PRESS DIGEST - Financial Times - May 23

Financial Times

BROWN TO BANK: LIGHTEN UP

The prime minister and chancellor have been left furious by negative comments made by Bank of England governor Mervyn King, with officials in the Brown administration talking of thinly-veiled animosity between the prime minister and governor. Meanwhile, official data released on Friday showed household spending fell at its fastest rate for more than 30 years in the first quarter, with wages and benefits seeing their biggest falls in more than 50 years.

INVESTMENT AND TRADE DATA MUTE OPTIMISM

The first quarter saw stockpiled goods sold off at record rates in Britain, though any optimism was undermined by weak figures for household spending, investment and trade. The Office for National Statistics said on Friday the economy contracted by 1.9 percent in the first quarter, though its figures show inventories of parts and finished goods fell by six billion pounds, equivalent to two percent of GDP and the largest fall in stocks since records began in 1955. However, the decline in stock has been interpreted as a positive sign as companies will have to restart production of new goods.

INCREASE IN PART-TIME PENSIONERS

Big employers have been forced to make rapid adjustments to their pension systems in order to cope with employee requests to work part-time once they reach retirement age while also drawing some of their company pension. At Norwich Union, the number of people taking income from their pension while leaving it invested in the stock market has risen almost 50 percent compared to a year ago. A report from Help the Aged and Age Concern shows 60 percent of people over 50 believe they may have to work longer than planned.

MARSTON'S SPRINGS DIVIDEND SURPRISE

On Friday, Marstons (MARS.L) chief executive Ralph Findlay declined to comment on whether the brewer and pub owner would follow in the steps of rival Greene King (GNK.L) by launching a rights issue. His silence came as Marstons reported a 21 percent decline in underlying interim profits and maintained its dividend. Revenue in the six months to April 4 was down 2.8 percent at 307.5 million pounds, and profit was down from 35.5 million pounds to 27.7 million pounds, excluding a 12 million pound mark-to-value writedown on an interest rate swap.

CHRYSALIS BEATS ESTIMATES AND SEEKS DEALS

The independent music publisher Chrysalis (CHS.L) reported a nine percent increase in revenue to 31.2 million pounds for the six months to March 31, exceeding analyst expectations. Trading profits at the group also increased, although an interest rate hedge loss of 3.6 million pounds resulted in pre-tax losses of 2.6 million pounds, down from 13.1 million pounds. Chrysalis chief executive Jeremy Lascelles said the company is planning to use its 37.5 million pound loan facility to make selective catalogue purchases. "We are looking at a number of possible acquisitions," he said.

MECOM LAUNCHES 142 MILLION POUND RIGHTS ISSUE

David Montgomery, chief executive of the pan-European newspaper group Mecom (MEC.L), said on Friday the company would look to raise 141.5 million pounds through a fully underwritten rights issue and that the group had renegotiated its banking facilities to reduce its debt burden. Mecom will issue 9.4 billion new shares at 1.5 pence, in a six-for-one share placing trading at a 70 percent discount on Thursday's closing price. "The financial restructure that we have secured gives us the resources to see through the economic uncertainty and also equip the company to transform the business model of our newspapers," said Montgomery.

PEARL HOPES TO FINISH DEBT RESTRUCTURING

Pearl Group is said to be finalising a three billion pound debt restructuring with its main lenders and, according to sources involved with the negotiations, a final agreement could be delivered next week. The negotiations are expected to conclude with Liberty Acquisition Holdings, a Cayman Islands-based acquisitions company, agreeing to provide 500 million pounds in new capital and take a stake in Pearl Group, leaving Hugh Osmond's Sun Capital and the private equity firm TDR with significantly reduced holdings.

CROMBIE BOLSTERS RBS BOARD

Sir Sandie Crombie has been appointed as a non-executive director by Royal Bank of Scotland (RBS.L). Crombie, currently chief executive at the insurer Standard Life (SL.L), will become RBS's senior independent director when he joins the bank at the beginning of June. RBS said it was making good progress with the recruitment of two further non-executive directors, as it continues to overhaul its board. RBS chairman Sir Philip Hampton said Crombie would bring a "deep understanding of insurance and financial services to the role" and confirmed that the appointment had been made in consultation with UK Financial Investments, the body that manages the government's shareholding in the bank.

SEGRO BIDS FOR RIVAL PROPERTY GROUP

Segro (SGRO.L), the industrial property group, has made a takeover bid for rival property group Brixton BXTN.L, which is facing potential covenant default on some of its bank facilities and bonds this summer. Brixton confirmed yesterday that "Segro was one of a small number of parties" interested in talks but refused to name any of the other parties, although it is thought that Brixton has been talking with private equity firms regarding a potential sale or convertible bond issue. Segro confirmed on Friday it had made a preliminary approach for Brixton, adding the offer it envisaged was in the form of its shares.

BRITISH AIRWAYS PLUMMETS TO RECORD DEFICIT

British Airways (BAY.L) has announced its chief financial officer, Keith Williams, and chief executive, Willie Walsh, are to forego their pay for July as part of the airline's drive to cut costs. BA said there will be no management bonuses and that it is to impose a freeze on basic pay, as well as offering all staff the option of unpaid leave and temporary or part-time working. The airline said it is to cancel its dividend, following the announcement of record pre-tax losses of 401 million pounds for the financial year to the end of March.

Prepared for Reuters by Durrants