02/02/2016 BBC Business Live


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This is Business Live from BBC News with Alice Baxter and Sally Bundock.


They may pump the black stuff, but they've now headed into the red.


Oil giant BP reveals just how bad things are with their latest set


of results as they grapples with falling revenues and further


Live from London, that's our top story on Tuesday, 2nd February.


Oil giant BP has reported an annual loss of $6.5 billion in 2015,


its worst results in more than 20 years.


The British company struggled with a sharp downturn


Also in the programme, Alphabet, Google's parent company,


has surpassed Apple as the world's most valuable company


after its latest set of bumper earnings.


We'll keep you up-to-date with all the latest from the markets.


Asian shares slip on sliding crude oil prices and and downbeat


And Europe follows suit, opening lower.


And the boss of Icelandair will be with us in the studio to tell us


about its attempts to mix it up with the big boys of global air


travel and some try some unusual methods to win passengers.


Whatsapp boasts it now has a billion users.


Oil Giant BP has reported a headline loss of $6.5 billion for 2015 as it


massively downgraded the value of its oil reserves


Stripping out the effect of that adjustment, the company made profits


of $5.9 billion for the year - a 51% fall since last year


and the figures for the last quarter showed a 90% drop


As you can see, the firms share price has had a rough ride over


While dealing with the plummeting oil prices it has also been hit


with billions of dollars of fines relating to the Deep Water Horizon


Last month the company said it would cut 4,000 jobs globally


while slashing billions of dollars from spending on new projects.


Today the firm also announced that it would cut up to three


news will be worrying for shareholders and in particular


pension funds that rely on the large dividend which is currently worth


This is how the shares are doing this morning as well


BP currently down over 5.6%. Brent Crude hovering under $34, so that


recent rally we saw, that's pairing back.


I am joined now by Markets analyst, Jason Gammel from the investment


Al Is outlined the grim numbers there? Yes, it was a disappointing


number. That is a bit troubling. The cash generation was also relatively


weak in the quarter. They did generate ?5 billion in cash but ?3


billion was from changes in the balance sheet. Why do you think they


are retaining the dividend? Well, I think the dividend is something that


is fairly sacrosanct at BP and they want to be able to distribute cash


to shareholders, the owners of their business. The dividend is in 2016


going to be kind of a trade-off. There's about ?17 billion, they'll


generate ?20 billion so there is about a $3 billion short fall that


needs to come in through from incremental debt. You wonder going


forward what will the balance be between debt and capital expenditure


in the future and also where its investment is in the long-term


because against its peers, BP has lowest production growth really at


the moment? Yes. That's right. I think really most companies are


expecting that we'll see an increase in oil price from where we are at


today. So I think that really, the safety of the dividend is somewhat


reliant on on improvement in price. BP will invest but their growth is


limited than their peers so they'll have catching up to do. A new Depp


tell Chief Executive was announced yesterday, Lemar McKay, who's been


at BP for some time. Is this the beginning of a succession plan as


far as Bob Dudley is concerned or is it about dealing with the


challenging times? I would tend to lean towards the latter but we don't


really know, this was only announced yesterday afternoon, I imagine


they'll speak about it on today's conference call. He's been at BP for


a long time, perhaps not the right age to be successor to Bob Dudley


given that they are only about two years apart I believe but we'll hear


more about that this afternoon. Thank you so much, Jason Gammel. BP


very much in focus, a big player on the FTSE 100 and the shares down


over 5%. So let's have a look at some of the stories on the BBC live


page in a minute, but you have other stories to come first.


In other news, it's reported Yahoo's boss Marissa Mayer is set to reveal


cost-cutting plans that include slashing 15% of its workforce -


that's roughly 1,600 jobs, and closing some business units.


Plans could be announced after Yahoo's fourth-quarter


WhatsApp has hit the billion user mark. The number of people using it


has more than doubled since Facebook bought it in 2014.


Russia is lining up major state companies including Aeroflot,


diamond miner Alrosa and Rosneft, for potential privatisation


as the country looks for options to recoup revenues lost


The latest slide in crude prices is expected to drive Russia


into a second year of recession and has ripped a gaping hole


One story I would like to mention is national Australia Bank for some


time's been talking about trying to change its business and part of that


has been the demerger of Clydesdale bank. It would seem that that


demerger is off or at least the floatation is delayed for now.


Because of a credit rating query. That is the story that's broken in


the last hour which would effect many, many of you who're customers


with Clydesdale bank so keep an eye on that story. More on that on the


business live page. Sainsbury's have made an offer for


Home Retail Group who own Argos. A previous offer was rejected. We know


a deal is now going through. The jury is still out as to whether this


is a good deal. A lot more information on that as well on the


business live, as well as BP, the news we have just had out later in


the programme. We have Kamal Ahmed joining us shortly.


Let's take a look round the world at what business stories


And profits at games maker Nintendo have fallen 36% because of a lack


What is the latest? If you love playing video games, Nintendo is


famous for Super Mario and Splatoon and the like. The profits fell by


36% in the most recent quarter, the three months to December. The figure


came in at $241 million, below analyst estimates. The reason really


is because they need more hit titles, more games, software that


will sell their hardware, so we saw lower holiday sales of the Nintendo


Wii and the 3DS because people are not snapping up titles like they


used to. That said, it's a big year for the company. Nintendo is looking


for a new growth driver so there'll be a big shake-up of the company,


the biggest since 1970. So next month we are going to see the debut


of its first smartphone game call. It's also developing a new console


and there may be more on virtual reality. Investors were not


expecting too much because the shares fell about 1.5% in Tokyo


ahead of the afoundsment. Let's stay in the region


because Asian shares fell on Tuesday as crude oil extended it's heavy


losses from the previous session on continued oversupply fears,


hitting Asia's beleaguered energy stocks as most regional markets


retreated from a recent rally. Weak factory data from China


to the United States also added to the selling pressure,


although Shanghai and Hong Kong did Japan's Nikkei ended down 0.6%


as investors locked in profits after two straight days of big gains


following the Bank of Japan's surprise decision to introduce


negative interest rates In Europe all the major indexes have


followed Asia in opening lower. Alphabet, the company which owns


the search engine Google, has now overtaken Apple


to become the world's most Here's Nadia Tawfik to tell us more


on this and what's making the business world in


the United States today. Alphabet is $568 billion, so


surpassing Apple. If you look at the report, it was very much in line


with what investors expected. The revenue was up around 17% for the


quarter, off the back of its core Google business really and the


strength there with mobile ads and YouTube ads. So that was to be


expected. What we were looking for in this report is how the other part


of Alphabet, this new company with its other bets, other ventures which


are more ambitious, how that was affecting the overall revenue and


outlook of the company. Joining us at the markets


and the stories in the news He's the Chief Executive


for Nutmeg Investment Management. The first overnight results coming


through from Iowa. Quite interesting wasn't it? Absolutely fascinating.


We had so much last night, the transfer deadline day in the


football, the American election going on. And all this wonderful


economic and markets news as well, so for nerd like me it was just a


dream. You didn't sleep? Not at all. This story has three pillars to it.


The first one is that Ted Cruz is a really serious candidate and he's


come out having won the Iowa vote with a large share, about 28% of the


voters. Everybody thought that Trump would be the man because so many


first-time voters turned out. Not in Iowa though, because it's a kind of


Ted Cruz battleground, he was expecting to do well in this one? He


put so much effort into Iowa so if he hadn't won it would have been a


disaster. We saw the rise of Marco Rubio and I learnt that Iowa's one


of, if not the only state which has proportional voting, so the others


are all absolute, but in Iowa, Ted Cruz will get six votes, Trump will


get five and Rubio will as well, so they're almost tied.


Interesting that Hillary Clinton and Bernie Sanders are neck and neck?


Oh, and we don't know which way that is going to go. A couple of years


ago Romney was declared the winner, then Rick Santorum turned out to be


the winner. Amazingly close there. Really strong evangelical support.


Let's look at the Financial Times because this story here about a


spate of privatisations, a real reversal of what we have seen over


the course of Putin's decade and a half of rule in Russia where we have


seen a sort of maybe perhaps not straightforward nationalisation of a


lot of businesses but we have seen a decline in the sell off of shares of


a lot of the companies there? There's two reasons for that. One is


the sales in the early '90s which created the oligarch culture or the


few people, you know, the public have really rebelled against that,


there's been a big push back from the Russian population and Putin


recognises that. He doesn't want to make the same mistakes again. They


have to do something because of the hit the Russian economy is taking


with the oil prices? It's absolutely huge, the hole they have in their


budget. They are going to cut 10% of Government spending this year and


again, he's just asked his counterpart to say, please cut


another 5% 2010% off, can you imagine cutting 20% off the national


budget? ! The question is, could they sell anything in good value


because lots of their assets are energy based and now would be the


time to sell. Thank you very much.


Putinisation is what some are calling it on social media, as


opposed to privatisation. Icelandair looks


to freeze out the competition by offering the company's staff


including pilots and even the Chief Executive as personal tour


guides during transatlantic You're with Business


Live from BBC News. Sainsbury's has offered ?1.3 billion


to win control of Argos He is up north. Ben, tell us more.


Good morning girls. That's right, ?1.3 billion is what is on the


table. The deal is not yet a done deal. It just simply buys


Sainsbury's a little bit more time. They have agreed in principle this


cash and shares offer for Home Retail Group which owns the


retailer, Argos. They have got until 23rd February to finalise the deal.


You will know today is what we call put up or shut up dayment they had


to make a revised bid or walk away. The details of the revised bid is a


63% premium on the closing price of those Home Retail shares in January.


A deal they were holding out for, you will know they originally made


an offer that valued the firm at ?1 billion, but it was rejected in


November. Details of that only coming to light just recently. So


this is a revised offer, a higher offer, one worth ?1.3 billion.


Sainsbury's deciding to put up then. Are job cuts at Argos inevitable, do


we think? What you look at in the detail is what it means for areas or


towns or cities across the country that have both a Sainsbury's and an


Argos in close proximity. Sainsbury's says it expects to shut


a third of stores if they are close together and that is part of its


efforts to try and cut costs. It says it wants to save ?120 million


by rationalising the business. It means putting concessions from Argos


in a Sainsbury's store. That's inevitable and it is trying to


remove the overlap. The big question of why Sainsbury's is interested in


Argos. It comes down to the infrastructure that Argos has in


place. It is known as a retailer where you can get this stuff. Argos


spent a lot of money building the infrastructure to make sure people


are able to get deliveries quickly and that's something that


Sainsbury's wants. Ben, it is really good it check-in with you. Ben


Thompson there. He will be back tomorrow. This is Stelios, he has


launched an online grocery shop. You're watching Business Live.


Our top story: Underlying fourth-quarter profits


fell to $196 million, compared with $2.2 billion


for the same period Despite the poor results


the firm says its dividends Let's get the inside track


on what it takes to make a breakthrough in the competitive


world of Air travel. Icelandair is an Islandic airline


which operated out of 39 cities In recent years the airline has


grown considerably and this year they hope to transport 3.5 million


passengers that's 500,000 more One of the reasons for that growth


is Iceland's geographical location. Icelandair is able to offer low cost


one-stop transatlantic flights to passengers from other


countries in Europe The company now wants to build


on this success and is offering passengers on transatlantic routes


the option to stay in Iceland for up to seven nights at no


additional airfare cost. As a bit of a sweetener the firm


also says it will allow customers to use the company's staff including


pilots and even the Chief Executive as a personal tour guide


during their stopovers. With me is Birkir Holm Gounason,


Chief Executive for Icelandair. Welcome. Thank you. Let's talk about


this new buddy stop over idea that you're launching today. How will it


work? Basically, we have been offering a


stopover in Iceland since the 60s so people have the option to stay up to


seven nights on the way to North America or on the way back. Today we


are launching a service where staff will be a stopover buddy for one day


and I will be one of the buddies and we're going to take the passengers


around Iceland, show them our favourite places, locations and


restaurants and activities. Why do you want to introduce this? Do you


think Iceland is a country that's difficult to navigate as a tourist?


The general travel trend is changing. We did a survey among


11,000 tourists and people would like to spend more time with the


locals and the local culture instead of going to big tourist attractions.


So we believe the Airbnb and if you go to your friends you get to see


more interesting places. You know where to stay, where to eat, so we


want to be friendly. We are friendly, but we would like to show


it! But for those who are trying to get


from say London to a part of the United States, will look at going


via Iceland or via somewhere else to really reduce their costs? Yeah,


exactly. They are going to basically cut their air fare in half and go


via another destination. They don't necessarily want to stay for seven


days, they want to get on to cfl and crack on with their holiday there.


What makes you think it will be successful? The stopover project


increased 60% if recent years. A lot of people like to take a stopover in


Iceland because you don't have to pay anything additional in the air


fare. People go to the Will you Lagoon and all that. In our survey


and for the UK market, almost 70% of the people said they were


embarrassed they look liked a tourist. 23% said... No one wants to


look like a tourist, do they? 23% said they would rather like to


experience the local cultures, instead of going to the big tourist


attractions and 46% said that they would like to mix with the locals.


So I think this is something the travel trends are changing and


people if you look at Airbnb, house exchanges, people like to be around


the locals. A really interesting idea. It is. We shall watch to see


if it is successful or not. Thank you for coming. Thank you. And


telling us all about that. Let's take a closer look at a couple


of the bigger stories we have been Russian is lining up several


companies for potential privatisation as the Government


looks to compensate for the low price of oil. The New York Times is


reporting that Ted Cruz won the Iowa caucuses.


EasyJet airline founder Stelios has opened a trial Easyfood shop with


groceries sold at the knockdown price for 25 pence. I'm sure I can


pick up veg for 25 pence already. It is all orange inside as well!


Both BP and Alphabet have their results out and it's fair


to say they are at opposite ends on the spectrum.


Nice to see you, Kamal. It is such a busy day. I feel like I'm having to


catch my breath here. Do you want to start with BP and give us your


thoughts on that? BP, a really interesting business, clearly hugely


affected by the oil price. It has fallen 40% in the last year. If you


imagine an oil company, it is made out of two big drivers, oil


production, North Sea, Gulf of Mexico, exploration, that's


obviously been hit by the oil price drop. And it means that that is


really struggling now and fell to a loss in the final three months of


2015, compared to 2014, the second part of the business is downstream,


that's the refining, the selling of fuel to retail customers, that is


also struggling because the global slowdown has meant there is less


demand for refined products, it is losing more jobs in the downstream,


so these two engines are both spluttering and that's the problem.


The big message from Bob Dudley the Chief Executive has been this


morning, we will commit to the dividend. So at least investors and


savers and pension funds from around the world will be heaving a sigh of


relief. I was going to ask you about that. Many people are asking the


question, about the dividend can they really continue with that given


their financial situation? Well, obviously making a loss in parts of


your business is unsustainable. When I spoke to Bob Dudley two weeks ago,


he said that the oil price he thought would rise towards the end


of the year. He made a big bet that that would be the case, because cost


efficiencies, job cuts, taking on new debt, can only last for so long.


Otherwise, there will have to be another radical slimming of the


business. Quickly, Kamal, Alphabet, Google's parent company surpassing


Google as the world's most valuable company? Spectacular. A company that


has diversified in sharp contrast to Apple. Apple focussed on two or


three well done products. Google, android mobile, research, people are


using those things and they are highly, highly profitable. Thank


you, Kamal. So much more analysis online.


Thanks for your company. More Business Live tomorrow. Bye-bye.


Hello there. Storm Henry it starting to pull away from the UK now. This


wet weather front will bring


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