PRESS DIGEST - Financial Times - March 13

Financial Times

DARLING PLAYS IT SAFE IN FACE OF GLOBAL MARKET TURMOIL

Alistair Darling in his Budget on Wednesday signalled the British economy is at the mercy of events in the financial markets. The Chancellor of the Exchequer raised borrowing and taxes on drinkers, motorists and business to help fill a hole in the public finances. Darling struck an optimistic note on the likely duration of the credit squeeze but downgraded growth forecasts. Higher borrowing will raise public sector net debt to 39.8 percent of national income in 2010-11, just below the Treasury's ceiling of 40 percent. Economists said the arithmetic used in the Budget relied heavily on Darling's judgment that the global economic crunch will be temporary.

WARNING FOR ENERGY COMPANIES

Darling has given energy companies a reprieve from the threat of government action to cut electricity and gas bills but said he would legislate "as necessary" to secure extra help for people on low incomes or those who use pre-payment meters. The chief executive of Centrica (CNA.L), Sam Laidlaw, said: "We are pleased the chancellor has left the way open for further discussions with the industry on this issue and we look forward to explaining our thinking in more detail." Energywatch's Adam Scorer criticised the government, saying its fuel poverty policy was in "chaos". The only measures in the Budget relating to fuel poverty were the extra winter payments to pensioners.

OIL GROUPS HOPE FOR NORTH SEA INCENTIVES

The Treasury on Wednesday set out a package of modest tax breaks for North Sea oil and gas companies. The Treasury said the industry was expected to pay 9.9 billion pounds in corporation tax and petroleum revenue tax in the coming fiscal year, up from 7.7 billion pounds this year. The forecast is based on the assumption of an average oil price of 83.80 dollars per barrel this year, well below yesterday's record price of 106.39 dollars. In this context, the 25 million pounds estimated benefit of new tax relief for the industry is small. The North Sea is one of the world's fastest-declining regions of oil production with discoveries typically very small and big international companies retreating from the region. The Treasury is holding consultations with the industry on further tax relief. These are expected to conclude in June.

CLOSURE RISK FOR "ONE IN FIVE BINGO CLUBS"

Industry leaders said on Wednesday one in five bingo clubs may have to close as Darling had turned a blind eye to intense lobbying for a relaxation of the tax burden on the clubs. Several loss-making clubs have stayed open in the hope he would sympathise with the claim that bingo clubs are the only part of the gambling sector to be double taxed. Darling announced an index-linked rise in duty on gaming machines. Rank (RNK.L) is expected to close a few clubs and Gala Coral has 20 of its 160 clubs at risk. Shares in Rank Group fell 5.7 percent.

HBOS LOWERS INCENTIVE TARGETS FOR DIRECTORS

HBOS HBOS.L has changed its incentive plans for directors, saying the new targets reflect the lower growth rates expected at the bank as the economy slows. This month the bank saw a long-term incentive plan for 200 of its most senior directors fail to pay because the bank's total shareholder returns did not exceed those of competitors between 2005 and 2007. HBOS has now lowered hurdle rates for its long-term incentive scheme and plans to change its short-term incentive scheme which may bolster by 50 percent potential future payments for directors. HBOS denied it has made the hurdles easier saying they remained "as stretching as ever".

PANMURE GORDON DISMISSES RUMOURS IT IS SEEKING A SALE

Panmure Gordon (PMR.L), subject of persistent takeover rumours, has dismissed suggestions it is seeking a sale of the business. The broker faced tougher market conditions in the second half of last year and has reported a fall in pre-tax profits from 5.9 million pounds to 3.5 million pounds. Chairman Charles Stonehill said: "The board will always look at proposals that are in the interests of shareholders. However, we are quite comfortable with Panmure Gordon's prospects as an independent firm." The broker has had a tough time since its purchase of ThinkEquity last March for 62.4 million dollars. But revenue, boosted by the acquisition, rose 55 percent to 65.2 million pounds in the year to December 31. The company has 34.4 million pounds of cash on its balance sheet and its market capitalisation of 49.5 million pounds makes it a target to be taken private.

HIGH STREET GLOOM HITS FRENCH CONNECTION

Shares in French Connection (FCCN.L) rose six per cent on Wednesday to 85 pence as the high street chain announced lower annual profits. The results came broadly in line with expectations, with a fall in pre-tax profit in the 12 months to January 31 to 3.1 million pounds from four million pounds, and turnover falling to 236.2 million pounds from 241.3 million pounds. Chairman and chief executive Stephen Marks said men's wear had suffered from some poor product decisions and that he expected new staff to perform better. Marks said: "I think we had a fantastic men's wear team for 10 years and maybe they got burnt out and tired. Our product wasn't good enough."

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