PRESS DIGEST – British business press – May 21

The Times

QINETIQ TOUTS FOR WORK AS STAFF FEAR 1,000 JOB CUTS

The management of struggling defence research company
QinetiQ (QQ.L: ) has held meetings with counterparts in rival
defence companies, proclaiming its willingness to expand the
(previously very narrow) range of contracts it is willing to
take on. The company’s share price has fallen from 200 pence to
117.5 pence in the four years since its flotation, with market
capitalisation declining by 550 million pounds to 776 million
pounds over the same period. QinetiQ may be forced to make 1,000
of its 6,500 UK employees redundant if more revenue cannot be
generated.

SHANKS SEES GREEN SHOOTS AFTER BITTER WINTER HITS PROFITS

A harsh winter, the economic downturn and increased taxation
of Belgian landfill drove the annual profits of independent
waste business Shanks down by 24 percent to 33.2 million pounds.
However, the company’s performance was still ahead of
expectations and it also stated that its outlook for the future
was positive, claiming that it had endured the worst of the
recession and that recycling prices were starting to rise.

TEMPUS

Booker (BOK.L: ) (Buy)

Rotork (ROR.L: ) (Possible sell)

Cape (CIU.L: ) (Buy on weakness)

The Daily Telegraph

TESCO CHIEF BACKS CHEAP DRINK LIMIT

Sir Terry Leahy, chief executive of supermarket group Tesco
(TSCO.L: ), has called on the new coalition government to consider
setting a minimum price at which shops can sell alcoholic
drinks. His remarks come as government proposals suggest
prohibiting supermarkets and off licences from selling alcoholic
drinks as a loss leader. Leahy said he would “support any future
discussions on a minimum price for alcohol”, which could raise
the price higher than a ban on loss leader selling.

MOTHERCARE ‘PLANNING CAUTIOUSLY’ FOR THIS YEAR.

Ben Gordon, the chief executive of maternity and babywear
retailer Mothercare (MTC.L: ), has warned the consumer environment
in Britain remains “relatively challenging” and the firm is
“planning cautiously” for this year. Gordon said High Street
conditions remain unclear, stating: “I am not an economist but
from our point of view it is difficult to know what is going to
happen. And I think sometimes the economists don’t know either.”
His remarks came as Mothercare announced a 29 percent fall in
full-year pre-tax profits to 32.5 million pounds, despite a 5.9
percent rise in group sales to 766.4 million pounds.

‘ROBBED’ B&B SHAREHOLDERS CALL ON CHANCELLOR FOR HELP

Former retail shareholders in Bradford & Bingley (BB.L: ) have
called on George Osborne to assist in their fight for
compensation for losses they suffered when the buy-to-let
mortgage lender was nationalised. David Blundell, chairman of
the pressure group B&B Action Group, wrote to the new chancellor
asking for more detail on the decisions which led to the
takeover of the bank by the government. Claiming that the bank’s
one million shareholders were “robbed”, Blundell argues that B&B
shareholders were treated differently to those in Royal Bank of
Scotland (RBS.L: ) and HBOS (HBOS.L: ). In the letter, Blundell also
maintains that B&B was solvent and profitable with adequate
liquidity at the time of its nationalisation.

MS CANNABIS DRUG SET FOR UK APPROVAL

GW Pharmaceuticals (GWP.L: ) has announced its cannabis-based
drug for treating the symptoms of multiple sclerosis could be
approved for use in Britain by the end of June. The company said
the approval process is in its final stage, with only issues
relating to the wording of the drug’s packaging to be resolved.
The drug, Sativex, which will be marketed in Britain by German
firm Bayer, is also being developed to treat pain in cancer
sufferers. Analysts at the brokerage Piper Jaffray estimate that
sales of Sativex in Europe alone could reach 107 million pounds.

BOOKER OUTLINES INDIAN EXPANSION

Booker, the cash-and-carry retailer, is planning to open a
string of new stores in India after a test outlet in Mumbai
proved to be a massive success. The chain, which is run by
former Marks & Spencer (MKS.L: ) chief executive Charles Wilson,
will soon open a second store in Mumbai and is seeking to expand
elsewhere in the country in conjunction with an unspecified
local partner. The news came as Booker reported a 21 percent
increase in full-year pre-tax profits to 57.2 million pounds on
total sales of 3.4 billion pounds. Following the news, Dave
McCarthy, an analyst at Evolution Securities, praised the
figures, describing them as “excellent”.

GLAXO ASTHMA DRUG PATENT INVALID, RULES GERMAN COURT

A German court has ruled that a key patent on
GlaxoSmithKline’s (GSK.L: ) top-selling asthma drug, Advair, is
invalid, potentially giving a green light to generic
manufacturers. Advair made up 18 percent of Glaxo’s sales in
2009, with 5 billion pounds worth of worldwide sales. The
court’s ruling only applies in Germany, and is not applicable
outside the country, but it marks the latest in a series of
challenges to the patent, including cases in Britain and the
Netherlands. A spokesman for Glaxo said the company is studying
the judgement and is considering lodging an appeal.

SPORTS DIRECT’S STAKE IN BLACKS HALVED AFTER FUND-RAISING…

Sportswear retailer Sports Direct (SPD.L: ) saw its stake in
rival Blacks Leisure (BSLA.L: ) diluted from 27 percent to 14.5
percent after Sports Direct failed to take up its rights in a
share offer by Blacks. Sports Direct had blocked an earlier
fundraising attempt, voting against the placing and open offer,
as well as a firm placing of 39.3 million shares at 54 pence.
However, the resolution gained majority support and was passed.
Analysts believe the move indicates that Sports Direct has given
up on long-standing attempts to mount a takeover of Blacks.

QUESTOR

National Grid (NG.L: ) (Take up rights)

Cape (CIU.L: ) (Buy)

The Independent

OIL LEAK GREATER THAN FIRST ESTIMATES, BP ADMITS

Oil and gas company BP (BP.L: ) has admitted that more than
its original estimate of 5,000 barrels of oil a day may be
leaking from its oil well in the Gulf of Mexico. The leak was
sprung following an explosion and the subsequent sinking of the
Deepwater Horizon rig that had been mining the well. BP has said
that it is diverting 5,000 barrels a day from the well to a
drillship, but that an unknown additional quantity is still
leaking into the ocean. Scientists fear that the well could
potentially be leaking up to ten times more than BP’s estimate.

RIO TINTO SHIFTS ITS STANCE ON NEW TAX

Mining group Rio Tinto (RIO.L: ) has changed its opposition to
a new tax on the profits of resources groups. The Australian
government’s plan to tax 40 percent of profits has been met with
resistance from mining groups, who say that it will hinder
investment in Australia. Rio is expected to be the hardest-hit
when the tax comes into effect in 2012. Bill Champion, managing
director of Rio’s coal arm in Australia, said: “We aren’t
opposed to a profits tax, but we are interested in a tax reform
that encourages investment.” He suggested that 40 percent was
excessive.

INVESTMENT COLUMN

Cape (CIU.L: ) (Buy)

Investec (INVP.L: ) (Buy)

Great Portland Estates (GPOR.L: ) (Buy)

The Guardian

COALITION DEAL CREATES NEW THREAT TO FSA

Doubts have emerged over the future of the Financial
Services Authority following the publication of the coalition
government’s “programme for government” agreement, which
outlines the policy aims of the new government over the next
five years. The document contains a pledge to create a single
agency to tackle serious economic crime and to “bring forward
proposals to give the Bank of England control of
macro-prudential regulation”. When questioned about the
proposals, the chancellor George Osborne said, “The central
principle is macro-prudential oversight and we are in
discussions about what that means for the FSA.”

Investing Tools

PRESS DIGEST – British business press – May 21