PRESS DIGEST – Financial Times – June 12

Financial Times

DANGERS LURK AMID UPBEAT FORECAST FOR GDP GROWTH

The National Institute for Economic and Social Research has
predicted gross domestic product growth of 0.6 percent for the
three months to the end of May. The figure is slightly below the
0.7 percent that prevailed over the three months to the end of
April but still relatively healthy and in line with its long
term trend rate. The institute said, however, that the economy
still faces fallout from the Greece debt crisis, which has
undermined UK exports by making the euro weaker than the pound.
The institute’s forecast comes after the Office for National
Statistics said that both manufacturing and industrial output
dipped by 0.4 percent each in April.

MORE DIRECTORS FACE TAX PENALTY

Independent finance provider Syscap has discovered a 24
percent jump in the proportion of directors of insolvent
companies facing disqualification proceedings after failing to
pay corporate taxes. Research from Syscap revealed that 813
directors had proceedings issued against them in court for
non-payment of company tax in the 12 months to March 31. Chief
executive Philip White described the figures as a “wake-up call
for directors of companies encountering cash flow difficulties”
and warned business owners that employing a strategy to avoid
paying HMRC in order to pay suppliers’ bills could backfire and
result in insolvency.

EXPORTERS HIT BY CURRENCY WOES

The Forum of Private Business, a business support
organisation, has found that currency fluctuations are impacting
upon the export prospects of most small businesses in the UK.
According to the FPB’s study, commissioned by foreign exchange
group Global Reach Partners, 35 percent of business owners
polled said uncertainty in currency markets was impeding the
business planning process. Meanwhile, 26 percent of business
owners interviewed described currency fluctuations as positive
for profitability. But concern was raised after 44 percent
reported that they were actively engaged in managing foreign
currency risk.

SANTANDER TRIMS OFFER FOR RBS BRANCHES

Spanish bank Santander (SAN.MC: ) has scaled back its offer
for 318 bank branches being sold by Royal Bank of Scotland
(RBS.L: ), from its initial indicative offer of two billion pounds
in April to about 1.7 to 1.8 billion pounds. The decision by
Santander to reduce its bid follows scrutiny of the quality of
the bank’s loan portfolio and has been made to account for
potential further impairments and broader economic
uncertainties. To comply with state aid rules,
government-supported RBS has been required to sell some of its
branch network but RBS said it will only agree to a deal
offering good value for the taxpayer.

EASYJET BRAND DISPUTE LOOMS

Sir Stelios Haji-Ioanou, founder and shareholder of low cost
airline EasyJet (EZJ.L: ), has initiated High Court legal
proceedings against the airline to determine whether a brand
licensing agreement has been breached. Restrictions under the
agreement, for which Haji-Ioanou earns royalties of one pound a
year, mean the airline is limited by the amount it can make from
so-called ancillary services, to 25 percent of total income. The
agreement was made to prevent EasyJet from turning into a
conglomerate, which could swamp Haji-Ioanou’s EasyGroup
businesses. If successful, EasyJet could be forced to pay
Haji-Ioanou additional royalties. Haji-Ioanou said he believes
the airline operates above the 25 percent limit on ancillary
revenues.

TESCO TO BUY BACK ONE BILLION POUNDS OF DEBT.

Supermarket chain Tesco (TSCO.L: ) has become the latest
company to announce it will be buying back debt, with a one
billion pound buyback plan, to benefit from the decline in debt
prices since the financial crisis struck. Tesco is seeking to
exploit its high cash reserves, 2.8 billion pounds of cash or
equivalents, in order to save money on its borrowings, of which
it is paying 5.2 percent on average on some bonds outstanding.
Tesco said its strategy of retiring some of its “senior debt”
would help to “improve net finance costs on an ongoing basis”
and follows a “successful execution of cash generation
initiatives in the group over the past 18 months”.

HALABI CITY OFFICE BLOCK SOLD FOR 65 MILLION POUNDS

Property group Hammerson (HMSO.L: ) has described its 65
million pound acquisition of the Leadenhall Court office
building in London as being in line with its strategy to take
advantage of “attractive opportunities offered by the current
market conditions”. The development was part of a portfolio of
properties owned by the family trusts of entrepreneur Simon
Halabi, backed by a 1.15 billion pound loan securitisation which
defaulted last year when the value of the properties almost
halved. The securitisation was wound up last September and
buyers are being sought for the constituent properties.

TERRA FIRMA BUYS TIME FOR EMI WITH 105 MILLION POUND
INJECTION

EMI has won a year’s reprieve in its battle to avoid being
taken over by its lender Citigroup (C.N: ) after Guy Hands,
chairman of its private equity owner Terra Firma, won the
approval of 80 percent of his investors to inject 105 million
pounds into the music group. Focus now shifts to whether Hands
can either convince Citigroup to restructure the 3.2 billion
pound debt or raise more money by selling of part of the
company. According to a source familiar with the group, Hands is
still considering approaches to acquire 49 percent of EMI’s
music publishing business.

JOHN LEWIS RECORDS ANOTHER WEEK OF DOUBLE-DIGIT GROWTH

John Lewis Partnership [JLP.UL] reported another week of
double-digit revenue growth at its John Lewis department stores.
The retailer has seen sales rise by almost ten percent or more
year-on-year for nearly every week this year. Director of
selling operations David Barford cautioned that the group was up
against softer comparisons in the first half of the year than it
will face in the second half, but noted that, to the half year,
it was 11 percent up on year before last.

Investment Analysis

Prepared for Reuters by Durrants

PRESS DIGEST – Financial Times – June 12