Combined code comes under the microscope

Governance experts are hoping for improvements to rules on audit committees
and compliance disclosures, when the Financial Reporting Council completes its
latest review of the combined code on corporate governance.

Last week, FRC chairman Sir Bryan Nicholson announced that the quango was
opening a consultation on the combined code’s effectiveness – a move that has
been welcomed as an opportunity to improve the code further after its first year
of application.

Simon Lowe, risk management services partner at Grant Thornton, said he
expected the consultation to kick off a heated debate between the big FTSE
companies and smaller plcs over the issue of compliance for companies of
different sizes.

‘It will be interesting to see how responses vary between the larger and
smaller plcs,’ Lowe said. ‘Questions will be asked about whether the combined
code is still applicable to all companies and how to use the “comply and
explain” approach without paying lip service to good governance.’

Patricia Peter, head of corporate governance at the Institute of Directors,
said issues around the requirements for audit committees would be at the top of
the agenda.

‘The FRC’s consultation will look at audit committees and anecdotal evidence
that non-executives are being put off because of audit committee requirements,’
Peter said.

David Somerlinck, policy manager at the Pension Investment Research Council,
said he would be calling for improvements to company compliance disclosures
during the FRC’s review.

‘We still need to clarify issues around good disclosures of company
compliance,’ Somerlinck said. ‘Investors have had to plough through pages and
pages of documents when companies depart from the guidance in code.’

Somerlinck said there was also room to ease the rules blocking candidates
from chairing more than one FTSE100 company.

‘There should be room to judge these appointments on a case by case basis,’
he said.

The FRC will publish the consultation’s findings at the end of 2005. If any
changes to the combined code are recommended, a separate consultation will be
held early next year.

COMPANY REPORTS

MyTravel fined £240,000 for accounts error, while Tullow Oil reviews its debt
financing arrangements

FTSE100

Diluted net asset value (NAV) for the year ended March 2005 would have been £89m
higher under IFRS at British Land. The restatement saw NAV
increase from £5.91bn to £5.82bn, while pre-tax profits before exceptionals
climbed from £174.8m to £180.9m. The company said it was working successfully
with an industry body to set out guidance for net assets and earnings.

Imperial tobacco is bracing itself for a 5% hit to profits
after the European Court of Justice’s Advocate Jacobs issued an opinion saying
that Imperial’s ‘singles’ tobacco product should be taxed at the same rate as
normal cigarettes. ‘Singles’, pre-rolled cartridges of tobacco which cannot be
smoked immediately after purchase, are only sold in Germany and account for
about 25% of German profits.

FTSE250

Progress made in renegotiating financing arrangements is set to provide
Tullow Oil with up to $850m (£484.5m) of ‘debt capacity’. The
oil company said the refinancing would provide ‘greater flexibility’ for funding
its ongoing development programmes. The debt facility should be in place this
month.

The FSA has fined MyTravel £240,000 for leaving £24.3m of
losses out of its accounts. The watchdog said the breach of rules was not
deliberate. The inaccuracies came to light in 2002.

FTSE FLEDGLING

Information management group Microgen has postponed the
announcement of its interimresults for 2005 so it will havemore time to prepare
for its transition to IFRS. In a trading statement, the company said it would
defer the release of the results for the six months to theend of June until
September, but emphasised that the switchwould have no material impacton the
company.

AIM

Oriel Resources has been boosted by news that its 90%-owned
subsidiary, Muzbel LLP, has been granted investment tax incentives by the
Kazakhstan government.