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FTSE 100 5,698.93 +41.83 DOW CLOSED NASDAQ CLOSED /$ 1.58 unc / 1.18 unc /$ 1.33unc Certified Distribution30/08/10 03/10/10 is 110,015

www.cityam.comIssue 1,272 Friday 26 November 2010 FREE

MPC RIFTBREAKS OUTPOSEN ACCUSES

BOES KING OF

POLITICAL BIAS P3

BUYING A HOME NEXT TOA TOP STATE SCHOOL

FRIDAY PROPERTY SECTION P25

BUSINESS WITH PERSONALITY

THE DEVELOPER of the Pinnacle sky-scraper is scrambling to secure extrafunding to avoid being forced to haltconstruction on the 945-foot tower.

Arab Investments (AI) has made a

plea to some of the Pinnacles 60 orig-inal investors for extra cash to helpcomplete the tower on Bishopsgate,after lending conditions for specula-tive building projects in the UK failedto recover.

AI has tapped investors for 330mso far enough to complete just threefloors of the proposed 64-storey, 1msquare foot tower, according to sever-al sources.

City A.M. understands that HSBChad agreed in principle to provide a600m loan to complete the 1bnproject several months ago, but pres-sured AI to secure a pre-let tenant totake up at least 300,000 square feet inthe building before it would releasethe funds.

Several property sources said the

bank might offer a smaller loan if AIcan lock down a pre-let deal for morethan 150,000 feet.

AIs managing director KhalidAffara said it made sense to return toits original investors rather thanaccept the terms. We are currently indiscussions with the banks about the

major investor SEDCO behind theproject, with other investors, inject-ing a substantial further equityinvestment so that we can dramati-cally reduce the amount of debt nec-essary for the Pinnacle to becompleted, he said.

If this offer is accepted then thefull works will be approved muchmore quickly and without complet-ing a major pre-let prior to develop-ment finance getting into theproject.

Several companies includingSchroders, Aon and Jardine LloydThompson are currently in the mar-ket for offices of more than 100,000square feet.

However, restarted work on theCheesegrater and the Walkie Talkie

towers by listed firms leaves thePinnacle in an increasingly crowdedmarket when it is ready for tenants inearly 2013.

Theyve got a very unique build-ing on their hands which makes itincredibly expensive, said one prop-erty insider. Theyre going to be very

reliant on generating very high rentsto pay for construction.The company brought in CB

Richard Ellis as a second leasing agentalongside Savills in September to tryand pursue all potential tenants.Davies Arnold Cooper, the law firmadvising AI on the project, agreed in2009 to take up 100,000 square feet.Serviced offices provider Regus hasalso taken 80,000 square feet.

Arab does have opportunities forpre-lets, but there are not that manycompanies out there looking for vastamounts of space. Firms likeSchroders might decide to stay put inthe current climate, said a personfamiliar with the City market.

HSBC, CB Richard Ellis and Savillsdeclined to comment.

PINNACLEAPPEALS TOKEEP ICONIC

TOWER ALIVE

Amount of funding secured:

330m33%

Funding will pay for:

three complete floors

5%Office pre-lets to date:

18%Pre-let needed for HSBC loan:

another

30%

Developer could be forced to halt worknext year unless it can secure extra funding

BY MARION DAKERS

EXCLUSIVE

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News2 CITYA.M. 26 NOVEMBER 2010

No bonus cutat Stan ChartEMERGING markets bank StandardChartered yesterday distanced itselffrom talks between the UKs biggestbanks over limiting bonus payouts.

RBS, HSBC and Barclays are report-edly in discussions with each otherand the government over potentiallycutting 2010 bonuses as well as lend-ing more to businesses.

The UKs five biggest banks may alsocontribute up to 1.5bn over two yearsto the governments Big Society Bankfor social projects from their ownfunds as well as dormant accounts.

Standard Chartered is not preparedto limit benefits to its 85,000 employ-ees as just three per cent are UK-based, head of media relations, JonTracey, said.

We can confirm we are not part of

any pact, he said. It would be unfairto the vast majority of our staff to cur-tail compensation arrangements.

British Bankers Association chiefexecutive Angela Knight confirmedthe banks were talking to the govern-ment about pay and other issues.

It is believe that an agreementsigned by bank chief executives couldbe issued before Christmas. While,many of the banks are resisting a capon individual bonuses, it is likely thatweaker overall performances thisyear will naturally reduce somebanks bonus pools.

BYALISON LOCK

BANKING

Learn the lessons of financial history

THERE is nothing more enlighteningthan financial history yet perhapsthe only real lesson of all kinds of his-tory is that we never learn from it. Letme attempt, nevertheless, to draw acouple of key conclusions.

The first lesson from market histo-ry is that slumps and market crashescan always be much, much worsethan nearly everybodys worst fears.While we have just emerged from adevastating, bitter recession whichbankrupted and harmed millions,several aspects of previous crises wereworse. The stagflation of the mid-

1970s, including the SecondaryBanking crisis which destroyednumerous financial firms financedon the wholesale market and investedin property, was in many ways even

worse for the City that the disaster of2007-09. Those few individuals stillworking today who were alreadyactive in the City in the early and mid-1970s always speak of the secondarybanking crisis when the likes ofJessel Securities and Slate Walker col-lapsed in hushed, almost reverentialtones; to them, it was the scariesttimes in their lives, financially andeconomically.

As Kevin Dowd and MartinHutchinsons new book, Alchemistsof Loss, reminds us, the old FT shareindex dropped from its 1969 and 1972peak of over 500, and around 400 inlate 1973, to just 150 in January 1975.This was a collapse of 70 per cent innominal terms and given the ram-pant inflation at the time, it slumpedto a real terms level of under thenadir of 40.4 hit after the 1940 evacu-

ation of Dunkirk, an almost totaldestruction of value. The FTSE 100didnt perform anything like as badlyduring the recent crisis and neitherdid stocks in any major rich nation.

Next time a market crashes, commen-tators should remember this: it maybe bad or even unbearably terriblebut its almost certainly been worse.

The other big lesson is that wealways think we will be cleverer nexttime, that we wont be caught out bythe next bubble and that our forbearswere idiots. The truth, unfortunately,is that very few people maintain theircool when all around them are losingtheir heads. In retrospect, the massnaivety and stupidity is almost alwaysunbelievable. By late 1989, thegrounds of the Imperial palace inTokyo were worth more than theentire state of California. Japaneseingenuity then went one step furtherwith the introduction of 100-yearmortgages, which was the only way asalaryman could ever hope to affordthe dementedly high property prices

prevalent at the time. Nobody noticedthat people dont frequently work fora century, even in Japan, and that itcant be moral for a parent to bequestdecades of debt to their children and

grandchildren. It made sense at thetime just as the worlds cleverestmerchants seemed quite relaxedabout the fact that 12 acres of primefarm land in Holland was offered upfor a single tulip bulb at the heart ofthe mania of 1636-37.

So what about todays world willfuture generations think is crazy?Perhaps the fact that we have near-zero Bank base rates and yet believethat inflation is going to remainunder control (or even, as manyhouseholds seem to think, that suchlow rates will remain for the foresee-able future). Or that we have con-vinced ourselves that Londonproperty prices are fairly valuedagain? Or that it is right that gilt andbond yields in the UK and US are soridiculously low? Take your pick.

[email protected]

THE head of the UKs InvestmentManagement Association (IMA) yes-terday blasted the UK government asoblivious when drafting the newly-passed Alternative Investment FundManagers (AIFMD) directive.

Richard Saunders, IMA chief execu-tive, told a Brussels conference thebill is a case study of how not to dolegislation as political horse-trad-ing took over the drafting process.

EU legislators pursued a blatantlyprotectionist agenda, while the UKsnegotiations were a failure of Britishforeign policy, Saunders said.

Intervention by France, Germanyand the Barroso presidency substan-tially altered the draft AIFMD while theUK failed to influence it, he argued.

The UK played by the rules ofcricket, while everybody else wasplaying by the rules of ice hockey, hesaid. He described the final directiveas a missed opportunity that willimpose extra costs on the industry.

BYALISON LOCK

BANKING

IMA slams new directiveIMA boss Richard Saunders called the directive blatantly protectionist

NEWS | IN BRIEF

Cahn to leave UKTI in MarchSir Andrew Cahn is to quit the govern-ments international trade body UKTrade and Investment after five years aschief executive. He will step down whenhis contract ends in March 2011, report-edly for a private sector role. Cahn hasled UKTIs work to grow outbound UK

investment and attract overseasinvestors, including through the recentdelegation to China. UKTI today workswith 25,000 companies, up from15,000 in 2007. Cahn was appointed inMarch 2006 on a four-year contractthat was extended for a further year.

Irish insurers in ratings warningFive insurers in Ireland have beenwarned they face downgrades to theircredit ratings by Standard & Poors fol-lowing its decision to downgradeIrelands sovereign debt. The units areAllianzs Irish general insurance businessand its Worldwide Care business, alongwith Aviva Insurance Europe, Irish LifeAssurance and finally RSA InsuranceIreland. The Irish-based insurers of larg-er groups, were put on negative watchby S&P because of their exposure to theIrish market. MORE P:10 & 11

EDITORS LETTER

ALLISTER HEATH

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Editorial StatementThis newspaper adheres to the system ofself-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the EditorsCode of Practice, a copy of which can be found atwww.pcc.org.uk

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BBA chief execuriveAngela Knight saidbanks were talking tothe government aboutpay and other issues

AIRLINE FINANCING RIFT DEEPENSRyanair and Emirates have taken theunusual step of joining forces witheight other airlines as a multibillion-dollar row over aircraft financingstarts to split the worlds largest air-lines into two rival camps. The Irishbudget airline and Dubais Emiratesnormally shun industry alliances. Butyesterday they revealed they hadteamed up with carriers such asEtihad of Abu Dhabi, Korean Air,Norwegian and Australias VirginBlue to block what they say are dan-gerous attempts to curb the use ofexport credit agency backing for pas-senger jet purchases.

VILIFIED LENDERS LAUNCH CHARMOFFENSIVEBritains high street banks couldpledge to lend 180bn each year to

British companies, commit 1.5bn toDavid Camerons Big Society Bank

and promise a broad cut in bonus lev-els as part of a package of measures

intended to end the war betweenpoliticians and bankers that hasraged since the crash of 2008.

US TECH LEADERS RAISE THE STAKESON PAYSome of the worlds biggest technolo-gy companies are lifting pay ratesand taking other measures to retainand encourage employees, reflectingboth improved performance in theirbusinesses and heightened competi-tion for workers with the right expe-rience. Hewlett-Packard said thisweek on an internal blog for employeesthat it would reverse across-the-boardcuts to base salaries that had beenordered by former chief executive MarkHurd in February 2009. That followedGoogles decision earlier to grant itsworkforce a 10 per cent rise, and

Intels message that 2011 bonuseswould be the highest in a decade.

DEVELOPING STAFF IS NOT A WASTEOF MONEYPoor people management, under-trained leaders and ineffective com-munication are limiting the ability ofsome international aid and develop-ment agencies to deliver efficientservices, according to a study of lead-ership and talent development in thesector. Too many agencies still cele-brate mediocrity, says the report,which was commissioned by theCentre for Creative Leadership.

WIDOW OF FUND MANAGER SUEDOVER MADOFF LINKThe trustee seeking compensationfor victims of Bernard Madoffs$65bn Ponzi scheme has suedClaudine de la Villehuchet thewidow of an investment manager who committed suicide over hisinvolvement in the scam.

EUROZONES 440BN RESCUE FUNDDOES NOT NEED TO BE BIGGER, SAYSBRUSSELSBrussels denied reports that policymakers are considering doubling theEurozones 440bn (373bn) rescuefund to cover more struggling mem-ber countries. The EuropeanCommission, which heads up the EU,has suggested that the size of theEuropean Financial Stability Facility(EFSF) be increased, amid fears itmight not be able to accommodateSpain

HOME BUYERS SEE MORTGAGE RATESRISE ON NEW DEALSHome buyers will see their mortgagesincrease when their initial deal comesto an end, Britains biggest lender haswarned. Halifax is introducing a newstandard variable rate of 3.99 per cent

for all customers taking out a homeloan from the New Year.

FIAT TRIES TO BOOST SUV SHAREFiat plans for a midsize sport-utility-vehicle tailored for families with chil-dren marks its latest effort to expandin a market where its presence is stillsmall. The Sports Utility Vehicle,which will be based on the DodgeJourney of its American partnerChrysler Group, is the first modelfrom Chrysler that Fiat has chosenfor its namesake brand in Europesince forming its partnership withthe company in 2009.

HANA SIGNS $4.1BN DEAL FOR KEBSTAKEHana Financial Group chairman KimSeung-Yu said yesterday that the com-pany could fund its 4.689 trillion($4.1bn) purchase of a controllingstake in Korea Exchange Bank with amix of retained earnings, debt and

investment from a potential strategicpartner.

WHAT THE OTHER PAPERS SAY THIS MORNING

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THE Bank of Englands most seniorpolicymakers were divided overMervyn Kings support for the govern-ments austerity measures.

Adam Posen, an external member ofthe Monetary Policy Committee(MPC), yesterday said the governorsendorsement of the coalitions deficitreduction programme was excessive-ly political.

A number of people on the com-mittee [thought he was being] exces-

sively political in the election, he toldthe Treasury select committee

Posen added that a handful of othermembers of the MPC shared his con-cerns. A number of us were con-cerned more than me and one otherperson, but less than a majority, hesaid.

In a press conference following theMay inflation report just days afterthe coalition seized power Kingbacked the governments decision tomake 6bn of cuts in fiscal 2010.

Posen also said he objected to thewording of one paragraph in the infla-tion report, although the majority ofthe MPC did not support him.

The thinly-veiled criticism of Kingrepresents a huge challenge to hisauthority.

Chuka Umunna, a Labour memberof the select committee, said thatKings role was becoming overly politi-cised, although he blamed this onpoliticians rather than the governorhimself.

It is self-evident that the governorhas been drawn into political matters

but it is the fault of politicians, hesaid.

Nick Clegg has cited the governorsopinions as the reason for his volte-face on economic policy, while GeorgeOsborne is relying on him to compen-sate for his fiscal austerity packagewith monetary levers, he added.

Umunna was referring to Cleggsclaim that he decided 6bn of in-yearcuts were necessary after a telephonecall with the governor a claim round-ly denied by King.

Posen claimsMervyn Kingtoo political CITIGROUP is to revive its retail bank-ing operations in Europe through tar-geted new openings in select majorEuropean cities from 2011.

The move marks a return to growthin the banks retail presence after aperiod of winding down its branchnetworks in countries including theUK, as part of the terms of its bailoutby the US government.

Citi now aims to open flagshipbranch offices in a few westernEuropean cities in key markets suchas the UK, France and Germany,according to the Financial Times.

The new branches will be styled oncomputer brand Apples hugely suc-cessful stores in major cities, and willtarget affluent and frequently travel-ling customers who require servicesacross borders from a global bank.

Citis strategy envisages eventuallyopening a network of the branches in100 cities, ten to 15 of which will be inwestern Europe.

The approach supports Citi chiefexecutive Vikram Pandits strategy toredefine the banks retail bankingservices. The bank is also focusing ongrowth in emerging markets such asEastern Europe and will again con-centrate new openings in majorcities.

Citigroup declined to comment.

Citi planningnew Europeanretail operation

MPC member Adam Posen (bottom) said BOE boss Mervyn King is biased Pictures: PA, GETTY

BANKING

News 3CITYA.M. 26 NOVEMBER 2010

BYDAVID CROW

POLITICS

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LONDONCITY TO

STOCKHOLMFROM 65ONE WAY

Focus on Capital Shopping Centres 5CITYA.M. 26 NOVEMBER 2010

SHARES in Capital Shopping Centres(CSC) rocketed yesterday after US mallowner Simon Property revealed it hadmade an initial takeover approach forthe company.

Simon wrote to CSC on Tuesday, theday before CSC announced its 1.6bnoffer for the Trafford Centre inManchester, to urge the firm to post-pone its purchase and share offeringuntil Simon could make an all-cashtakeover offer.

CSC refused the request, and addedyesterday it was not in shareholdersinterests to delay the placing.

The firm announced its deal withTrafford Centre owner Peel Holdingsyesterday morning, alongside a suc-cessful 221m share placing to help

fund the deal and lower its own debts.CSC yesterday scheduled an extraor-dinary meeting for 20 December to

allow investors to vote on the TraffordCentre acquisition and discuss thepossibility of a takeover by Simon.

The purchase of the TraffordCentre, if accepted by shareholders,will hand a 24.9 per cent stake in CSCand the deputy chairman job to cur-rent Trafford owner and billionaireproperty investor John Whittaker.

Analysts at JP Morgan said of thedeal: Although we do not believe theTrafford purchase would be a bargainat five per cent initial yield, the centrelooks a perfect fit in CSCs portfolio. Inaddition, the announced equity plac-ing was hanging in the air and we wel-come the potential leveragereduction.

Capital Shoppings shares closed12.9 per cent up at 381p yesterday,valuing the firms issued shares at2.12bn.

Simon said its potential offer wouldbe at an unspecified premium tothe companys current valuation.

US suitor liftsCapital stockBYMARION DAKERS

PROPERTY

CSC is planning to buy the Trafford Centre in a 1.6bn deal Picture: REX

Its a win-win situation for investorsCAPITAL Shopping Centres (CSC)shareholders are currently in a win-win situation. While Simon Groupsbid interest seems to have taken itcompletely by surprise, the sharessnear 13 per cent surge to 381p indi-

cates the market is taking it seriously.Simon, which already owns 5.6 percent of CSC, is a big player in the US,with the cash to match. It is believedto be looking overseas because compe-tition concerns over its size is prevent-ing it making further largeacquisitions in its home market. Itsnot clear how much Simon is willingto offer, saying a deal will be at anunspecified premium to net asset

value, but its $30bn market capmeans CSCs 2.4bn market cap is rel-atively small fry for it to swallow.

CSCs planned 1.6bn acquisition ofthe Trafford Centre is what propelledSimon into action. If the deal goes

through Peel Group would gain a 19.9per cent stake in CSC making a fullacquisition near impossible. Simonhas until 20 December the date ofthe vote on the Trafford deal tomake a formal offer. But either wayCSC shareholders win. Either Simonwill come up trumps with a juicytakeover premium, or the Traffordcentre deal will go through which inthe long term should boost earnings.

BOTTOMLINEAnalysis by Katie Hope

DAVID Simon was named chairman ofthe board of directors of the group inOctober of 2007.

He had served as chief executive ofSimon Property Group since 1995. Hewas president of the firm from 1993.

Simon Property Group is the largestreal estate company in the US. It ownsor has an interest in 393 properties

comprising 264m square feet of gross

leasable area across the US, Europeand Asia.

Its portfolio includes PremiumOutlets and The Mills malls. It isheadquartered in Indianapolis,Indiana and employs more than 5,000people. It is listed on the NYSE.

Its international expansion is usual-ly based on partnerships with estab-lished players with a knowledge oflocal markets. It owns an interest in51 European shopping centres; eightPremium Outlet Centers in Japan; andone Premium Outlet Center in bothSouth Korea and Mexico.

Simon Property is believed to havetaken on Citigroup to advise on theCSC deal, though Citi refused to con-

firm this to City A.M. yesterday.

DAVID SIMON

SIMON PROPERTY

360

340

320

380

400

14 Oct 3 nov6 Sep 24 Sep

ANALYSIS l Capital Shopping Centresp 381.00

25 Nov

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MARGARET Beckett, the formerLabour foreign secretary, will todaybe named as the president of theNo to AV campaign, which aims tosecure a No vote in next Mays ref-erendum on the alternative vote.

The decision to appoint a Labourstalwart Beckett was party leaderfor a short spell in 1994 will beseen as an attempt to prove thecross-party, non-partisan nature ofthe campaign.

This is so important it has torise above party politics, she said

yesterday.Other Labour campaigners

against AV include former Labourhome secretary David Blunkett; ex-deputy Prime Minister LordPrescott; Lord Reid, a serial cabinetminister in Tony B lairs govern-ment; and Lord Falconer, the lastLord Chancellor.

Justice secretary Ken Clarke willbe a Tory patron opposing AV, alongwith education secretary MichaelGove; foreign secretary WilliamHague; former London mayor candi-date Steve Norris; and Baroness

Warsi, the chairman of theConservative party.

Margaret Beckett named aspresident of No 2 AV campaign


THE governments decision to ringfence spending on health and inter-national aid has been criticised by agroup of influential MPs.

Before the election, David Cameronpledged to protect spending in real-terms on health and overseas aid, in abid to soften the Tory partys image.

But in a report released today, theTreasury Select Committee says thecoalitions decision to spare somedepartments from the axe could leavemore deserving programmes withoutthe appropriate funding.

Andrew Tyrie MP, chairman of thecommittee, said: There has been agreat deal of ring-fencing in the cur-rent spending review. The risk is thatring-fencing distorts spending priori-ties, particularly in a radical reviewsuch as this.

Ring-fencing may fulfil electoralpromises. But ring-fencing can alsolead to allocative problems across gov-ernment as a whole, the report con-cludes.

The MPs also warned that protecteddepartments could avoid the efficien-cy measures that are taking place else-

where in government, as back-officecosts are slashed to protect front-lineservices as much as possible.

The use of the term ringfencingwas also misleading, the MPs said,because the NHS budget was beingused to fund other programmes, suchas social care.

Meanwhile, the committee hit outat the previous governments decisionto wave through an aircraft carriercontract with BAE, which provedunbreakable because the cost of can-celling would have been higher thanpressing ahead.

Tyrie said: Successive governmentshave struggled to deal with an over-committed defence budget. TheTreasury should draw on the lessonsfrom the seemingly unbreakable car-rier contract.

While MPs welcomed the govern-ments decision to produce an analysisof how progressive the budget meas-ures are, it warned that this was notnecessarily an indication of their fair-ness.

Whether or not the consolidationis fair is, and will remain, the subjectof political debate and the TreasuryCommittee will continue to take evi-dence on it, said Tyrie.

MPs criticise

ring-fencingof budgetsBYDAVID CROW

POLITICS

BRITAIN and France yesterday sig-nalled a looming crackdown on ultra-fast share trading that featured inMays brief flash crash freefall onWall Street, alarming regulators andinvestors globally.

French economy minister ChristineLagarde said a form of computerisedtrading known as high-frequency trad-ing (HFT) may need banning in some

cases.My natural tendency would be atleast to regulate, to oversee it verystrictly and after a cost-benefit analysisof these methods, maybe to forbid it,Lagarde told a parliamentary commis-sion hearing on financial speculation.

Britain, Europes biggest share trad-ing center and where HFT accounts forabout a third of trading on the LondonStock Exchange, also signalled thattougher rules were needed.

Spotlight shines onhigh-speed tradersTRADING

David Cameronpromised to protectspending on theNHS before the elec-tion, in a bid tosoften the Torypartys image

Picture:REX

BYDAVID CROW

POLITICS

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Are they fast enough?Come and meet the Team Sky Pros as they gear upto take on the City in the IG Markets Square Mile Challenge.

From 11am Friday 26th November,Broadgate Circle, London.

Find out more at www.igmarkets.co.uk/cycling

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ITALIAN bank Unicredit is expandingin the Czech Republic with morebranches and franchises, it emergedyesterday.

Unicredit is understood to be plan-ning to enlarge its 60-strong branchnetwork by at least 40 branches and

to expand its franchise network to 90outlets, especially in smaller towns

and cities.The group is Italys biggest bank,

but lags behind rivals such as SocieteGenerales Komercni Banka in the for-mer Eastern Bloc nation.

Unicredit said it was keen onexpansion in the region because itexpects retail operations there togrow.UniCredit operates in 22 coun-tries, with about 162,000 employees

and 9,578 branches.Brokers believe the Czech Republic

is a sound investment bet, with goodstandards of living and a relativelyunder-developed banking structure.

They reckon UniCredit is likely toleave smaller eastern Europeannations such as the Baltic republics,helping it to focus its resources onmore lucrative markets. It is in 19countries in central and EasternEurope and says its presence results

from strong commitment in theregion.

UniCredit plans Czech Republic expansion

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COLIN Snowdon, chief executive ofAldermores residential mortgage

lending, has left after less than a yearwith the firm. Snowdon is believed tohave left by mutual consent.

He was one of the key players atAldermore, responsible for buildingup the groups residential lending

business.Aldermore, one of the new banks

to have emerged out of the financialcrisis, announced Snowdons depar-ture as part of a reorganisation.

It has appointed CharlesHaresnape, former group mortgageservice director at Connells Group asmanaging director of residentialmortgages at Aldermore.

The mortgage division will be head-

ed by Mark Stephens, deputy chiefexecutive office at Aldermore.

Aldermore scored a coup earlierthis month with the appointment ofCity veteran Sir David Arculus as its

new chairman.Aldermore, which is backed byAnacap and Morgan Stanley, startedout by specialising in commerciallending to SMEs. It began lending onbuy-to-let mortgages in May this year.

Aldermore in shake-upBYDAVID HELLIER

BANKING

FIVE people linked to a brokerage thatwas closed down by the FinancialServices Authority (FSA) last year werecharged with insider dealing yester-day.

Blue Index, a contracts for differ-ence (CFD) brokerage was closeddown by the FSA in May 2009 justdays after it was raided by police.

The FSA has charged the five with17 counts of insider dealing betweenOctober 2006 and February 2008.James Saunders, co-owner and direc-tor, and his wife Miranda werecharged with seven counts of insiderdealing relating to trading ahead ofseven takeover announcements.

Saunders has also been chargedwith three separate offences of dis-closing inside information.

And Saunders along withChristopher Hossain, a former seniortrader with the brokerage, werecharged with encouraging clients totrade CFDs in relation to two stocks.Hossain has also been charged withinsider dealing ahead of a takeoverannouncement.

Meanwhile, James Swallow, theother co-owner and director has beencharged with three offences of insiderdealing in relation to trading aheadof three takeover announcements.

Adam Buck, a former Blue Indexemployee, has been charged with onecount of insider dealing ahead of atakeover announcement. All five werebailed to appear at City ofWestminster magistrates court on 20December.

The FSA has been intensifying itsaction against insider dealing recent-ly. Its highest profit scalp to date

being former Cazenove brokerMalcolm Calvert who was jailed for 21months in March.

It currently has 11 cases waiting togo to trial in the next year.

Five chargedby FSA overinsider deals

TWO private equity funds arebelieved to have joined KohlbergKravis Roberts (KKR) in the buyoutfirms bid for Del Monte Foods,sources familiar with the situationsaid yesterday.

Vestar Capital Partners and a fundrun by Centerview partner James Kiltsare both understood to be workingwith KKR, with the suggestion that anagreement could be announced with-in days.

KKR is believed to have been inadvanced talks to buy Del Monte forseveral weeks. News of the potentialtake over earlier this week promptedratings agency Standard & Poors toput Del Monte Foods on watch for apossible downgrade, suggesting anytakeover could add meaningful debtthat would weaken Del Montes creditprotection measures below currentlevels.

KKR had offered $18.50 a share forDel Monte, which would value thecompany at about $3.58bn (2.3bn).

Centerview recently bought pizzamaker Richelieu Foods fromBrynwood Partners. Vestar has invest-ed in consumer-focused companiesincluding Birds Eye Foods and SunProducts.

KKR, Centerview, Vestar and DelMonte declined to comment.

Del Monte has cut its sales outlooktwice this year, citing higher rebatespaid to retailers to spur consumerspending.

The company currently trades at 12times projected earnings, which isbelow the sector average of roughly16.4 times projected earnings.

Del Montes stock has leapt 62 per

cent this year, with sharp gains overthe past week driven by the takeoverspeculation.

The shares closed up 5.5 per cent at$17.99 yesterday.

Equity fundsjoin bid forDel Monte

BYMATTHEWWEST

M&A

BY PHILIPWALLER

BANKING

REGAL PETROLEUM said yesterday itwas in the early stages of takeovertalks with suitors, sending shares inthe troubled oil explorer soaring.

The company, which has suffered aseries of setbacks this year after disap-pointing well results in Ukraine, said

it had received a number of approach-es after it announced plans for a

strategic review and the departure ofits chief executive.

Shares in Regal, which have fallen86 per cent since the beginning of theyear, surged to gain 46 per cent yester-day to 18.3p, valuing the company atabout 39.5m.

The background is theyve gotmore cash than the current marketcap, one analyst, who did not wish to

be named, said of the firms potential appeal.

Regal confirms bid approach

BYHARRY BANKS

OIL

BYMATTHEWWEST

REGULATION

Colin Snowdon (left) and Sir David Arculus (right) Picture: GETTY

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THE cost of insuring Spanish,Portuguese and Belgian debt is at orclose to record highs, with Irelandsbailout crisis spilling into the bondmarkets of other peripheralEurozone countries.

Ten-year credit default swaps (CDS)on Spanish government debt are atrecord highs, reaching 312 basispoints (bps) yesterday. That meansthat it costs 312,000 to insure 10mworth of long-term Spanish debt.

Meanwhile, Portuguese CDSspreads are at peaks last seen on 11November, when German chancellorAngela Merkel declared that privatebondholders should accept haircutson their investments if a countrydefaults. Ten-year CDS reached431bps yesterday.

Irish CDS spreads also widened 16points to 595bps, while Belgian CDShit a record, doubling in price to302bps.

The spread between the yield on

peripheral Eurozone sovereign bondsand German bunds also reached arecord for some countries yesterday.

The Irish-German spread rose to anall-time high of 734bps, while thePortuguese-German spread hit430bps, 30bps short of its recordhigh.

The movements show that despiterepeated attempts to reassure mar-kets, Eurozone leaders have failed toprevent the investor flight fromcountries in financial difficulties.

Capital Economics Ben May said:With worries about the political sit-

uation and the banks unlikely to easeany time soon, Ireland could effec-tively be locked out of the bond mar-kets for a prolonged period.

Insuring eurodebt leaps torecord highsBY JULIET SAMUEL

WORLD ECONOMY

The cost of borrowing for Portugal, Belgiumand Ireland has soared to record highs in recentweeks. The spread between Irish bond yields andGerman bond yields is at a record high of 734bps.

FAST FACTS | EUROZONE DEBT

Focus on Eurozone crisis10 CITYA.M. 26 NOVEMBER 2010

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THE cost of recapitalising Irish bankscould be even higher than the 22-27bn estimated.

The potential cost of large-scaledefaults in residential mortgages,currently not included in the Nama

bad bank programme, has not beenfactored into recapitalisation figures

by credit analysts.If Nama is forced to accept dis-

tressed residential loans for the firsttime it would cause a spike in contin-gent liabilities for the state.

Meanwhile, Ireland may create asecond bad bank by merging theremaining operations of Anglo IrishBank and building society Irish

Nationwide, and using that entity totake bad loans from other banks.

EUROPEAN clearing house Clearnetyesterday pushed up its marginrequirement for trading Irish sover-eign bonds, raising it from 30 per centabove the normal requirement to 45per cent above the norm.

Clearnet, which handles 11 tril-lions worth of bond trading a month,said its analysts had made the decisionafter the spread between Irish bondyields and a basket of triple-A ratedEuropean bond yields moved above athreshold of 450 basis points.

The action means that traders of

Irish sovereign bonds must supplyClearnet with collateral equivalent toa value of 45 per cent of their net expo-sure, far above the normal require-ment which is typically two to fiveper cent.

It indicates that Clearnet thinks the

market is pricing in nearly a one-in-two chance of a default.

The move is the third such changein two weeks, meaning that the collat-eral required for trading Irish bondshas been above that of equivalentbonds since 10 November, when theyield on Irish ten-year bonds jumpedto 8.6 per cent.

Clearnets head of fixed incomeJohn Burke said: We cant afford tobe surprised by a fast default. We haveto protect ourselves against the possi-bility.

The spread between Irish andGerman bond yields is now at an all-time high of 734 basis points.

Clearnets move comes as Irelandprepares for an important by-electionin Donegal, usually a safe seat for themain government party but now atrisk of falling to the far-left national-ists Sinn Fein on the back of thebailout chaos.

Margin call on

Irish bonds up

GERMAN chancellor Angela Merkelsrepeated interventions in the euro cri-sis have prompted anger among EUofficials, who fear that Germany isturning its back on the Eurozonesinterests in favour of its own.

Eurogroup chairman Jean-ClaudeJuncker said yesterday that he is con-cerned that in Germany, the federal

(government) and local authorities areslowly losing sight of the Europeancommon good. European CentralBank official Ewald Nowotny hasadmitted that he is irritated withMerkel.

Merkel has made several proclama-tions seen as unhelpful by EU officials,in particular her insistence on reiterat-ing that private bond traders mustshare the burden of bailouts by accept-ing haircuts on their investments.

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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

Merkels commentstest EU patience

Republics banks face fresh woes

BY JULIET SAMUEL

WORLD ECONOMY

The Irish-Germanspread rose to anall-time high of 734basis points yester-day, while thePortuguese-Germanspread hit 430bps,30bps short of itsrecord high.

Picture:PA

BY JULIET SAMUELWORLD ECONOMY

29 October: Angela Merkel proposes thatthe new EU bailout mechanism includehaircuts for private bond traders.10 November: Merkel reiterates her posi-tion, followed by a reassurance that itwould only apply after 2013.18 November: Merkel says she is com-pletely convinced that the measure must

be adopted.23 November: Merkel says the euros situ-ation is exceptionally serious.24 November: Merkel asks in Reichstag:Have politicians got the courage to makethose who earn money share in the risk aswell?25 November: Merkel rows back, sayingthis is about a future crisis mechanism,and wont apply to current investors.

TIMELINE | ANGELA MERKELSINTERVENTIONS

0.6

0.5

0.4

0.3

23 Oct 1 Nov 8 Nov 15 Nov 22 Nov

ANALYSIS lBank of Ireland

8.8925 Nov

0.4

0.35

0.3

0.45

25 Oct 1 Nov 8 Nov 15 Nov 22 Nov

ANALYSIS lAllied Irish Banks

0.3025 Nov

350

250

150

50

450

30 Sep 15 Oct 29 Oct 15 Nov

ANALYSIS l10-year credit default swaps

56

299

431PortugalSpainGermany

BY STEVE DINNEEN

WORLD ECONOMY

Focus on Eurozone crisis 11CITYA.M. 26 NOVEMBER 2010

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RESTLESSIN THE CITY

FOR YANKBANKERSNO rest for our American friends in theCity, it seems. The Capitalist had a snooparound some of the biggest US banks UKbranches yesterday, hoping to find themwonderfully empty due to an outflow oftraders to celebrate Americas biggestholiday of the year.

But no, it seems our bankers were hardat work into the evening hours yesterday.

It was business as usual at bothGoldman Sachs and Bank of America-Merrill Lynch, with one exception: thecanteens of both were given over to aThanksgiving themed lunch of turkey,cranberry sauce and pumpkin pie tooffer some cheer to all the hard-working

yanks.Over at Investec, however, the celebra-

tions were on a grander scale if some-what cosmopolitan. Traders headed offto Canary Wharf early for a curry withtheir brokers. Not particularly tradition-al, but certainly a uniquely British styleof celebration.

But it wasnt necessarily to thank thepilgrim fathers for their foresight.Instead, they were celebrating a day ofthin trading and lazy markets.

Each to their own.

STELIOS STAREASYJET entrepreneur Stelios Haji-Ioannouin partnership with the Leonard CheshireDisability charity, last night picked a busi-nesswoman for the worthy winner of theannual Stelios Award for DisabledEntrepreneurs and a cheque for 50,000 forTiny Mites Music. Vanessa Heywood wasdiagnosed with multiple sclerosis in 1995,forcing her to give up her career as a profes-sional actress, singer and dancer. Ratherthan wallowing in her sorrows, she tookadvantage of her musical talent and set up

a business offering live and recorded musicsessions aimed at young children.

CRYSTALLISED SOOTTIMES may be tough, but the sparklers arestill pulling in the buyers. Gem Diamondsyesterday raked in a not-to-be-sniffed at$22.7m from the sale of two of its largediamonds a generously proportioned184 carat diamond and 196 carat diamondrespectively. Not bad for a piece of crys-tallised soot!

CITY VERSUS LYCRATO mark its official sponsorship of TeamSky the pro-tour cycling team spread-betting firm IG Group is holding a City

suits versus the cycling pros bike race atBroadgate today.

City folk, including several lycra-clad IGsenior traders, will be pitting their cyclingskills against Britains cycling Olympicgold medallist and Team Sky leaderBradley Wiggins. While all slots to raceagainst the champion himself are taken,the opportunity to watch the suits sweatit out over a one-mile course on a station-ary bike with all the huffing and puff-ing and sweating that it entails is surelyworth a gander. And if thats not enough

to tempt you along, perhapsWiggins characteristic hon-esty could lure you there.

After struggling up aPyrenean mountain in this

years Tour De France race hetold reporters: Ive got noth-ing. I just dont have the form,its as simple as that. I justfeel consistently mediocre.

You never know, ifWiggins not on formagain, then the suits couldbe in with a chance.

To find out, turn up todaybetween 10am and 3.30pmto witness the battle of thebikes.

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The Capitalist12 CITYA.M. 26 NOVEMBER 2010

EDITED BY

JULIET SAMUELGOT A STORY? [email protected]

Ive gotnothing.I just feel

consistentlymediocre,said BradleyWiggins

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THE government yesterday con-firmed the 6bn Thameslink proj-ect and a plan to order hundreds ofnew train carriages to ease over-crowding on the railways, but saidsome schemes would face moredelays.

Ministers also failed toannounce the builders of the newrolling stock and deferred a deci-sion about replacing the UKs age-ing Intercity 125 high-speed trains.

Transport secretary PhilipHammond said the governmentwas planning to buy 2,100 carriagesby May 2019 as part of an 8bnpackage of new rail schemes.

Hammond committed ministersto funding the 6bn Bedford to

Brighton north-south Thameslinkproject in its entirety, but therewas dismay that the scheme wouldbe completed two years late in2018. He also announced a 600melectrification by 2016 of the GreatWestern line from London toOxford, but delayed a decision onelectrifying the rest of the line toWales until the new year.

Train builders Bombardier andSiemens, who are bidding to sup-ply more than 1,000 trains forThameslink, are likely to welcome

confirmation of the project, whichit was feared may have been cut,but they are still none the wiserabout the winning bidder.

The delay to a decision on theIntercity Express Programme(IEP) the project to replace theIntercity 125s, some of which are40 years old, is also likely to causeconcern. The government is review-ing the 7.5bn IEP scheme toreduce its complexity and cost.

Japanese firm Hitachi is pre-ferred bidder on the project whileBombardier, which employs about3,000 people at the UKs last trainfactory in Derby, is reserve bidder.

A spokesman for the Derby &Derbyshire Rail Forum, which rep-resents Bombardier and other com-panies, said the announcementwas positive for train builders.

Trains get go-aheadBY PHILIPWALLERTRANSPORT

Focus on transport14 CITYA.M. 26 NOVEMBER 2010

IN the mid-nineteenth century therailway was banned from buildinglines and stations into the City andthe West End by a Royal

Commission. The effect of that deci-sion is still felt today and with theexception of the very busy originalThameslink route we currently haveno real cross London rail links and acapital sorely in need of additional railcapacity.

So for thousands of London com-muters yesterdays news that the final

phase of the Thameslink Programmehas joined Crossrail on the govern-ments will-do list is very good newsindeed. Together an upgraded north-south Thameslink network and the

east-west Crossrail will provide the

capacity and services that the capitaland its passengers badly need.Wed all like a commute that takes

us straight from our home station toour destination no changes withnone of the stress that connectingservices all too often seem to induce.

Both Thameslink and Crossrail willhelp deliver that aspiration for manythousands of passengers with new andlonger trains to a wider choice of desti-nations reducing the need for pas-sengers to change trains or transfer tothe Tube.

Travellers will see some benefitsfrom the Thameslink Programme verysoon with new and better stations atFarringdon and Blackfriars and thefirst 12 car trains running on the exist-ing Bedford to Brighton route by theend of 2011.

London will finally benefit from anintegrated cross city railway. An

improvement that will last beyond allour lifetimes, which will stand as alegacy for future generations. Rick Haythornthwaite is chairman ofNetwork Rail

GUEST COMMENT

RICK HAYTHORNTHWAITE

Philip Hammondconfirmed that thegovernment willbuy 2,100 carriagesby May 2019

CITY VIEWS: WILL THE GOVERNMENTS PLANS EASE TRAIN CONGESTION?Interviews by Thomas Hamed

I think it might be enough, though I would need to see how the increase would beimplemented. I am nervous how the government and rail companies plan to pay for this.The government is not in control of rail companies and rail users are a captive audience.

DAVID TOPPING | ACCOUNTAGILITY

A 17 per cent increase wont be nearly enough to relieve congestion. I certainly wontaccept a rail fare increase, as fares are already too expensive as it is. What they needto do is serve more destinations with their trains.

MATTHEW WRIGHT | PHONE PROFESSIONAL

Rails are congested, and more trains would be great. However, increased fares andtaxes wouldnt be worth it. We are all struggling because life costs are rising, and railcosts are already too high.

RINITA SMIT| RSA GROUP

Oxford

Radley

Culham

Appleford

DidcotParkway

Reading

Twyford Maidenhead Hayes &Harlington

LondonPaddington

Slough

Chols

ey

Gorin

g&St

reatle

y

Pang

bourn

e

Tilehurs

t

Taplo

wBu

rnham

Lang

ley

Iver

Hanw

ell

South

all

West

Drayt

onWest

Ealing

Acton

Main

Line

BedfordFlitwickHarlingtonLeagraveLutonLuton Airport Parkway

Kings Cross ThameslinkFarringdon

City ThameslinkBlackfriarsLondon Bridge

East CroydonRedhillGatwick AirportThree BridgesBalcombeHaywards HeathWivelsfieldBurgess HillHasscocksPreson ParksBrighton

HarpendenSt Albans

Londons railwayis finally joined up

The government gavethe green light for the

6bn upgrade of theThameslink lineyesterday

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OAKLEY Capital has bought a 50 percent stake in Time Out, in a deal that

values the iconic magazine at morethan 20m.Founder Tony Elliot has been

searching for an investor but wasdetermined to resist being snappedup by a larger media company.

He is understood to have made atleast 3m from the share sale thesum he invested in it earlier this yearafter banker Lloyds became uncom-fortable with the level of lending tothe firm.

He says he will hang onto theother half of the firm he founded in1968 with just 70.

The group has grown to incorpo-rate 36 city magazines published in

24 countries, 22 travel magazines in19 countries and an extensive eventsbusiness.

Annual turnover is 17m downfrom its peak of 25m in 2007.However, the firm reported a profitof 1.7m after cutting costs.

He said: We are more profitablethis year than we have ever been, andgoing forward the sky is now thelimit on what we can achieve.

Elliot added: There is incoming

money into the business that hasdealt with debt. Its dealt with work-ing capital, its dealt with variouscosts and I have some money. Wenow have absolutely no debt.

Oakley director Peter Dubens saidthe investment firm plans to developTime Outs digital potential.

We are going to help the business,which has not had a lot of workingcapital over the last few years, to cre-ate a very large presence digitally,both mobile and on the internet.

There are many cities the maga-zine is not in, and the other thingthat will happen will be expansion,both more depth in cities it is already

in, and in further cities all over theworld.

Liberum Capital acted as financialadviser and broker on the deal.

115

125

135

14 Oct 3 Oct6 Sep 24 Sep

ANALYSIS l Oakley Capitalp

130.5025 Nov


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Time Out owner sells 10m stake

BY STEVE DINNEEN

MEDIA

TONY Elliott famously founded TimeOut in London in 1968 for just 70,building the firm into a global pres-ence.

The 63-year-old took his magazineto America in 1995 to scepticism onboth sides of the Atlantic but it hassince become a staple in cities includ-ing New York and Chicago.

He had a well publicised spat withthe BBC after its acquisition of LonelyPlanet, a major rival to his Time Outcity guides. In 2005 he survivedprostate cancer.

He has also endured peaks andtroughs with the business.

Earlier this year he was forced toinject 3m of his own money into thebusiness, which included remortgaginghis St Johns Wood home.

TONY ELLIOTT

TIME OUT

SERIAL entrepreneur Peter Dubenslearnt his trade from Joe Lewis, theBahamas-based billionaire currencytrader, who he spent his summers shad-owing as a student. He has sold every-thing from novelty T-shirts to smoothies.

He made his name in the wake ofthe dot com bubble in 2000 by buyingup troubled companies for pennies, fix-ing them (or breaking them up) andselling them for a healthy return.

He launched Oakley Capital in 2007,before the crash, but was spurred onby the credit crunch, sending his teamlooking for distressed firms in need ofa cash injection. He specialises in finan-cial services and technology firms. Hismost famous venture is Pipex, thebroadband group, which he sold in2007 for 210m.

PETER DUBENS

OAKLEY CAPITAL

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DAILY Mail General Trust (DMGT) yes-terday reported a boost in its nationalnewspaper division, with the DailyMail and Metro both recording recordoperating profits.

Group revenue slipped six per centfor the year but pre-tax profit climbed23 per cent as cost cutting measureskicked in.

The publisher saw overall profits atAssociated Newspapers its nationalnewspaper division rise 54 per cent,even taking into account losses madeby the failed London Lite.

Metro, the groups star performer,now ranks as the third largest nation-al newspaper by circulation.

The results were buoyed by thesteady recovery of the UK advertisingsector and a stringent cost cuttingprogramme.

Revenues at AssociatedNewspapers slipped three per centbut underlying revenue, taking intoaccount discontinued operations,grew five per cent.

Chief executive Martin Morganstruck a cautious note, saying: I do

not think any of us really knows howBritish consumers are going tobehave with the VAT rises.

However, he says that at a microlevel DMGT is performing ahead offorecasts. He said: Trading exceededour expectations throughout theyear.

Our international business-to-busi-ness companies have delivered excel-lent profit growth, demonstratingstrength across the portfolio.

Our UK consumer businesses haveachieved a sharp improvement inprofitability reflecting the actionstaken to reduce costs and to elimi-nate loss-making activities, andgrowth in our national advertising.

DMGT profits

soar as costcuts kick inBY STEVE DINNEEN

MEDIA

DMGT chief executive Martin Morgan says Januarys VAT rise is a concern

Focus on DMGT 17CITYA.M. 26 NOVEMBER 2010

ANALYST VIEWS: WHAT DO YOU THINK OF DMGTS RESULTS? Interviews by Steve Dinneen

LORNA TILBIAN | NUMIS

It is encouraging in business-to-business, with the group guiding to good growth. Business-to-consumeris more mixed, with Associated starting the new fiscal year well, but Northcliffe still challenging.

PAUL GOODEN | RBS

Given the accounting hit we expect consensus earnings to remain unchanged for 2010 to 2011.With strong share price and no earnings upgrades, there could be some profit taking in DMGT.

MANOJ LADWA | ETX

Full-year numbers show what a difficult period it has been for the media company. But itsmanagement has been adept in turning in a profit despite sales dropping sharply.

500

460

540

580

14 Oct 3 nov 23 nov6 Sep 24 Sep

ANALYSIS l Daily Mail General Trust

p 544.5025 Nov

DMGTRevenue

1.9bn(-6%)

Profit 247m

(+23%)

EuromoneyRevenue

330m(+4%)

Profit 96m

(+25%)

AssociatedNewspapers

Revenue

850m(-3%)

Profit 95m

(+54%)

DMGT Information

Revenue

231m(flat)

Profit 53m (+14%)

Risk Management

SolutionsRevenue

153m(+12%)

Profit 47m (+12%)

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EUROPES second-largest tour opera-tor Thomas Cook is buying more thanhalf of Russian rival Intourist to enterthe growing Russian travel market.

Cook will invest up to $45m(28.5m) $10m in cash and $35m inits shares in the venture for the 50.1per cent stake.

It said the deal would enable it to

cater for strong Russian demand forbeach and family holidays, particular-ly to Turkey and Egypt.

In March, Thomas Cook andIntourist were understood to be dis-cussing a full takeover as an option.

Thomas Cook and its rival, TUITravel, majority owned by Europestop travel agency TUI of Germany, areturning to emerging markets such asRussia and China for growth as theyare close to fully realising savings

from creating their firms in 2007.Also, the UK and German tourist

markets are seen as relatively mature.Intourist was founded in 1929 and

was the monopoly provider of travelservices in the Soviet era. Russias oil-to-telecom holding company Sistemaacquired the business in 1994.

After a significant restructuring in2005, it became Russias biggest mass-market travel brand, selling breaks toRussian tourists holidaying at home.

Cook takes Russiantrip with Intourist

Thomas Cook chief executive Manny Fontenla-Novoa is buying into the Russian market

BY PHILIP WALLER

LEISURE


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FoxDaviesFoxDavies has made three new hires inits research and market-making divi-

sions. Shahin Amini will be joining the oiland gas research team, working withLionel Therond on expansion coverage.

Amini has ten years experience in theindustry, having worked for Halliburton,BPP Technical Services and Kvaerner Oil& Gas. Paul Singer has also joined as anoil services analyst, moving fromBarclays. He has also previously been anequity analyst with BP and ARCO

Chemical and has worked for CreditLyonnais, Enskilda and Morgan Stanley.

Juan Alvarez has also been hired for

the mining research team from GolderAssociates, where he has worked as amining geologist for seven years.Previously, he worked at Rio Tinto,Anglogold, Terrasearch and SurtecGeosurveys.

Prime Rate Capital ManagementPrime Rate Capital Management, aprovider of liquidity and fixed income

products, has added Annie Norton as anassistant portfolio manager. She will bereporting to Gary Skedge and joins the

firm from MF Globals fixed incometeam. She has previously worked atGulf Internationa Bank and RZBLondon.

London Pensions Fund AuthorityLPFA has appointed three new mem-bers to its board: councillor Sir MerrickCockell, Anthony Dalwood and council-lor Stephen Alambritis.

CITY MOVES | WHOS SWITCHING JOBS Edited by Juliet Samuel

Grant ThorntonGrant Thornton has appointed a new head of

retail: Barry Knight. Knight brings 20 years offinancial advising experience in retail, tourismand travel. He has worked for Littlewoods,Burton Group (now Arcadia Group), Sears,Selfridges, Jaeger and Boots. In his new roleat Grant Thornton, he will be leading the retailteam to serve clients on a range of mattersincluding audit, tax, restructuring and corpo-rate finance.

+44 (0)20 7557 7245morganmckinley.com

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

in association with

8/8/2019 Cityam 2010-11-26

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.com

Economic News 19CITYA.M. 26 NOVEMBER 2010

EMIGRATION from the UK plum-meted in 2009, according to gov-ernment figures released yesterday.

And more pressure was piled onthe Conservative pledge to cap netmigration after it increased to198,000 but only because of thedrop in people leaving.

Immigration actually fell by23,000. The number of UK citizensleaving the country decreased to140,000, a ten year lowand a 19per cent fall on the previous year,according to the Office forNational Statistics (ONS).

And the overall number of peo-ple emigrating (including foreign-ers) also fell sharply, by 59,000.

The Conservatives went into thelast election with a key promise toreduce net migration to below sixfigures. The policy has come underfire from business groups, such asthe Chartered Institute ofPersonnel and Development (CIPD)and British Chamber of Commerce(BCC).

David Frost of the BCC said lastweek: The Prime Minister has saidBritain is open for business. Ourmigration policies must reflectthat sentiment.

John Philpott, an economist atthe CIPD said that a cap on the sup-ply of labour will create unmetdemand. That means either vacan-cies are unfilled, or that employerscompete for staff, driving upwages, he argued.

Earlier in the year business secre-tary Vince Cable clashed withConservative minister DamianGreen who claimed that net migra-tion figures show why we musttighten our immigration system.

Cable disputed the claim, tellingthe Financial Times that theincrease in recorded immigrationhas nothing to do with the numberof non-EU work permits issued:they actually declined.

Yesterdays data showed non-EUimmigration almost unchangedfrom that seen in 2008.

The Conservatives have pledgedto make the law business friendlyby exempting inter-company trans-fers, allowing multinational com-panies to bring in staff from theirbranches outside the EU.

Emigration from UKfalls to ten-year lowBY JULIAN HARRIS

UK ECONOMY

JAPANS export market stalled inOctober, failing to grow on the pre-vious month, it was announcedyesterday.

Compared to October 2009Japanese exports grew 7.8 per cent,yet this was below the Bloombergmedian projection of 10.7 percent and far weaker thanSeptembers year-on-year growth of14.3 per cent.

Year-on-year improvements

peaked in February, hitting a stag-gering 45.3 per cent.

Rates of growth have been decel-erating since making October theeighth consecutive month inwhich export growth has decelerat-ed. As exports fell, imports rose,growing by 8.7 per cent on the pre-vious year, and 0.7 per cent onSeptember.

Exports fell to both of Japanskey trading partners, China andthe US. Yet the most drastic declinecame in exports to the EuropeanUnion. In September exports tothe region increased by 11.2 per

cent, yet last month they actuallyfell, recording a rate of -1.2 per cent.

The decline could continue, andhave a negative effect on JapaneseGDP, according to observers. KyoheiMorita and Yuichiro Nagai ofBarclays Capital Research look fora decline in the fourth quarter as awhole. We believe exports togeth-er with private consumption willcause real GDP to contract duringthat period, they added.

Meanwhile, data yesterdayrevealed that Japans core con-sumer prices fell 0.6 per cent inOctober from a year earlier, down

for the 20th consecutive month,pointing to persistent deflation.

Slump in Japanese exports to harmGDP growth as inflation falls againASIA

NEWS | IN BRIEF

Italian business morale boostFurther Eurozone relief came from Italyyesterday, where business confidenceedged upwards for November. The ISAEresearch body announced an index scoreof 101.6 for the month, a boost for theItalian manufacturing sector. The scorewas up from 100.1 recorded in October,

considerably above the level expected byeconomists who had predicted a decline.The results follow similar surveys inGermany and Italy, which showed confi-dence increases in both countries earlierin the week.

Philippines GDP data disappointsGrowth in the Philippines was lowerthan expected, it was announced yester-day. GDP for the three months toSeptember rose by 6.5 per cent, yeteconomists had expected growth of 7.3per cent or above. The news came in thesame week as disappointing figures alsoemerged from Thailand and Taiwan. Theeconomy in Thailand contracted by 0.2per cent in the third quarter of the year,while industrial output slumped inTaiwan.

New jobs growth in SwitzerlandSwiss employment was up in the third

quarter, increasing by one per cent com-pared to a year ago. Full-time work wasalso up, rising 0.9 per cent. The increasesmarked the highest level of employmentsince the early 1990s.The majority of retailers expect higher December sales this year than last Picture: REUTERS

102x103RETAIL sales have unexpectedly shotup in the UK, according to figuresreleased yesterday.

In a survey conducted by theConfederation of British Industry (CBI),55 per cent of retailers said sales wereup compared to this time last year.Only 13 per cent said that sales hadfallen.

And confidence is returning to thehigh street for the festive period, with59 per cent expecting higherDecember sales than last year.

Overall, the balance figure forNovember sales stands at +43 per cent,

up from +36 per cent for October.The news came as John Lewis

announced a 12 per cent rise in saleson the same time last year, and a 29per cent rise compared to the same

time in 2008. Last week 88m wasspent in the department store.

Wholesaling also rose, according tothe CBI, while the survey revealedwidespread commitment to increasedbusiness investment.

However, retailers expect to employless people than at this point last year,the survey revealed.

And even the positive figures werecalled into doubt. The report appearsto have overstated sales growth com-pared with official data, said ChrisWilliamson, chief economist atMarkit. The results must be treatedwith some caution, he added.

And the CBIs Ian McCafferty, admit-ted that sales in 2011 may not be so

strong. Retail sales growth may losesome of its sparkle, he said. VAT is ris-ing in January, and a combination ofweak wage growth and high inflationis eating into household incomes.

Retailers confidentof Christmas boom

as sales rise againBY JULIAN HARRIS

RETAIL

8/8/2019 Cityam 2010-11-26

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ELECTRONICS retailer Dixons nar-rowed its first half-losses, it said yester-day, after closing smaller stores andreplacing them with so-called bigbox units.

The company reported a 7.9m lossin the six months to 30 September,less than the 17.6m loss it made inthe same period last year.

Sales growth was more muted inthe second quarter, following a short-lived boost from the World Cup. Like-

for-like sales rose two per cent in theUK and Ireland, compared to a six percent hike in the previous threemonths.

Slower sales of flatscreen TVs which jumped during the footballtournament were mostly responsi-ble for the slower growth.

Dixons has restructured its busi-ness after several quarters of losses.The company has opened new super-stores, and has brought the brandsCurrys and PC World under one man-agement team.

Dixons said its new or refurbishedstores which boast higher profitmargins were performing morestrongly than the rest of the group.

A spokesman said: When we trans-form our stores, customers are lovingit, and suppliers are loving it.

But some analysts are sceptical thatphysical stores can compete in theelectricals marketplace, as onlinerivals undercut them on price.

The company remains a work inprogress, although there are someencouraging signs in the midst of amajor turnaround at the group, saysRichard Hunter, analyst at HargreavesLandsdown. There are pure out andout retailers who would give Dixons arun for their money.

Other analysts said Dixons couldbeat the current market trends.Ramona Tipnis of Shore Capital says

Dixons high gross profit margin willkeep the company in a strong posi-tion. Tipnis noted that the company iscutting costs by 50m this year.

The company runs 650 stores in theUK, including 25 megastores. Dixonsclosed at 26.70p on the London StockExchange, a gain of 10p.

BY THOMAS HAMEDRETAIL

BRITAINS largest quoted housinglandlord Grainger said yesterdaythat its full-year operating profitrose 19.5 per cent to 94.2m, butexpressed caution about the out-look for the UKs housing sector.

In light of the ongoing chal-lenge of the current economic cli-mate, we remain cautious aboutthe prospects for general growth in

residential values over the nexttwo years, Robin Broadhurst,Grainger chairman said.

Its net loss in the year toSeptember narrowed to 10.8mfrom 122m a year earlier

The company said its gross netasset value per share rose 3.1 percent in the 12 months to the end ofSeptember to 200p, up from 194p,and it proposed a final dividend of1.2p per share for a full-year totaldividend of 1.7p.

Grainger, which also owns prop-erty in Germany, had said lastmonth it expected group propertysales in the year to the end ofSeptember to fall 23 per cent dueto a challenging UK housing mar-ket, although trading profits willimprove on higher margins.

Economists have warned thatthe housing sector faces further

falls in prices as rising unemploy-ment takes its toll.

Britains largestquoted housinglandlord cautious

BY HARRY BANKSPROPERTY

Youngs revenue sees modest increaseLONDON pub chain Youngs reportedprofit before tax rose four per cent forthe first half of the year to 11.9mdespite a period of mixed trading withthe first three months benefitingfrom better weather than the second.However, while it remained positiveabout its outlook for the full-year itsaid the governments austerity pro-gramme gave it reason for some cau-tion.

The brewery said the increase inprofit reflected strong performancefrom its hotel chain and increased

profits at brewers Wells & Youngs, inwhich it has a 40 per cent stake, whichcontributed 2.1m to overall profit.The results prompted a modestincrease in the share dividend of twoper cent to 6.36p per share.

Revenue growth was however mod-est at just 0.7 per cent to 67.7m whilenet debt remained almost unchangedat 62.6m despite Youngs investmentof 8.2m in the business.

The brewery said despite the diffi-cult economic environment it hadstuck to its strategy and not adoptedheavy discounting measures to driveliquor sales. Youngs also said its pen-sions deficit had fallen to 13.5m as a

result of additional payments madeinto the fund during the period.

Stephen Goodyear, chief executiveof Youngs, said the results reflectedthe resilient performance of its pubswhile its hotels, which had recentlybeen the subject of managementattention, had shown particularly pos-itive growth.

The second half has started posi-tively with managed house revenueup 3.4 per cent in total and up 1.8 percent on a like-for-like basis, he added.

Separately, Capital Pub Companysaid revenue rose 18 per cent to13.1m in the first half, while pre-taxprofit rose 45 per cent to 2m.

BY MATTHEW WEST

HOSPITALITY

News 21CITYA.M. 26 NOVEMBER 2010

BEST OF THE BROKERS

ANALYSIS lCompass Group

530

510

550

570

6 Sep 24 sep 14 Oct 3 Nov 23 Nov

p

548.0025 Nov

COMPASSJPMorgan rates the caterer overweightwith a target price of 630p. The brokerexpects volume recovery to boost earningsnext year, with around four per cent organ-ic revenue growth. It adds that the nextshare price catalyst is the firms AGM inFebruary, telling investors to look for recov-ery in business and industry sales.

ANALYSIS lMan Group

220

260

300


p 279.4025 Nov

MAN GROUPRBS rates the hedge fund manager sellwith a target price of 235p. The brokerthinks more traditional asset managerssuch as Jupiter have better fund flow per-formance, and that Man could strugglewith a maturity spike in 2012. It adds thatthe firms AHL fund could also suffer in thewake of a bumper year in 2008.

ANALYSIS lGem Diamonds

190

210

230


p

208.2525 Nov

GEM DIAMONDSEvolution Securities keeps its add recom-mendation on the miner with a target priceof 227p. The broker notes the firms recentsale of two large diamonds for $23m,which it says will lift revenue for the year.However, it adds that operating costs atGems Letseng mine are a challenge as pro-duction increases this year.

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

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10 paulmh 38,897.25 289

Dixons pareslosses afterrestructuring

8/8/2019 Cityam 2010-11-26

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QATAR Airways has threatened tohand extra business to European air-craft giant Airbus after attackingBoeing over problems with its new787 Dreamliner.

Chief executive Akbar Al Baker saidthe airline was considering increas-ing its order for five Airbus A380super-jumbo planes and might ordera re-engined version of the A320 sin-gle-aisle jetliner. He did not say howmany more A380s it might order.

Qatar has expanded its fleet fromfour to 94 aircraft in 13 years and hasorders for 200 more from Airbus andits US rival Boeing worth $40bn,including 30 Dreamliners.

Al Baker said Boeing had failed indeveloping its 787 Dreamliner, whichis expected to suffer further delaysfollowing a fire on a test flight.

Boeings development of the car-bon-composite 787 is running aroundthree years late and brokers expect afurther delay as it addresses the causeof a fire which led to the test flightbeing grounded two weeks ago.

Al Baker said Qatar had been noti-fied of some delays to 787 deliveriesbut declined to say whether this was

before or after the test flight incident.I was really taken aback by the

[787] programme. I never expected aprogramme could be delayed somuch with a company like Boeing,which has pride in its quality. Theyhave very clearly failed, he said.

Boeing declined to comment on AlBakers comments, but said it haddetermined the cause of the fire andwas making changes to the jet. Itexpects to say more about 787 deliver-ies in the next few weeks. The first787 had been due for delivery in 2008to launch customer All NipponAirways. Qatar has not chosenengines for the 500-seat plane andthe blowout of a Rolls-Royce Trent900 engine on a Qantas A380 wouldnot affect it, he said.

BRITISH water and waste companyPennon launched a fresh assault onthe governments renewable energypolicy yesterday, calling it weddedto wind and neglectful of projects togenerate power from waste.

The company, which combinesSouth West Water and waste manage-ment company Viridor, unveiled a tar-

get to increase the capacity of itswaste-to-energy plants to 300

megawatts (MW) by 2015, from cur-rent levels of around 130MW.

That level of capacity would beroughly equivalent to Europesbiggest windfarm, the 322MWWhitelee site in Scotland.

Yet Colin Drummond, chief execu-tive of Viridor, said it was being heldup by the UKs onerous planningprocess for waste-fuel plants.

The government seems complete-ly wedded to wind. Obviously they

have got a localism agenda, but itseems to me quite wrong that in eco-

nomically difficult circumstances Ihave got approaching 1bn of energyfacilities that are held up in planningand that would be readily finance-able immediately, he said.

Pennon issued the attack alongsideits half-year results. Adjusted pre-taxprofit rose 0.7 per cent to 96.2m forthe six months to 30 September, beat-ing a forecast of 91m.

In a note to clients, Credit Suissesaid cost savings at the group were

impressive but unlikely to continueat a similar rate.

Pennon claims governments energypolicy is biased towards wind power

A DEAL for the sale of German utilityE.ONs stake in dominant Russian gascompany Gazprom to Russian statebank VEB may be announced as earlyas today, a source in Russias energyministry said yesterday.

The idea is completely realistic. Ithink that this is what will happen, Ithink it will be announced in thenearest future possibly tomorrow,

the source said.Russian Prime Minister Vladimir

Putin, also chairman of VEB, is likelyto discuss the sale of the 3.6 per centstake valued at $4.5bn (2.85bn) atcurrent market prices -- with Germanchancellor Angela Merkel in Berlintoday.

The discussions are going in sucha way that we will take this stake, thesource said.

A Russian newspaper said VEBwould likely pay a premium for theGazprom stake over the current mar-

ket price, to support the companysmarket value.

Russian state bank eyesE.ONs stake in GazpromENERGY

CHILEAN copper miner Antofagastareported a surge in nine-month profiton the back of higher output and met-als prices, but this fell short of someinvestors expectations.

The London-listed group also said ithad launched operations at its newEsperanza mine, part of an expansionthat is due to lift output by a thirdnext year.

Nine-month earnings before inter-est, tax, depreciation and amortisation

(ebitda) jumped 74 per cent to $1.96bn(1.24bn), but this was less than

expected.It was a small miss, maybe three tofive per cent, said one analyst whodeclined to be named, referring toAntofagastas ebitda. He noted thatlosses from commodity derivativeshad shaved $52.6m from profits.

Output from Esperanza, togetherwith expansion at the companys flag-ship Los Pelambres mine, is due toboost annual copper output next yearby about a third to 700,000 tonnes.

Higher output and metalprices boost AntofagastaMINING

TATE & Lyle yesterday sold off the lastof its historic British sugar business-

es offloading its molasses distribu-tion arm for 67m.Northern Irish commodities group

W&R Barnett has bought the unit incash, and Tate & Lyle says it will usethe proceeds to pay down its net debt.

The molasses business had annualsales of 228m in the year to 31March, generating profits of 13m.

The sale follows on from its deci-sion in July to offload its main sugarand golden syrup division to

American Sugar Ref ining for 211m,and is part of Tate & Lyles chief exec-utive Javed Ahmeds plan to focus thecompany on speciality food ingredi-ents.

Tate & Lyle said the sale of the finalpiece of its global sugar operation aVietnamese business was progress-ing well.

I would like to thank our molassesemployees for their hard work andcommitment over many years andwish them every success in thefuture, said Ahmed.

Our clear priority is to grow thespeciality food ingredients business,supported by cash generated from

bulk ingredients. This disposal repre-sents another important step as wefocus, fix and grow our business, headded.

Tate & Lyle unit sold for 67mBYKATIE HOPE

FOOD

Qatar attacks

Boeing overDreamlinerBY PHILIPWALLER

AEROSPACE

BYHARRY BANKS

UTILITIES


Qatar chief executive Akbar Al Baker (inset) is considering upping its Airbus order Picture: REX

Hopes risefor aviation

recoveryHOPES of a firm recovery in globalair travel have risen after passengerdemand increased by a tenth lastmonth, industry figures showed.

Demand increased by 10.1 percent in October while freight rose14.4 per cent, according to trafficdata from the International AirTransport Association (IATA).

Industry growth was returning tomore normal patterns and passen-ger demand was five per cent abovethe pre-crisis levels of 2008, the fig-ures showed.

But airlines stayed cautious,expanding seats by four per cent inthe first ten months of the yearagainst an 8.5 per cent increase indemand.

IATA director-general GiovanniBisignani said a single month didnot make a trend and it was unclearwhether the freight rise indicatedvolume recovery or stabilisation.

The picture going forward is any-thing but clear, but for the timebeing, the recovery seems to bestrengthening, he said.

IATA said the passenger demandgrowth in October was slightlybelow the 10.7 per cent inSeptember, but both months repre-sented an improvement on August.

European carriers increaseddemand by 9.6 per cent over October2009 and North American airlin

cityam 2010-11-26

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