PRESS DIGEST - British business - Nov 1

The Times

PROFIT WARNING SENDS BT GROUP SHARES PLUNGING BELOW FLOTATION PRICE OF 1984

BT Group's (BT.L) profit warning and the loss of senior executive Francois Barrault resulted in the fall of its shares to a record low of 115.1 pence. The group said it was ditching efficiency targets at its global services unit and that full-year earnings would be below expectations. The company said its failure to cut costs and the ongoing decline at its higher margin UK operations destroyed any hope of pushing profits margins in its global unit to the 2011 target of 15 percent. BT said margins would remain between seven to eight percent. Staff in the global services unit are preparing for job losses at the group as it moves to cut costs.

CENTRICA FORCED INTO DEEP DISCOUNT ON 2.2 BILLION POUND RIGHTS ISSUE

Centrica (CNA.L) is poised to raise 2.2 billion pounds through a rights issue in order to fund its purchase of a 25 percent stake in British Energy BGY.L. The discounted rights issue is for 1.4 billion shares at 1.60 pounds each, which amounts to almost half of the group's closing price of 304 pence on Friday. Chief executive Sam Laidlaw said the proceeds would help pay for the 3.1 billion pound stake in the nuclear generator and that he expected to raise the rest of the cash from debt provided by the banks that have also underwritten the share issue.

THE CYCLE OF "BOOM BOOM" MAY BE OVER

Entertainment Rights ERT.L has issued its second profits warning in two months after breaching banking covenants and receiving a one million pound emergency loan. The company, which owns the rights to characters such as Postman Pat, has been given a covenant waiver to avoid another breach this month. Its balance sheet remains squeezed following the purchase of Classic Media for 106.9 million pounds last year. The business reported an operating loss of 105 million pounds for the eight months to August 31, on turnover of 20.3 million pounds. The loss was mainly due to the writedown of 83 million pounds in the value of some of its characters and franchises.

The Daily Telegraph

BRITISH GAS WILL NOT PASS ON LOWER COSTS

British Gas has said it will not cut customers' bills despite the 20 percent fall in wholesale gas prices since the summer. The company refused to promise loser tariffs, even though it admitted it expects to make more money in the second half due to the earlier price hikes. The company has raised prices twice in 2008, taking the average gas bill from 568 pounds to 882 pounds, according to Energywatch. Nick Luff, of parent company Centrica (CNA.L), said: "Gas prices have not come down in the way oil prices have and we would need to see a sustained wholesale fall before we cut consumer prices."

BACK TO BLACKS

Outdoor clothing retailer Blacks Leisure BSLA.L could sell its Freespirit and O'Neill surfwear stores as part of a strategic review. Mike Ashley, the owner of Sports Direct, who owns 29 percent of Blacks, last year threatened to instigate a boardroom revolt unless it cancelled its plans to sell Freespirit. On Friday, however, Neil Gillis, chief executive of Blacks Leisure, said Ashley's opposition was "no longer an issue". The company's losses came in at 6.7 million pounds for the six months to August 30 and like-for-like sales dropped 7.7 percent.

SOUTHERN CROSS REFINANCES ITS DEBT

Shares in Southern Cross climbed 48 percent to 95 pence on Friday after the care homes operator confirmed it had managed to refinance its debt. The group's new deal gives it facilities worth 166.2 million pounds, with most not due for renewal until 2010. Southern Cross has seen its shares plummet from a 538 pence high following a profits warning in June and revealed it had breached its banking covenants by failing to sell a portfolio of homes bought with borrowed cash. Chairman Ray Miles said the group was now free to focus on "providing high-quality services to our residents, maintaining high occupancy rates and delivering shareholder value".

The Independent

CITY FURY OVER TERMS OF BARCLAYS BAILOUT

Barclays (BARC.L) could face an investor revolt over its decision to take cash from Middle Eastern investors instead of accepting the UK government bailout. The bank announced on Friday it will raise 7.3 billion pounds from parties in Qatar and Abu Dhabi, who will own up to a third of Barclays. However, the move still requires the approval of the bank's existing shareholders and the fall in its share price suggests the move may not proceed without protest. Barclays executives argue that the bank should gain a competitive edge in the "current market landscape" since its actions would not be restricted by government ownership.

FRIENDS PROVIDENT TO KEEP LOMBARD

Insurer Friends Provident FP.L has abandoned plans to sell its wealth management arm after it failed to secure a deal. The company said it had received several proposals for Lombard, but would now hold on to the division and "manage it to deliver improved returns". The group's attempts to sell its 52 percent stake in F&C Asset Management have also failed and the company has chosen to distribute the shares among shareholders in Friends Provident. The insurance group also reported a 14 percent drop in life and pensions sales to 701 million pounds.

INM RECEIVES APPROACHES FOR AUSTRALASIAN INTERESTS

Independent News & Media (INME.I) said on Friday it had received a number of unsolicited approaches regarding its 39.1 percent stake in Australian media firm APN (APN.AX). The publishing group's shares soared 27 percent higher to close at 0.635 euros on speculation of a deal, which would cut its net debt from 1.4 billion euros to less than 600 million euros. INM said it believes APN's share price does not reflect the actual value of the company and market position in Australia and New Zealand.

The Guardian

JOHN LEWIS SALES DROP BY 9.8 PERCENT

John Lewis [JLP.UL] suffered a 9.8 percent drop in sales at its department stores last week, compared to last year's figures, and warned of a "testing Christmas". The retailer said it was clear that its shoppers were being "far more judicious" as recession looms. Matthew McEachran, an analyst at Singer, said the figures indicated falls in the "high teens" on a same store basis. Sales at the company's Waitrose division rose 0.6 percent, which McEachran said signified a like-for-like decline.

Prepared for Reuters by Durrants.