PRESS DIGEST - British business - July 1

The Times

TESCO LINKED TO EARLY SALE OF NORTHERN ROCK

The government's attempt to find a buyer for Northern Rock (NRKx.L) before the next general election appears to be making headway, with the supermarket Tesco (TSCO.L) expressing a preliminary interest in acquiring the nationalised bank. The Treasury's separation of the bank's good and bad assets make it a more attractive prospect for any potential buyer, as the toxic mortgage loans held by the bank will probably remain in state possession. Virgin is also willing to renew a bid for Northern Rock, while other private equity groups have expressed an interest.

BOWKER RESIGNS AMID TURMOIL AT EMBATTLED NATIONAL EXPRESS

The troubled transport group National Express (NEX.L) has been thrown into further turmoil by the sudden resignation of its well-respected chief executive Richard Bowker for an unnamed high-profile job overseas. The company has already been hit hard by the recession and is at the point of stalemate with the government in crucial negotiations over the future of its East Coast rail operation, preventing it from holding a much-needed 400 million pound rights issue. An unwelcome bid from its rival First Group further complicates the situation.

XSTRATA CHIEF WOOS ANGLO IN A MINING MASTERCLASS

Mick Davis, the chief executive of miner Xstrata (XTA.L), chose a Melbourne Mining Club industry dinner to give a speech that was apparently a thinly-veiled attempt to sway shareholders of its underperforming rival Anglo American (AAL.L) - and Anglo's chairman, who was present - into supporting Xstrata's proposal of a merger of equals, after the initial approach was rejected by the Anglo board. "You cannot think about acquisitions for a decade and then expect that you will get the risk one right, because you have no skill base and no experience," remarked Davis, pointedly.

TEMPUS

Reed Elsevier(REL.L) [Hold until detail emerges]

Carpetright(CATVU.L) [Pass]

Hill & Smith [Buy on weakness]

The Daily Telegraph

MORE PAIN FOR KEYDATA INVESTORS

More than 37,000 investors holding Isas sold by collapsed Keydata Investment Services will be forced to pay tax on these non-compliant investments, despite previous reassurances from HMRC that tax owed would be recovered from the Isa manager - which is now in administration. In addition, administrators PwC are to notify a further 5,740 investors that income payments have been suspended completely, as it has called in the Serious Fraud Office in regards to more than 100 million pounds of questionable assets.

NO RECOVERY UNTIL 2012, CARPETRIGHT BOSS WARNS

Lord Harris of Peckham, chief executive of Carpetright (CATVU.L), has warned that the economy could take another three years to recover, as the retailer reported a 72 per cent fall in full-year profits and slashed its dividend. However, Harris was optimistic about the company's long term prospects and anticipated an improvement in Carpetright's fortunes next year. Like-for-like sales were down 13.5 per cent and the final dividend, payable on September 25, has been cut to four pence a share.

GALA CUTS 300 JOBS AMID REORGANISATION AND BINGO CLOSURES

A reorganisation and the closure of five more bingo clubs have been cited as the reasons for Gala Coral's decision to cut almost 300 jobs. The restructuring is aimed at saving about 10 million pounds a year and will involve a similar amount of upfront costs. Chairman Neil Goulden said the changes were unrelated to a review of funding options by Lazard, whose conclusions are due this autumn. Gala is saddled with 2.7 billion pounds of debt and risks breaching banking covenants if it invests 200 million pounds of cash on its balance sheet in the business. Gala asked Lazard to explore options to get at this cash, whilst keeping its lenders on-side.

QUESTOR

BG Group(BG.L) [Buy]

Hargreaves Services(HRGV.L) [Buy]

The Independent

HMV PROFITS FROM DEMISE OF RIVALS ZAVVI AND WOOLWORTHS

HMV UK & Ireland(HMV.L) reported an 11.5 per cent rise in pre-tax profits, before exceptional items, to 63 million pounds for the year to April 25, with analysts predicting that the demise of the entertainment retail group's rivals, Woolworths and Zavvi, will benefit HMV in the coming year. Total sales increased 4.4 per cent to 1.96 billion pounds, with a 1.9 per cent increase in like-for-like sales. The group will pay a final dividend of 5.6 pence, giving an unchanged total dividend of 7.4 pence. HMV chief executive, Simon Fox, said: "We are working hard to maximise the market share opportunity that has arisen from the withdrawal of competitors."

PIRC BACKS MOVES TO FORCE M&S TO SPLIT ROSE'S ROLE

In a statement issued on Tuesday, the shareholder advisory body PIRC recommended that Marks & Spencer(MKS.L) shareholders vote to re-elect Sir Stuart Rose as the retailer's executive chairman, but only on the proviso that M&S follow recommendations made by the Local Authority Pension Fund Forum to take all reasonable and practical steps to bring forward the appointment of an independent chairman. M&S is widely expected to post a 2.5 per cent fall in like-for-like sales for the first quarter on Wednesday, an improvement on falls of 4.2 per cent in the fourth quarter.

UNIONS FUME AS LLOYDS AXES 2,100 MORE STAFF

Lloyds Banking Group(LLOY.L) announced on Tuesday that it is to cut a further 2,100 jobs over the next three years, taking the total number of job losses at the group following Lloyds TSB's merger with HBOS to more than 7,000. Lloyds said that a third of the job cuts would be achieved through natural attrition and cuts to the number of contract and agency staff employed. Mark Fisher, director of group operations at Lloyds, said: "By bringing the businesses together we will be better placed for the future, regrettably however, some of our colleagues will be affected by our plans."

INVESTMENT COLUMN

Carpetright(CATVU.L) [Cautious Hold]

LairdLARD.L [Sell]

Atlantic Coal [Buy]

The Guardian

BP CONSORTIUM WINS HISTORIC DEAL FOR IRAQI OIL

A consortium led by BP(BP.L) has won the right to develop Iraq's largest oil field. BP will work with Chinese partner CNPC and an Iraqi state-owned enterprise to develop the Rumaila field, which is situated in the south of the country with estimated reserves of close to 18 billion barrels. The 20-year contract gives the consortium six years in which to increase output at the oil field to a minimum 2.85 million barrels per day. BP and CNPC have agreed to be paid two dollars per barrel if targets are met, around half of their original asking price.

O2 JOINS LIST OF PHONE NETWORKS CIRCLING TROUBLED T-MOBILE

O2(TEF.MC), Britain's largest mobile phone company, is thought to have expressed an interest in Deutsche Telekom-owned T-Mobile UK. Orange(FTE.PA), the third largest player in the sector, has denied submitting a bid for the company, having had several offers rejected over the past year. Speculation over T-Mobile's future in the UK has peaked in recent days, with investment bank JP Morgan having approached Vodafone(VOD.L) regarding a possible bid. Analysts value T-Mobile UK at around three billion pounds.

WOLSELEY CHIEF QUITS AFTER THREE TURBULENT YEARS

Chip Hornsby has stood down as chief executive of building materials company Wolseley(WOS.L), with shares having lost 75 per cent of their value during his tenure. Hornsby will be replaced by former Alliance Unichem head Ian Meakins, and will receive a payoff of around 750,000 pounds - equivalent to one year's salary. Chairman John Whybrow said: "It's time for new ideas and fresh blood." Shares closed up 32 pence at 1158 pence.

Prepared for Reuters by Durrants