tv reports, page-9

sabre,

i commented the other day that branson hasn't had very many successful businesses and you said that was nonsense and i also said he makes himself a lot of money but nobody else....i.e investors in his businesses.

read the article below and also note the quote from it about the future demand for oil.

"Oil prices will continue to rise due to a combination of global demand and falling reserves," he told London's Telegraph newspaper last month.


George Lekakis

June 07, 2008 12:00am

RICHARD Branson's Virgin empire has come under severe financial pressure as the credit crunch and spiking oil prices wreak havoc in most of his businesses.

The man ranked last year by Forbes magazine as the world's 236th richest person, with a personal fortune estimated at almost $US8 billion, is preparing to absorb a few financial hits as growth slows in his key markets - Britain, the US and Australia.

Chief among Sir Richard's concerns are his airline businesses, including the international carrier Virgin Atlantic and the Australian domestic operator Virgin Blue.

The financial services businesses trading under the Virgin Money moniker are also suffering, particularly in Australia where it is no longer profitable for the business to distribute basic lending products such as mortgages and personal loans.

And in the US, the Virgin prepaid mobile operation which was floated on the New York Stock Exchange last year is in meltdown.

It's a tricky, perhaps ominous time for Sir Richard, whose faltering Australian and global activities demonstrate that his glossy brand is as vulnerable as any other to souring economic conditions.

Sir Richard is alert to the problems.

Last week he conceded that the international airline industry was poised for another shake-out as rising jet fuel costs magnify the vulnerability of low-margin carriers.

While he said he was confident that Virgin Atlantic would weather the cost blowout, he acknowledged that some international carriers would not survive.

"Oil prices will continue to rise due to a combination of global demand and falling reserves," he told London's Telegraph newspaper last month.

"The strong airlines will survive, but one or more major US carriers will go out of business this year."

Singapore Airlines has a 49 per cent stake in Virgin Atlantic, which operates various routes between Britain, the US, Africa and South Asia.

The airline paid Sir Richard $US1.6 billion for the minority stake in 1999, but now wants to sell out because it says the returns are disappointing.

"It's not a secret we regard it as an underperforming investment," Singapore Airlines chief Chew Choon Seng said on May 14.

Virgin Atlantic has suffered a sharp slide in earnings in the past two years as the price of jet kerosene has soared.

The company's profit fell to pound stg. 20.6 million in 2007 from pound stg. 65.6 million in 2006 as the cost explosion cut a swathe through profit margins.

Virgin Atlantic now faces the prospect of running up losses this year, as does the locally listed Virgin Blue.

Confusion surrounds the operating performance of the Australian air carrier after JP Morgan analysts Matthew Crowe and Russell Crichton-Browne warned clients on Thursday that Virgin Blue would not survive if it did not increase fares.

"Equity injections would be futile as prices would not cover costs," the analysts stated in a report.

"Even with $1 billion in equity Virgin Blue would become insolvent in this scenario."

The analysts have since backed away from the analysis included in their Thursday report, but not the bearish revisions to their earnings forecasts.

JP Morgan expects Virgin Blue's net profit to slide almost 60 per cent this year to $82 million and to $19 million in 2009.

Sir Richard also has headaches in the financial services sector, with his high-profile Virgin Money arm in Australia struggling to compete in key lending markets.

In fact, the global liquidity crisis has curtailed Virgin Money Australia (VMA) to the point where it is no longer able to market mortgages and personal loans to local borrowers.

VMA is a joint venture between Sir Richard and Macquarie Group, but the latter has pulled financial support for the embattled business which last year posted a net loss of $3.3 million.

Macquarie's pull-back is part of its wider decision to exit lending activities because of deteriorating credit markets.

The sub-prime crunch came at the worst time for VMA which also had a deficiency of capital and reserves of $5.3 million on March 30 last year.

This means the Australian entity was balance-sheet insolvent and poorly positioned to fund the business expansions that had been signalled by its local chief executive, David Wakeley.

VMA is now at the crossroads and faces a difficult future unless Sir Richard or Macquarie inject more capital into the business.

More than half of VMA's Sydney-based staff were made redundant this week after the company abandoned plans to launch a personal loan product.

The partnership with Macquarie is under review but any move by Sir Richard to buy out its stake may prove very costly.

Macquarie owns only about 10 per cent of VMA but is owed $18 million according to the 2007 accounts.

The Virgin brand is also doing it tough in the US.

Wireless communications provider Virgin Mobile USA, which was listed on Wall Street last year, has copped a hiding from investors amid disappointing results and heavy customer attrition.

The stock was trading above $US16 last October but closed on Thursday at under $US4.

The share price slump has wiped hundreds of millions from the value of Virgin Group's 35 per cent stake in the company.

South Korean mobile phone giant SK Mobile is now negotiating to buy out the business.

Another drain on Sir Richard's net worth is a fizzy drinks operation, Virgin Drinks Group. It posted a net loss of more than pound stg. 7 million last year and had net liabilities of pound stg. 131 million when it last reported in March 2007.

Virgin Drinks is one of more than 300 companies which are ultimately owned by Branson family companies, including Virgin Group Holdings, an entity incorporated in the British Virgin Islands.

Getting a precise measure on Sir Richard's net worth is almost impossible because financial accounts filed with regulators in the British Virgin Islands are not made public.

While Sir Richard looks like taking a big haircut on his net worth in 2008, consumers around the world might take some comfort from the fact that his hyper-active marketing machine will still be running in overdrive.