British investors turn to energy and IT

After the protracted effects of the economic recession led many local UK investors to cut back on their investment budgets and scale down operations, 2011 brought the first sign of a recovery with overall British investments going up by almost 10 percent. UK investors are keeping a stiff upper lip and focusing on the full half of the glass, meaning new sources of future growth – energy and IT.

Simona Bazavan

“2011 was a difficult year for British investors because Romania is still recovering from the recession, posting a minimal growth in GDP. However, British companies are generally well managed and they coped well. I know of no British companies who left Romania,” Raymond Breden, executive chairman of the British Romanian Chamber of Commerce (BRCC), told BR.

British firms invested EUR 69 million in 2011, up 9.58 percent against 2010, and making the UK the 11th biggest investor in the country, according to data from the National Trade Register Office (ONRC), cited by the British Embassy to Bucharest. The number of newly registered British companies also went up by 7.6 percent last year, totaling 4,437 firms.

Telecommunications, the pharma industry, construction and manufacturing are the fields where UK firms have a strong presence in Romania. And IT and energy are joining the list as investors look for new sources of growth.

Vodafone heads the line

The first name that comes to mind when talking about the British presence in Romania is undoubtedly Vodafone. The UK telecom company has invested some EUR 2.7 billion in Romania since it started running operations here.

This year, one of its top priorities will be to secure the spectrum it needs during the auction of licenses organized by the Romanian state this summer.

Vodafone Romania had 8,327,280 customers at December 31, 2011, at the end of the third quarter of the financial year 2011/2012. Its mobile internet customer base grew by 77 percent quarter-to-quarter and by 75 percent year-on-year.

Meanwhile, revenues from mobile internet increased by 33 percent quarter-to-quarter, and by 58 percent year-on-year.

Vodafone’s mobile average revenue per user (ARPU) was EUR 7.3 for the quarter ended December 31, 2011, a growth of 1.4 percent on the previous quarter and of 9.3 percent year-on-year.

At December 31, 2011, contract subscribers accounted for 41 percent and prepaid for the other 59 percent of Vodafone Romania’s total customer base.

Looking for healthy profits

British pharmaceutical giant GSK invested some USD 141 million in Romania between 1998 and 2011, Pascal Prigent, general director of GSK Romania, told BR. Out of this USD 106 million went into the company’s factory in Brasov.

GSK plans to further consolidate its local business and says it wants to play an important part in the reform of the local healthcare system through continuous dialog with the authorities and medical services suppliers.

Prigent says the local pharma market is a contradictory one. On one hand there are obstacles, like the overall unpredictability and volatility, which make it hard for a company to make plans, and the lack of transparency in decision-making. On the other hand there are also many opportunities to develop the business. “We could say that there are unsatisfied medical needs (…) and the market will further develop as these people will require medical care and treatment,” explained Prigent. In 2011, the company’s investments in Romania amounted to USD 16.25 million.

Melrose finds a place on local market

The local oil and gas sector has proved an appealing industry for UK investors in the past year. The British ambassador to Bucharest, Martin Harris, announced on his blog last October that Melrose Resources and its partners (e.n. Petromar Resources) will invest approximately USD 130 million in oil exploration in the Black Sea.

Melrose Resources is a UK-listed oil and gas exploration, development and production company with core assets in North Africa and Eastern Europe.

In Romania, Melrose holds operated interests in two exploration concessions in the shallow waters of the Black Sea – Muridava and Est Cobalcescu. The two blocks have a combined area of 2,000 sqkm and have proven exploration plays and attractive prospectivity, according to the company.

Melrose Resources is not the only British company interested in oil and gas exploration in Romania. Zeta Petroleum, an oil and gas firm founded in 2005 in the UK and acquired by an Australian company last year, attracted some USD 8.7 million this April under its initial public offering on the Australian Stock Exchange (ASX).

The money raised from this IPO will be used to fund the development of two onshore gas and oil fields the firm owns in Romania – Bobocu and Jimbolia. The Bobocu gas field is located 20 km northeast of Buzau and 110 km northeast of Bucharest. It was discovered in 1Issues966. Production started in 1977 but was abandoned in 1995 due to problems of sand influx in well boreholes from producing reservoirs. Jimbolia oil field is located about 40 km east of Timisoara on Romania’s border with Serbia.

Hiring local brains

British IT company Endava posted a 60 percent growth y-o-y in its business in Romania in 2011, giving it a turnover of EUR 9.2 million, with a quarter of the company’s sales being achieved locally.

“Endava’s investments in Romania have so far created about 500 jobs. Out of this figure, approximately 100 jobs were added in 2011 and in the first five months of this year another 150 hires took place. By yearend we estimate another 250 jobs will be created,” Radu Grosu, delivery unit manager at Endava Bucharest, told BR. Romania is an attractive location for IT companies. The reasons for this are the good qualifications of graduates, geographical proximity to large global economic centers, cultural affinities, the IT infrastructure which is constantly developing and fiscal incentives for the IT sector, said Grosu. Only 9 percent of the company’s sales come from the region.

By the end of this year Endava plans to have more than 750 employees in its three centers located in Bucharest, Cluj and Iasi. As for sales expectations, Grosu said the company wants to maintain a similar turnover growth rate to recent years, of around 25 percent.

Finance factor

Britain’s Royal Bank of Scotland has been active in Romania since 2007 when it successfully led the consortium bid for ABN AMRO, and in October 2008 the bank was rebranded locally as RBS.

Back in Britain, RBS, which received GBP 45.5 billion from taxpayers during the world’s biggest bank bailout, announced job cuts and asset sales at the beginning of the year in order to reduce its so-called “non-core” division.

After unsuccessfully trying to sell its local business last year, RBS Romania announced plans to sell only its retail division and focus on corporate banking, its initial core activity. In Romania, RBS had a EUR 1.26 billion exposure in 2011, down 4.5 percent y-o-y.

Elsewhere, consumer credit provider Provident Financial Romania reported a gross profit of EUR 4.7 million in 2011 and revenues of EUR 63 million, due to improved lending activities.The number of customers increased by 20 percent y-o-y to 249,000, while the volume of loans taken out also gained 17 percent y-o-y to EUR 101 million.

Provident, owned by the British group International Personal Finance (IPF), has invested over EUR 125 million in the last five years, and plans additional investments of EUR 30 million this year.

The beginning of the year brought changes for British insurance company Aviva in Romania. MetLife, Inc. acquired from Aviva plc its life insurance businesses in the Czech Republic (Aviva Czech Life) and Hungary (Aviva Hungary Life), and its life insurance and pension businesses in Romania (Aviva Romania Life and Pensions).

The transaction is expected to be completed this year, and is subject to regulatory approvals. The financial terms of the deal have not been disclosed. Aviva said last year that it had invested RON 243 million (approximately EUR 60 million) in the local market, with a RON 30 million increase in social capital for 2010.

Willbrook goes green

Last October Willbrook International completed the Willbrook Platinum Business and Convention Center. The scheme was built in compliance with green development guidelines following a total investment of EUR 100 million.

Willbrook Platinum Business and Convention Center, which comprises two buildings, is located near Baneasa Forest with direct access to DN1. The buildings include five floors with 37,000 sqm of class AAA office space. The project also features a convention center with 2,100 seats, a fitness center and a 400-seat restaurant.

There are 850 parking spaces

out of which 500 are underground. Realitatea TV, Pfizer and Samsung Electronics Romania are among the tenants in the project.

simona.bazavan@business-review.ro

British presence in Romania

Number of Companies: 1,412 companies with “active” status registered in Romania at the end of March 2012, with more than 10 percent British shareholding

Number of employees (2010): 32,887, up 2.9 percent y-o-y

Turnover 2010: EUR 2.2 billion, up 8.6 percent y-o-y

Financial status: At December 2010, out of all the companies, 894 (63.6 percent) recorded operating loss, up from 791 companies in 2009, 448 (31.9 percent) recorded operating profit, up from 402 in 2009 and 64 (4.5 percent) companies submitted nothing or did not declare an operating result, down from 213 companies in 2009.

Source: ICAP Romania

The Best of British: UK highlights

Vodafone

The British telecom company is the largest UK investor to Romania with EUR 2.7 billion spent here over the past 15 years. This year, one of the operator’s top priorities will be to secure the spectrum it needs during the auction of licenses organized by the Romanian state this summer.

GSK

British pharmaceutical giant GSK invested some USD 141 million in Romania between 1998 and 2011, out of which USD 106 went into the company’s factory in Brasov where it produces some of its international brands. Last year, the company’s investments in Romania amounted to USD 16.25 million. GSK plans to further consolidate its local operations.

Endava

IT company Endava posted a 60 percent growth y-o-y in its business in Romania in 2011, giving it a turnover of EUR 9.2 million. The company has continuously expanded over the past years, reaching about 500 employees in Romania, and says it wants to add another 250 by yearend.

Melrose Resources

The British oil and gas company will invest approximately USD 130 million in oil exploration in the Black Sea. Melrose holds operated interests in two exploration concessions in the shallow waters of the Black Sea – Muridava and Est Cobalcescu – which cover 2,000 sqm and have proven exploration potential.

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