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FTSE 100 5,657.10 +75.82 DOW 11,187.28 +150.91 NASDAQ 2,543.12 +48.17 /$ 1.58 unc / 1.18 unc /$ 1.33 +0.01 Certified Distribution04/10/10 - 31/10/10 is 110,406

New trains

set to easecongestion

PHILIP Hammond, the transport secre-tary, will today unveil plans to buy 2,000new train carriages to ease congestionon Britains creaking rail network.

London is expected to be one of themain beneficiaries of the pro-gramme, with crowded Thameslinkroutes earmarked for a significant boost in capacity. The plans wouldlead to a 17 per cent increase in capac-ity on the national rail network,equivalent to space for an extra185,000 passengers.

The new carriages will largely beused to ease congestion on existingroutes, although Crossrail the newline connecting east and west London is also expected to benefit.

The government had tried to forcefranchised train operators to intro-duce new rolling stock at their ownexpense. But, because there are nocontractual obligations on the traincompanies to buy new carriages, thegovernment has decided to step in.

A source close to Hammond said:We know that commuters resenthaving to pay higher fares but thatmoney will go towards paying forthese 2,000 new carriages which willmake a big difference to overcrowd-ing and reduce pressure on ourbusiest routes.

The government expects to intro-duce additional carriages on services

into London Paddington and Waterloo, as well as LeedManchester, Sheffield, Liverpool,Newcastle, Birmingham and Bristol.

BY DAVID CROW

TRANSPORT

Protesters take to the Dublin s treets af ter the scale of Irelands budget cuts are announced Picture: GETTY

THE Irish government today released afour-year austerity plan described asdraconian and staggeringly aus-tere by analysts, with15bn (12.6bn)of budget cuts planned by 2014.

But the measures failed to placatethe markets, where Irish bond yieldscontinued to rise on fears that the gov-ernment will be unable to get the cutsthrough parliament: 10-year yields jumped to 8.9 per cent, just short ofthe highs they reached before Irelandannounced its intention to apply for abailout.

The cost of insuring Irish debt alsorose, with credit default swaps rising by 16 basis points (bps) to 595bps,meaning it now costs 595,000 toinsure 10ms worth of debt.

Economists welcomed the depth ofthe cuts but were sceptical about theplans growth forecasts: it predicts anaverage growth rate of 2.75 per centover the next three years despite a like-ly contraction in the economy during2010.

People immediately took to thestreets to protest against the plans,which would come on top of15bn ofcuts already made. The new cutsinvolve slashing Irelands minimum

wage one of the highest in Europe by one euro to7.65, reducing the pub-lic sector payroll by 24,750 and cutting wages for new hires by 10 per cent.

IRELAND BETS ALLON DRASTIC CUTS

BY JULIET SAMUELWORLD ECONOMY

www.cityam.comIssue 1,271 Thursday 25 November 2010 FREE

ALAINDUCASSE

A FAMOUS CHEF

WHO TALKS

VEGGIES P33

WORLDS TOP GOLDMINER:THIS ISNT A NEW BUBBLEBARRICK BOSS INTERVIEW P22

BUSINESS WITH PERSONALITY

Welfare payments will also be reducedby2.8bn.

Overall, the plan makes 7bnsworth of cuts in services, 3bn in capi-tal expenditure and makes up the restwith 5bn of tax rises. The cuts are tobe front-loaded, with 4.5bn of cutsand1.5bn of tax rises to come in 2011.

However, the tax changes do notinclude any rise in the countrys flag-ship 12.5 per cent corporation tax rate one of the lowest in Europe. Instead,

the government proposes raising VATto 23 per cent over three years (from 21per cent now), reducing the value ofincome tax credits and tax bands by16.5 per cent and doubling its carbontax to30 per tonne.

Irish Prime Minister Brian Cowen,who yesterday confirmed the EU/IMF

bailout would be

85bn said: Thesize of the crisis means that no one will be sheltered from the contribu-tion that has to be made towards

national recovery.But with two independent MPs

defecting from the government coali-tion this week, Cowen is short of thevotes needed to pass the package.

And even if it passes, it does notaddress the insolvency of the countrys banking system. Commerzbanks

Peter Dixon said: The underlyingproblem of the massive hole in bank-ing sector balance sheets is yet to betackled. IRELAND FOCUS: P10-P11

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News2 CITYA.M. 25 NOVEMBER 2010

Time to rethink environmental policy

IN an age of austerity, it is vital wethink outside of the box. This ought tobe especially true of environmentalissues, an area in which Britainremains wedded to old thinking. Wedesperately need a pro-growth, pro-jobs strategy to help the private sectorget us out of our present mess yetthe unthinking, uncosted green con-sensus that all three major UK politi-cal parties have accepted wholesale isfast becoming one of the major barri-ers to a proper recovery.

Britains manufacturing sector hasbounced back over the past year but it

remains smaller that at the previouspeak. It will be hard for it to growmuch more unless the governmentspolicies towards carbon emissions areloosened. The rules and the pledge

to slash emissions are supported bymany well-meaning people but unfor-tunately make no sense: an importedgood that used up a lot of carbon dur-ing its production is not deemed aproblem but a good that is producedin the UK is penalised if it is carbon-intensive. What this means is that wedont want to pollute directly, even ifthat means shutting down what is leftof our industry but we dont carewhether others pollute even more toproduce the goods we eventually con-sume. That way we can buy them (atleast those of us not out of work cando so) while retaining a clear con-science. Its the usual hypocrisy butone we can no longer afford.

There are cheaper, more adaptive ways of combating any climatechange. Here is a simple one whichBoris Johnson should investigate. In

New York, Mayor Michael Bloomberghas launched the NYC CoolRoofs ini-tiative. The idea seems stupid but is infact brilliant: painting roofs withlight, reflective surfaces helps reduce

cooling costs, cuts energy usage andlowers greenhouse gas emissions.President Barack Obamas administra-tion has endorsed the policy, with acool roofs policy announced for theDepartment of Energy and other fed-eral institutions.

Light coloured surfaces reflectmore sunlight than dark ones do,turning less of the suns energy intoheat. Increasing the reflectiveness of buildings and paved surfaces whether through white surfaces orreflective coloured surfacescanreduce the temperature of buildings,cities, and even the entire planet.

Hashem Akbari, a Montreal-basedacademic, has teamed up with otherscientists to found the White RoofsAlliance. It already has the backing ofNew York, Taipei and even Athens.Akbari has calculated that tempera-

tures could be cut by 2.8 degrees inlocalities that judiciously paint theirroofs white, turn roads a concretecolour and plant trees. In a paper inthe Climatic Change journal, he esti-

mates that one ton of carbon dioxidecan be offset for every 9.3 squaremeters of black rooftop that is painted white. Bjorn Lomborg, head of theCopenhagen Consensus Center and aprofessor at Copenhagen BusinessSchool, calculates that for an initialexpenditure of $1bn, a sufficientnumber of streets and rooftops in LosAngeles could be painted to reducetemperatures in the region by morethan global warming would increasethem over the next 90 years. A similarstrategy could be applied to parts ofBritain, allowing us to preserve moreof our manufacturing base. Crazy?Americans clearly dont think so andwhat is really crazy is to cripple UK Plcwith unaffordable costs that will drivebusiness to China while doing noth-ing to help the planet.

[email protected]

LLOYDS Banking chief Eric Daniels yesterday warned that forcing abreak-up of the bank with its 30 percent plus share in several retail mar-kets would be a mistake.

There is mounting speculation thatSir John Vickers independent com-mission, set up by the coalition gov-ernment after the election, couldforce Lloyds to unwind its controver-sial takeover of rival HBOS.

The commission will make its finalrecommendations next September,but an interim report is due out inthe Spring. Concentration does notlead to competitive outcomes.Concentration allows for safety andstability, he told the Daily Mail.

Daniels has asked the coalition tostick by Labours pledge to keep thebank intact.

Lloyds chief inplea to avoid aforced break-upBANKING

EDITORS LETTER

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STUDENTS TAKE TO THE STREETS AGAIN

POLICE last night said they had dispersed the final student demonstrators in centralLondon after a day of protests against higher tuition fees and university cuts, for the sec-ond time this month. Police said 17 people were injured, including two officers as protest-ers were contained on Whitehall. There were 32 arrests mainly for public orderoffences and criminal damage, according to the Metropolitan Police. Picture: GETTY

DAVID Rowland, the property tycoon,gave the Tories a 1.065m gift in thethird quarter, figures released yester-day showed, making him the biggestpolitical donor.

Rowland had been expected to become the Tory party treasurer,although he ruled himself out afterother donors balked at the prospectof his appointment.

Overall, donations plummetedcompared to the period before the

election, falling to 7.2m from26.26m in the second quarter,according to figures from theElectoral Commission.

The second biggest donor was tradeunion Unite, which gave the Labourparty 818,366.

In a remarkable twist, the UKIndependence Party raised more cashthan the Liberal Democrats, reflect-ing the partys flagging support.

UKIP raised 354,000 while theLiberals who raked in 2m in thesecond quarter received just350,645.

BYDAVID CROW

POLITICS

Rowland gives Tories 1mDavid Rowland withdrew his candidacy for Tory treasurer

TOYOTA STILL ON ALERT AFTER CRISISToyota remains on a crisis footing ayear after the first of a wave of recallsof more than 12m vehicles, an execu-tive at the Japanese carmaker hassaid.Shinichi Sasaki, the board memberresponsible for quality, told theFinancial Times: I dont think the cri-sis is over. If we step down the level ofour efforts at this point in time, itmay mean we are sowing the seeds ofcrisis once again.

SAP CONSIDERS OPTIONS AFTER FINESAP said it would consider all avail-able options and hinted it wouldseek a settlement after a US juryimposed a $1.3bn fine on the Germangroup for illegally downloading rivalOracles software. The decision is asignificant setback for SAPs new

management just as it had started toboost morale at the company.

PORSCHE POSTS STRONG PROFITSPorsche gave a strong sign of confi-

dence to employees and investorswhen the German sports car makeralmost doubled its workers cashbonus and posted a stellar 19 per centprofit margin in the past quarter.The producer of the iconic 911 sportscar said it would pay its more than13,000 employees a performancebonus of2,100 for the past financialyear, which ended in July.

TIFFANY SEES SALES SPARKLETiffany is seeing early demand duringthe first weeks of the holiday seasonexceed its expectations, according toMichael Kowalski, its chief executive,as the US jeweller raised its full-yearearnings forecast.We are now a few weeks into the all-important two-month holiday seasonand sales growth is exceeding ourexpectations, although the majorityof the holiday season is certainly still

ahead of us, Mr Kowalski said onWednesday.

INVESTORS RUSH TO JOIN FACEBOOKFUNDS American investment groups thathave created Facebook funds toenable retail and institutionalinvestors to own a slice of the socialnetworking giant have been over-whelmed by demand.The companies have been buying upshares in the secondary market, fromFacebook employees or those leavingthe company, to be held in limited lia-bility companies.

BANKS AIM TO APPEASE CRITICSWITH PACT TO CUT BONUSESAs political pressure grows ahead of Januarys bonus round, The Timeshas learnt that senior executivesfrom Barclays, HSBC, StandardChartered and Royal Bank of Scotlandheld discussions last week about a

possible pact to cut bonus payoutsand boost lending to small firms.

GERMANY WALLOWS IN GOLDENAUTUMNBehind the unfolding horror story ofIreland, Greece, Portugal and Spain,something is stirring in Europe whichpromises a rather better future thanthe grim, crisis-ridden headlines of themoment might suggest. Germany, thepowerhouse of the European econo-my, is growing again, and what's more,it is domestic demand, not net trade,which is driving the renaissance.

PORTUGAL GRINDS TO A HALT IN GENER-AL STRIKE PROTESTING AUSTERITYMEASURESPortugal was crippled on Wednesdayas workers staged a 24-hour strikecausing travel chaos and closingschools and hospitals to protestagainst tough austerity measuresdesigned to tackle the debt crisis. The

stoppage was the first since 1988 toinvolve Portugals two main unions.

SPAIN DEFENDS ITS BANKING SECTORSpanish officials are mounting anaggressive campaign to dismiss fearsthat Europe's fiscal woes which havealready leapt from Greece to Irelandand may soon spread to Portugal will reach their shores.This week, Spanish officials hastenedto throw up a firewall around theircountry with a volley of positive com-ments about the progress of Spain'sfiscal reforms and the soundness ofits banking sector.

WITH EU DEAL, RUSSIA PAVES WAYFOR WTO MEMBERSHIPRussia and the European Unionreached a deal Wednesday that couldpave the way for Russia to join theWorld Trade Organization in 2011.Weve practically resolved all theissues, deputy prime minister Igor

Shuvalov said after meeting with sen-ior EU officials.

WHAT THE OTHER PAPERS SAY THIS MORNING

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FBI agents yesterday made the firstarrest in what could be the biggestinsider dealing probe in US history.

Don Ching Trang Chu, 56, wasarrested yesterday in connection withthe investigation.

He is an executive at PrimaryGlobal Research, an expert networkfirm that pairs hedge funds with cur-rent and former employees at pub-licly traded firms.

Top US hedge funds and mutuals

have also been subpoenaed as part ofa massive insider trading operation.

Hedge funds SAC Capital Advisorsand Citadel, along with mutual funds

Janus Capital and WellingtonManagement have been asked tohand over paperwork to the taskforce.

The SEC has demanded trading andcommunications data from a num-

ber of firms as it searches for evi-dence of organised insider tradingrings.

No one at any of the firms receiv-

ing the requests for information fromthe SEC has been accused of wrongdo-ing.

Non-affiliated Apple analysts havealso been linked with the investiga-tion, as the SEC probes the leaking ofconfidential build plans toinvestors.

The news further rattled nerves onWall Street a day after federal agentsraided three hedge funds and cartedaway boxes of documents.

Diamondback CapitalManagement and Level GlobalInvestors, both hedge funds, were

both raided by the FBI on Monday. The other fund searched was LochCapital Management, which is basedin Boston.

Arrest madein US insiderdealing probe THE European Commission has for-mally agreed to consider a requestfrom chancellor George Osborneseeking support for common rules on

the disclosure of bankers bonuses ina move that will delay the introduc-tion of such pay regulations in theUK.

Osborne is seeking to link the intro-duction of rules on transparency inthe UK which would force banks toreveal details of 1m-plus bonus pay-ments to a European Union-wideagreement covering Frankfurt, Parisand other EU financial centres.

Osbornes request comes after pres-sure from banks who had warnedthat the strict interpretation of therule that caps the upfront cash com-ponent of large bonuses at 20 percent, with the rest paid in shares or

deferred could see UK banks strug-gle to hire as their terms were lessattractive.

Another fear is that the rule couldleave bankers with no bonus cash atall as the 50 per cent tax rate would

be applied not just to the recipientsupfront cash award, but also to shareawards.

The decision means British bankswill not face new disclosure rules dur-ing the bonus rounds in February andMarch.

Osborne seeksEU backing overbank bonuses

SUBPOENAED FIRMSIN FBI PROBE

SAC Capital Advisors

Janus Capital

Citadel Loch Capital Management

BY STEVE DINNEEN

ENFORCEMENT

BANKING

Subpoenaed firms include SAC CapitalAdvisors, Citadel, Janus Capital and WellingtonManagement. On Monday the FBI raided DiamondbackCapital Management and Level Global Investors.

FAST FACTS | SEC PROBE

News 3CITYA.M. 25 NOVEMBER 2010

Don Ching TrangChu was arrestedby the FBI yester-day as part of aninsider dealinginvestigation

RAIDED BYTHE FBI

DIAMONDBACK CAPITALMANAGEMENT

Diamondback Capital Management

Level Global Investors

LOCH CAPITALMANAGEMENT

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RESOLUTION, the life funds grouprun by Clive Cowdery, yesterdayended its broking relationship withCitigroup following the summerdeparture of Andrew Thompson, oneof the banks most senior corporatebrokers.

Sources said that Resolution wasvery much a relationship drivencompany and that Thompsonsdeparture to Deutsche Bank was bound to make a difference to thebanks relationship with Citigroup.

Resolution said its new financialadvisers would be RBC and BarclaysCapital, two institutions that wereextremely supportive of a recentfundraising that Citigroup was notinvolved in.

Thompson looked after Citigroupsrelationships with a number of large

UK financial institutions. The banksFTSE 100 financial services clientsinclude Lloyds Banking Group, Icap,

Resolution and F&C AssetManagement.

Citigroup yesterday said that the bank had won mandates recently,including Punch Taverns andDeutsche Telekom, but that clientlosses were also inevitable from timeto time.

Sources close to Citigroup said thatthe banks relationship withResolution had been cool for alongish period and that Resolutionsdecision had not come as a surprise.

Resolutions choice of RBC as ajoint adviser was no doubt assisted bythe presence of Josh Critchley whohad been the companys broker whileat his previous employer GoldmanSachs.

Resolution is the first FTSE 100client to be won by RBCs rapidlyexpanding European capital marketsteam which has gone from 10 to 22clients over the past year. This

demonstrates our ability to advisecompanies up and down the sizescale, says Critchley.

Resolution

ditches Citi

BYDAVID HELLIER

FINANCIAL SERVICES

TERRA FIRMA, the private equityowner of record group EMI, is under-stood to have received a number ofapproaches for its Odeon cinemachain.

One approach is said to have comefrom private equity group BCPartners, which lost out to Doughty

Hanson in the recent bid battle forcinema group Vue Entertainment.

Canadas Omers Private Equity,part of the Ontarios municipal work-ers pension fund, which also lost outin the bid battle for Vue, is alsothought to be interested, according toSky News. The move follows TerraFirmas founder Guy Hands defeat inhis high profile New York court battlewith Citigroup over the purchase ofEMI.

Critics expected Hands to sell assetsafter the ruling.

Private equity bidders circleTerra Firmas Odeon cinema chain

PRIVATE EQUITY

PRIVATE equity firm Blackstone hastabled bids for the UK petrol business-es of Total and Murphy OilCorporation, it was reported yester-day, after the firms attempts to buypower producer Dynergy wereblocked by shareholders.

Blackstone is in talks to buy theforecourt operations of French energygroup Total and Murphy subsidiary

Murco Petroleum, according to Sky News.Blackstone would own more than1,200 UK petrol stations if both dealsgo through, though a source familiarwith the sales said there are other bid-ders for both firms and Blackstonessuccess is not guaranteed.

Goldman Sachs is overseeing theauction of Murcos UK downstreamassets, while JP Morgan is handlingthe Total auction.

A spokesperson for Blackstone didnot return calls for comment.

A Total spokesperson declined tocomment on the story, but said: Totalannounced on 8 September that it was reviewing its UK assets with aview to selling them as a going con-cern. As part of that process we havebeen discussing the potential acquisi-tion of these assets with a number ofparties.

Blackstones $4.7bn (2.98bn) bidfor Dynergy fell through on Tuesdayending months of talks, after Dynergyshareholders voted down the plan.

Blackstone makes offers fortwo petrol station companiesBYMARION DAKERS

PRIVATE EQUITY


Resolutions CliveCowdery cooledon Citi after thedeparture of

Andrew Thompson

Josh Critchleywas yesterdaycelebrating RBCs

first FTSE 100client win

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THE trustee seeking to recover moneyfor defrauded Bernard Madoffinvestors has sued UBS for more than$2bn (1.2bn), accusing it of collabo-rating in the imprisoned swindlersmassive Ponzi scheme.

UBS was accused of sponsoring for-eign feeder funds that sent clientmoney to the once-respected moneymanager, lending them an aura oflegitimacy while shielding itself

from liability through secret sideagreements.

Despite identifying red flags atBernard L. Madoff InvestmentSecurities, the Swiss bank and feederfunds chose to enable Madoff's fraudfor their own gain, collecting at least$80m in fees, court-appointed trusteeIrving Picard said in a 107-page com-plaint.

Madoffs scheme could not have been accomplished unless the UBSdefendants had agreed to look the

other way and to pretend that theywere truly ensuring the existence ofassets and trades, the complaint said.In fact they were not and never did.

The complaint alleges 23 counts offraudulent transfers and other mis-conduct.

In a statement, UBS called Picardsallegations completely unfoundedand without merit and pledged todefend itself.

Picard, a partner at Baker &Hostetler in New York, is liquidatingMadoffs investment business. He has

filed at least 20 clawback lawsuitsto recover $17.5bn from feeder fundsthat steered money to Madoff's firm,friends and family members.

UBS is sued in$2bn case byMadoff truste BP made a series of decisions whiledrilling its doomed Macondo wellthat saved time but added risks priorto its massive Gulf spill, according to

a White House oil spill commissiondocument.

The chart compiled by the commis-sions investigative team outlines 11unnecessary actions taken by BP andits partners in the lead-up to thelargest offshore oil spill in US history.

The document has not been offi-cially released by the commission,

but was made public in an article byenergy trade publication Greenwire

yesterday.BP workers on shore made most of

these risky decisions, such as notwaiting for more centralisers (devicesused to ensure the cement casing isapplied evenly around the well) and

not installing additional plugs and barriers, the commission documentsaid.

The chart stands in contrast tosome comments made by the com-missions investigators during thathearing that BP workers did not cutcorners on safety to save money.

The investigators said their initialfindings only indicated that workerson the rig did not consciously risktheir own safety due to concernsabout money.

INFLUENTIAL pubic relations execu-tive Matthew Freud is trying to wrest

back control of his agency fromPublicis the French communica-tions group that he sold a 50.1 percent stake to in 2005.

The two are locked in talks to sepa-rate, a source confirmed to City A.M.last night, but are struggling to agreea valuation for Freud

Communications the UKs largestPR consumer firm boasting the likesof Nike and Bupa as clients.

When Publicis bought the stakefive years ago, the whole company

was valued at around 70m-80m,but analysts believe the figure couldbe higher now given that Freud has bucked the market trend with rev-enues continuing to rise despite thedownturn. Its revenues jumped 23per cent to 33m last year, while pre-tax profits rose 28 per cent to 6.7m.

BP put speedahead of safety,says US report

Freud tries to go it aloneas seeks split from Publicis

Matthew Freud expected more help from Publicis to expand internationally Picture:PABYHARRY BANKS

BANKING

ENERGY

The estimated $65bn Ponzi scheme run byMadoff was uncovered on 11 December, 2008,and cost former clients all or most of their savings. Madoff, 72, pleaded guilty in March 2009,and is serving a 150-year sentence in the US.

FAST FACTS | MADOFF

NewsCITYA.M. 25 NOVEMBER 2010

BYKATIE HOPEMEDIA

5

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RUSSIA is ready to divest a stake instate-controlled bank VTB for at least$3bn, its first deputy prime ministersaid yesterday.

Russia is seeking to raise some$59bn through a state privatisationprogramme by 2015, to plug a hole inthe budget and speed up growthahead of the 2012 presidential elec-tion. Our position is, not less than$3bn, he said. If the current marketprice is lower, then well have to post-pone the deal, Igor Shuvalov saidafter talks with European

Commission officials on trade issues.VTB is Russias second largest bank.

BARCLAYS Wealth has set up a book-ing centre in Hong Kong, the firmannounced yesterday, as part of itsplans to quadruple assets under man-agement and double its number ofprivate bankers in Asia over the nextfour years.

An undisclosed number of UK staffwill temporarily relocate to help setup the booking centre, a source closeto the bank said yesterday.

The facility allows private bankingcustomers in Asia to retain assets inHong Kong, rather than using the banks existing booking centre inSingapore. The company refused toreveal the value of the assets it man-ages in the region, but said aroundtwo-thirds of its 153.5bn asset pile isheld outside the UK.

Barclays Wealth North Asia headJoanna Chu said: This is an impor-tant milestone for us in Hong Kong...Our North Asian clients now have theadditional option of having theirassets managed in a location closer tothem.

It is part of Barclays attempt to

expand aggressively in the AsiaPacific region. The bank is thought tohave around 100 wealth managers inAsia, with plans to triple this number within five years. Barclays Wealthalso signed up to a Japanese joint pri-vate banking venture in June.

One analyst who did not wish to benamed yesterday said the bank mightbe over-ambitious with its expansiongoals.

Their target to quadruple assetsunder management in Asia reallydepends a lot on market conditionsimproving. Without a global recoverythey wont come close, the analystsaid. It also depends on the base levelof assets under management, whichthe company has not mentioned.

People familiar with the firm saidBarclays continued to look at relocat-ing its base outside of the UK, butstressed that no decision has yet beenmade and that the new office inHong Kong is not part of a generalmove abroad.

City A.M. revealed exclusively lastmonth that senior executives atBarclays Bank are weighing up thecost of moving the groups headquar-ters overseas.

Barclays sets

up new officein Hong Kong

EDUCATIONAL publisher Pearsonsays it plans to continue its expansionin India.

The firm wants to strengthen itsposition as the Indian education sec-tor continues its rapid growth.

It says it will consider acquisitionsand partnerships to fuel the expan-sion. Pearson Education Internationalboss Mark Anderson said: We are inIndia for the long term. We are alwaystalking to people [about] expandingour services and presence.

The news comes a day after Pearson

bought South African firm CTI for31m.

Pearson looksto east to growRussia eyes saleof VTB for $3bn

BYMARION DAKERS

PRIVATE BANKING

BANKING

PUBLISHING

VODAFONE yesterday continued itsconsolidation drive as it bought backaround 25m of its shares.

The worlds largest telecoms firmby revenue said it bought the sharesthrough JP Morgan Cazenove atprices between 166.8p and 163.4p.

Since 16 September Vodafone hasbought 458m shares at a cost, includ-

ing fees, of 764.05m, which it sayswill be held in treasury. Vodafone iscurrently valued at 85.43bn.

The share buy-back scheme is partof a larger drive to consolidate its business. Earlier this month itannounced a 3.1bn sale of its stakein Japanese carrier SoftBank.

This followed the 4.3bn sale of itsinterests in China Mobile last month.Vodafone says two-thirds of the pro-ceeds from the China Mobile sale will

be returned to investors through ashare buy-back programme. The buyback came as it emerged

that Vodafone could be fined $1bn inorder to keep its 2G spectrum licensein India. It follows a report by Indiasnational auditor that found the tele-coms ministry allotted spectrum toexisting operators Bharti Airtel,BSNL and Vodafone beyond the con-tracted limit without imposing anyupfront charges.

Vodafone in 25m buy-back asfaces $1bn bill for India license

Vodafone chief executive Vittorio Colao wants to concentrate on core markets


BY STEVE DINNEENTELECOMS

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EMBATTLED life insurers shouldexpand into emerging markets, divestnon-core assets and tailor products toageing populations to tackle thechanging industry landscape, areport by US financial servicesprovider State Street said yesterday.

Challenges include increasinglyscarce capital, more stringent solven-cy regulations and declining tradi-tional revenues, according to thereport.

It found that firms should sell non-core assets to raise capital and priori-tise core products and geographies,said State Street senior vice president

Wade McDonald.There are very strategic decisions

that need to be made around theshape of the business model in thefuture and where they prioritise theirinvestments, he added.

To manage demographic change inthe West, insurers should offer morelong-term care insurance products

that fit customers changing lifetimeneeds, such as corporate wraps thatcombine healthcare, insurance andpension products.

The shift from defined benefit todefined contribution is a positive forinsurers, but firms must develop moreoutcome-certain income streams for thepost-retirement phase, the report said.

McDonald said firms should focusmore on new distribution models.The baby boomers are now comingup to retirement so were entering aphase of de-cumulation that requiresnew capability to allow people to

effectively plan to live longer, he said.Expansion into younger, under-

served markets such as Asia and east-ern Europe should also be a priority,found the report.

And it said that insurers shouldoutsource aspects of their portfoliosto maintain returns. It is going to

become harder for insurers to deliverinvestment returns of four per cent ormore because they have to reduceexposure to equities due to SolvencyII, it said.

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Life insurers facebattle to survive,says State Street FORD is cutting its debt by $1.9bn(1.2bn) in a bid to strengthen its bal-ance sheet and get itself rated invest-ment grade again.

In Fords tender offer to reduce itsautomotive operations debt, holdersof some $2.55bn of senior convert-ible notes due in 2016 and 2036accepted cash and company stock fordebt.

That reduces Fords annual inter-est payments by about $180m, thecarmaker said yesterday.

Ford borrowed heavily in late2006, allowing it to avoid the bank-ruptcies that felled rivals GeneralMotors and Chrysler last year, butleaving it with a heavy debt load.

The carmaker expects a solid prof-it in 2010 and has cut its automotiveoperations debt by about $12.8bn

this year, reducing annual interestexpense by nearly $1bn.

Ford also expects to be net cashpositive in its automotive opera-tions meaning it would have morecash than debt by the end of 2010.It would be the first time that this

would have happened since the sec-ond quarter of 2008.

Ford will pay $534m in cash pre-miums and on 30 November issue274m shares of common stock toconvert the notes.

Ford reduces itsdebt by $1.9bnwith bond swap

BYALISON LOCK

FINANCIAL SERVICES

AUTOMOTIVE


TIFFANY HINTS AT STRONG CHRISTMAS

LUXURY jewellry retailer Tiffany said yesterday its fiscal third-quarter profit rose a bet-ter-than-expected 27 per cent, helped by demand across most geographic regions.Tiffanys quarterly net income rose to $55.1m (34.8m), or 43 cents a share, from $43.3m,or 35 cents a share, in the year-earlier quarter. Sales in the quarter ended 31 October rose 14per cent to $681.7m boosting hopes of strong Christmas holiday trading. Picture: REX

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SPECIALIST doorstep lender ProvidentFinancial said yesterday it expectedthe impact of government spendingcuts to have a modest impact on itscustomers.

The lender said for the 12 weekssince the beginning of September itsHome Credit sales were seven percent ahead of sales for the same peri-od a year ago.

The company said this was due to

an increased focus on selling credit toexisting customers and what itbelieves to be increased visibility ontheir household incomes.

The firm said the capping of bene-fits that a family can receive ataround 500 per week would affectless than one per cent of its HomeCredit customers who will also not behurt by cuts to child benefit for thebetter off.

It added capping of housing bene-fit would not have a significant

impact on the small minority ofHome Credit customers living in private rented accommodation and inreceipt of benefits. It pointed outthere was no change to social housingrents for existing tenants, which isrelevant to almost half of the compa-nys customer base.

Peter Crook, chief executive ofProvident Financial, said continuingfavourable trends for the businesshelped reinforce managementsconfidence of delivering a good resultfor the year.

Provident upssales despitebenefit cuts UK SPECIALIST mortgage lenderParagon Group said yesterday itexpected lending to increase as aresult of higher demand in the pri-

vate rented sector as it reported high-er-than-expected full-year results.

The lender said profit before taxstood at 71.8m for the year to 30September 2010, up almost 25 percent from 54.3m the previous year.

Paragon said its strong perform-ance came as a result of strong buy-to-let distribution, encouraging levels ofmortgage applications and improvingarrears performance that was wellbelow its peers.

The firm resumed lending inSeptember, after being forced to closeits doors in early 2008 because ofhigher lending costs at the height ofthe financial crisis.

Paragon chief executive, Nigel Terrington said market conditions were very favourable for landlords,due to strong levels of tenantdemand.

There are currently not enoughproperties in the private renting sec-tor to accommodate demand,Terrington said. He also added thatrents will rise quite strongly overthe coming months.

Paragon added it expected to issuemortgage backed securities in 2011.

Paragon seeslending returnas rents rise

Provident Financial chief executive Peter Crook is confident for the full-yearBYMATTHEWWEST

FINANCIAL SERVICES

FINANCIAL SERVICES

NewsCITYA.M. 25 NOVEMBER 2010 9

Reassuring update means sharesshould be in for a rapid re-ratingPROVIDENTS update has confound-ed expectations. Peer Cattles, which

is in restructuring talks, warnedjust last week that creditors shouldbrace themselves for heavy losses, yet Provident has managed toremain profitable with HomeCredit finally growing again upseven per cent year-on-year.

Its statement directly reassureson the fears that have hit the sharesrecently the impact of welfare cutson customer cash flows is insignifi-cant the capping of benefits that

family households can receive ataround 500 per week will affect

less than one per cent of householdsserved by Home Credit. Its balancesheet is strong with 300m head-room on its debt facilities, and itsgearing ratio below 3.5 times.

An 8.2 per cent dividend yield thisyear and a ten times price to earningsratio make the shares attractive.

BOTTOMLINEAnalysis by Katie Hope

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IRELAND is set to nationalise theremainder of its stricken banking sys-tem, Irish Prime Minister Brian Cowensaid yesterday.

The plunge in share prices for Bankof Ireland and Allied Irish Banks thisweek could leave the state in majoritycontrol of Irelands three majorlenders, with Anglo Irish Bank already

having been nationalised. With the banks desperate for cash and withinvestors steering clear, it is likely to beleft to the government to preventthem from collapsing with furthercash injections.

Since Monday, AIB has seen 28 percent wiped off its value while Bank ofIreland stock has plunged 42 per cent.The banks are also now dependent onthe European Central Bank for theirsurvival, with the ECB supplying them

with130bn (110) in October alone.Cowens comments come even asIrish central Bank governor PatrickHonohan said that the governmentstake in the banks was for sale.

Meanwhile, Moodys ratings agency warned that the Irish governmentwas being too optimistic about eco-nomic growth and threatened amulti-notch downgrade as a result.S&P has also cut Irelands rating fromA to AA-.

Irish state to nationaliserest of its major banksBY JULIET SAMUEL

WORLD ECONOMY

Protestors contin-ued to demonstrateoutside the Irishparliament as thegovernmentunveiled a plan for15bn of cutsbetween now and

2014.

Picture: REUTERS

Ireland Focus 11CITYA.M. 25 NOVEMBER 2010

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PMS GAGSHAS HACKS

ROLLING INTHE AISLESSEVERAL dozen political hacks were yes-terday treated to an unusual dinnerguest as David Cameron became the firstserving Prime Minister to attend theirregular parliamentary lunch club in 31

years.Asked about how he saw his role, he

gave a concise summary of his primeministerial style: I see myself as more ofa chairman. I dont want to be chief exec-utive or chief financial officer or evenchief operating officer, as my predeces-sor sometimes tried to be, he explained.

As for whether he wanted former firstsecretary of the Treasury David Laws toreturn to power and when, he was even

more plainspoken: Yes and soon.But it was the diminutive House of

Commons speaker John Bercow (whochairs Prime Ministers Questions each

week) who provided the PMs most enter-taining material.

Recalling health minister SimonBurns dislike for the speaker, Cameronrecounted how Burns had somehowmanaged to persuade his driver toreverse into Bercows parked car. Thepint-sized speaker, spotting the mishap,came running down into the courtyard

CITY CHRISTMAS FAIRChristmas fair season has arrived and with

it one of the Citys oldest gentlemensclubs will be opening its doors to thepublic for the first time in its history.

The City of London Club, founded in1832 and boasting a past membership

of the first Duke of Wellington and SirJohn Peel, will be hosting a sizeable

Christmas fair today in aid ofarmed forces veterans charity Helpfor Heroes and kids charity Coram.

Every conceivable knick-knack willbe on sale: Christmas pudding, shot-

gun cartridges, hand-knitted garters,pork pies, teddy bears, gin, cigars and so

on.And among the seasonal goodies youll

find at least a couple more sober offerings,from Strutt & Parker Private Investorsand By Association, a grouping of busi-nesses including everything from prop-erty investors to vintage car sales.

The fair runs until 8.30pm today at 19Old Broad Street.

where he confronted Burns straight off:Im not happy! he declared. Whichone are you then? demanded Burns.

After a brief anecdote in which herecalled hauling President Barack

Obama out of the girls bathroom at theG20 summit, Cameron moved ontoEurope.

After one long, tough negotiationabout bailout mechanisms, he said,Italian PM Silvio Berlusconi tried tolighten the mood with a joke, Cameronrecalled. The first line of it was why didthe chicken cross the road? But the nextline was so dirty that the interpreterrefused to translate it!

Gives one faith in internationalbailout talks, doesnt it?

BULLSEYEThe senior management of the ForestersFriendly Society, including chief execu-tive Kevin Dann and Neil Armitage (pic-

tured top right) were given some targetpractice outside the Tower of London yes-terday, as the organisation celebrated thesigning of a three-year partnership withthe UKs Olympic and Paralympic archeryteams. Aside from sponsoring the team,Foresters will be working to promote thesport of archery among its 70,000 mem-

bers. And in turn, Britains best archerswill be given the chance to sign up to avariety of financial products courtesy ofForesters. If nothing else, at least the pair-ing should keep one side on target.

House of Commons speaker John Bercow is famously pint-sized, unlike his wife Sally Picture: REX

Berlusconispunchlinewas so dirty

that theinterpreterwouldnttranslate it!said DavidCameron

The Capitalist12 CITYA.M. 25 NOVEMBER 2010

EDITED BY

JULIET SAMUELGOT A STORY? [email protected]

Foresters Friendly Society chief exec Kevin Dann

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THE outgoing boss of United Utilitiesyesterday backed an investors plea tothe water industry regulator to keepshareholders sweet as it posted lowerprofits, but voiced confidence on itsoutlook.

Philip Green, who is leaving inMarch, supported Invesco Perpetualfund manager Neil Woodford after hesaid regulation may cause inadequateinvestor returns. Woodford, whoowns about seven per cent of United,sold his 100m stake in rival SevernTrent last month.

Green described the last regulatoryreview as tough but fair, but he saidinvestors were needed to help theindustry invest in the next few years.

I would support Neil Woodford insaying its important that the regula-tor makes sure the equity markets get

an adequate return, Well continue toneed high levels of capital, he said.United, which serves about 7m peo-

ple in north-west England, blamedregulatory price cuts and higherinterest charges for a 24 per cent fallin core pre-tax profit to 196.2m inthe six months to 30 September.

The group said it was on track tohit its 2015 targets and announced aninterim dividend of 10p per share.

Green, who will be replaced bydefence industry boss Steve Mogford,said he would be interested in compa-ny chairmanships. The job at Unitedis largely done and there are otherthings I would like to do, he said.

United in pleato watchdogBYPHILIPWALLER

UTILITIES

ROLLS-ROYCE got another boost yes-terday a deal worth $1.2bn (760m)with Middle Eastern airline Emiratesto maintain engines on 50 Airbus andBoeing jets.

Rolls, which faced an engine fireon a Qantas Airbus A380 superjumboon 4 November, will service Trent 700

engines on 29 Airbus A330 jets andTrent 800 turbines on 21 Boeing 777s.

Rolls is likely to welcome the deals, which follow a 1.13bn order fromAir China, as the latest vote of confi-dence after the A380 incident, whichforced the jet to return to Singapore.

It also resulted in regulators order-ing checks on all A380s and repairslikely to reduce Rolls annual profits.

European regulator EASA hasreduced inspections it imposed on

the A380s after the accident, sayingthey were no longer needed.

Emirates maintenance agreementboosts Rolls after plane accidentAEROSPACE

GROWING demand for vehicle cata-lysts and higher metal prices yester-day helped speciality chemical groupJohnson Matthey to boost profits bynearly half, beating forecasts.

The platinum refiner and worldslargest supplier of catalytic convert-ers posted underlying pre-tax profitof 164.3m in the six months to 30

September, compared to 114.4m theprevious year, against an average mar-ket forecast of 157m.

Falling demand for automotiveproducts hit the group last year as therecession affected sales, but the firmsaid an improved economy helpedfuel a recovery in vehicle productionin the six months to September.

The group said Chinese quotas onexports of rare earth materials, whichare used to store oxygen in gasoline

catalysts, were forcing up prices andhad lifted the groups costs. It is working on ways to substitute thematerials in its products.

The company, which also refinesother precious metals and makesparts for fuel cells and f ine chemicalsfor drugs, expects its second half to besimilar to the first six months.

Chief executive Neil Carson said:The outlook for the second half ofthe year for the group is good.

Catalyst demand and pricehikes lift Johnson MattheyBY PHILIPWALLERINDUSTRY


United Utilities boss Philip Green said the industry needs investors

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CAPITAL Shopping Centres (CSC) con-firmed yesterday it was close to buy-ing the Trafford Centre inManchester for a total of 1.6bn.

The retail property group said it was in advanced talks with currentowner Peel Holdings, which has heldthe shopping centre since it was builtin 1998 at a cost of 600m.

CSC plans to issue 750m in newshares and convertible bonds to Peel,as well as taking on 800m net debtfrom the firm if the deal goes ahead.

Peel, which is privately owned byproperty billionaire John Whittaker,

will own 19.9 per cent of CSC as partof the deal. Peel could also convert

bonds it receives through the saleinto shares, giving it a 24.9 per centstake and making Whittaker thelargest investor in CSC.

He will become a non-executivedirector and deputy chairman of theCSC board, the firm said.

CSC announced that it was alsoconsidering an equity placing worthup to 9.9 per cent of existing shares,

worth 221m at yesterdays closingprice, to help fund the purchase andpay down debt. However, the total

amount raised is likely to be lower asthe stock becomes diluted by the twoshare issues.

Seymour Pierce analyst SueMunden, who currently has a sellrating on CSC, told City A.M.yesterday:This move is to be welcomed.Obviously the share placing is goingto have a dilutive effect, but it is a wayfor the company to attract investorsat a time when they are acquiring ahigh profile asset.

We have always believed that theoperational management of thegroup is strong but they have beenheld back, in our view, by a weakfinancial structure.

Shares closed 5.1 per cent lower yes-terday at 337.4p.

CSC closes in

on TraffordCentre mallBYMARION DAKERS

PROPERTY


SQUEALS of excitement this weekas the candidates were instruct-ed to pack a bag for a foreign trip.

While everyones thoughtsturned to beaches and suntans, Stuart

wondered if theyd be sent to a war-

zone. While unleashing Stuart Baggson Afghanistan is an appealingthought, Im pretty sure the UN wouldclass it as a war crime.

Instead it was off to Hamburg tomake and sell British crisps but the

thought of travel did little to improvemorale. I hate the Germans, grum-bled Christopher. Perhaps best he does-nt lead this time. Instead Chrisnominated himself, rousing thetroops with a speech that began, Ivelost three tasks in a row now

Stella lead for Apollo after beingnominated by Stuart, part of a plan toprotect himself. His logic wasnt clear

but he seemed very proud of himself.Leaders in place, the next thing to

choose were flavours. Joanna tookcharge of market research for

Apollo, a laborious task involvingcollaring a man in a Germansupermarket and asking him

what flavours of crisps he likes.

Presumably something got lostin translation as they ended upwith stilton and paprika and aham and pickle f lavour that tast-ed like prawn cocktail.

Synergy plumped forGerman classics,goulash and curry-

wurst (the latterbeing so popular inGermany that amuseum was created

in its honour). This was as far asany of the candidates were

prepared to indulge theirhosts; their attempts at thelanguage were limited toDas ist wunderbar and

an increasingly desperateSprechen sie Englisch? asthey went door-to-door. Well, some of them tried.Laura sulked again while

Christopher and Jamie took a

more leisure-ly pace, sam-pling thelocal beersand switch-

ing a 9am pitch to a much morecivilised post-lunch slot.

Back in the boardroom, there wasjust time for Lord Sugar to expand onhis concept of export English, where-

by you slow down and take care over

your words when doing businessabroad. The challenge also gave thisunlikely Henry Higgins some goodpunning opportunities; Herr-

brained was used, but sadly no discus-sion of who was best and wurst.

In any case it was Chris back in theboardroom. Having lost four consecu-tive tasks, he looked ready to fire him-self but Lord Sugar was ready to givehim yet another chance and bid Auf

Wiedersehen to Christopher.

Lord Sugar bids Auf Wiedersehen once again

APPRENTICE REVIEW

GRAEME ALLISTER

CAPITAL Shopping Centres (CSC) hastaken on Bank of America MerrillLynch and UBS to advise on itsplanned share placing.

Simon Mackenzie-Smith and SimonFraser are heading the team at BAML.Mackenzie-Smith has been withMerrill Lynch since 1996, when he

joined as managing director of invest-ment banking. He is credited withbeing instrumental in establishing thebanks UK franchise, and has beeninvolved in a wide range of mergers

and acquisitions and restructurings

including Punchs acquisition of man-aged pubs operation Spirit in 2006.

Co-head of corporate brokingSimon Fraser has spent 14 years atthe bank, working alongsideMackenzie-Smith on the Segro,Debenhams and Liberty deals, as wellas Inchcape, Natex and SSE.

UBS corporate broking managingdirector Jonathan Bewes and head ofinvestment banking Hew Glyn Daviesare also advising. Davies has severalretailers among his client list includingSainsburys and Northern Foods, aswell as Bank of Ireland, which com-pleted a 1.7bn rights issue in June.

Bewes worked with Davies toadvise Capital Shopping Centres whenit split from Liberty in March this year.

He has also worked with AMEC,chemicals firm ICI and broadcasterCarlton during its 4bn merger with

Granada.

SIMONMACKENZIE-SMITH

MERRILL LYNCH

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CATERING group Compass yesterdayreported strong full-year results withpre-tax profits up 18 per cent to922m, beating consensus analystforecasts of 904.5m.

Compass, which provides meals forUK schools, hospitals, hotels and thearmed forces, saw net profits rise 15per cent to 675m from 586m last year, also beating analysts expecta-tions.

Revenues rose 7.6 per cent to

14.5bn while underlying operatingprofit increased 13 per cent to top1bn for the first time.

The company said it would raise itsfull-year dividend 33 per cent from13.2p to 17.5p per share, beating aver-age estimates of 15p.

But chief executive Richard Cousins warned that economic conditionsremain challenging and despiteimprovement in the UK and Irelandmarket, revenues for the region fell 2.6per cent to 1.78bn.

Compass performance was driven by higher sales in north America, itsaid, where revenues increased 9.7 percent to 6.39bn due to a culture that isreceptive to outsourcing.

North America, which nowaccounts for 44 per cent of group rev-enues, saw profits rise 11 per cent to491m, whereas UK and Ireland prof-its were comparable to 2009 at 114m.

The UK and Ireland accounts for 12per cent of group revenues.

Compass is expanding into emerg-ing markets, with 17 per cent of itsbusiness now in these economies.

Compass upsdividend afterprofits jump ASSET-management firm Liontrustreported a pre-tax loss of 1.6m in thesix months to 30 September accord-

ing to an earnings report released yes-terday.

Despite the loss, the firm saw itsfirst net investment inflows in six years. Investors moved 90m intoLiontrust products last quarter, andhave already invested 76m sinceOctober. Total assets under manage-ment now amount to 1.24 bn.

Vinay Abrol, chief financial officerand chief operating officer, said: Weare moving in the right directionbecause we have a sound marketingstrategy.

He added: Our shareholders arevery supportive, and we have a robustcash balance.

The company offers unit trusts andhedge fund products in the UK andcontinental Europe.

Liontrust inflows increased after astrong performance of its funds inrecent months.

Major brokerage house HargreavesLansdown also helped increaseinflows after it recommendedLiontrusts European Absolute Returnfund.

Its shares closed down 1.5p at92.50p, yesterday.

Liontrust postsloss but boostsclient inflows

Compass chief Richard Cousins said economic conditions were challenging

BYALISON LOCK

CATERING


ANALYST VIEWS: WHAT DID YOU MAKE OFCOMPASS RESULTS ? Interviews by Alison Lock

KEVIN LAPWOOD | SEYMOUR PIERCE

These results from Compass were comfortablyabove our expectations, although the increase in total divi-dend was a big surprise. The outlook is positive.

NIGEL PARSON | EVOLUTION SECURITIES

The combination of strong cashflow and low debthas given Compass the firepower to accelerate earnings andincrease the dividend.

JULIAN CATER | COLLINS STEWART

While earnings are in line with our expectations,cash flow performance has been outstanding, around100m better than we had forecast.

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ANALYSIS l Compass Groupp

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BY THOMAS HAMED

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RESILIENT economic growth con-tinues to be recorded in the UK,according to official figuresreleased yesterday.

The economy grew by 0.8 percent in the three months toSeptember, the Office for NationalStatistics (ONS) confirmed.

And GDP was up 2.8 per centcompared to 12 months earlier. Thefigures mark a calendar year ofconsecutive growth in the UK.

Further good news came in thedetails, which look more sustain-able than in prior quarters accord-ing to Andrew Goodwin, senioreconomist at the Ernst & YoungITEM Club.

There is greater balance andthis gives the impression of dura-

bility, and much smaller relianceon stockbuilding, he added.

There was also less reliance onconstruction growth, which fell tofour per cent, down from theunusually high second quarter rateof 9.5 per cent.

GDP was boosted by a surpriseimprovement in net trade asexports grew faster than imports.

However, there remain concernsfor the economys prospects in thefinal quarter of the year, and into2011.

Growth in consumer spendingremains weak, falling to 0.3 percent. Falling incomes, governmentspending cuts and the impendingrise in VAT will pinch consumers,say analysts.

Combined with tight credit con-ditions and potential knock-oneffects of the crisis in Ireland, GDP

looks set to slow further in thefourth quarter, possibly down toaround 0.4 per cent according toChris Williamson, chief economistat Markit.

Most analysts expect per quartergrowth between 0.3 per cent and0.5 per cent for next year.

The economy is in a robust state, but there is no room for compla-cency, said David Kern, chief econo-mist at the British Chambers ofCommerce (BCC).

The government must focus allits efforts on enabling the privatesector to make 2011 a year forgrowth, he said. Obstacles thathamper businesses in their effortsto create jobs, invest and exportmust be removed.

The ONS will report on fourthquarter growth on 25 January next

year.

GDP grows steadilyyet may stall in 2011BY JULIAN HARRIS

UK ECONOMY

Economic News18 CITYA.M. 25 NOVEMBER 2010

NEWS | IN BRIEF

Incomes boost for US hopesConsumer growth could hold the key toa US recovery, a survey showed yester-day. Personal incomes were up 0.5 percent in October according to thePersonal Income and Outlays reportcompiled by the US Bureau of EconomicAnalysis. Growth in personal income is

increasingly being driven by wages andsalaries, rather than government trans-fers, said Peter Newland of BarclaysCapital Research. And unemploymentbenefit claims are down, falling by34,000 during the week ending 20November, according to another report.Yet the news was hampered by less pos-itive signs for US growth. Durable goodsproduction fell, as economists expected,while house prices suffered anotherdrop. New home sales fell by 8.1 percent in October, according to govern-ment figures.

China succumbs to inflation riseThe Chinese government may rise thetarget rate of inflation in spite of sayingthat prices are under control, it wasreported yesterday. Inflation wasrecorded at 4.4 per cent in October,dragged upwards by escalating foodprices, which rose by 10.1 per cent.

But now the government may have toincrease its target rate of inflation tofour per cent for 2011. Chinas centralbank hiked interest rates in October forthe first time in nearly three years.

MPCS SENTANCE CALLS FOR RATE RISE

ANDREW SENTANCE, who sits on the Monetary Policy Committee (MPC), has insistedthat the UK can cope with a modest rise in interest rates. Speaking in Belfast yesterdayhe argued that deficit reductions will help a private sector-driven recovery. Earlier thismonth he again voted for a 0.25 per cent rise in rates. Picture: GETTY

GERMAN business confidence contin-ues to surge hitting its highest levelsince reunification, a survey released

yesterday showed.Economists had expected no

improvements in the Ifo BusinessSurvey for November, yet the indexrevealed an enhanced business cli-mate for the sixth consecutive month.

The indicator jumped to 109.3points, up 16.5 per cent on the sametime last year. It has now reached thehighest level since the survey beganalmost two decades ago.

Signs of a consumer recovery were

supported by a 45 per cent surge inconfidence in the retailing sector,

while figures for manufacturing andconstruction were also up.

Germanys consumer revival is

reflected in the survey, which hadrecorded negative retailing figuresuntil an acute lift in confidence since

July. On Tuesday the German economyreceived a boost from a similar meas-ure of economic activity, thePurchasing Managers Index (PMI)

which rose sharply in November.German GDP growth for the third

quarter of the year had earlier beenconfirmed at 0.7 per cent.

The positive figures for Novemberoffer some relief for German manufac-turers, after the EU revealed that newmanufacturing orders from theEurozone fell by 3.8 per cent inSeptember.

However, the Eurozones woes are

not all bad news for Germany, accord-ing to Jennifer McKeown of CapitalEconomics. The drop in the euro hasactually helped manufacturing inexport-reliant Germany, she said.

German businessmorale at highest

since reunificationBY JULIAN HARRIS

EU ECONOMY

ECONOMIST VIEWS: WHAT IS THE OUTLOOK FOR GROWTH? Interviews by Julian Harris

LAI WAH CO | CONFEDERATION OF BRITISH INDUSTRY

The boost from the stock cycle waned, but its encouraging to see net trade supportinggrowth for the first time in over a year. Growth was more broadly balanced than before.

NICK BATE | BANK OF AMERICA MERRILL LYNCH

Exports have actually been quite strong this year. Net trade is up as imports have fallen.Contrary to some claims, it is not obvious that cuts have had a big impact on growth.

CHARLES DAVIS | CENTRE FOR ECONOMICS AND BUSINESS RESEARCH

2011 will be quite a bad year for growth. Rising commodity prices this year will lead to

higher consumer prices next year. Expect rates to remain at 0.5 per cent till late 2012.

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ONLINE gaming firm Sportingbetsaw its first quarter profits soar byalmost a third as it exceeded expecta-tions in its European business.

Pre-tax profit rose 31 per cent to8.5m, compared with 6.5m lastyear. Net gaming revenue grew fiveper cent to 51.1m.

Sportingbet, which has customersacross Europe, Australia, Canada,South America and South Africa, saidtrading since the start of the secondquarter remained robust with mar-gins in line with their historic average.

Michael Campbell, analyst withDaniel Stewart, said he believes thefirm is undervalued by at least 20p ashare excluding M&A activity. Withexpected deals coming up he set a tar-get price of 130p, more than doublethe shares current 61p.

He said: The business continues todeliver improved results despite ongo-ing grey regulatory issues acrossEurope.

Last week, the company said itsSwedish rival Unibet withdrew frommerger talks, but Sportingbet

remained in discussions with severalother parties over potential deals.

Last week the company alsoannounced a five-year joint venture with Russias First InternationaBookmakers, which trades under theLiga Stavok brand, to establish anonline sports betting service in thecountry. Chief executive AndrewMcIver said: Entry into new geo-graphic markets, such as our recentlyannounced Russian joint venture,demonstrate the additional opportu-nities that are available to the group.

Sportingbet shares have lost nearlya quarter of their value since thechief executive last month said thecompany was not up for sale.

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17.5%. Cashback must be claimed before 31.01.2011.Sony,VAIO, Alpha, Walkman, BRAVIA, and their logos are

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GAMING


MercerMercer has made three senior appoint-ments. Mark Stanley has been appoint-

ed head of business development &client service for its UK investmentmanagement business. Based in

London, he will join Mercer next monthfrom Bedlam Asset Managementwhere he was head of sales & clientrelationships.

Dan Melley has been appointed UKleader for Mercer Dynamic De-riskingSolutions (MDDS). MDDS is Mercer's

leading fiduciary management solutionwhich, in the past year, has secured 17clients with assets of 1.5bn.

Alan Baker will take on the position ofEMEA head of solutions managementfor Europe, the Middle East and Africa(EMEA). In his new role, he will focuson spearheading the development of a

number of significant new initiativesand solutions within Mercers broadinvestment business.

CinvenEuropean private equity firm, Cinven,has appointed Thilo Sautter as a part-

ner. Sautter will join Cinven in 2011from Investcorp, where he has workedfor over thirteen years. Prior to leavingthe firm, he was the partner responsiblefor private equity investing in Germanspeaking markets, a member of theInvestment Committee and headed theBusiness Services sector team.

Towers WatsonChris Ford has been appointedas Towers Watson's new investmentleader for EMEA. Ford joined the com-pany in 1990 and has held a variety ofresearch, consulting and management

positions, including heading up theNew York Investment practice.

RBC Wealth ManagementRBC Wealth Management has appoint-ed George King as head of portfoliostrategy and head of investment con-sulting.

CITY MOVES | WHOS SWITCHING JOBS Edited by Juliet Samuel

PricewaterhouseCoopersPricewaterhouseCoopers (PwC) has appointedAndrew Miller to lead its government informa-tion security services offering as part of PwC'scontinued investment in the development of itsrisk assurance practice. Prior to joining PwC, he

was at Fujitsu Defence & Security where hewas responsible for transforming its securityservices portfolio.

+44 (0)20 7557 7245morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

MAGAZINE publisher Future posted asmall rise in full-year profit yesterdaybut warned 2011 looks anything butbenign.

The publisher of Official XboxMagazine saw its adjusted profits risenine per cent to 8.3m on revenuemarginally down at 151.5m.

Chief executive Stevie Spring toldCity A.M. she was a Gemini aboutthe results: If you look at Future wehave a fantastic story to tell, there areloads of reasons to be cheerful.

But then I poke my head aboveground and I see the Eurozone in melt-

down, consumer confidence in thegutter, government cuts that have yetto really bite, high unemployment its hard to be bullish with all thatgoing on. I have a feeling 2011 is goingto be anything but benign. There is abig chance of a double dip now.

Future, whose special-interest mag-azines and websites range from com-puter games to cycling, said its US business returned to profitabilityafter a cost cutting programme wastaken to combat the slowdown in theUS advertising market.

Future also reduced its net debt bymore than half to 7.4m from a year

earlier and raised its interim divi-dend by 22 per cent to 1.1p per share.

BY STEVE DINNEENPUBLISHING

Future sees its revenues slide andwarns that 2011 will be difficult

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News22 CITYA.M. 25 NOVEMBER 2010WORDS BY ROGER BAIRD

The worlds largest goldminer seesblue skies ahead as demand soarsBarrick Golds boss iscashing in on themetals bull run buthas some problems toresolve in Africa

Aaron Regent, the chief executive ofthe worlds biggest goldminerBarrick Gold, straightens his tie andsmiles its a good time to be in the

gold business.Regent, a 44-year-old with a middle dis-

tance runners build, is sitting in a meet-ing room in the recently refurbished Savoy

Hotel, and can be forgiven for feelingpleased with himself as golds prospectsseem to get brighter everyday.

Over the last two years the preciousmetal has been on a bull run, regularlyreaching record highs as investors look fora hedge against inflation to shield againstthe ongoing economic uncertainty, andprovide a safe haven away from the volatil-ity of shares and currencies. Golds latestrecord high was on 9 November, when itreached $1,424.30 (901.80) an ounce; inJanuary 2000 the price was a mere $280.

Earlier this month World BankPresident Robert Zoellick said leadingeconomies should consider adopting amodified gold standard as an internation-al reference point of market expectationsabout inflation, deflation and future cur-rency values.

Gold has played little part in setting howcurrencies are valued since the BrettonWoods fixed exchange rate regime brokedown in 1971, but the last few years hasshaken some investors faith in the presentsystem of flat money, unpredictable gov-ernment intervention and rising tensions.

Not surprisingly, Regent, an accountantby training, does not see this coming to anend soon. The smooth-talking Irish-bornCanadian says: We are going through astructural change and more people wantto use gold as money. The attitude of cen-tral banks to gold has changed. Over thelast few decades they had been sellers ofgold. Now they are buyers. Central banksin China, Russia and India are buying up alot of gold.

Currently 40 per cent of gold is boughtas an investment, 50 per cent as jewellery,with the rest used for industrial purposes.

Regent says: The fundamentals are verystrong for gold. And the elements that

have made it so are as strong as ever.He adds: Is this a bubble? I dont think

so. Over the last 40 years one ounce of goldhas on average been able to buy 15 barrelsof oil. Thats still the same today. So thegold price is keeping its relative position incomparison with other commodities.

All of this is a powerful tonic for theCanadian-based goldminers bottom line.In October the firm posted a record thirdquarter net income of $837m, compared toa one-time loss of $5.35bn the year beforewhen it was in the middle of unwindingits long-term gold hedging programme,which limited the firms exposure to goldprices.

The business which owns 25 mines insuch countries as US, Australia and PapuaNew Guinea produces 10 per cent of theworlds gold and employs 20,000 people. Ithas gold reserves of 139.8m ounces. Its cashcosts, or costs of production, are $454 perounce, compared to $518 a year ago. Thegroup is listed in New York and Toronto,and has a market value of $50bn.

But Regent is keen to ramp up produc-tion to take advantage of the high goldprice. This year the firm plans to mine

between 7.65 and 7.85m ounces, comparedto 7.4m ounces a year ago. And by 2014 itplans to push this figure up to 9m ouncesof gold a year.

To do this Regent reorganised the firmlast year into four key regions: NorthAmerica, South America, Australia Pacificand Africa. He also cut the headcount inthe Toronto head office by 25 per cent to200.

He says: I wanted to get the area man-agers closer to the business. They are onthe ground and are in the best place tomake decisions. I wanted them to runthose businesses and take responsibilityfor their decisions. There was too muchoverlap between corporate and the regionspreviously.

The business, which was set up by chair-man and founder Peter Munk in 1983, hadprimarily grown through acquisitionsrather than finding its own deposits. But itis, however, developing two major mines,

which will be key to Barrick reaching its9m ounce target.

It is working on the Pueblo Viejo minein the Dominican Republic, which isexpected to begin production in the fourthquarter of 2011, and the Pascua-Lamamine, on the border between Argentinaand Chile, slated to start output in 2013.

Regent says: These two mines will pro-vide a lot of the increased production weare targeting. Altogether, we are workingon six projects and our spend on them thisyear is $180m. It will be more next year.

In March Regent spun off around nineper cent of the groups assets onto theLondon Stock Exchange. This business,called African Barrick Gold, is made up offour mines in Tanzania that produced716,000 ounces of gold last year.

Things initially started well. The firmfloated towards the lower end of its 550pto 650p price range at 575p, but this still valued the business at around 3bn,which made it big enough to enter theFTSE 100.

However, African Barrick Gold twicehad to round down its 2010 forecasts fromaround 850,000 back to 716,000 ounces,after having in July admitting it was hav-ing trouble getting to the higher grade ore

in the mine. And then last month itrevealed that there was a fuel theft ring atits Buzwagi mine the largest in the spun-off business, and resulting in the firing of60 workers. As a result, it was forced towarn that production would suffer until itcould train enough workers to replacethose that had gone. This theft comes afew years after one of its mines wasattacked by locals who stole gold, becausethey claimed the mine had taken awaytheir livelihoods.

African Barrick Gold currently trades at523p, below its float price.

Some analysts wonder whether Barrickhas actually parked a problem unit byfloating African Barrick Gold, a businessthat has in the past suffered from years ofunderfunding.

But Regent is quick to point out thatBarrick retains a 74 per cent stake in theunit and that he is chairman of the newcompany.

He says: We are not distancing our-selves from this business, nor would we.

Because we are such big shareholders thisgives us the biggest incentive to make surethe business is a success. We have alsobrought new shareholders into the opera-tion and we want them to make a goodreturn on their investments. It has been afrustrating period. Buzwagi production isbelow what we had hoped. But we are notin despair, the assets are still there.

The goldminer adds: The easy decisionon the fuel theft would be to be quietabout it and try to muddle along. Theright decision was to deal with it and firethe people involved in the incident.

He says the Buzwagi mine is on theway back to full production.

And he adds that the London floatallowed Barrick to get in a high qualitymanagement team, led by chief executiveGreg Hawkins, who he backs. The unit, hesays, is also looking at making acquisi-tions in the Congo and the rest of Africa.

Investors expect much from Regent,who has a golden boy reputation in themining industry.

After a short stint at accountants Ernst& Young, the Alberta-raised Regent joinedminer Noranda and became chief execu-

tive of the multimillion-dollar businessbefore he was 30. When the firm mergedwith Canadian nickel miner Falconbridgein 2005 he remained the head of theenlarged firm.

And even when Anglo-Swiss mininggiant Xstrata bought out Falconbridge for$18bn in 2006, Regent managed to getXstrata boss Mick Davis, who is known as atough dealmaker, to repeatedly raise hisbid despite the fact that the bigger firmalready owned 25 per cent ofFalconbridge. He spent the next three years from 2006 at Canadian firmBrookfield Asset Management as jointhead of its new infrastructure fund. ThenPeter Munk at Barrick tempted him backto run a public company last January.

Regent might have a problem unit tosort out, but overall the comfortable feath-er bed of record gold prices should givehim the time and the space to addressmost of the issues he faces. For investors,

meanwhile, the mantra is simple in goldwe trust.

Age: 44Work: Aaron Regent became Barrick GoldsCEO in January 2009. Between 2005 and2009 he was co-CEO of BrookfieldInfrastructure Group. Between 2002 and2005 he was chief executive officer ofminer Falconbridge. Prior to that, Regentworked for rival Noranda, where he carriedout a variety of roles before becoming pres-ident. He started off at Ernst & Young.

Education: University of Western Ontario.Family: Married, three daughters. Lives inToronto.

Hobbies: A board member of the NationalBallet of Canada and The Trails Initiative,

an outdoor activities charity for children.

CV | AARON REGENT

Barrick Gold chiefexecutive AaronRegent in a meetingroom on the groundfloor of the newlyrefurbished Savoy

Hotel on the Strand

Picture: MichaTheiner/City A.M.

The attitudeof centralbanks to goldhas changed.Over decadesthey havebeen sellers.Now they are

buyers.

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ANALYSIS l Barrick Gold

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XINMAO Groups financial advisersaid yesterday that the group hadChinese bank financing lined up forits $1.3bn (820m) offer for Dutchcable maker Draka, in a bid to dispeldoubts over its proposed bid.

Xinmao had a commitment fromone of the larger banks in China toprovide the funds as necessary forthe deal and had submitted a letter ofcommitment from the bank to

Draka, Joseph Krant of Amsterdam- based Catalyst Advisors said yester-day.

A fragmented market has madeDraka the darling of the cable manu-facturing industry, with FrancesNexans, Italys Prysmian and ChinasXinmao all making approaches asthey chase a slice of the demand forcables in anything from telecommu-nications to cars.

Draka is a market leader in elevatorcables. It has designed and provided

cables for the 58 lifts of the worldstallest skyscraper the 828 metreBurj Khalifa in Dubai.

This is a formal offer. Its as for-mal as the competitive offer from theItalians. Comments that Xinmao isnot a serious contender are non-sense. We dont underestimate theChinese and I would recommendthat others do not as well, Krantsaid.

We felt if we could acquire it, wecould grow this company on growthin Asia-Pacific in optical fibres and

optical communication, and doublethe size of the company in three tofive years, he said.

Earlier, Tianjin Xinmao Science & Technology, Xinmaos listed arm,issued a statement saying its parentwas trying to trump a lower offer forDraka by Italys Prysmian, currentlyvalued at 810m (686m).

Tianjin Xinmao Group will offer20.5 per share, valuing Draka atabout1bn, the listed unit confirmedto the Shenzhen stock exchange.

Xinmao: Wereserious aboutDraka offer FRENCH biotech firm Vivalis and itsBritish partner GlaxoSmithKline havewon US clearance to begin testing forthe first time on humans flu vaccines

that were produced using Vivalisstechnology.

Vivalis said in a statement that theterms of the milestone were not dis-closed. Typically, biotech companiesreceive fees from partnership dealswhen a drug progresses in its develop-ment.

The Food and Drug Administration(FDA) accepted a so-called investiga-tional new drug application that willallow GSK to test its influenza vaccineproduced in Vivaliss duck stem cellline technology on humans in anearly stage Phase I trial.

It is the first time that Vivalis tech-nology, which is quicker, simpler and

cleaner than developing vaccines inchicken eggs, has been put throughregulatory screening.

Vivalis has said the flu vaccinecould be the first duck stem cell-based human vaccine to be marketedin 2015.

We continue in our commitmentto advancing innovative technologiesin markets where commercial successis defined by safety, efficacy, and effi-ciency, said Franck Grimaud chiefexecutive of Vivalis.

Vivalis and GSKset to test fludrug on humans

BYHARRY BANKS

INDUSTRIAL

PHARMA

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

ANALYSIS l Northern Foods

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p54.2524 Nov

NORTHERN FOODSEvolution Securities has upgraded the foodfirm to a buy with an upgraded targetprice of 60p. The broker believes the com-panys planned merger with Greencore tocreate Essenta will create a market leaderwith a complementary mix of products,

with synergy savings of up to 90m. Thenew firms proforma dividend per shareremains attractive with a seven per centyield, Evo adds.

ANALYSIS lInternational ferro metals

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INTERNATIONAL FERRO METALSNumis rates the steel product producer abuy with a target price of 50p. The bro-ker says the firms recent AGM statementwas mainly positive, with expected rootand branch cost-cutting and concernsabout rising costs. The firm was optimisticon demand for stainless steel, particularlyin China, but the broker sees danger in theSouth African Rand gaining strength andfurther dampening growth in the country.

ANALYSIS lExperian

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p742.50

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EXPERIANJP Morgan Cazenove rates the credit-

checking company overweight with a tar-get price of 800p. The broker believes theIrish f

cityam 2010-11-25

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