PRESS DIGEST - Financial Times - April 23

Friday April 23 2010

Financial Times

BHP CHIEF PLAYS DOWN IMPACT OF SEC'S PROBE

Marius Kloppers, BHP Billiton's (BLT.L) chief executive, said that a corruption investigation by U.S. financial regulator, the Securities and Exchange Commission, will only have a "modest" impact on the mining company. However, when referring to the potential damage the investigation may have on the company's corporate governance record, Kloppers said: "There is absolutely nothing more important in life than our reputation." According to a source close to BHP, the investigation centres on a former bauxite exploration project in Cambodia and an alleged $2.5 million unofficial payment made to Cambodian officials -- a claim rejected by BHP in 2007 when the incident was said to have taken place.

TAKEOVER OF ARRIVA WILL SET THE PACE

According to Rudiger Grube, Deutsche Bahn's chief executive, the German state-owned transport group's agreed cash offer for UK bus and rail operator Arriva (ARI.L) will be one of many such deals as European transport companies seek greater consolidation. "(Market) liberalisation is starting now and the consolidation process will follow," said Grube. "We have the chance to participate in entering this market in Europe -- or we can sit back and continue to shrink." Arriva's chief executive, David Martin, said the board had recommended the 775 pence per share offer because it reflected the future value in the group.

DARLING DEFICIT HIGHEST IN PEACETIME

Figures released by the Office for National Statistics showed the public sector deficit has swollen to 163.4 billion pounds ($251.3 billion), the highest level of borrowing by a peacetime government. Economists have called on all political parties to be frank on how they plan to tackle the debt, which amounts to 11.5 percent of national income. The figure is three billion pounds below the 166.5 billion pounds forecast by chancellor Alistair Darling in March's Budget, largely due to lower-than-expected borrowing by local authorities.

PUNCH EYES THORLEY'S SUCCESSOR

As pub owner Punch Taverns (PUB.L) revealed a pre-tax profit of 70.3 million pounds for the 28 weeks to March 6, chief executive Giles Thorley announced that a search for his successor was at a "very advanced" stage. Two candidates within the organisation, Roger Whiteside and Mike Tye, are thought to be in the frame for the top job, although conditions are likely to remain challenging. Like-for-like earnings at Punch's core tenanted pub division before interest, tax, depreciation and amortisation are down 11 percent, while rent concessions and extra beer supply discounts granted to 1,000 publicans are running at a cost of two million pounds per month. Shares closed down 1.65 pence at 96.35 pence.

WH SMITH RULES OUT SHARE BUY-BACK SCHEME EXTENSION

WH Smith (SMWH.L) has announced a four percent drop in like-for-like sales for the six months to the end of February. The British newspaper and stationery retailer spent 35 million pounds in the first half of the year repurchasing shares in a buy-back scheme that saw the share price rise by ten percent and the interim dividend climb 13 percent to 6.1 pence. In addition, pre-tax profit rose two percent to 62 million pounds. However, chief executive Kate Swann confirmed on Thursday that the group has decided against extending the buy-back programme, choosing instead to invest in acquisitions and to return cash to shareholders at the end of year. Shares closed down 9.5 pence at 505 pence.

DRUGS GROUPS HIT BY RULING ON INCENTIVES

The European Court of Justice has rejected efforts by drugs companies to prevent Britain's National Health Service paying doctors to prescribe cheaper medicines. "Prescribing incentive schemes" have been launched across the country in recent years with the intention of saving the NHS money through the prescription of generic medicines rather than high-priced patented drugs. The Association of the British Pharmaceutical Industry argued the NHS should be banned from doing so under the same rule that prevents drug companies offering incentives to doctors. The ECJ ruled there was a distinction between drug companies and health services as the latter were not seeking to promote commercial products.

LLOYDS SHAREHOLDERS WARNED OVER LARGE EXECUTIVE BONUSES

On Thursday, trade body the Association of British Insurers issued an "amber top" alert on Lloyds Banking Group's (LLOY.L) remuneration policy. The ABI is urging shareholders to use the time before next month's vote on the bank's pay policy to carefully consider the decision to award large bonuses to senior executives. Although Lloyds said extensive consultation with shareholders had led to changes to its remuneration strategy, investors have queried the performance criteria that saw executives awarded more than five million pounds in bonuses in a year when the bank reported a 6.3 billion pound loss.

FOUNDER OF DFS SET FOR 300 MILLION POUNDS FROM SALE

DFS founder and chairman, Lord Kirkham, will make in excess of 300 million pounds from private equity firm Advent International's 500 million pound purchase of DFS Furniture. While Kirkham is selling DFS Furniture, the operating arm of the sofa retailer, he will hold on to DFS Properties, which owns approximately one third of the group's store estate. Despite debts of about 330 million pounds at DFS's holding company, the operating company's net debt is believed to be less than 100 million pounds, resulting in Kirkham's considerable profit.

TRANSOCEAN DRILLING RIG SET TO SINK

According to industry experts, The Deepwater Horizon, a $500 million oil rig owned by the world's largest offshore drilling company, Transocean, looks increasingly likely to sink after an explosion on Tuesday. The rig had been working for BP (BP.L) and the incident, which could cause a significant oil spill in the Gulf of Mexico, calls the British energy company's safety record into question once more, following an explosion at its Texas City refinery in 2005. Although Transocean is responsible for the safety of the Deepwater Horizon, industry insiders say that BP would have had a part to play in safety oversight.

RETAIL SALES DIP DURING FIRST QUARTER

Data released by the Office for National Statistics shows UK retail sales volumes, excluding fuel, dropped 0.6 percent in Q1 compared to the previous three monthly period. A rise in VAT, bad weather and the fragility of the economy were cited as the reasons for the weakest quarter of sales since 1991. In addition, the Bank of England revealed in its quarterly Trends in Lending report that the stock of outstanding loans to British businesses was 9.2 percent down in February 2010 on the same period in 2009.

($1=.6501 Pound)