Cairn Energy returns to the FTSE100

Cairn Energy’s return to the FTSE100 last week will provide the oil and gas
company with access to a broader shareholder base and enhance its ability to
raise further capital in the future.

The Edinburgh-based company first appeared on the FTSE100 last year after its
stock soared by 300% following a major oil discovery in Rajasthan, but the group
dropped back into the FTSE250 on the back of a downbeat trading statement
in December.

Cairn’s return to the top flight places it in a strong position to obtain
further capital as it begins prospecting on five new blocks in India and starts
the exploration of sites off the coast of Bangladesh.

Tim Murphy, corporate finance partner at Deloitte, said entry into the
FTSE100 provided access to a bigger pool of shareholders, which made fundraising
less complicated.

‘Institutional investors invest a certain percentage of their funds in each
of the companies in the FTSE100. A company moving into the index immediately has
access to a larger shareholder base. In any subsequent offerings, it will be
easier to raise capital,’ Murphy said.

Cairn’s ability to access funds from debt is not likely to improve as
markedly following its re-entry to the group of leading companies.

Harvey Hoogakker, assistant director of debt advisory services at Ernst
& Young, said that although more equity was available to a new FTSE100
group, its ability to source debt remained the same.

‘Anything that raises the profile of a company is good, but moving up an
index shouldn’t change the credit fundamentals of a business, which are more
important when it comes to debt,’ Hoogakker said.

‘Some industries lend themselves to higher leverage. Certain FTSE250
companies may be able to access more debt than other companies in the FTSE100
because of the nature of their business.’

Deloitte’s Murphy, however, said the prestige that came with being a FTSE100
company did carry a degree of clout when meeting with potential lenders.

‘Standing counts and if a company is in the FTSE100 it is a big tick in the
credit assessment box. The ability to raise further share capital goes hand in
glove with securing debt,’ Murphy said. ‘A company in the FTSE100 is a strong
business and goes into lending negotiations with its glass three-quarters full.’

Cairn will officially re-enter the leading index on 19 September after a
six-month absence. Online gaming group PartyGaming is the only other company to
enter the FTSE100 after the FTSE Group’s latest review.


Pension scheme payment sees Go-Ahead report a cash-flow drop, while Hays
delivers record profits

Passenger transport group Go-Ahead would have reported an
operating cash flow of £157m for the 2005 financial year, but had to reduce it
to £132m after making
a £25m payment to its pension scheme in June. Go-Ahead reported pre-tax profits
of £97.3m.

Growth of 11% in accountancy and finance enrolment helped recruitment group
Hays deliver record profits of £165.9m for the year ended June
2005. Hays said that both temporary and permanent recruitment fees grew well and
that the business generated good productivity gains. Hays’ pre-tax profits
increased by 30%, rising from £147.7m in 2004 to £191.5m.

PartyGaming, the online gaming group and new FTSE100
constituent, said its effective tax rate for the six months to 30 June, before
IPO costs and share-option charges, was 6.2%. The company, which reported
revenues of $437.4m (£239.4m), said it operated companies which were
incorporated or domiciled in Gibraltar, India and the UK. The group has
tax-exempt status until 31 December 2007 in respect of its subsidiaries in
Gibraltar, with an extension possible until 31 December 2010. Trading profits
arising in the Indian subsidiary also qualified for exemption until 31 March

Net debt at electronic maintenance group Premier Farnell
increased by £109.5m after it reclassified its preference shares from equity to
debt, as required by IFRS. The reported net debt was £331.7m. The group reported
an operating profit of £34m for the half-year ending 31 July 2005, down from
£37.3m for the 2004 half-year.

Investment company Niche said it had realised ‘impressive
profits’ on two recent disposals. The group recorded a 215% gain on the disposal
of shares in property group Ely, and enjoyed a 58.5% return on its investment in
In Cup Plus. CEO Christopher Stainforth said the group was planning to
accelerate its investment programme into pre-IPO businesses, as well as
undervalued small cap companies.

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