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Come and have a go if youthink youre smart enough.Join us at the next evening information session on 24 November 2010.

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BUSINESS WITH PERSONALITYwww.cityam.comIssue 1,267 Friday 19 November 2010 FREE

FTSE 100 5,768.71 +76.15 DOW 11,181.23 +173.35 NASDAQ 2,514.40 +38.39 /$ 1.60 +0.01 / 1.18 +0.01 /$ 1.36 unc Certified Distribution04/10/10 - 31/10/10 is 110,406

GM PULLS OFFRECORD FLOAT

Reviews:

HARRY

POTTER

IS BACK p32

GENERAL MOTORS closed 3.6 per centhigher yesterday after pulling off thebiggest IPO in US history.

The stock closed at $34.19, up fromits float price of $33 a share.

Frantic trading throughout the daysaw more than 100m shares changehands, out of the total of 478mplaced, while financial advisers strug-gled to meet the demands of investorsdesperate to get hold of the stock.

GM raised $20.1bn after pricingshares at the top of its proposedrange. The total is expected to top$23bn after underwriters on the dealtake up options to shift extra stock.

It is the largest ever IPO retailuptake, with small investors snappingup more than 17 per cent of the firm,although this was less than the 30 percent originally expected.

Combined fees are estimated to

have exceeded $248m, with MorganStanley and JP Morgan taking homearound $40m each.

Bank of America Merrill Lynch andCitigroup were also listed as leadunderwriters, with Barclays Capital,Deutsche Bank, Goldman Sachs,Credit Suisse and Royal Bank ofCanada all working on the deal.

The roaring success of the IPOcould set the US and Canadian gov-ernments up for a windfall down theline as they offload the remainder oftheir stakes.

The US government sold aroundhalf of its 61 per cent interest, whileCanada sold 20 per cent of its 11.7 percent stake.

Barack Obama hailed the float as avictory for his Tarp bailout scheme.He said: Supporting the Americanauto industry required tough deci-sions and shared sacrifices, but ithelped save jobs and rescue an indus-try and make it more competitive.

BY STEVE DINNEEN

AUTOMOTIVE

IRELAND is likely to take a loan worthtens of billions of euros from theInternational Monetary Fund andEuropean partners to prop up its bank-ing system, the troubled countrysbanking chief said yesterday in the firstofficial confirmation that a bailout isimminent.

Central bank governor PatrickHonohan said we are talking about avery substantial loan for sure tens ofbillions, yes, when asked about the res-cue package.

The intention is and the expecta-tion is, on their part and personally onmy part, that negotiations or discus-sions will be effective and a loan will bemade available and drawn down asnecessary, he added.

Experts from the EuropeanCommission, the European CentralBank and the IMF met at the Irish cen-tral bank yesterday to discuss the possible rescue package, with discussionsset to continue into next week.

Finance minister Brian Lenihan saidin parliament that the embattled gov-ernment had not formally asked for aloan, and the amount needed was cur-rently unknown. Estimates yesterdayranged from80bn (68bn) to 110bn.

The banks themselves cant put afigure on the residential debt, and the

figure has been going up and up overthe last two years, WorldSpreads chiefexecutive Conor Foley told City A.M. lastnight. Based on our estimates of the

banks debts, the amount neededwont be less than 80bn.

The government would not becoerced into altering its 12.5 per centcorporate tax rate as part of a bailout

deal, Irelands deputy Prime MinisterMary Coughlan said yesterday.French and German officials are

thought to be pressing Ireland to raise

the attractive rate, but Coughlan toldthe Irish parliament: Its non-nego-tiable. Lenihan said on Wednesday thecountrys tax policy was protectedunder the EUs Lisbon Treaty.

Irish employers group IBEC backedthe governments firm stance. Anychange in the corporate tax regimewould be counterproductive to the col-lective efforts to reduce the budgetdeficit, said director general DannyMcCoy. Ireland is a small, open trad-ing economy and the recovery willcome from enterprise. It is vital thatthe ability of Irelands enterprise sectorto drive growth and recovery is notundermined in any way.

David Cameron said he has notruled out a direct UK contribution toIrelands coffers, telling a House ofCommons committee yesterday thatIreland is a close neighbour, a goodfriend, a country that we have veryclose political and economic relationswith . . . Our banks are very connected tothe Irish banks. We have an interest innot just the Eurozone being a success,we have an interest in Ireland being asuccess.

After 10 days of losses, Europeanstock and bond markets and the eurorebounded yesterday on expectationsIreland would become the secondEurozone country after Greece toreceive a bailout.

Irelands cost of borrowing, which is

close to an 11-year high, fell as worriesof a sovereign default eased. Yields on10-year gilts dropped from 8.3 per centto 8.1 per cent yesterday.

IRELAND WILLRECEIVE TENSOF BILLIONS

IN LOAN DEALBY MARION DAKERSBANKING

Central bank governor Patrick Honohan (top)said Ireland would take a substantial loan;while deputy PM Mary Coughlan (bottom) saidits low corporate tax rate was non-negotiable

Barack Obamahailed the floatas a success forhis Tarp scheme

Picture: REX

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ANALYSIS lGeneral Motors$

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News2 CITYA.M. 19 NOVEMBER 2010

Hands looksfor next dealPRIVATE equity tycoon Guy Handssaid yesterday he was focused on thenext deal following his attempts tosue Citigroup over his purchase ofstruggling music label EMI.

He said his firm would look likegeniuses if it hadnt bought EMI, butrefused to discuss his recent legal bat-tle against Citigroup. EMI is whereEMI is, he told the Super Investorconference in Paris yesterday.

It was the Terra Firma owners firstpublic appearance since losing a$2bn (1.25bn) fraud case against theinvestment bank over the purchase ofEMI. Hands unsuccessfully claimedCitigroup had tricked him into pay-ing $6.8bn for the debt-laden firm inMay 2007.

He told conference delegates that

private equity needed to accept lowerreturns in the future. 2004 to 2007 was an anomaly...the Woodstockyears. We have to accept reality andstop chasing ghosts. We are backwhere we were, Hands said.

Buyout funds should return tobasics, he said. Private equity wouldhave to invest in good businesses andhold on to them long-term ratherthan selling out after three years.

Investors should expect returns ofeight or nine per cent rather than the20 per cent seen at the height of themarket, he added.

BYMARION DAKERS

PRIVATE EQUITY

Crisis must be used to force change

SOMETIMES, crises are the best way toforce through change. Take what hashappened to the US car industry. Iwish the US government hadnt bailedout General Motors; governmentsshould not be in the business of help-ing individual firms in this way. Theassistance helped GMs remainingemployees but it unfairly put othercompanies at a competitive disadvan-tage, including Ford, Toyota and oth-ers who had done all the hard work toput their own houses in order.

Putting that crucial point aside,however, at least GM was transformed

during its bankruptcy phase, with fac-tories shut and ridiculously generousunion-negotiated wage and pensioncosts cut to more realistic levels. Thefirm now makes money on every car it

sells, rather than losing a packet.The IPO values GM at about $63bn.Roughly $23.1bn will have beenraised, the biggest public offering inhistory, eclipsing the $22.1bn raked inby Agricultural Bank of China in July. This is an astonishing turnaroundfrom GMs near-death experience in2008. Its rescue left the US Treasurywith a 61 per cent stake, cut to 33 percent yesterday. At $33 a share, the par-tial sale represents a loss of $9bn ontaxpayers original investments; how-ever, the soaring share price meansthat they could still quite easily breakeven on the deal over time. GMs trans-formation it has, of course, still along way to go is a perfect case studyof how a crisis can transform a seem-ingly untransformable organisationand thus end up being beneficial.

In a similar fashion, the British gov-

ernment ought to have made use ofthe Irish crisis to push through realchange in the EU and force a renegoti-ation of the Treaties to allow the UK toextricate itself of those bits that it

doesnt like. Prior to the election, theTories said they wanted to repatriatesome powers from Brussels toWestminster, including on social poli-cy. Depressingly, the trend since theelection has been entirely the otherway, with European institutions crack-ing down on the City like never before.The government has blown a once-in-a-decade opportunity to reverse thisnonsense. Eurorealist Tories have beendefeated by unthinkingly pro-EU ele-ments within the coalition.

One change which the crisis must-nt trigger is the abolition of Irelands12.5 per cent rate of corporation tax.Competition between nations for cap-ital, labour and corporate HQs is agood thing. The French and Germanshate it, because they want to keeptaxes higher; they would rather createa cartel of high-tax nations. If Ireland

were forced to give up what is one ofits few successful policies, it is fin-ished as an economy. Hiking corpora-tion tax wouldnt even raise anymoney. Firms that have relocated to

Dublin would simply up sticks againand move somewhere else; they wontreturn to high tax countries. There aremore low tax jurisdictions than ever,not least the up and coming globalfinancial centre that is Singapore.

The Eurozones existential crisis wont end with Irelands bailout. Itwill be merely delayed. Ireland can besaved. This may not be true of someother Eurozone countries; their day-to-day non-banking budget deficit aremuch larger and their economies lesscompetitive. Another bailout of anoth-er small country a few months downthe line would start to stretch the EUand IMFs ability to cope. The realworry is whether Spain or Italy willeventually lose the markets confi-dence. Britain desperately needs toturn this crisis to its [email protected]

THE CONSERVATIVE and Labour par-ties are set to name several City play-ers in the latest lists of appointedpeers.

Stanley Fink, the Tory party treas-urer and former chief executive ofMan Group, is among those said to beon the list of the latest entrants to theHouse of Lords, which will berevealed on Saturday.

Former BMI chairman Sir Michael

Bishop is also thought to be on thelist of up to 30 new Conservativepeers, along with Andrew Feldman,the party co-chairman and a universi-ty friend of David Cameron.

The Labour party has also submit-ted a list of up to 20 candidates forthe Lords, who have been scrutinised by a selection committee. Labourslist is thought to include NigelDoughty, founder of private equityfirm Doughty Hanson and owner ofNottingham Forest FC, and readymeal entrepreneur Sir Gulam Noon.

BYMARION DAKERS

POLITICS

City stars set for peeragesFormer Man Group boss Stanley Fink is to join the House of Lords Picture: GETTY

NEWS | IN BRIEF

Dell reports strong third quarterDell raised its yearly income forecastafter third-quarter margins and earn-ings beat expectations, helped by slidingcosts of PC components propelling itsshares 4.8 per cent higher. The personalcomputer maker, which vies with Acerfor the number two spot in the global

PC market, expects stable demand fromgovernment and corporate customersand favourable component prices thiscurrent quarter. Dell beat earnings fore-casts by a wide margin. It yesterdayreported net earnings for the quarterended 29 October of $822m (512m),up from $337m, from a year ago.

Gap posts weak earningsGap posted a slight decrease in net prof-it that met Wall Street estimates,despite tepid sales in advance of the keyholiday selling season, but the apparelretailer stood by its 2010 profit outlook.Net profit in Gap's third quarter fell oneper cent to $303m (189m), from$307m a year earlier. Sales rose two percent to $3.65bn, above the $3.58bnexpected by Wall Street. The firm said itwould close about 100 Gap stores in2010, 10 below its earlier guidance.

EDITORS LETTER

ALLISTER HEATH

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Editorial StatementThis newspaper adheres to the system of

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Distribution helplineIf you have any comments about the distributionof City A.M. Please ring 0207 015 1230, or [email protected]

Terra Firma boss GuyHands made his firstpublic appearancesince his failed lawsuitagainst Citigroup

LLOYDS HOT FOR PROPERTY DEALSLloyds Banking Group will be behindalmost one-sixth of all property dealsin the UK this year, as some 4bn ofproperty has been shifted by boom-time borrowers needing to repayloans to the banks 30bn troubledreal estate debt division. Lloyds, thelargest lender to commercial proper-ty with almost a quarter of the250bn of outstanding debt, hasformed a 425-strong business supportteam headed by Richard Dakin.

BRAZIL FACES AIRPORT SHORTFALL ATWORLD CUPBrazil risks public embarrassmentbecause it will run out of space at itsairports well before it hosts the WorldCup in 2014 due to a rapid increase indemand and inadequate develop-ment plans, according to leading air-

line industry executives. Withoutmore development, observers fear

that Brazil will face flight delays andcancellations around the World Cup.

DEBT VENTURE AIMS TO PLUG 1.5BNPROPERTY HOLEFund managers Schroders and CairnCapital have teamed up withEurohypo, the German bank, tolaunch a real estate debt venture withthe aim of plugging a 1.5bn hole inthe UK property market. There is ashortage of new real estate lending asbank retrench after profligate lend-ing for property purchases during theboom years.

SPORTECH AND BETFRED LEAD FIELDIN TOTE RACESportech, the football pools opera-tor, and bookmaker Betfred are theearly frontrunners in the auction forthe governments Tote betting busi-ness. Lazards, which is conductingthe auction, this week sent out aninformation memorandum to

prospective bidders, according tothose close to the deal.

US FACES BOYCOTT FOR CARBONHABITThe US will be banned from sellinggoods to many countries if it contin-ues to shirk its promise to cut green-house gas emissions, according to theworlds leading climate change econ-omist. In an interview with TheTimes, Lord Stern said nations that were taking strong action on emis-sions could start imposing restric-tions on dirty US exports by 2020.

GAMBLERS CAN STILL TURN TOLITTLEWOODS FOR A WINNER The name may have disappearedfrom the pools coupons handed todoorstep collectors every week, butLittlewoods will survive on the inter-net for another five years. Footballpools operator Sportech has signed alicencing deal with Shop Direct,

which owns the Littlewoods brand, touse the name for online gambling.

BERNARD MADOFF EMPLOYEESARRESTEDA former secretary to Bernard Madoffand another long-term employee ofthe multi-billion-dollar fraudster havebeen arrested and charged with secu-rities fraud and falsifying books.Annette Bongiorno, who worked as asecretary and helped to run the backoffice at Madoff Securities, was arrest-ed at her home in Boca Raton, Florida.Joann Crupi, another former employ-ee, was also arrested.

HALF OF BRITISH BUSINESSES HIT BYPROFIT SQUEEZEAlmost half of British businesses werehit by decreased profits in the lastquarter, according to a survey of busi-ness owners and financial directors. Aquarterly ranking of the warningsigns of business distress by R3 found

that a downturn in profits was experi-enced by 49 per cent of firms.

NORWAY CENTRAL BANK OWNS 7.5PCOF BLACKROCKNorges Bank, the central bank ofNorway, became the latest to reportboosting its stake in BlackRock. afterBank of America and PNC FinancialServices sold a total of $9.57bn in aBlackRock secondary offer thismonth. According to a filing with USregulators yesterday, Norges nowowns 9.85m shares, or 7.5 per cent ofBlackRocks common shares.

TRICHET CONCERNED ABOUTSTABILITY PACTEuropean Central Bank president Jean-Claude Trichet yesterdexpressed grave concerns about thedepth of the EUs stability pact, call-ing for a quantum leap in econom-ic governance, while speaking at acentral banking conference in

Frankfurt. He called for increasedgovernance and surveillance.

WHAT THE OTHER PAPERS SAY THIS MORNING

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DELOITTE Touche Tohmatsu is inadvanced talks about a possibletakeover with Roland Berger StrategyConsultants it emerged yesterday.

The discussions to merge theGerman firm with Deloittes strategicconsulting practice are in line withconsolidation activity in the widerconsulting sector this year. Risk man-agement firm Aon acquired HewittAssociates in a $4.9bn (3.05bn) dealwhich added to its human resourcesconsulting arm.

Deloitte confirmed yesterday thatdiscussions were taking place.

We can confirm that Deloitte andRoland Berger are in advanced discus-sions to merge their businesses. Wehave an exciting ambition to create a

market leading strategy consultancy within Deloittes Consulting busi-ness, the accountancy said.

It is believed the new firm would be called Roland Berger DeloitteStrategy Consultants.

Martin Wittig, Roland Bergerschief executive, is thought most likelyto become the new companys chiefexecutive with Jeff Watts, Deloittesglobal strategy and operations leader,being lined up as his deputy shouldthe deal go through.

Roland Berger also confirmed thetalks with Deloitte. MatthiasHopfmueller, a spokesman for thefirm said: Discussions between thetwo companies are already takingplace to open up new growthprospects for ourselves and Deloittebut we have to discuss this with allthe partners at our internationalmeeting in December.

Roland Berger began as one-mancompany in 1967 with a focus on mar-

keting consulting. In 2009, the com-pany generated 616m in sales andemployed 2,000 staff worldwide.

Deloitte woosRoland BergerBYMATTHEWWEST

M&A

THE PRIVATE equity owners of UnitedBiscuits are opening up a possible2bn sale to new bidders after exclu-sive talks with a preferred suitorended, people familiar with the mat-ter said yesterday.

US food groups Kraft, CampbellSoup and Kelloggs, which all looked

at United Biscuits before Chinese foodgroup Bright Food entered exclusive

talks, are likely to be invited back intothe process, the people said.

A number of rival buyout firms arealso thought to be readying approach-es for the business.

United Biscuits, Britains biggestsnack food group and maker ofMcVities biscuits and Hula Hoops, isowned by Blackstone and PAIPartners. Blackstone declined to com-

ment last night, while PAI did notrespond to requests for comment.

United Biscuits back on the blockas Chinese firms offer crumblesCONSUMER

AIRCRAFT maker Airbus will seekcompensation from Rolls Royce fordisruption linked to its engine failureon a Qantas flight earlier this month.

Rolls-Royce plans to replace enginesin the wake of the Qantas Airbus A380 emergency, when an engineblow-out forced a passenger plane toturn back to Singapore.

We cant comment on customersbut we can say that any cost Airbusincurs, we will seek full financialcompensation from Rolls-Royce, anAirbus spokesperson said yesterday.

The move means that Rolls-Roycecould face a more serious financialimpact than thought from the inci-dent.

Airbus, which has almost 200orders for A380 planes on its books,said disruption caused by the inci-

dent could delay deliveries next year.Qantas said yesterday around 40Rolls-Royce engines, or around half ofthose in use in A380 aircraft, will beaffected. Qantas six A380s have beengrounded since the incident. The air-line said in a memo yesterday itspilots had struggled to shut down anengine on the flight on 4 Novemberdue to debris from the Rolls-Royceengine that severed cables as it brokeup mid-flight.

Airbus to seek compensationfor Rolls-Royce engine failureBYMARION DAKERSAVIATION

News 3CITYA.M. 19 NOVEMBER 2010

WHITNEY STRIKES AGAIN

MEREDITH Whitney, the analyst credited with predicting the financial crisis, plans to gohead-to-head with Moodys and Standard & Poors by launching her own credit ratingsagency. Whitney already set up her own research company, Meredith Whitney AdvisoryGroup, last year after leaving her analyst role at boutique investment firm Oppenheimer.

Picture:REUTERS

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PLANS to cap the number of skilledmigrant workers coming to the UKwill only go a small way to achievingnew immigration targets and are like-ly to damage economic growth, agovernment advisory body warned.

The Migration Advisory Committee(MAC) was asked by Home SecretaryTheresa May to recommend limits onthe number of skilled workers enter-ing the UK from outside Europe.

Its latest report says that if govern-

ment targets to return immigrationlevels to the tens of thousands from196,000 by 2015 are to be achieved,the number of workers from outsideEurope will need to be cut by between13 and 25 per cent next year.

But in his foreward, MAC chairProfessor David Metcalf stated: It isnot possible to reduce net migrationto the tens of thousands by limiting work-related migration alone. Thisgoal can only be achieved by also cut-ting net migration under the study

and family routes. The professor noted widespread

concern among employers regardingthe impact that limits on migrationcould have and suggested that alter-native methods to capping workersmay be more practicable.

Limits on work visas could beeased if, for example: the study andfamily routes bear more than theirpro-rata share of any cuts.

The 300 page report gave supportto businesses concerned by the eco-nomic impact of a stringent cap onmigrant workers. He said: [Skilled]

migration makes a small but positivecontribution to GDP per head. Sucheffects will accumulate over time andbecome more significant.

Baroness Jo Valentine, chief execu-tive of business lobby group LondonFirst praised the bold nature of thereport.

She said: It is quite brave of themto point out, more than once in thedocument that the economic caseargues against capping these highlyskilled individuals.

Advisers saymigrant capneeds rethink THE government is to publish a list ofits biggest suppliers today as itlaunches its drive to make publicspending more accountable.

Cabinet Office minister, FrancisMaude, will publish the spendingdata later this morning which showsall departmental spending above25,000.

Among the governments biggestsuppliers are the Young PeoplesLearning Agency, established in Aprilto provide support for training andeducation to all 16 to 19 year-olds inEngland, Partnerships for Schoolsand the Greater London Authority.

The data published covers govern-ment spending over the last sixmonths and the government expectsthat charities alongside access toinformation groups will use it to help

the public understand where moneyis being spent.

The government has also createdan open access website to give thepublic and computer programmedevelopers easy access to the datafrom all levels of government.

The Taxpayers Alliance welcomedthe move. A spokesman said: Thereis lots of excellent information thatwill make it easier for us to hold thegovernment to account for its spend-ing activities

Governmentpublishesspending data

BY TOM DE CASTELLA

POLITICS

TAX


Indeed it will help because the govern-ment is spending way too much. Much

of this money is wasted.Thankfully, the new transparen-cy also lets me pay taxes withconfidence.

I think the transparency will help me forman opinion. It will help me find out what mygovernment is spending on, and deter-mine if I like it or not.Undoubtedly, this gives me confi-dence now that I can see wherethe money is being spent.

I would say yes. Disclosure is a reallygood thing because it lets you see wherethe money is going. If youdont disclose, no one will trustyou.

TONY STIRZAKER | MOLEX

PHIL MOORE | RSA INSURANCE

PIERRE HENRI LEROY | PROXINVEST

CITY VIEWS: IS THE GOVERNMENT RIGHT TO PUBLISHA LIST OF ITS BIGGEST SUPPLIERS? Interviews by Thomas Hamed

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GEORGE Osbornes decision to hikeVAT will shave 0.3 per cent off GDP in2011-12, the off icial independent fore-caster said yesterday.

The chancellor will increase thesales tax from 17.5 per cent to 20 percent in the New Year, as he seeks topay down the largest deficit inBritains peacetime history.

Yesterday, the Office of BudgetResponsibility (OBR) revealed theamount of damage it expected the

tax hike to do to economic growth.The interim OBRs June 2010

Budget forecast assumed that theincrease in the standard rate of VATfrom 17.5 per cent to 20 per cent

would reduce the level of real GDP in2011-12 by around 0.3 per cent, it saidin a statement.

Shadow chancellor Alan Johnsonseized on the figures, claiming thehike would ultimately result in fewer

jobs.He said: David Cameron promised

he wouldn't raise VAT because it hitsthe poorest hardest. He broke thatpromise.

Now the independent OBR hastold us the impact of Camerons veryown jobs tax slower growth andfewer jobs.

The OBR only publishes theassumptions behind its forecasts inresponse to a formal request.

Yesterday, it refused to say who hadasked for the information, althoughsources close to the Treasury insist it

was the Labour party.Meanwhile, economists at the

Adam Smith Institute called on thegovernment to consider more spend-ing cuts instead of the VAT rise, whichthey said would do less damage to theeconomy.

The coalition should urgently con-sider making further spending cutsinstead of raising VAT, which is goingto hit every household in the coun-try, said Tom Clougherty, executivedirector of the Adam Smith Institute.

The rise will come into force on 4January 2011.

VAT rise willhurt growth,says the OBR GOVERNMENT spending cuts will putthe brakes on UK growth, accordingto influential think tank theOrganisation for Economic Co-opera-

tion and Development (OECD) whichyesterday slashed its forecast for theUK in 2011.

The Paris-based group said Britainwill grow by 1.7 per cent in 2011, wellbelow the 2.5 per cent it predicted inMay and the 2.3 per cent expected bythe Treasury.

But despite warning of head winds and subdued growth, theOECD continued to judge theCoalitions fiscal tightening substan-tial but necessary.

The OECDs revised forecadragged some growth it previouslysaw for the UK next year into the cur-rent 12 months, upping the 2010 fore-

cast to 1.8 per cent from 1.3 per cent.However, the pace will slow as contri-

butions from businesses stockbuild-ing wane and householdconsumption remains subdued, itsaid.

The organisation forecast worldgrowth would slow to 4.2 per cent in2011 from 4.6 per cent this year

before returning to a rate of 4.6 percent in 2012. Last May, it projectedexpansion of 4.6 per cent in 2010 and4.5 per cent in 2011.

RETAIL sales in the UK rose for thefirst time in three months in October,according to official statistics released

yesterday.Sales volumes were up 0.5 per cent

compared to September, but still 0.1per cent lower than the same monthin 2009.

Online retailers continued to out-perform their traditional High Street

rivals, with non-store retailing up 1.2per cent on September and a stagger-ing 12 per cent on October 2009.

But shops selling household goodssuch as hardware stores and DIYsuperstores fared the worse, with salesdown 4.7 per cent year-on-year, due tothe slowdown in the housing market.Sales at these retailers were down 0.6per cent on September.

Analysts warned the VAT hikewould likely stem retail sales growthin the New Year.

OECD warns ofUK headwindsas cuts forecast

Retail sales pick up butgrowth stays sluggish

The High Street is losing out to internet sales Picture: Micha Theiner/City A.M.

BYDAVID CROW

ECONOMICS

ECONOMICS

Economic News8 CITYA.M. 19 NOVEMBER 2010

BY JULIAN HARRISECONOMICS

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AV AIL ABL E AT H. S AMUEL U W W W . H S A M U E L . C O . U K

THE chancellor could have to cut pub-lic spending by even more thanplanned, economists warned yester-day after government borrowing inOctober was higher than last year.

The Office for National Statistics(ONS) said net borrowing was 10.3bnlast month, up from 10.1bn inOctober 2009.

There is now a very real risk thedeficit will overshoot the govern-ments target of net borrowing of149bn for 2010-11, according toGraeme Leach, chief economist at theInstitute of Directors.

Chancellor George Osborne mayhave to revisit spending cuts and taxhikes if the economy underperforms between now and March, Leach

added.The ONS figures show public sectornet debt reaching 845.8bn the

equivalent of 57.1 per cent of the UKsGDP up from 694.7bn or 49.3 percent of GDP at the end of October2009.

These figures exclude financialinterventions such as bailouts forbanks. Including these amounts, thepublic sector debt is 64.5 per cent ofGDP, says the ONS.

Mark Littlewood, director generalof the Institute of Economic Affairs,said: The real liabilities facing thecountry are even worse than thesenumbers indicate. When our colossalpensions liabilities are considered,the true scale of our indebtednessruns into several trillion.

Interest payments on the debt alsoincreased to 3.86bn in October from3.35bn a year earlier.

However, economists at IHS GlobalInsight pointed out that that the pub-

lic finances have benefited fromincreased corporation tax and VATreceipts.

Governmentborrowing upon last yearBY JULIAN HARRIS

ECONOMICS

Economic News 9CITYA.M. 19 NOVEMBER 2010

Economists said George Osborne might have to make deeper cuts Picture: GETTY

ECONOMIST VIEWS: HOW BAD IS THE PUBLIC SECTOR DEBT? Interviews by Julian Harris

ALAN CLARKE | BNP PARIBAS

Borrowing is still on track to undershoot the latest emergency budget target. Nonetheless, thedeterioration in recent months is a disappointment and may reflect slower growth.

GEORGE BUCKLEY | DEUTSCHE BANK

Deficit levels are still high but should come down next year as fiscal tightening steps up a gear.But only if forecasts of strong growth and employment do not prove overly optimistic.

MICHAEL SAUNDERS | CITIGROUP

The figures were encouraging, as they were in previous months. And those months debt levelshave since been revised down. The UK remains well on course to meet its target.

NEWS | IN BRIEF

Mortgage lending slumpsGross mortgage lending last month wasthe lowest October total since 2000,according to figures released yesterday.The Council of Mortgage Lenders esti-mated that lending was down nine percent, from 13.6bn in October 2009 to12.4bn last month.The figures coincided with fresh Bank ofEngland data on the level of mortgagelending by major UK lenders.The Bank announced that 44,000 newmortgages were approved in October,yet the value of mortgage lending forhouse purchases is down from 5.6bn in

September to 5.3bn. This represents anine-month low, the Bank said yesterday.

Car production boosts industryOver a million cars have rolled out ofBritish factories this year, according tofigures released yesterday and most ofthe vehicles are being exported.Production of new cars grew six per centin October, while production is up 30.4per cent so far this year. Earlier this weekthe European Automobile ManufacturersAssociation reported a 16.6 per cent fallin new EU registrations. Yesterdays fig-ures from the Society of MotorManufacturers and Traders (SMMT)showed exports up 6.4 per cent, account-ing for over four out of five cars pro-

duced in the UK. Commercial vehicleproduction was up 47.1 per cent.

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The Capitalist10 CITYA.M. 19 NOVEMBER 2010

EDITED BY

JULIET SAMUELGOT A STORY? [email protected]

FUN AND FROLICS ASCITYS FINEST GATHERAT FINSBURYS PARTY

Centre left to right:Finsbury seniorpartner RolandRudd; PhilipBassett, Labouradviser in theHouse of Lords and

RBS chairman SirPhilip Hampton

On right: CreditSuisses UK manag-ing director ofinvestment bank-ing SebastianGrigg

Left: Katherine Garrett-Cox, Alliance Trust chief;Right: Carphone Warehouse chair Charles Dunstone

On left: RBS chief executive Stephen Hester and former business secretary Lord PeterMandelson; On right KKR partner Dominic Murphy

From left to right: Baronness Vadera, consultant to the Dubai government, AllianceBoots chief executive Andy Hornby and M&S chairman Robert Swannell

Complete with ceiling lights, a steadyflow of champagne and a path of can-dle-filled lanterns guiding our path,the Tate Britain was last night deckedout for one of the biggest City shindigsof the year last night. The annualparty of Roland Rudds Finsbury PRmade its triumphant return to thecosy environs of the museum in fullstyle. Guests strolled past a violet-lit,upside-down aeroplane hanging from

the ceiling to the central lobby, wherea sizeable chunk of Rudds two dozenFTSE 100 clients had gathered fordrinks and high jinks.

Your Capitalist was there, watchingas the axles of business at least, itsmore champagne-fuelled side weregreased. Speculation that Finsbury

would ruthlessly shed its New Labourcredentials in favour of this coalitionfad proved groundless, as we spottedonly the regular Tory attendees.

And, of course, the dark prince ofNew Labour himself PeterMandelson was seen gliding acrossthe floor. Smoothly, he sailed into aconversation with RBS honchoStephen Hester. How are you?exclaimed the lord as if the two wereold friends. Ive just come back fromChina.

His impeccable black tie drewqueries off to the Italian ambas-

sadors, he said airily. But what wasthe old hand doing in China?

Apparently embracing his John theBaptist role, as he put it, but furtherspecifics remained a mystery.

Does he still think hes runningRBS? one chairman asked as the Lordpeeled Hester off from the crowd.

And Sainsburys chief executiveJustin King strolled the floor display-ing his heart on his sleeve or lapel in the form of a huge badge bearingthe supermarkets logo (and kindly

enlarged to fit the clumsy Olympicequivalent). As Centrica chairman Roger Carr

deployed his charming smile toanother guest and former Lloyds bossSir Victor Blank made a fashionablylate entrance, Nat Rothschilds BMWpulled up at the Tates steps. Forsome, the evening was still young.

ALL OF IT MUST GOEver wanted your own private stringquartet concert? Or to see what goeson behind the scenes at fashion house

Anya Hindmarch? All such delightsare up for grabs at the Pilotlightonline charity auction. The charityacts as a mentor to smaller non-profitagencies, helping them find fundingand business advice from big Citynames. Bidding starts today in itsonline auction and will close on 30

November, so get your offers in nowat www.pilotlight.org.uk/auction

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THE owners of French yoghurt maker Yoplait rejected a 1.4bn (1.19bn)unsolicited bid from Europes largestdairy group, Lactalis yesterday, sayingit was too low and would force out amajor shareholder.

Unlisted Yoplait, which competes

with food giant Danone, has been inthe spotlight since the summer when

private equity fund PAI Partners saidit wanted to sell its 50 per cent stake.

The other half of Yoplait is ownedby Sodiaal, a dairy co-operative, whichwants to keep its participation.

Lactalis offer, made on 16November, was for all of Yoplait.

The price proposed by Lactalis nei-ther reflects the intrinsic nor strate-gic value of Yoplait, nor its growth

potential, Sodiaal and PAI said in ajoint press release.

The sale process, which officiallystarted a few days ago, could alsodraw interest from food giants suchas Nestle, General Mills, which distrib-utes the Yoplait brand in the UnitedStates, Asian food groups and privateequity groups.

Lucien Fa, who had been withDanone for 21 years, came on boardas chief executive in 2002. Following

a restructuring plan, the loss-makingYoplait returned to profit.

Yoplait owners reject 1.2bn Lactalis bid

JULIAN Treger, the well known share-holder activist, has triggered the sale

of the Aim markets largest company Western Coal by agreeing to sell a23.5 per cent stake in it to WalterEnergy, the US coal company.

Treger, who came off the board ofWestern Coal last month, owned the

stake through one of his funds, the Audley European OpportunitiesMaster Fund.

Treger has agreed to sell 40 percent of his shareholding now for

cash, with the rest later subject tohim getting a higher offer fromanother buyer.

If the sale of his entire holding goesthrough at the current price he willhave netted 530m from an invest-

ment that cost only around 20mthree years ago.

Walter Energy has said it wants tobuy Western Coal for $11.50 a share,valuing it at $3.3bn (2.06bn), more

than any other Aim company.Western Coal says it sold three mil-lion tonnes of coal last year butexpects to get to six million tonnes bythis year. It is being advised in the UKby Nick Wells at Cenkos Securities.

Treger triggers 2bn bidBY DAVID HELLIER

MINING

ADMINISTRATORS have been forcedto break up the remainder of trou-bled housing group Rok after a solebuyer failed to materialise.

Just 500 jobs out of a workforce of3,800 look set to be saved afterPriceWaterhouseCoopers (PwC)found buyers for only parts of thefirm.

PwC said that it had sold parcels ofthe construction and social house building division to ManseConstruction Services, a subsidiaryof Balfour Beatty, saving 381 jobs.

The reprieved section is made upof construction operations in MiltonKeynes, Gatwick and Heathrow andthe social house building businessesbased in the South West and NorthWest of England.

In a further development, sourcesclose to housing maintenance firmMears Group, claimed that it wassaving more than 100 jobs in theSouth West.

But the majority of the firmsemployees are being made redun-dant after earlier expressions ofinterest to buy the whole group col-lapsed.

PwC are retaining a team of 200people across the group to help windup the business but these jobs willgo once the parent group closes.

According to PwC, Rok which builtand maintained social housing, wasa casualty of public sector cuts andthe construction slump.

PwC Jeremy Webb joint adminis-trator said: We are delighted thatwe have been able to secure a sale ofpart of the business hence preserv-ing employment for 381 people.

This is tinged with disappoint-ment that there was not sufficientinterest in the other parts and hencethe redundancies that have beenmade today.

PwC sellsremainingRok units

CAPITA yesterday said revenueswould be hit harder by governmentspending cuts than it previouslyexpected, casting a shadow over pre-dictions that robust support servicesfirms stand to gain from the era ofausterity.

Since the coalition was formed inMay, many large support servicesfirms such as Capita and rival Sercohave sounded bullish about theirability to gain market share becauseof increased levels of governmentoutsourcing.

We indicated that pressures onpublic spending might potentiallyaffect growth in the short term... This is now occurring and will sub-due revenue growth in the secondhalf of the year more than previouslyanticipated, Capita said.

Capita, which processes 25m life,savings and pensions policies andhandles complaints for the BBC, saidrevenue growth would be modest because many existing contractswould not be renewed or offset withnew deals, and because fewer con-tracts had been signed in the secondhalf.

The support services sectorslargest players had been expected tocash in on the cuts because of theirpenetration, size and diverse list ofservices.

Capita sayscuts will hitits revenues

TWO members of imprisoned finan-cier Bernard Madoffs inner circlewere arrested on charges of helpingto conceal the largest financial fraudin history, US prosecutors said yester-day.

The indictments of former employ-ees Jo Ann Jodi Crupi, 49, and

Annette Bongiorno, 62, brings toeight the number of people criminal-

ly charged since the December 2008revelation of Madoffs multibillion-dollar decades-long fraud.

Hours after the two women werearrested at their homes, ManhattanUS attorney Preet Bharara hinted atmore arrests and criminal charges inthe case.

The fraud shook investor confi-dence in market regulators who

missed Madoffs epic swindle despiterepeated warnings.

Two linked in Madoff caseUS CRIME

Julian Tregers share sale sparks a deal at Western Coal Picture: REX

BY HARRY BANKS

SUPPORT SERVICES

BY HARRY BANKS

FOOD MANUFACTURING

BY TOM DE CASTELLA

CONSTRUCTION

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INSURER Chaucer will expand its UKmotoring operations as part of anambitious new growth strategy.

It says the push into motoringinsurance will involve a significantpresence on price-comparison web-sites. Chaucer wants to balance itsexposure to the catastrophe business, which offers high returns but highvolatility, with a greater input to thelower-risk motoring sector.

However, the firm says its core business remains the 27 specialistLondon classes, including the newinternational division, and the UKdivision. It says it aims to become atop three dedicated Lloyds busi-ness. It is currently number six.

It will also develop a new globalenergy business, taking advantage ofits energy, nuclear and engineeringexpertise.

The company has targeted an over-all return on equity of 12 per cent anda reduction in its combined ratio oftwo per cent.

Total premium rate increases of 2.7per cent are forecast for this year afterpremium income for the first threequarters rose more than four per cent

to 677m.Bob Stuchbery, chief executive,

said: A key focus of the managementteam over the past few months hasbeen to ensure we have the strategyand resources in place to make themost of our core strengths as a busi-ness going forward.

With the launch of our new strate-gy, we firmly believe we are now bet-ter positioned to meet the developingneeds of our markets, to deliver asuperior return on capital and tobuild enduring value for our share-holders.

Chaucer has staged a strong recov-ery after a torrid period of natural dis-asters which included the Chilean andHaiti earthquakes, European wind-storm Xnthia and floods in Australia.

ENGINEER Weir Group has snappedup an American firm that makes windturbines and hydro-electric power sta-tions.

The Glasgow-based group refused tosay how much it is paying for American Hydro Corporation, whichhas revenues of 27m and assetsworth 18m.

Weir also said it would invest 6min a new Canadia service centre, to fur-

ther boost growth in North America. American Hydro has had a tie-up

with Weir over the past five years andalso worked with the company onhydro projects in Scotland during the1990s.

Weirs chief executive, KeithCochrane, said: Hydro-power is the worlds largest source of renewableenergy.

He added: Combined with American Hydro, we have the engi-neering depth and skills to accelerateour development in established hydromarkets throughout the Americas andEurope

Weir has worked with AmericanHydro before, so knows the business

well, said RBS analyst AndrewDouglas.

Weir snaps up American Hydro Corp toboost its presence in renewable energy

BRITISH manufacturing buyout firmMelrose said trading was slightlyahead of its own view and that rev-enue visibility remained healthy asorders were increasing.

Melrose, which has grown by buy-ing underperforming businesses, saidit was confident that the year wouldend strongly and provide a good basefor 2011.

The companys Dynacast business,which makes die-cast metal parts, is

expected to post second-half operat-ing profit similar to first half levels, itsaid in a statement.

Melrose plans to sell Dynacast for aprice expected to be more than350m. It has hired Rothschild toadvise on the sale.

Dynacast accounted for about afifth of Melroses total revenue for thesix months to the end of June.

Melrose shares, which have morethan doubled in value in the year to

date, closed 4.9 per cent lower at288.6p yesterday.

Melrose hires Rothschildto sell die-cast metal firmMANUFACTURING

CASH-rich Europeans are rushing toinvest in prime property in one ofLondons most expensive postcodes,in a bid to protect their money amidgrowing fear over the stability of theeuro, according to property firmSandfords.

The firm says cash-rich individualsfrom Europe currently account for 60per cent of property purchases inLondons W1 postcode.

Ireland and Portugals mounting

debt problems and the potentialimpact on the value of the euro have

led to a surge of interest from buyerskeen to move some of their wealthinto London prime property,Sandfords added.

Around a quarter are looking tomake London their primary resi-dence, while the rest are purchasingas a means of diversifying theirwealth and seeking protection fromthe turbulence in the Eurozone.

Properties between 1.5m and 4mare selling in seven days on average.

Wealthy Europeans pileinto London propertyPROPERTY

LONDON Mayor Boris Johnson yester-day unveiled new station designs forCrossrail.

Johnson showed pictures of eightnew Crossrail stations, five of whichare underneath Central London.

The stations feature wide plat-forms, escalators and lifts to ease con-gestion.

All stations will also have step-freeaccess to platforms.

Speaking at the event, Johnson saidthat Crossrail will form the backboneof Londons rail infrastructure.

He said: As Crossrail moves fromthe drawing board to reality we cansee the breathtaking benefits it willbring to our city.

Rail minister Theresa Villiers, alsoat the event, said Crossrail will add 10per cent to Londons rail capacity, andmove more workers into the City.

[Crossrail] will create thousands of jobs and potentially generate up to50bn for the UKs GDP, Villiers said.

The 16bn project will bring pas-senger trains under central London.

The line, running from east-to-west,has direct connections between theCity and Heathrow, London CityAirport, and Eurostar rail services atStratford. It will also run to CanaryWharf.

The station designs are displayeduntil 8 December at the BuildingCentre, near Tottenham Court RoadUnderground station.

Station plansfor Crossrail

are unveiledTRANSPORT

BRITISH Airways (BA) yesterday won ahigh court battle to prevent hundreds

of air cargo customers suing it in aUS-style class action lawsuit.Two UK f lower importers that sued

BA in 2008 cannot represent all directand indirect customers of the carrier,because there was no way to know ifthey had the same interest in thecase, the Court of Appeal in Londonruled yesterday.

Justice John Mummery concludedthe customers request for a so-calledrepresentative action was fatally

flawed.The companies, which claim they

suffered a loss as a result of the air-lines involvement with a global car-tel which fixed the price of air cargo,

had wanted to bring a class-actionsuit on behalf of around 200 compa-nies.

BA pleaded guilty in the US threeyears ago to being involved in the car-tel and was fined $300m for its role inthe separate conspiracies to fix bothcargo rates and passenger fares.

Last week, BA alongside ten otherairlines was fined 104m by the EUafter an investigation into the aircargo cartel.

BA, which could still face individ-ual claims, said in a statement: Wewill continue to contest every classaction brought by cargo customers.

BA wins appeal in cargo caseBYKATIE HOPE

AVIATION

Chaucer aims

to grow carinsurance armBY STEVE DINNEEN

INSURANCE

BYMARION DAKERS

ENERGY


New station designs were unveiled for Crossrail yesterday

Keith Cochrane, chiefexecutive of WeirGroup, has worked withAmerican Hydro on

various tie-ups before

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INVESTEC, South Africas fifth-largest bank, is selling Rensburg FundManagement (RFM) for 45m, it said

yesterday as it unveiled a six per centhike in underlying operating profit.

Franklin Templeton has enteredinto a conditional agreement toacquire RFM from Investec, whichmanages about 880m in UK equities,and is a small part of RensburgSheppards, which was bought earlier

in the year by Investec.RFM chief executive Alex

Brotherstone said the deal would givethe firms fund managers global distri-

bution opportunities.But he was unable to give details of

his own future: Im keen to stayaround and will work very closely with

Jamie to see how we can expand. At themoment I remain joint chief executiveuntil the group is integrated.

Meanwhile, Investec said operatingprofit totalled 228.15m in the six

months to 30 September, up 5.6 percent from 215.9m a year earlier.Excluding a 46m profit made in thesame period last year on the repur-chase of debt, profits were 34 per centhigher. It added net interest incometotalled 321.17m, compared with297.36m a year earlier. Meanwhile,

bad debt charges totalled 122.85m,compared with 134.29n a year earlier.

The investment bank and assetmanager said the regulatory environ-ment remained challenging, but activ-ity levels were starting to improve.

Investec sellsits Rensburgfunds division CLOSE Brothers said overall perform-ance during the first quarter wassolid yesterday, driven by good loan book growth on continued demand

for its specialist lending services. The merchant bank said its loan

book stood at 3.1bn at the end ofOctober compared to 2.9bn threemonths earlier, an increase of sevenper cent. It said it also remained posi-tive about the outlook for the fullfinancial year.

However, Close said its bad debtratio grew slightly compared to thefirst six months of the year due to aproblem property portfolio althoughit said it expected its bad debt ratio to

be lower by the end of the 2011 finan-cial year.

The banks asset management divi-sion made a small loss as it continued

to invest for future growth, particu-larly in private clients. Total fundsunder management increased 14 percent to 8.5bn at 31 October 2010,compared to 7.4bn three months ear-lier reflecting the acquisition of theChartwell Group and market move-ments.

Close Brothers said its securitiesdivision had recorded sound perform-ance although its derivatives trader,Mako, had been subdued due to lower

volumes and volatility.

A MINING director was yesterdayawarded 10m (8.5m) after a judgefound he had been defamed by falseallegations he made inappropriate,naked advances to a work colleague.

Donal Kinsella, a director atKenmare Resources, had beenaccused of making three trips to thedoor of a female fellow director late atnight.

The jury accepted the marriedfather of sixs explanation that he

was prone to sleepwalking, did notwear pyjamas and had been drinking whilst taking painkillers. The inci-dent took place on a work visit toMozambique.

Kinsella argued the incident hadmade him a laughing stock after he

was asked to resign as chairman ofthe firms audit committee.

He took particular exception to a pressrelease which he said was suggestive.

Close Brothersreports solidstart to year

Naked mining directorwins 10m libel case

Donal Kinsella said he had been made a laughing stock by the allegationsBY TOM DE CASTELLA AND MATTHEW WEST

BANKING

BANKING

NewsCITYA.M. 19 NOVEMBER 2010

BY STEVE DINNEENMINING

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NATIONAL Grid saw six-month pre-tax profit surge 45 per cent to 938m,

with operating profit growing inevery part of the business.

The good performance is in part weather-related, with a warm sum-mer in the US leading to high use ofair conditioners on the east coast

where National Grids interests are.Six-month earnings per share (EPS)

have increased five per cent to 20.3pwith the 2.3bn rights issue complet-ed in June. As a result of the earningsgrowth, National Grid increased itsinterim dividend by eight per cent to12.9p a share. The firm, which ownsand operates electricity and gas net-

works in both the UK and US, saidthat profits were flattered somewhat

by earnings from previous periods being carried over into the currentresults, with this effect accountingfor about 200m of pre-tax profit.

Chief executive Steve Holliday toldCity A.M. that the firm is also on track

with its 3.7bn investment pro-gramme, with most money beingspent in the UK. It is planning for aseven per cent overall growth in itsassets over the next five years, with

electricity transmission expected tosee 13 per cent growth.

Holliday said: We are renewingassets that are old and connectingnew generators lots of them windand nuclear. And we have to reinforcethe system so that the power can flowfrom where theyre located to where

you and I live.National Grids investment pro-

gramme has been particularly affect-ed by Britains increasing reliance onimported gas, meaning that energyhas to be transported from differentpoints of entry than used to be thecase. As a result, it is expanding itsfacility on the Isle of Grain off thecoast of Kent by a third, which willmake it big enough to supply 20 percent of the UKs gas demand.

ENGINEERING firm AMECs sharesgained 2.5 per cent yesterday after thegroup won two contracts on oil andgas rigs in the North Sea.

Oil refiner ConocoPhillips has hired AMEC for engineering and procure-ment work on its existing Judy plat-form around 240km from the

Aberdeen coast, as well as for initialwork on its new Jasmine gas reservoir.

The value of the contract win hasnot been disclosed.

ConocoPhillips anticipates produc-tion on the Jasmine platform will

start in the fourth quarter of 2012. AMEC shares closed 28p up at11.54, its highest close in more thana year.

I am delighted that our long trackrecord of delivery of major and com-plex projects for ConocoPhillips,including on this field itself, has beenrecognised through this significantcontract award, said John Pearson,managing director of AMECsEuropean & West African business.

AMEC wins North Sea oilrig engineering contract

ENERGY

DEFENCE firm QinetiQ saw its sharessoar yesterday after it posted a 14 percent rise in first-half profit onstronger sales and better cash genera-tion.

Sales at the defence technologyfirms global products business,

which accounts for around a third ofgroup revenue, grew 65 per cent, driv-en by demand for its Q-NET vehicleproducts to support operations in

Afghanistan.QinetiQ reported underlying pre-

tax profit of 51.6m for the sixmonths to the end of September, onrevenue seven per cent higher at865m.

Its shares, which had fallen morethan a third this year after it lost akey Ministry of Defence training con-tract, closed up 13.6 per cent at112.5p, valuing the floated portion ofthe firm at 647.5m.

The overall beat comes from thelumpy products business, mainlyfrom the Q-Nets order which the mar-ket had underestimated, Bank of

America analyst Celine Fornaro saidin a research note, adding the compa-nys 231 per cent cash conversion rate

was a key positive.QinetiQ, which was spun off from

the Ministry of Defence in 2001, saidit had cut net debt a quarter to 327mover the past 12 months, adding costcuts and self-help measures werestarting to bear fruit.

QinetiQs costcutting helps

boost resultsDEFENCE

BAA CHAIRMAN Sir Nigel Rudd hasadded his name to a list of nine signa-

tories to a letter urging the govern-ment to stop dragging its feet onroadworks policy in London.

The letter, sent out by the office ofLondon Major Boris Johnson, wastoday delivered to transport secretaryPhilip Hammond and warns thatthere is still too much disruption onthe capitals roads caused by road-

works with just two years to go untilthe Olympic games.

The letter calls on the government

to speed up its consultation on road-works disruption and to get on with aconsultation on lane rental that wasmeant to begin in July.

It says that Hammond should

urgently approve regulations thatwould mean utility companies could be charged for digging up the capi-tals busiest roads at the busiesttimes.

Automobile Association presidentEdmund King has also signed the ini-tiative. He said: 84 per cent ofLondoners back tougher penalties forutility companies that dig up theroads without permission. An effi-cient lane rental system would con-

centrate the minds on cash andreduce the capitals cones, chaos andcongestion.

The letter claims that roadworkscost London 1bn per year and are at

the root of 38 per cent of the citystraffic jams. Data from public.lon-donworks.gov.uk shows that therehave been 22 active roadworks caus-ing disruption in the City of Londonin the last two weeks alone.

The other signatories to the letterinclude Jules Pipe, the chairman ofLondon councils, Sue Terpilowski ofthe Federation of Small Businesses,and James Drummond, chief execu-tive and president of Invensys Rail.

Roadworks action demandedBY JULIET SAMUELTRANSPORT

National Grid

dividend up asprofits soarBY JULIET SAMUEL

ENERGY


HERITAGE HITS MORE OIL IN IRAQ

ONE of Heritage Oils wells in Iraq has hit a bigger-than-expected hydrocarbon deposit,the firm said in a trading statement yesterday. Shares closed down 2.3 per cent at 367p,however, after no update was given on the companys ongoing tax dispute with theUgandan government. The company has set aside around $400m (249m) in relation tothe tax quarrel linked to its sale of assets to former partner Tullow. Picture: REUTERS

MercerThe consultancy has taken on Simon

Thompson as a senior consultant in itshealth and benefits business. Thompson

joins from Bupa, where he was a com-

mercial manager leading the client rela-tionship team in the south of the UK.Before this he was UK and Ireland salesmanager for Europ Assistance Holdings.He has spent the last ten years workingon healthcare and benefits.

F&CMichael Sell is set to join the F&Cemerging equities team, following thefund managers recent appointment asgroup manager for the Board ofTraditional Funds global emerging mar-ket and emerging Asia funds. Sell, whohas managed the Asian fund for previ-ous manager Nevsky since January

2008, will join F&C on 1 February.

Smith & WilliamsonThe investment manager has appointedDavid Amplett-Lewis as a director togrow its discretionary fund manage-ment business with independent finan-cial advisers (IFAs). He has 11 years ofexperience with IFAs and investment,working most recently at DeutscheBank within private wealth manage-ment as an investment director. Also

joining is Amanda Keyton, who will beworking alongside Amplett-Lewis topromote the firms discretionary wealthmanagement services to the intermedi-

ary sector. The firm has also recentlyhired Nick Richards as a business devel-opment director, supporting the privateclient side of the business.

HIG EuropeThe European branch of the privateequity firm has hired Neil McIlroy as anassociate in its London office, bringingthe companys UK investment team to25. McIlroy joins from European buy-out firm Cinven, where he spent fouryears in the industrial and healthcareinvestment teams. Before this heworked at Morgan Stanley within theinvestment banking division.

CITY MOVES | WHOS SWITCHING JOBS Edited by Marion Dakers

Man GroupThe alternative asset manager has hired JennyMorton as head of consultant relations, startingon 22 November. She joins from PutnamInvestments, where she was head of globalconsultant relations, and has also held seniorroles at Fidelity, Boston Partners and theBoston Company. Morton will report to PaulDackombe, head of institutional clients UK, andwill be responsible for leading Mans initiativeto build relationships with UK consultants.

+44 (0)20 7557 7245morganmckinley.com

To appear in CITYMOVESplease email your career

updates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

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PRIVATELY held commodities giantGlencore is considering listing inthe first half of next year, in an IPOthat could raise around 10bn.

Glencore, the worlds biggestcommodity trader, has been prepar-ing to go public after issuing a$2.2bn (1.bbn) convertible bondlast year.

The group, which yesterday post-ed a strong jump in nine-monthprofit, is considering an IPO that

would likely launch off the back offull-year results in March or April,according to two people familiar

with the matter who declined to be

named.Switzerland-based Glencore

declined to comment.While no final decision has been

made on the size of the offering, itcould raise around 10bn, onesource said, making it one of the

biggest London flotations on record.The IPO could to be a dual listing

in London and Hong Kong, anothersource said. Morgan Stanley,Citigroup and Credit Suisse areexpected to be involved in the list-ing.

In the credit markets, the cost ofinsuring Glencores debt againstdefault fell, which analysts said wassparked by the news about possibletiming of the IPO.

Five-year credit default swapstightened 30 basis points to 215

basis points, the tightest levels sinceMay.

Whilst we wouldnt expect theproceeds to be put towards debtreduction, we consider theincreased transparency and addi-tional funding source should pro-

vide comfort to credit investors,analyst Matthew Robbins at RBSsaid Another analyst said an IPO ofGlencore would likely not take placeuntil it completed a spin-off of itsgold assets. In August, Glencoreunveiled plans for spinning off orlisting its Kazzinc gold assets, whichcould be worth more than $5bn,next year.

Glencore paves wayfor 10bn flotationBY HARRY BANKSCOMMODITIES


NEWS | IN BRIEF

Lagardere aims for Spring IPOFrench media group Lagardere will sellits stake in pay-TV group Canal+ Francein an initial public offering (IPO) inspring 2011, Lagardere's chief financialofficer Dominique d'Hinnin said yester-day. D'Hinnin told an investor conferencein Spain that Canal+'s majority owner

Vivendi had never responded to a priceproposal Lagardere had sent early thisyear, and there had been no negotia-tions.

Ex-car czar Rattner sued by NYSteven Rattner, the former Obamaadministration auto industry czar, wasyesterday sued by New Yorks attorneygeneral Andrew Cuomo for allegedlypaying kickbacks to win investmentsfrom the state's public pension fund.Rattner separately settled a related USSecurities and Exchange Commission(SEC) civil lawsuit, agreeing to pay$6.2m (3.9m) and accept a two-yearban from working with an investmentadviser or broker-dealer. That accordrequires court approval. Cuomo and theSEC alleged Rattner entered quid proquo arrangements with the New YorkState Common Retirement Fund toobtain $150m in investments for his pri-

vate equity firm, Quadrangle Group, in2005 and 2006.

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Consumer News16 CITYA.M. 19 NOVEMBER 2010

ARCADIA, the owner of retail chainsincluding Topshop and BHS, is plan-ning further international expan-sionafter posting a 6.4 per cent rise inpre-tax profit to 213.2m for the yearto the end of August yesterday.

Arcadia Groups operating profitsincreased 10.4 per cent to 279.6m inthe year, on sales up 40 per cent to2.8bn.

Total sales were 2.8bn with sales

at UK stores open at least a year up1.3 per cent, and up one per cent inthe first 11 weeks of the new finan-cial year.

However, UK like-for-like salesgrowth at the group which alsoincludes Miss Selfridge, Burton,

Dorothy Perkins, Wallis and Evans has declined in recent weeks.

Sir Philip Green said he was eyeingSouth Africa, Australia and Asia toexpand his chains, which include

Top Shop and BHS.Arcadia already has 2,542 owned

and 579 franchised outlets in 37countries. The group has just agreedto open five stores in Brazil, and is indiscussions to set up in South Africaand Australia.

Green said: We also have get to goto Asia. Weve got to sit down anddraw up a business plan. I remain

cautious about the year ahead, withincreases in VAT, rates, raw materialsand some wage inflation. But I lookto grow the business both at homeand overseas.

The company said that Green willnot receive a dividend.

Arcadia looksoverseas togrow profit

SPAR UK managing director JerryMarwood has announced he is set toleave the company after nine years incharge.

He will move on next summer butis yet to reveal his future plans.

During his time at Spar, Marwoodhas overseen rapid company growth.

The company has a 2,583-strongnetwork of supermarkets in the UK,all of which are independently ownedand managed, and it recently report-ed a 3.1 per cent year-on-year increasein sales for the three-month period to

the end of July.By category, sales of own-brand

products grew by 4.4 per cent, whilefresh food and wine sales increased

by 3.9 and 3.5 per cent respectively.Spar said in statement : Jerry has a

desire to move on to seek new chal-lenges and we have been working

with him to map out a process whichwould ensure a smooth transition.

Marwood said: I still have a num-ber of exciting business initiatives toimplement, a replacement to findand a handover to complete all of

which will take some time.

SABMiller sales boostedby its emerging markets

A STRONG recovery in emerging mar-kets helped brewing giant SABMiller

beat forecasts with a 16 per cent risein half-year earnings, while the MillerLite brewers markets in Europe andNorth America struggled.

The worlds second biggest brewer,which earns more than 80 per cent ofits profits from emerging markets,said Africa and Asia had fully recov-ered while high unemployment inmature markets was holding backany upturn in beer sales.

Chief executive Graham Mackaysaid: The outlook is extremelymixed.

Emerging markets are finealthough some have been hit by tax

but developed markets in Europe andNorth America are struggling.

The brewer of Peroni and Grolschbeers said it would continue to bene-fit from lower raw material pricessuch as for barley to the end of itsMarch 2011 year and then see a smallrise the following year as higher grainprices come through.

The market seems to haveassumed that SABMiller is betterplaced than some competitors to deal

with the increase in some commoditycosts, said Matthew Webb at brokers

JP Morgan Cazenove.

Spar MD to moveon after nine years

BY JOHN DUNNE

RETAIL

COLEEN Rooney yesterday launchedher debut fashion collection with theonline and home shopping retailerLittlewoods.

Rooneys collection goes on sale inDecember and is inspired by fashionicons including Jackie Onassis.

Floor-sweeping maxi dresses, neatshifts and strapless prom-style dressesfeature in the range. Rooney said: Iam often asked about the clothes thatI wear and my sense of style. By creat-ing a range myself I hope to make myfavourite looks available to all.

Coleen Rooneylaunches debutclothes line

RETAIL

RETAIL

CONSUMER

Arcadia boss Sir Philip Green is planning international expansion Pic: Micha Theiner

JOHN Lewis said sales had risen by11.3 per cent over the last four days driven by a strong performance fromfashion and helped by the colder

weather. The department store said the

week had begun well as consumersstarted thinking about buyingChristmas gifts.

Lesley Ballantyne, John Lewis direc-tor of operational development said:This week is shaping up to be a reallystrong week, by last night we were11.3 per cent up on last year.

All areas are very positive but fash-ion particularly stands out, wherecustomers are taking advantage ofour beautiful winter ranges in

womens cashmere.Sales of fleece robes jumped 118 per

cent during the four days compared to

last year, while sales of slippers rose 15per cent, and Ugg earmuffs 112 percent. Watch sales were up 25 per cent.

The retailer is considered a bellwetherfor the consumer climate on the highstreet and issues regular tradingupdates in the run-up to Christmas.

John Lewis insales surge asXmas nears

RETAIL

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HALFORDS said yesterday it had refi-nanced its debt arrangements as itposted a rise in first half profit.

The cycle and car parts retailer sawpre-tax profit rise 12.8 per cent in thesix months to 1 October.

Halfords said it had grown its mar-ket share in its more expensive cyclesrange as more people invest in bikes

to ride to work.The company also said it had seen aslight bounce in satnav sales afterthey had plummeted earlier in theyear.

Halfords said its Autocentre devel-opment plan was on track withrebranding of all centres to be com-pleted by early 2011.

Meanwhile net debt stood at109m at the end of the period with anew debt facility agreed with the

companys banks.Chief executive David Wild said:We are pleased that we have had anagreement with our banks that is pos-itive for us.

This has been a big period ofchange for the company with newdistribution arrangements and there-branding of our servicingAutocentres. We think we have theright stock for Christmas whichshould give us another boost.

Halfords refinances asearnings drive forward

Halfords chief executive David Wild is bullish on 2011 Picture:Micha Theiner/ CITY A.M

BY JOHN DUNNERETAIL

Consumer News 17CITYA.M. 19 NOVEMBER 2010

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iPhone users in the UK will soonfind adverts inside apps they down-load as Apple rolls out its iAds plat-form outside the US.

The platform allows applicationdevelopers and Apple itself tomake money from advertising con-tained within apps.

It is set to launch in the UK andFrance in December after attract-ing a host of big money advertisersin the US.

European launch partners willinclude LOral, Renault, Louis

Vuitton and Absolute Radio. Apple describes the technology

as a powerful new way for adver-tisers to reach millions of iPhone

and iPod touch users.The launch of iAds heralded the

start of a major advertising warbetween Apple and Google. At thelaunch of the iPhone 4, Apple chiefexecutive Steve Jobs claimed iAds

would help Apple to control 48 percent of the mobile advertising mar-ket by the end of 2010 a clearswipe at Googles dominance.

The emergence of iAds has pro- vided Apple with a lucrative newrevenue stream. An estimated 5bn

apps have now been downloadedthrough the App Store, with Applepocketing a third of the cover price.Now it will also be able to cream offa premium from ads.

iAds, which is built into iOS 4,lets users stay within their currentapp while engaging with an theadvertisement.

Apple says the platform aims tocombine the narrative quality of

TV ads with the interactivity of dig-ital for something entirely new.

Marc Menesguen, LOrals Headof marketing said: Were thrilled

by the quality, the interactivity andthe depth of iAds user experience,giving us an unparalleled opportu-nity to reach and serve the mostengaged and discerning customersat the digital forefront of beauty.

iPhone users to seeadverts inside appsBY STEVE DINNEEN

TECHNOLOGY

REED Elsevier yesterday reaffirmedits outlook for a slightly lower oper-ating profit margin this year assubscriptions to its scientific andlegal publications remained weak.

The Anglo-Dutch company hasbeen slow to respond to economicrecovery as corporate subscriptionscome up for renewal only periodi-cally, and are worth less as firmsemploy fewer staff a fact that pro-tected it in the early stages of the

recession.It has also been investing heavily

in its Lexis Nexis legal business inthe United States, where it is work-ing to reverse a long decline inmarket share against ThomsonReuters Westlaw.

A company spokesman said: Amodest reduction year on year inadjusted operating margin isexpected, due to a weak revenueenvironment and increased invest-ment in legal markets. Any sus-tained recovery is expected to begradual and remains dependent oneconomic conditions.

Reed said it was making goodprogress in developing legal prod-

ucts for the US market, althoughsubscription renewals continuedto reflect low levels of legal activity.

This week, Reed agreed to sellLexis Nexis Deutschland to WoltersKluwer, effectively ceding theGerman market to its Dutch rival,

which has invested there for aquarter of a century.

Reed said yesterday its exhibi-tions business the worlds largest,

which includes the annual mip-com entertainment fair and the

Vienna Auto Show was stabilis-

ing. It expects to grow this divisionover the next year.

Reed Elsevier confirms gloomyoutlook as subscriptions remain weakPUBLISHING


RIMs Playbook (below) will go head-to-head with Apples iPad Pictures: REUTERS/ REX

BLACKBERRY maker Research inMotion (RIM) yesterday fired a warn-ing shot to Apple when it released a

video claiming to show the superiori-ty of its tablet computer.

RIM is set to launch its rival to theall-conquering iPad in the secondquarter next year. Named thePlaybook, it will attempt to lure users

with its ability to run Flash videos,which Apple has blocked.

The video runs through a series ofcomparison tests with a BlackBerryPlaybook and Apple iPad, whichdemonstrate the speed of the

PlayBook Browser, its support for richFlash content, and the performanceof open web standards like HTML 5 onthe PlayBook.

On paper the Playbook looks like a

possible contender for the iPadscrown.

Its processor and RAM are bothsuperior, despite its smaller size. This

would be good news for users dealing with a lot of video or multi-taskingbetween apps.

It also appears to have been posi-tioned closer to BlackBerrys coreenterprise market, rather than theconsumer-facing iPad, which couldreel in large numbers of business-focused users.

However, analysts say the producthas come late to a market Applestablet computer has already taken bythe scruff of the neck.

In Apples fourth fiscal quarter, the

second quarter that the iPad has beenavailable, the company sold 4.2munits. Analysts also see Google

Android-powered devices becomingincreasingly important.

BlackBerry claimsPlaybook is more

powerful than iPadBY STEVE DINNEEN

TECHNOLOGY

Steve Jobs believesiAds can help Applecapture almost 50per cent of themobile ad market

BROADCASTER ITV will keep consid-ering the possibility of paying a divi-dend given its newly strong balancesheet, but investing in programmes ismore urgent, its chief executive said

yesterday. Adam Crozier, who took over in

April, said ITV needed to make moreof its own content and technology toprofit from coming web distributionchannels such as Google TV, Apple TVor YouView in Britain.

ITV makes only 45 per cent of itsown programming, or 17 per centexcluding soap operas CoronationStreet and Emmerdale.

To cut costs, ITV ran down invest-ments in content during the reces-sion, buying in programmes and

relying on mass-audience shows likethe X Factor to attract advertisers.

We have some investments weneed to make, and we've been upfrontabout that, said Crozier.

Crozier coolon restartingITV dividendMEDIA

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| PROMOTION

TERMS & CONDITIONS: The prize is four tickets to the Lord Mayors Big Curry Lunch on 6th April 2011. The promoter is ABF The Soldiers Charity and the promoter reserves the right to change the prize to one of equivalent or greater valuewithout notice. Entry in to the promotion is free and no purchase is necessary, entrants must be aged 18 and over. Travel expenses and accommodation are not included. The closing date is 21st November 2010 at 11:59pm. The winner will bedrawn at random from all the correct entries and will be notified on 22nd November 2010. By entering the promotion you agree to receive further information and similar promotions from City A.M. and ABF The Soldiers Charity. If you wish

not to receive any further information please add No after your answer. The winners, by accepting the prize, agree to publicity if required. The Editors decision is final and one entry per reader.

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A BLACKSTONE-led quartet and tworival teams are readying bids for ISS,the $7bn (4.4bn) Danish cleaninggiant as Europes biggest post-crisis

buyout heats up.The owners of ISS Goldman Sachs

Capital Partners and Swedens EQT are exploring an initial public offer-ing (IPO) of the company or a sale ofit. Blackstone Group, the buyout titanthat is raising a near-$15bn fund, is

working with Bain Capital, NordicCapital and Clayton Dubilier & Rice.

CVC and Apollo Management arealso preparing a joint bid, while

Apax, which can draw on co-investorssuch as Chinese and Singaporean sov-ereign wealth funds, is workingalone.

Indicative offers for ISS, one of the worlds largest facilities servicesfirms, are due next week.

The owners and all of the other private equity firms either declined to

comment or had no immediate com-ment.

ISS yesterday reiterated it wasexamining strategic alternatives

but declined to comment further.A deal of this size will require big

equity cheques from new buyers,hence the four-strong Blackstoneteam. Purchasers might also draw ona buoyant high-yield market and seekto keep some of ISSs big, existingdebt pile in place.

Citi, Goldman and Nordea are like-ly to be among ISSs key existing

lenders: the trio arranged a 23bncrown (2.6bn) refinancing in 2007,

Thomson Reuters Loan Pricing Corp(LPC) data shows. ISS sees its mainpeers as British security servicesgroup G4S, French catering and serv-ices company Sodexho, UK cateringservices provider Compass Group andSwedish security services Securitas

AB. Goldman and EQT will have toweigh whether a deal, at perhaps a lit-tle more than 40bn crowns will offera better return than an IPO.

Private equitybattle loomsfor Danish ISS THE US Securities and ExchangeCommission (SEC) is investigatingCitigroups role in a $1bn mortgage-backed securities deal in 2007.

Citigroup improperly pushed anindependent manager to put specificassets in a collateralised debt obliga-tion (CDO) it created in February2007. The deal, which was backed byother CDOs that were backed by slicesof subprime mortgages, was man-aged by Credit Suisse AlternativeCapital.

Citigroup said in a regulatory filingearlier this month that it continuesto cooperate fully in response to sub-poenas and requests for informationfrom the Securities and ExchangeCommission.

Spokeswoman Danielle Romero-Apsilos declined to comment on the

specific probe yesterday but said in anemail: Its been widely reported thatthere are ongoing industry-wide inves-tigations into CDO-related matters.

Shareholders have also suedCitigroup over its CDOs and othersecurities, claiming the bank know-ingly misled them about the value ofand risk related to the securities.

A judge dismissed parts of the law-suit earlier this month, but allowedthe investors to pursue some of theirCDO-related claims.

SEC probes Cition mortgagesecurities deal

BYHARRY BANKS

M&A

BANKING

NewsCITYA.M. 19 NOVEMBER 2010 19

BEST OF THE BROKERS

To appear in Best of the Brokers email your research to [email protected]

ANALYSIS l Trinity Mirror

90

110

130

23 Aug 13 Sep 1 Oct 21 Oct 10 Nov

p 74.5018 Nov

TRINITY MIRRORAltium Securities rates the media groupbuy with a reduced target price of 145p.The broker has trimmed its pre-tax profitforecasts for 2011 and 2012 by four andeleven per cent respectively, following amore cautious revenue outlook in lastweeks management statement. Altium stillviews the shares as cheap, but remainswary for future years until more concretesigns of recovery emerge.

ANALYSIS l Mark & Spencer

360

400

440


p 390.2018 Nov

MARKS & SPENCERExecution Noble has upgraded the super-market to buy with an upgraded fairvalue price of 475p, following its researchon M&S customers. The broker sees thefirms new strategy as a real driver forsales growth, with the food business as a

particularly strong opportunity. It addsthat the brand could also cash in on thehomewares market, which is ripe for con-solidation.

ANALYSIS l Keller Group

580

620

660


p 546.0018 Nov

KELLER GROUPBNP Paribas rates the construction firmneutral with a reduced target price of650p. The broker believes there is furtherpressure on margins from continued slowdemand in North America and Europe, withthe company forced to cut costs. However,it adds that Keller can maintain its dividendpayments despite a 10 per cent earningsper share shortfall, due to its recently-reduced net debt levels.

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