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Competition body slams audit firms

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MARION DAKERS

THE COMPETITION Commission will this morning find that the Big Four accountancy firms have too much control over the industry, and call for measures to encourage Britain’s largest companies to change auditor regularly to boost competition.

In its long-awaited provisional report, the commission is expected to find no evidence of collusion, but will raise concerns that PwC, KPMG, Deloitte and Ernst & Young have an unfair grip on the books of big UK companies.

Many blue-chip firms have “Big Four-only” rules in place, and the commission is set to propose a ban on such measures, according to Sky News.

But it is expected to be less forthright about imposing mandatory rotation, in a move likely to upset mid-sized accountancy firms attempting to crack the FTSE audit market.

The Competition Commission will also urge investors to become more vocal about a firm’s choice of auditor.

All but a handful of the FTSE 100 use one of the Big Four to audit their accounts, and a firm will keep their auditor for an average of 48 years, according to a House of Lords report in 2011.

At least four blue-chip companies are believed to have put their audit contract out to tender in 2012, but only two – asset manager Schroders and oil explorer BG Group – decided to switch. Both continue to use the Big Four.

The Competition Commission declined to comment last night.

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Chiltern Miniatures

BAE plans ?1bn share buyback as profit stalls

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CATHY ADAMS

DEFENCE and aerospace firm BAE Systems yesterday launched an ambitious ?1bn share buyback programme, as evidence of the “robust performance” of the FTSE firm.

Chief executive Ian King said he could see “green shoots” in the company, which gave it the confidence to unveil the buyback, although full implementation still hinges on discussions with Saudi Arabia over pricing of a key contract.

Despite its optimism, BAE yesterday posted a six per cent fall in profit,, and sales over the year fell seven per cent.

Full-year underlying earnings before interest, tax and amortisation fell to ?1.9bn, hurt by unresolved discussions over pricing of the Saudi Arabian contract to supply the Gulf state with Typhoon aircraft.

BAE warned that its key UK and US markets would be “constrained” this year.

It has come under pressure from shrinking military budgets in the US and the UK, as governments try to reel in large budget deficits.

The UK government pledged in 2010 to slash its defence spending by eight per cent by 2014 while the US – from which BAE derives around 40 per cent of its income – already has plans in place to cut $487bn (?320bn) from its defence budget for the next decade.

BAE – whose proposed merger with European peer EADS collapsed in October as Germany refused to give it the green light – is “absolutely not” in discussions to revive the tie-up, King said yesterday.

Meanwhile, BAE yesterday inked a longevity swap with L&G to safeguard it against the risk that its 31,000 pensioners live longer than current estimates.

     
     
  Chiltern Miniatures  
 

ADDRESS: 1 Elmbourne Road

CITY: London

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POST CODE: SW17 8JS

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CATEGORY: Games and Toys

 

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Rothschild hit by epic defeat

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CATHY ADAMS

BUMI co-founder Nat Rothschild yesterday suffered an embarrassing defeat at the coal miner’s EGM, with 19 out of 22 proposals for a board overhaul flattened by shareholders in a public City showdown after months of increasingly bitter exchanges.

Rothschild, who arrived at the extraordinary meeting with his mother Lady Serena Rothschild, proposed last month ousting 12 out of the 14 current Bumi directors and bringing in a team of his own.

Investors yesterday chose to back the current Bumi board, with more than 61 per cent of stakeholders supporting incumbent chief executive Nick von Schirnding and the deputy chairman director Sir Julian Horn-Smith.

Rothschild’s proposed appointment as an executive director was rejected by 63 per cent of investors, which marked the weightiest defeat of all the resolutions.

The outcome of the EGM, held at the Honourable Artillery Company on City Road yesterday morning, will see two current Bumi board members – former chief executive Nalin Rathod and independent non-executive director Jean-Marc Mirzhai – step down.

In a narrow victory, one of Rothschild’s proposed new team, former British ambassador to Indonesia Sir Richard Gozney, has been voted onto the Bumi board.

In a statement following the results of the meeting, the FTSE 250 coal miner welcomed Sir Richard’s appointment and the “decision of shareholders to support the board on substantially all resolutions”.

The board will now speed up the divorce of Bumi Resources from the London-listed Bumi PLC, as well as a restructuring of the board, which will be “pursued with a sense of urgency”.

“The board will be re-structured and will be significantly smaller while retaining a majority of independent directors,” the firm said last night.

Speaking at the EGM, von Schirnding said that the agreement signed last week with the Bakries, which saw them put $50m (?33m) in a ringfenced account for the buyback of Bumi Resources, was a “tangible step forward” for shareholders.

The powerful Indonesian investors last night welcomed the outcome of the meeting.

Hedge fund veteran Rothschild, also speaking last night, labelled the result a “pyrrhic victory” for the Bumi board, adding that a “substantial majority” of non-aligned shareholders voted for his proposals.

Calling again for the full release of the probe by law firm Macfarlanes, the financier added that he will continue to remain a shareholder of Bumi, and he will “continue to fight for the rights of the minority independent shareholders”.

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