000 shareholders and a sow named Cedric descended on Docklands to berate the directors about boardroom greed, lousy service and just about everything else.

Will there be pigs?

No plans for another porcine protest have been revealed, but the two- legged chief executive, Cedric Brown, will make his final appearance before retiring.

Is pay still an issue?

No doubt Cedric's retirement package will be. His pension, perks and consultancy fees almost match his pounds 493,000 salary. But shareholders have a fresh gripe - the company's miserable financial performance.

Miserable?

Pre-tax profits fell 21 per cent to pounds 986m last year. The shares have been one of the worst performers in the Footsie index of large companies. And there is now talk of a dividend cut. The "Sids" who piled into the shares 10 years ago are now sitting on a very pedestrian return.

But it's a cast-iron monopoly, isn't it?

Not any more. Competition was introduced for business customers some years back. And the domestic market is being opened up to competition right now, starting in the West Country.

Any other problems?

You bet. You can sum them up in three words: take or pay.

Take or pay?

The company is locked into long-term deals (known as "take or pay" contracts) under which it is obliged to buy far more gas from North Sea producers than it now actually needs. With deregulation threatening sales and spot prices falling, these could cost it pounds 520m a year.

What's the strategy then?

British Gas has gone for the fashionable option - demerger. The regulated pipeline monopoly is to be called TransCo International and separated from the smaller chunk of the business which does the actual drilling, to be known as British Gas Energy. Shareholders will end up with shares in both entities.

What's the point?

Expect to hear about competitive re-organisation or some such trendy, business school babble. The more compelling reason - one unlikely to be heard from the rostrum - is that it will ringfence the potential losses from those disastrous take-or-pay contracts. BGE will take the pain but Transco will be untouched.

And what about the customers?

Oh, them. Expect to hear a fair amount of flak from the floor about customer service. The company had to relinquish its Charter Mark certificate when complaints to the industry regulator, Ofgas, doubled to almost 50,000 last year. The response has been to appoint a new "managing director, quality & customer service". Bluffers should check their bills twice anyway.

TOMORROW

Statistics: Feb visible trade balance, March non-EU trade, Q1 preliminary GDP, provisional April M0.

Interims: Ashbourne, Gardiner, Grampian, Moran, Utility Cable.

Finals: Holders Technology, SWP Group, VTR.

TUESDAY

Statistics: UK British banking groups mortgage lending.

Interims: Air London International.

Finals: James Finlay, Parambe, Tullow Oil.

WEDNESDAY

Statistics: April purchasing managers survey, March final M4, bank lending, and consumer credit.

Interims: BAT Industries (Q), Biotechnology Investments (Q), Carr's Milling, MMT Computing.

Finals: Shiloh.

THURSDAY

Statistics: April official reserves.

Interims: Kwik Save Group, Unilever (Q1).

Finals: Hopkinsons Group.

FRIDAY

Nothing scheduled.

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