SVE Starvest Plc

RNS No3786f
SAVE GROUP PLC
3rd June 1998


                      SAVE GROUP PLC
                 CHAIRMANS AGM STATEMENT
                             
                             
A number of very significant events have occurred since the
year end that cement my previously articulated view that
Price Watch, as it is known, is drawing to a close.

Price Watch was a campaign by Esso to regain market share
by using price as the sole marketing tool. It started in
September 1995 and could only be permanently successful if
it triggered the restructuring of the UK downstream
industry. By definition, this meant that the weaker players
had to go; that is the privately owned dealer site and
vulnerable oil company supplier. As a result of Price Watch
the OFT was instructed to look into the position.

Up to the year end we had seen the demise of several
thousand privately owned dealer sites and the withdrawal
from the market place of a number of suppliers, including
Burmah, Mobil and several smaller companies. Since the year
end, Shell has absorbed Gulf and the Gulf refinery closed,
Texaco has taken over Proteus Petroleum, British Fuels
parent, CPL Industries Limited, has just announced the
takeover of UK Petroleum (At a cash price of #29m to
include 11 Company Owned Sites and 715 Dealer Contracts),
Dupont has just put Conoco (Jet) world wide up for
disposal, Repsol UK is also for sale and the OFT has
reported.

There will be more to come, we have not yet reached the end
of the restructuring. I believe that the Esso market share
is once again falling, price having lost its exclusivity.
To reverse this, Esso can only make an acquisition or
reintroduce a forecourt promotion. Shell are known to
aspire to one of the top two places in any market that they
are in, but are currently languishing behind Esso and BP.
As Shell already have a very good forecourt promotion watch
out for a further acquisition, maybe one that would include
the closing down of another refinery. Of the other major
players; Texaco, Total, Conoco (Jet), Fina, Elf, Murco, Q8
and Repsol, only Total is well balanced between its
upstream and its downstream operations. The others all
refine far more than they can retail through their branded
sites.

I have not yet referred to the OFT Report, which must be
considered good news for those, other than Supermarkets,
engaged in the retail selling of petrol and diesel. Whilst
I was disappointed that in admitting that petrol was sold
at a loss, the OFT chose to wash over the fact by saying
that this is no longer happening. It may not have brought
back the thousands of petrol stations that closed but it
would have helped to restore the dignity of those who went
out of business.

The one major conclusion and recommendation that the OFT
made was in relation to the Supermarkets. For a long time
the view has been held that the Supermarkets have been
working, and therefore competing, with an unfair advantage.
Historically, petrol stations have been paying rates based
on the volume of petrol sold whilst Supermarkets have been
assessed as part of the store. The OFT has recommended to
the Valuation Office that this method of assessment be
changed from the next revaluation. Therefore with effect
from April 2000, the Supermarket cost base will go up by as
much as 1p per litre or #100m per annum. Clearly for the
industry as a whole to be able to increase road fuel prices
by just 1p per litre would increase revenues from
downstream operations by some #400m per annum.

Trading for Save this year so far has been encouraging. Due
to the collapse of the oil price which served to keep the
price war going in 1996 and 1997, there has been little
desire to cut prices at the pump further and therefore
gross margins have remained stable if still somewhat
inadequate. I suspect that the position of Conoco (Jet) and
Repsol will militate against increasing margins to any
great extent in the near future.

April 1998 will be remembered as the wettest April for
nearly 200 years. Whilst this only had a very marginal
effect on the growth we have enjoyed in our petrol sales
this year it had a very marked effect on our car wash
sales, why wash your car if it is going to rain every day?
This cost us about #300,000 in reduced profit in the month
of April.

Saves fuel sales however have been very buoyant,
recovering very strongly against the overall market as the
upstream suppliers find themselves under extreme pressure
from a low crude price and as Save commenced to be
competitive on all its sites. January 1998 was broadly
unchanged, however, February was up 5%, March 6%, April 4%
and May 9%, well up on the industry as a whole.

Gearing on a year on year basis will be substantially lower
at the half year, as we take advantage of the opportunities
brought about by the expiration of Burmahs old 10 year ICI
supply agreement.

I believe that changes in the industry will continue to
help Save and we remain alert to any opportunities.
Increased profitability compared with 1997 will depend on
sales and prices, but subject to that, I hope to report an
increase in comparative profits at the half year and a
maintained dividend. We have our sales increasing, and we
will also look for the opportunity to increase prices as
the major suppliers continue to lose revenues upstream.

The fact is, in the absence of unforseen circumstances, we
are in for long period of low crude oil prices. The
industry as a whole will simply have to make more money
downstream to compensate for the loss of revenue upstream.
Save, with its good sites in good locations, must benefit
from this process as it will from the increasing cost base
of the supermarkets resulting from any implementation of
the OFT recommendation on business rates.


R James Frost
Chairman


Contacts:   James Frost
            Save Group                01296 436661

            Tim Anderson
            Buchanan Communications   0171 466 5000

END

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