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FTSE 100 t5,976.70 -79.73 DOW t 11,825.29 -12.64 NASDAQ t2,725.36 -40.49 /$ 1.60 unc / 1.19 unc /$ t 1.35 +0.01 Certified Distribution29/11/10 till 02/01/11 is 98,444

TROUBLED music retailer HMV hascalled in KPMG for debt managementadvice to try to stop it breachingupcoming bank covenants.

HMV, which experienced a torridday yesterday after admitting thatcredit insurers had reduced their cov-erage of its sales amid fears of its cred-itworthiness, has hired the

accountant to provide specialist debtadvisory services, sources told City A.M.

The work is expected to involverenegotiating its bank borrowing

commitments ahead of covenantsthat are due in April.

It announced that it had a prob-lem with its bank covenants and ithad to get someone in there, andthat someone was KPMG, onesource said. It is true that it hascalled them in on this occasion andfor this reason. The retailer hascome under increasing pressuresince admitting in its trading updatetwo weeks ago that it will close 60

UK stores this year to avoid breach-ing its banking covenants. Like-for-like sales plunged 13.6 per cent inthe five weeks to 5 January, a criticalperiod for the years profits.

But HMV, led by boss Simon Fox,is still a profitable business that isexpected to make a 46m full-yearprofit, and its suppliers remainedfully behind the company, thesource told City A.M.

HMV made 74.2m profit before

tax in 2009, up 17.7 per cent from2008s level of 63m. But its debt hasrocketed after a series of acquisitions from just 6.5m in the year to June2009 to 67.6m by June 2010 and151.6m by October 2010. InDecember it said it will sell its f lag-ship Oxford Street store for 13.75m,to pay off debt it is believed.

HMV is expected to make anotherannouncement today as it battles torestore its credibility. SHARE FALL: P15

BY ALISON LOCK

RETAIL

PAY per employee at Wall Streets topinvestment bank fell by 14 per cent in2010 compared to the previous year,figures showed yesterday. The declinein pay at Goldman Sachs comes amida fresh row about bonuses, despitecompensation tracking the banksperformance.

The bank announced a 13 per centdecline in revenues to match the fallin its pay costs. However, the ratio ofpay to revenues grew to 39.3 per centthis year, up from an all-time low of35 per cent in 2009.

Although the bank spent just fourper cent less in total on staff pay, ithired an extra 3,200 people to bringits headcount to 35,700. A third of theadditional hires were in growth mar-kets as opposed to mature marketslike the US and UK, with the focusparticularly on wealth management.

The extra hires mean that averagepay per head fell to $430,000 or269,000 last year. It is not clear whatproportion of the pay-outs is made upof base salaries, benefits and stockoptions versus bonuses, but fixed payis understood to have risen inresponse to a raft of regulations tar-geting bonuses.

The decline in pay was on the back

of plunging earnings overall at the

bank, with pre-tax profits dropping35 per cent year-on-year. Althoughfirst-half earnings held up, the last sixmonths have seen clients scale downtheir trading due to mounting uncer-tainty about sovereign debt.

The fourth quarter of 2010 saw rev-enues from executing fixed income,currency and commodities trades forinstitutions drop 37 per cent to$13.71bn. The bank put the fall downto lower client activity levels, whichreflected broad market concernsincluding European sovereign debtrisk.

The market turmoil also hit corpo-rate finance activity as companies putoff floats and M&A, so that invest-ment banking revenues dropped 10per cent.

The drop in traditional investmentbanking activities has been a themefor Goldmans rivals as well, with JPMorgan reporting a 21 per cent dropand Citigroup seeing a 19 per centfall in investment banking netincome.

Goldmans shift towards hiring forits asset management business in lessdeveloped markets will add to a grow-ing debate as to whether the tradi-tional investment banking model isundergoing fundamental changes inthe wake of the financial crisis andexpanding regulatory costs.

FOCUS ON US BANKS: P5

GOLDMAN LOSES SHINEAS PROFITS NOSEDIVE

HMV chief executiveSimon Fox has called inKPMG to advise on howto manage its debts thathave risen sharply

www.cityam.comIssue 1,304 Thursday 20 January 2011 FREE

HMV in crisis talks as debt threatens bank limits

NEWS CORPMULLS SALESKY NEWS COULD

BE USED TO EASE

BSKYB DEAL P3

BY JULIET SAMUEL

BANKING

BUSINESS WITH PERSONALITY

Goldman boss Lloyd Blankfein saw profits dip last year

BOOK NOW FOR BESTVALENTINES TREATSRESTAURANTS AND HOTELS P24

Goldman Sachs

Revenues

Earningsper share

EPS changeon 2009

FOURTH-QUARTER US BANK EARNINGS

$8.6bn

-53%

$3.79

JP Morgan Chase

Revenues

Earningsper share (EPS)

EPS changeon 2009

$6.2bn

+51%

$1.12

Citigroup

Revenues

Earningsper share (EPS)

EPS changeon 2009

$18.4bn

+112%

$0.04

BNY Mellon

Revenues

Earningsper share

EPS change

on 2009

$3.8bn

-7%

$0.55

Wells Fargo

Revenues

Earningsper share

EPS change

on 2009

$21.5bn

+663%

$0.61

Northern Trust

Revenues

Earningsper share

EPS change

on 2009

$906m

-22%

$0.64

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News2 CITYA.M. 20 JANUARY 2011

UK could face1bn EU finesA SERIES of catastrophic failures hasleft Britain facing up to 1bn in finesrelated to its handling of the EuropeanUnion agricultural scheme, in whichEU funds are given to member statesto support their farming industries.

The National Audit Office (NAO), which signs off on financial state-ments compiled by the finance min-istry, said yesterday the scale of thefines meant it could not sign off onthe finance ministrys statement onthe use of EU funds.

The Treasurys statement on the useof EU funds in the 2008-2009 financial year highlights 398m of confirmedcorrections a fine the EU imposes by withholding money givingreduced funds to Britain in future --and a provision for further possible

corrections of 601m.The fines represent huge past costs

and potential future costs to the tax-payer of implementing EU schemes inthe UK, Amyas Morse, the auditorgeneral, said in an unusually bluntassessment. Official statements fromthe Treasury and other Whitehalldepartments from that period cannotyet be seen as a true and fair report ofthe use of EU funds in the UK, he said.

The blame for the waste of money islargely being laid at the door of theDepartment for Environment, Food andRural Affairs which oversees EU subsidies.

BYKATIE HOPE

EUROPEAN REGULATION

UK economy has hit turbulence again

AFTER a run of good news, the UKeconomy has hit choppy waters oncemore, though hopefully conditions will soon improve again. Growth bounced back between February andOctober 2010. Since then, manufactur-ing has remained buoyant; but servic-es have slowed, especially in December(the snow was bad). Construction isslowing. The services sector purchas-ing managers index for December wasthe single worst piece of data for theUK economy I have seen in ages fortu-nately, January will be better, but thisblip in the recovery is unfortunate.

Yesterdays jobs data was downbeat,albeit not irreparably so from a longer-term perspective. Claimant countunemployment reached 1.616m in January 2010. It then fell until July,

rose slightly, and has fallen back since(to 1.456m) in December. The numberof people on the dole thus droppednine per cent last year, a decent result.

Less good were the survey-basedmeasures. Employment bottomed outat 28.843m in the three months toFebruary 2010. By August, it had bounced back to 29.158m, beforefalling back down to 29.089m in threemonths to November. Nevertheless, weremain up 246,000 since February.This is not as good as it sounds: full-time jobs are down 4,000; part-time up250,000. This is usual at this stage inthe cycle but underemployment is rife.

Public sector jobs peaked inDecember 2009 at 6.097m and are nowdown to 6.014m, a drop of 83,000.Private sector jobs troughed at22.764m at the end of 2009. By the endof June, private employment had

reached 23.111m, staying put inSeptember. For all the disastrous head-lines yesterday, private jobs were stillup by 347,000 over nine months. Extrajobs may have been lost in the run up

to Christmas, but the private sectorcan clearly easily mop up losses in thestate sector. Whether it can grow asfast as the overall number of new peo-ple entering he jobs market is less cer-tain. Unemployment grew untilFebruary 2010, hitting 2.486m. It thenfell to 2.448m by August. It is now backup to 2.498m, slightly higher than atthe start of the year. More than theentire increase can be accounted for bya rise in joblessness among 18-24 yearolds, suggesting schools and universi-ties are failing to teach the right skills.

This impression is reinforced byanother fact: the number of UK-bornpeople in employment was 25.41m, up100,000 on a year earlier; yet the number of non-UK born in employment was 3.886m, up 204,000. A recordnumber of overseas-born people havejobs this group has more than recov-

ered from the recession, led by growthin workers born in Eastern Europe (arecord 593,000 now work here), Africaand India. This performance is to thegreat credit of the overseas-born (of

which I too am one) but there is evi-dently something wrong with theBritish educational system and themotivations, ability and incentives ofparts of the workforce.

Despite the present choppiness, theUK economy will again create more jobs than are lost this year. Austeritypolicies are essential to stave off bank-ruptcy. But the governments inabilityto articulate a pro-jobs, anti-red tapepolicy to make it easier and less riskyfor firms to hire people is a major fail-ure. Its educational reforms are beingslowed by opposition from councils, bureaucrats and unions. Its welfarereforms would boost employment but will take ten years. For the sake ofBritains jobless, David Cameron mustrediscover a sense of urgency.

[email protected] me on twitter: @allisterheath

News Corp could be prepared to dis-pose of Sky News or other assets tosmooth its path to taking full controlof BSkyB, it emerged last night.

Rupert Murdochs media group hasapproached the Department ofCulture, Media and Sport (DCMS), the body responsible for approving thetakeover of BSkyB, with a range ofoptions that include selling Sky News,according to the Financial Times.

Watchdog Ofcom has already toldDCMS it should refer the takeover7.5bn bid to the CompetitionCommission. The larger group, whichincludes chairman and chief execu-tive of News Corp in Europe and Asia James Murdoch, had bid to buy theshares in BSkyB that News Corp doesnot already own, in a deal that valuedthe broadcaster at roughly 12bn.

A spokesperson for DCMS said thedepartment would not provide arunning commentary, while NewsCorps US office did not return calls.

BYMARION DAKERS

MEDIA

Sky News could be soldJames Murdoch is part of the News Corp team that want to buy BSkyB

NEWS | IN BRIEF

Floods dampen BHP coal outputBHP Billiton, the worlds biggest miningcompany, said its coal production tum-bled 30 per cent this quarter comparedto the previous three months, after cata-strophic flooding in Australia badly hitoutput. The London-listed group said itscoal output faces long-term disruption,

echoing a similar warning from Rio Tintoearlier in the week. BHPs iron ore out-put rose four per cent year-on-year onthe back of rising demand for industrialraw materials. Iron ore is expected toaccount for more than $5bn (3.1bn) infirst-half earnings for BHP.

Aviva loses its European chiefInsurer Aviva is replacing its head ofEurope for the second time in 18months, after Andrea Moneta left thefirm. Britains second-biggest insurer bymarket value said Moneta, the formerchief financial officer at Italys UniCreditGroup and ECB employee, would leavethe company at the end of February. IgalMayer has been appointed chief execu-tive for Europe with immediate effectand will be succeeded by RichardHoskins, the current chief financial offi-cer of North America.

EDITORS LETTER

ALLISTER HEATH

7th Floor, Centurion House,24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowNight Editor Katie HopeBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Alex Ridley

CommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

Editorial StatementThis newspaper adheres to the system of

self-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

Printed by Newsfax International,Beam Reach 5 Business Park,Marsh Way, Rainham, Essex, RM13 8RS

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

National Audit Officechief Amyas Morsesaid there were severalsignificant issues inthe UKs accounts

MOD FACES FRESH CRISIS OVER ITSFUNDINGSenior figures in the Ministry ofDefence are warning of a possiblereopening of last Octobers StrategicDefence and Security Review becausethe MoD lacks the funds needed toprovide the military capabilitydemanded by the government for2020. The department has discoveredthat it needs to find at least 1bn ayear of additional cuts if they are tomeet the Treasurys targets.

PENSION CORP'S MOVE SET TO FREECAPITALPension Corporation has offloaded500m worth of risks attached to pen-sioners living longer than expected asit looks to free capital so it can com-pete for new business. The company,one of a handful of businesses set up

to take on UK defined benefitschemes from company pension

funds, has been trying to raise up to600m in fresh capital since 2009.

TWO FOUND GUILTY IN TOREX FRAUDCASE Two former Torex Retail executiveshave been convicted of defraudingthe shareholders of the former AIM-quoted group. Edwin Dayan andChristopher Ford were directors arthe retail companys subsidiary XNCheckout and caused more than1.65m in ficticious profits to berecognised in the firms accounts.

CITY ANALYST CALLS FOR TESCO TOSTART PRICE WARA leading City analyst has called forthe incoming chief executive of Tescoto embark on a massive UK price war,to cripple the competition and stop Tescos rivals opening a swathe ofnew stores. Dave McCarthy, analyst atEvolution Securities, said Tescoshould reposition on UK pricing

under Philip Clarke, who becomesgroup chief executive in February.

FRIENDS IN NEED: MUSIC CHIEFS LINEUP TO HAIL UNIQUE HMV The music industry has come outfighting for HMV after supply fearssent the companys shares to a newlow. Seven leading executives, includ-ing the heads of the four largestrecord labels, have written to The Times pledging to support HMVthrough its recent difficulties andpraising its contribution to the musicindustry.

WIND POWER BRINGS NEW JOBS TOHUMBERSIDEHulls prospects of becoming the cen-tre of Britains wind energy industrywill move a step closer today with anannouncement from Siemens that itplans to build an 80m wind turbinefactory in the city. Up to 700 jobs will be created as part of the German

manufacturers choice for its newplant to make offshore turbines.

US TRADER HETCO DRIVES UP OILPRICEAn American trading group reported-ly building up a huge physical posi-tion in North Sea oil has drivenLondon Brent prices above $98 a bar-rel. Hetco, which is part-owned by USoil and gas group Hess Corp, was saidto have taken control of eight NorthSea Forties oil shipments and twoBrent cargoes and it is believed to bein the market for more.

SENIOR GOLDMAN SACHS WORKERLEAVES AFTER INTERNAL BREACHOne of Goldman Sachs most seniorLondon-based staff has left the bankjust days before the firm is due to payout billions of pounds in staff bonus-es. Kevin Connors, co-head of globalforeign exchange sales for G10 curren-cies, left the bank last week for

allegedly breaking unspecified inter-nal rules.

NOKIA CANCELS US LAUNCH OF X7PHONEIn another setback for Nokia Corp,the Finnish mobile-phone giant hascanceled the US release of a smart-phone that was slated to launchexclusively this year with AT&T, peo-ple familiar with the situation said.Nokia had intended to debut thetouchscreen phone, dubbed the X7, inconjunction with AT&T ahead of theMobile World Congress trade confer-ence next month.

ALFA SEEKS TO CALM VIMPELCOMSPAT The chief executive of Russian con-glomerate Alfa attempted yesterdayto calm tensions that have flaredbetween it and Telenor, a rival share-holder in VimpelCom, over a reviseddeal to merge the Russian mobile

operator with the telecom assets ofan Egyptian billionaire.

WHAT THE OTHER PAPERS SAY THIS MORNING

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ONLINE retailer eBay beat Wall Streetestimates during Christmas trading,posting a five per cent rise in quarter-ly revenue to $2.495bn (1.56bn).

Net revenue dropped 59 per centyear on year to $559.2m, the firm said yesterday, following massive gainsfrom selling internet phone serviceSkype in the same quarter last year.Underlying earnings rose 24 per cent.

On an adjusted basis, eBay earned52 cents per share, surpassing the 47cents expected by analysts.

Its shares rose five per cent in after-hours trading.

eBay had 94.5m active users in thefourth quarter of 2010, up five percent on last year, with particularlystrong growth in the UK, US andGermany that was partially offset bysluggish trading in China and Korea.

PayPal also performed well, with a28 per cent jump in the number ofpayments to 421.1m in the threemonths to the end of December.

Users of the eBay website made$15bn-worth of transactions, exclud-ing vehicles, in the quarter with morethan $9bn coming from outside theUnited States.

Vehicle sales worth nearly $2bntook place on eBay during the quar-ter.

We are driving strong globalgrowth at PayPal and strengtheningour core eBay business, said chiefexecutive John Donahoe.

And we are innovating quickly inareas such as mobile, which is help-ing to position us at the forefront oftrends shaping the future of shop-ping and payments.

The company is hoping to prove toshareholders that improvements toits site and user experience, includinglower upfront fees and daily deals, isencouraging traffic and deliveringmore consistent sales.

eBay said it predicts stable globalinterest rates and market growth,and expects revenue growth of between 12 and 16 per cent in thecoming year.

UK sales help

eBay resultstop forecasts

EU suspends carbon market

*Exclusions

apply,see

instore

for

details.

The European Union froze spot tradein its carbon market for a week yester-

day the longest period in its histo-ry after a security breach, seeking toprotect the battered reputation of theEUs main weapon against climatechange.

The US, Japan and Australia haveall delayed implementing similar capand trade schemes, and the latestglitch to the EU system -- by far thelargest and most successful such

scheme in the world -- could detractfurther from adopting carbon tradeas a global policy.

The trading scheme limits the car-bon emissions of all big EU factories

and power plants by issuing permitsfor each tonne of carbon emitted, which companies can then tradeamong themselves.

The European Commission sus-pended much of its EmissionsTrading Scheme, the hub of a 92bn(77.4bn) global market, following thesuspected theft of about 7m of emis-sions permits from the Czech

Republics carbon registry. It allowedtrade in derivative markets to continue.

This theft and a hacking attack onthe Austrian registry on 10 Januaryfollows a raft of scandals to hit the

market in the past two years, includ-ing VAT fraud, a phishing scam (orcomputer fraud) and the re-sale ofused carbon credits.

All traders have left the market -this is serious, said one trader.

Europes top climate official, JosDelbeke, said he was speechlessabout the negligence some memberstates have been showing.

BYMARION DAKERS

CONSUMER

BYHARRY BANKS

TRADING

HOUSEBUILDER Taylor Wimpey hasreceived at least three bids for itsNorth American assets, which couldbe worth about 600m, according toreports last night.

Hedge fund billionaire JohnPaulsons Rain Tree Investment, BarrySternlichts Starwood Capital Groupand a private US homebuilder havesubmitted bids for Taylor Morrison,

the firms arm in North America.Both Rain Tree and Starwood

reportedly bid the branchs book value, which analysts put at about600m. Taylor Wimpey hiredJPMorgan Chase last year to sell its USand Canadian assets, and said in itstrading update on Tuesday that it wasin the early stages of evaluating sever-al interested bidders.

Taylor Wimpey was unavailable forcomment last night.

Paulson eyes up TaylorWimpeys US businessPROPERTY

News 3CITYA.M. 20 JANUARY 2011

Former trader Danielle Chiesi admitted to passing on insider information in New York

New Castletrader Chiesi

pleads guiltyA FORMER hedge fund trader pleadedguilty to passing inside information toGalleon Group founder and co-defen-dant Raj Rajaratnam in a New Yorkcourt yesterday.

Danielle Chiesi had been due tostand trial alongside Rajaratnam, whodenies any wrongdoing.

The former trader at New CastleFunds, which was once part of BearSterns, was accused of making around$4m (2.5m) in illegal profits fromtrades on confidential company infor-mation during 2008.

She learnt secret data about technol-ogy firms Intel, IBM and AMD, prosecu-tors said.

Chiesi allegedly used tip-offs fromformer IBM executive Robert Moffat,which she then passed to Rajaratnam.

Moffat pleaded guilty and was sen-tenced to six months in prison and a$50,000 (32,410) fine last September.

Of the 24 people criminally chargedin the Galleon insider trading case, 16have now pleaded guilty.

The federal court in New York is dueto sentence Chiesi on 13 May. She is setto receive between 37 and 46 monthsin prison as part of a plea bargain, buther lawyer said she is not expected totestify against Rajaratnam.

ENFORCEMENT

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The Capitalist6 CITYA.M. 20 JANUARY 2011

EDITED BY

DAVID HELLIERGOT A STORY? [email protected]

MYSTERYOVER 140M

FLAT IN ONEHYDE PARK

THERE was at least one hot topic of conver-sation at yesterday lunch-times launch ofOne Hyde Park, the worlds mostexpensive apartments, and that was theidentity of the buyers of the threePenthouse flats, the most expensive of

which sold for 140m. Around 350 guests, including Simon

Cowell, Arcadia boss Philip Green andFormula One supremo Bernie Ecclestone,

were invited to the launch party at theKnightsbridge development, where they

were shown a selection of the 86 units inthe complex.

The prices, averaging about 6,000 asquare foot, are the highest ever paid for

residential space, according to propertyexperts. The development, which is theCandy brothers most ambitious project

yet, is a joint venture between theirGuernsey-based vehicle, CPC Group, and

Waterknights, a company owned by theQatari Prime Minister, Sheikh Hamad bin

Jassim bin Jabr Al Thani.Some say that the backers of the project

liked the investment so much that theyveput some of their money into the potthough this seems to be wide of the mark,at least as far as the top 140m penthouse

BAGEL MANIAAnyone travelling through St Pancras thisafternoon will be greeted by defeated USPresidential candidate Robert Burck per-forming country and western songs wear-ing only a pair of Y-fronts. The NakedCowboy, a New York street entertainer,

will be performing an official bagel jin-gle Ode to the Bagel to promote a newrange at the New York Bakery. Look out!

ACKERMANN PAYS OUTJosef Ackermann was in London yesterdayto celebrate Deutsche Banks victory as theBank of the Year at IFRs 16th awards din-ner at the Grosvenor House hotel.

Ackermanns bank also won the nowcustomary auction to head up the inter-

active tombstone with a 500,000donation to Save the Children. The auction, compered by DJJohnnie Vaughan and MelanieSykes, raised a total of 1.4m.Bank of America Merrill Lynchchipped in with 125,000.

is concerned. The buyer of that is definite-ly not anybody associated with the proj-ect, says David Forbes at Savills, one of theagents on the project. Theres been a lotof speculation but were not allowed to

comment on any of the sales, he added. The Candys own spokesman said the

buyer of the most expensive penthousecame through an enquiry from the official

web-site. Theres no confirmation of whohe or she is and nor does the purchaseappear yet on the Land Registry.

A CAUTIONARY TALESean Dilley (pictured top right), the blind par-liamentary lobby hack whose guide-dog Chip

became a staple of rolling election coverage,

found himself in a sticky situation earlier thisweek.

He was engaged in a conversation aboutdisgraced Labour MP Eric Illsley, who recentlypleaded guilty to three charges of false

accounting over his expense claims.Under archaic parliamentary law an MP

cannot resign unless they are appointed to aroyal office of profit a decorative title helduntil another MP resigns. I cannot believethat Eric Illsley, a convicted thief, is to begiven a royal office of profit, said Dilley.And not only a royal office of profit,

but the bailiff of the chilternhundreds! Hed nick everything! Ofcourse, standing right behind Dilley

was none other that Illsley himself,who sheepishly made himself scarce.

Who lives in a house like this? The residents of One Hyde Parks penthouses remains a mystery

The prices,which averagearound

6,000 persquare footare thehighest paidfor residentialspace

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CARBON emissions will continue torise over the next 20 years, with meas-ures to reduce climate change out-stripped by increased energy demandfrom emerging economies, accordingto analysis by BP.

The oil major predicted yesterdaythat global demand for fuel is likelyto grow by nearly 40 per cent by 2030,with 93 per cent of the growth com-ing from non-OECD countries.

Non-OECD energy consumptionwill be 68 per cent higher by 2030,averaging 2.6 per cent per yeargrowth.

It expects non-fossil fuels, such asnuclear, hydro-electricity and renew-able sources to make up 18 per cent ofenergy growth in the next 20 years,but predicts fossil fuels will still makeup 64 per cent of the global increase.

Chief executive Bob Dudley said ofBPs forecasts: Our base case assumesthat countries continue to makesome progress on addressing climatechange, based on the current andexpected level of political commit-ment. But overall, for me personally,it is a wake-up call.

BP, which last week announced anexploration project in Arctic Russia,has made public its annual EnergyOutlook for the first time this year.

It predicts modest growth for fuelsoutside the control of the OPEC oilcartel, mostly led by a large increasein biofuels and experimental oilsources such as the Canadian sanddeposits.

Coal, oil and gas will each make uparound 27 per cent of the market by2030, BP said, taking over from oilscurrent solo dominance.

OECD oil demand peaked in 2005and in 2030 is projected to be roughlyback at its level in 1990. Biofuels willaccount for nine per cent of globaltransport fuels.

We are not as optimistic as othersabout progress in reducing carbonemissions. But that doesnt mean weoppose such progress, said Dudley.

BP said world primary energydemand growth will average 1.7 percent per year from 2010 to 2030,decelerating slightly beyond 2020.

ExxonMobil is due to release itslong-term energy outlook in the com-ing weeks, and is expected to paint asimilarly gloomy picture about cut-ting global emissions.

BP forecasts

emissions riseBYMARION DAKERS

ENERGY


Its time for the City to stop ignoring Brussels

DID we not learn anything fromthe great British fridge fiasco? You remember those surrealmonths, when TV bulletins lead

every night with the giant fridgemountains swamping the country-

side, growing by the hour. And it wasall because Britain sent a junior offi-cial into the Brussels lions den, andhis London bosses not only didnt lis-ten to him, they didnt know who he

was. That poor junior official if Iremember rightly his name wasKevin knew it would be a recipe forchaos to ban the disposal of fridgescontaining CFCs while Britain had nota single facility to remove the chemi-cals. But to the mandarins and minis-ters in London, Brussels was overthere and so could safely be ignored.

So it was Britain at its most normaluseless when the AIFIM directive onhedge funds was written by Frenchofficials at the request of a Danish

socialist while Britain, which has an 80per cent market share, was not awareof what was happening. As aEuropean Commissioner said whenthe Mayor and I met him, the previous

government had to be dead with theworms eating [its] flesh not to notice.He was palpably relieved to meet a sen-ior British politician to engage with.

Now that Brussels is controlling theregulation of our most importantindustry, ignorance is not bliss, butunaffordable. Although Britain is the banking, securities, insurance andoccupational pensions capital ofEurope, no British person was appoint-ed chair to the new European Banking Authority, the European Securities

and Market Authority, or theEuropean Insurance and OccupationalPensions Authority. The chairmen,appointed last week, are Portuguese,Italian and Dutch, and there is not a

single British representative on theboard of the EBA. City practitioners areshocked.

The solution isnt difficult. We havethe most people with financial servic-es experience in the EU, and we should be flooding the three new Europeansuper regulators with staff (includingthose from the FSA). According to fig-ures from theCityUK, we have 12 percent of the EU population, but just f iveper cent of all European Commissionofficials we need a programme to

double that. The government mustscan senior appointments coming upover the next few years, and have astrategy for getting British people inplace. We should put top people up for

the top jobs, not just any middleranker whose arm we can twist.Having experience of Brussels shouldbe a prerequisite to promotion, ratherthan Brussels being a career cul de sac. And industry should play its part,offering staff for secondment toensure we get the regulation it needs.If we carry on ignoring Brussels, it isntBrussels that will suffer. It is us. Just ashappened with the fridges.

Anthony Browne is an adviser to theMayor of London

VIEW FROM CITY HALL

ANTHONY BROWNE

ANALYSIS lWorld commercial energy use

18

15

12

9

6

3

0

19501870 2030

Energyoutlook2030

Nuclear

Hydro

Gas

Oil

Coal

Renewables*

*Includes biofuels

ANALYSIS lGlobal CO2 emissions from energy use

40

30

20

10

0

20101990 2030

OECD

Non-OECD

Energy outlook 2030

BilliontonnesCO2

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THOUGH Jean-Claude Trichet doesnot step down as ECB president untilOctober, the race has long been on toreplace him, with Germanys Axel

Weber at the top of the pile. Weber, a former economics

professor and president of

Germanys Bundesbank

since 2004, has emerged as the fron-trunner ahead of Bank of Italy gover-nor Mario Draghi.

As potential rivals yesterdayplumped for ECB executive posts,

Webers stock rose higher, with hisappointment seen as a boost toGerman confidence in the Eurozone.

Trichets successor is expected to beannounced at around June, though

no date has yet been set.

BYELIZABETH FOURNIER

PROFILE


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THE International Monetary Fund(IMF) will launch the first of its manda-

tory health checks on big banks this week under a beefed-up inspectionscheme following criticism of previoustests.

The probes will start in Britain, to befollowed by IMF tests of banks in

Sweden, the Netherlands, Germanyand Luxembourg ahead of wider tests

by the EU to assess the health oflenders.

The IMF move comes as a rating

agency study found that more than 30of the worlds top banks have insuffi-cient capital to withstand a big prob-lem, including Credit Suisse, Bank of

America and Mizuho Financial.Standard & Poors said most banks

had improved their capital adequacyin the past two years but many still fellshort and the risk-adjusted capitalpositions of banks was generally a rat-ing weakness.

The EU has come under pressureafter finding only a small capitalshortfall among banks last year, just

before spiralling problems at banksforced an international bailout of theIrish government.

Stress tests come earlyBYHARRY BANKS

EUROZONE

THE EU clarified the powers of itsnew insurance and markets super-regulators in proposals published

yesterday. The commission is to change two

existing financial services directivesto clear the way for the EuropeanInsurance and Occupational Pensions

Authority and the EuropeaSecurities and Markets Authority.

The amendments, set out in itsOmnibus II proposals, identify areas

where the regulators can proposenew technical standards as they movetowards the single rule book modelof pan-EU regulation. It also detailshow to resolve disputes betweenmember states national regulators.

By giving the new supervisors aclearly defined mandate and bringingexisting legislation in line with thatmandate, the commission furtherdelivers on the promise of creatingmore solid and stable markets andmitigating future crises, said mar-kets commissioner Michel Barnier.

It has also amended the Solvency IIdirective that will set new capitalrequirements and internal models forEuropean insurers from 2012.

For the first time, it has set a finaldate of 31 December 2012 for compa-nies to implement the new directive

but in recognition of the challengefacing insurers, it has set transitionalarrangements to help them adapt.

There should be a smooth transi-tion to the new regime, market dis-ruption should be avoided, it said.

PricewaterhouseCoopers insurancepartner Charles Garnsworthy said it

was unrealistic to expect almost3,600 insurers to be fully compliant

by the deadline.The introduction of these transi-tional measures will allow insurersand regulators time to fully comply

with the directive, Garnsworthy said.

EU amendsSolvency IIguidelines

MICHEL Barnier, the EU markets com-missioner, stepped up efforts yester-day to extend scrutiny of auditors

beyond the borders of the EuropeanUnion.

In a bid to ensure EU states accessto more information about the auditsdone on major companies, the inter-nal market and services commission-er has added ten non-EU states,including China, Switzerland and theUS, to a list of countries that willcooperate with EU members on over-sight of auditors. The move isdesigned to tighten the net over auditpractices in the wake of the financialcrisis, in which financial institutionsand companies given a clean bill bytheir auditors subsequently failed.

With auditing now moving beyond national borders, there is aneed for effective global auditor over-sight, the markets commissionersoffice said.

Barnier said the decision was takenagainst a backdrop of improvementsto the audit market.

International cooperation on audi-tor oversight is crucial to avoiding theoverburdening of audit firms andduplicating supervisory work, andabove all, to promoting a high degreeof investor protection by ensuringhigh quality audits, he said.

The ten countries joining the 27 EUstates were selected because theiraudit oversight systems are at a com-parable level. These are Australia,Canada, China, Croatia, Japan,Singapore, South Africa, South Korea,Switzerland and the US.

The commission has also identifieda further 20 states that are taking

steps to reach an equivalent level andcould be included in the informationsharing agreement in future. Theseinclude Abu Dhabi, Egypt, India,Russia and Thailand.

Europe toshare auditinfo globally

BRITAIN received a flood of bids at asale of 25-year government bonds

yesterday, after a sharp rise in infla-tion spurred demand for good-valuegilts that are less vulnerable to a risein Bank of England interest rates.

This healthy demand for Britishgovernment debt at a time of heavy

public borrowing highlights thesharp contrast between market per-

ceptions of the UK fiscal outlookand that for other large-scale bor-rowers such as Greece, Ireland andPortugal.

After a well-received 2.25bn auc-tion of 25-year gilts, British giltfutures rallied 15 ticks to test a ses-sion high. The sale of 4.25 per centMarch 2036 gilts drew bids worth2.11 times the amount on offer, well

above the 1.62 cover achieved at thelast sale of this gilt in 2005.

Demand high for UK giltsUK ECONOMY

IMF head Dominique Strauss-Kahn has beefed up its inspections on big banks Picture: Rex

BYALISON LOCK

REGULATION

BYALISON LOCK

REGULATION

Weber is top choice for ECB

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F&C Asset Managements rebelshareholder Sherborne Investorsstepped up its attack on the currentboard yesterday with a critique of itsstrategy.

In a letter to shareholders,Sherborne said it had invested in F&Cdue to its persistently poor perform-ance compared with peers and itbelieved investor concerns over strate-gy were the cause of its low valuation.

F&C chairman Nick MacAndrewcalled the letter a partial and flawedcritique of the past and saidSherborne had not offered an alterna-tive strategy.

Sherbornes move escalates its bidto take control of F&C ahead of ameeting on 3 February to decidewhether to replace MacAndrew anddirector Brian Larcombe withSherborne representatives.

We believe that F&Cs manystrengths have not been reflected inthe performance of its share price,the letter said.

Sherborne, which has built up a17.6 per cent stake in F&C sinceAugust, argued that the decisions tobuy REIT Asset Management in 2008and Thames River Capital last yearsaddled F&C with debt, diluted share-holders interests and generated

income from volatile performance

fees rather than steady managementfee income. Sherborne also criticisedF&Cs debt management, arguingthat a renegotiation of debt terms in2009 caused a dividend cut.

We believe that the companysfinancial policyhas caused reduc-tions in shareholder value that wereavoidable, it said.

MacAndrew said Sherborne hadmisunderstood the economics ofand rationale for the acquisitions...both of which were overwhelminglysupported by shareholders.

He added Sherborne had notaddressed concerns that its three pro-posed board members EdwardBramson, Ian Brindle and DerhamONeill lacked the experience to runthe firm.

Numis analyst David McCann saidthe letter left shareholders still nonethe wiser as to what Sherborne mightdo differently if it were to get in.

Sherborne

ups ante inF&C pursuitBYALISON LOCK

ASSET MANAGEMENT

Sherborne Investors chairman Ian Brindle (left) and F&C Asset Management chairman Nick MacAndrew (right)


MORE NEWSONLINE ATwww.cityam.com

17 August:Sherborne Investors buys 5.2 per centstake in F&C for 15m. F&Cs shares rise23 per cent. 18 August:Sherborne raises stake to 9.7 per cent tobecome F&Cs second-largest shareholder. 20 August:Sherborne adds 0.5 per cent to its stake,taking it to 10.2 per cent or 52m shares,worth 32.9m. 26 August:Sherborne increases stake to 11.3 percent, worth 36.2m. 31 August:Sherborne raises stake to 14.6 per cent 16 December:Sherborne calls an extraordinary general

meeting to oust F&C chairman NickMcAndrew and director Brian Larcombeand replace them with three of its choice. 20 December:Sherborne cashes in further shareoptions to raise its stake to 17 per cent. 6 January:F&C appeals for shareholders to voteagainst Sherborne at the EGM. 14 January:F&C publishes plan to restructure itsoperations and cut 12m costs. 19 January:Sherborne sends letter to shareholderscriticising F&Cs strategy; F&C rebuffsallegations. 3 February:EGM and vote on board to take place.

TIME LINE | SHERBORNES STAKEBUILDING

ANALYSIS lF&C Asset Management

70

80

90

12 Nov 2 Dec 22 Dec 14 Jan25 Oct

p

92.0019 Jan

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14/28

PUB operator JD Wetherspoon saidyesterday sales grew in recent weeksdespite the snow but warned profitmargins were coming under pressurefrom the increasing cost of food,drink and other bills.

Wetherspoon, which operates near-ly 800 outlets, said like-for-like salesincreased three per cent in the 12

weeks to 16 January, up from 1.6 percent in the previous quarter.

Wetherspoon, which has buckedthe trend of declining sales and prof-its across the pubs sector over the past

three years, said it was confident of areasonable performance in 2011.

ELECTRICALS retailer Kesa yesterdaywarned that profits would be at thelower end of expectations due to

weaker sales at its UK chain Comet.Total like-for-like sales for the peri-

od between 1 November and 18January were down four per cent.

But Comet sales plummeted 7.3 percent as tough competition, lukewarmconsumer sentiment and poor weath-er took its toll.

Kesa said that the pre-Christmassnowfall in the UK and continentalEurope during its key trading period,knocked at least two per cent offsales.

The company also said that saleshad softened since the VAT rise to20 per cent.

Kesa, which also runs marketleader Darty in France, said it wouldrespond to the challenges at Comet

by cutting costs, improving its web-site and refocusing stores on its mostprofitable categories.

The retailer said full-year adjustedprofit before tax would be towardsthe lower end of analysts forecasts

range of 98 to 119m (82m to99.5m).

Chief executive Thierry Falque-Pierroton said there were no plans tospin off Comet or to switch the com-panys listing to France, as had beensuggested by analysts.

He added: We remain confident inour strategy and committed to ourplans to implement the Darty con-cept in all our markets and we havein place a number of additional meas-ures to improve revenue and reducecosts.

Matthew McEachran of SingerCapital Markets said: Trade did pickup in the week after Christmas, oncethe snow melted.

Kesa profit

squeezed byComet sales

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game are trademarks and/or copyrighted materials of their respective owners. 2009 Gameloft. All rights reserved. Gameloft, the Gameloft logo are trademarks of Gameloft in the U.S. and/or other countries.

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CHARACTER Group is to launch itsown version of building bricks toexploit some of its best-selling models

based on licences including Dr Whoand HM Armed Forces.

The new building blocks, which areset to rival Lego, will be launched atnext weeks London Toy Fair.

The company will also launch Bobthe Builder and Squinkies ranges atthe fair.

Character whose blocks are a dif-ferent texture to Lego said it expectsrevenues for the six months to

February to be a third higher thanlast years comparative first half.

Character looksto rival LegoWetherspoonhas happy Xmas

BY JOHN DUNNE

RETAIL

LEISURE

RETAIL

SALES at online fashion retailer ASOSsoared by 59 per cent over theChristmas period with its interna-tional performance driving the com-pany forward.

Overseas sales jumped by 156 percent while poor weather in the UK hitdeliveries.

The firm said UK retail salesincreased 23 per cent to 56.3m, in

the three months to 31 December. ASOS launched American, Frenchand German websites in October 2010as well as a free global shipping offerin the run up to Christmas.

Chief executive Nick Robertsonsaid: The weather knocked betweentwo and five per cent off our UK sales

but internationally we have beenincredibly strong.

We have more websites to launchthis year and are very confident.

ASOS surge drivenby overseas salesRETAIL

Consumer News14 CITYA.M. 20 JANUARY 2011

ANALYST VIEWS: WHAT IS DRIVING THE ADVANCE OF ASOS IN ATOUGH CONSUMER ENVIRONMENT? Interviews by John Dunne

PHILIP DORGAN | ALTIUM SECURITIES

With the launch of the US website going well, ASOS has accelerated its growth, as expected and management has reinvestedmargin gains in the offer, again, as expected. We are maintaining our Hold recommendation. We are bullish that ASOS will hit its salestarget, but think that the short-term outlook is discounted by the shares for now.

NICK BUBB | ARDEN

The UK growth of only 23 per cent is dis-

appointing, given weak comparables [stock shortagea year ago] and it may well be that the snow disrupt-ed Christmas orders and deliveries. International sawmind-blowing growth of 156 per cent. With full-yearprofit before tax to be only in line with expectations,we still think ASOS is over-valued.

SIMON LLOYD | DTZ

Growth in the area of internet sales has

accelerated in the last two to three years with onlinebeing the fastest growing area of retail sales duringthe last 12 months. This trend will have contributedto the enhanced sales seen by many internet retailersover the holiday period.

ANALYSIS lKesa Electricals

150

160

170


p 136.0019 Jan

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UNEMPLOYMENT benefit claims fell by 4,100 between November andDecember to hit their lowest numberfor 21 months, official data revealed

yesterday. The claimant count dropped by

almost 10 per cent over the course oflast year, according to the Office ofNational Statistics (ONS).

This was its third monthly drop ina row, despite the fact that snow

would have hampered job hunting,said Vicky Redwood of CapitalEconomics.

However, the overall jobs marketstagnated or declined, according toother data released by the ONS.

Total employment fell in the threemonths to November, while unem-ployment edged upwards, by 49,000.

The rise pushed the unemploy-ment rate to 7.9 per cent, the samerate as that measured earlier in the

year, in the three months to February.In the summer unemployment was

predicted to average 8.1 per cent in2010, according to the governmentsindependent fiscal watchdog butas the economic situation improved,the forecast was revised down to

7.9 per cent.The Office of Budget Responsibility

(OBR) forecast unemployment wouldedge up slightly to eight per cent this

year, before falling as low as 6.1 percent by 2015.

We expect private sector job cre-ation to more than offset falling pub-lic sector employment just as it didduring the fiscal consolidation of the1990s, the OBR said.

Government sector employmentfell by 33,000 in the three months toSeptember, yet remained above sixmillion some 211,000 higher than itstood in September 2008.

Yesterdays figures also reveal ashift from full time to part time work.

Although both part time and fulltime employment fell, part time

workers now account for 27.3 per centof total employment, up from 25.7per cent at the end of 2008, saidHoward Archer of IHS Global Insight.

The number of people workingpart time because they could not finda full time job increased by 26,000,the ONS said, totalling 1.16m thehighest figure since comparablerecords began in 1992.

For 16 to 24 year olds, unemploy-ment jumped by a percentage pointto reach 20.3 per cent.

GERMAN economic growth is expect-ed to hit 2.3 per cent this year, officialforecasts said yesterday.

Germanys economy ministryincreased its forecast by half a per-centage point.

Yet while some economists thinkgrowth will be close to last years 3.6per cent expansion, the ministry low-

ered its forecasts for exports andimports -- and said global trade,

including protectionism, posed themain risks to the outlook.

Growth, nonetheless, should stillbe strong, they said.

The German pick-up is extra large.Now we have to make sure it is extralong, said economy minister RainerBruederle. The time of nerve wrack-ing stop and go is over.

The forecast follows another weekof strong economic data for the coreEurozone state.

Confidence among Germaninvestors soared to its highest rate

since July, according to survey resultspublished on Tuesday.

The Zew index rose to 15.4, from4.3 in December, with half of all sur-

veyed investors expecting a Eurozoneinterest rate hike within six months.

The week began with theBundesbank confirming strongmanufacturing orders towards theend of last year.

However, the Bundesbank expectsoverall economic growth to slow in

Germany this year, forecasting a twoper cent increase.

Protectionist barriers to trade a mainrisk to German growth, says ministry

RECOVERY in the Eurozone will besluggish this year, according to aReuters poll of economists.

A resurgent German will not besufficient to drag the single currencyarea above quarter-on-quarter growthof 0.3 to 0.4 per cent in the first halfof the year, and 0.5 per cent in each ofthe second two quarters, the surveysaid.

While the 17 country euro areaeconomy is expected to grow around

1.5 per cent this year and 1.7 per centin 2012, economists predict almost

twice those rates of growth in the US.A Reuters poll of around 80 econo-mists suggested the US economy willexpand by three per cent in 2011, upfrom 2.7 per cent in a similar poll inDecember.

The upgrade in forecasts was due tosurprisingly positive data, the unex-pected payroll tax cut, and evidenceof increased houshold spending, saideconomist Andrew Tilton of GoldmanSachs.

Stunted recovery aheadfor Eurozone, says survey

EUROZONE ECONOMY

HOMEBUILDING in the US recordedits second lowest rate in over half acentury last year, according to datareleased by the commerce depart-ment yesterday.

New house starts totalled 587,600,only a small improvement onthe 554,000 begun in 2009 thetwo worst years since records began

in 1959.December saw a 4.3 per cent fall,

with new housing starts, since thesame time the previous year, stand-ing at 529,000.

Low construction activity for anextended period is necessary to purgeexcess supply from the housing mar-ket, commented INGs TeunisBrosens.

Weak demand in the US housing

market, as well as the excess supply,suggest that new house construction

will remain sluggish in the comingmonths.

We therefore expect a very slowand soft construction recovery,Brosens warned.

Financial markets had a mutedreaction to the figures, although goldprices hit a session high followingtheir release.

New American house construction fallsto second lowest level in over 50 years

US ECONOMY

GROWTH is expected to cool acrossAsia this year as governments tighten

monetary policy to tackle rising infla-tion, according to a poll released yes-terday.

Yet Asias rising economies will stilllead global growth in 2011, far out-pacing rich world peers.

A global survey by Reuters ofaround 500 economists showedChina again topping the economicexpansion charts for this year, eventhough the double-digit growth ofthis year is expected to drop to

around 9.3 per cent.Indian growth, meanwhile, is pre-

dicted to accelerate to 8.5 per cent inthe fiscal year ending March 2012.

Both countries, however, are fight-

ing stubborn price inflation.In China inflation is now tipped toquicken to 4.3 per cent, a much faster

build-up of price pressures than econ-omists had expected in Octobers poll.

And inflation in India is now seenat 8.8 per cent, up from 8.3 per centexpected in the October poll.

The prospect of further tighteningis already spooking some foreigninvestors who flocked to the regionlast year, drawn by its robust growth

and higher returns.Indonesian stocks have recoiled

after a sizzling 46 per cent gain in2010. Indonesian price inflation hassurpassed four per cent.

Later this year, Asian policymak-ers are going to have to be muchmore aggressive to get inflationunder control and the consequenceof that will be weaker growth, saidRobert Subbaraman, Nomuras Asiachief economist.

Economists expect global econom-ic growth to slow to 4.2 per cent this

year from around 4.7 per cent lastyear, before picking up slightly to 4.3per cent in 2012.

Inflation to slow Asian boomBYHARRY BANKS

ASIA ECONOMY

Benefit claims

drop, yet jobsmarket slowsBY JULIAN HARRIS

EMPLOYMENT

BY JULIAN HARRIS

EUROPE ECONOMY

Economics16 CITYA.M. 20 JANUARY 2011

BANKS GOAL IS NOT ALWAYS TO LOWER INFLATION, SAYS POSEN

CENTRAL banksshould not simplylook to lower infla-tion, but ratherensure price stabili-

ty, the Bank ofEnglands AdamPosen said lastnight. You needinflation a littleabove the zeromeasure to keepthere being a lot oflock-ups in theeconomy, he told ameeting at AstonUniversity. Posenhas been pushingfor more quantita-tive easing, despitethe Bank comingunder fire as infla-tion has jumped to3.7 per cent.

Picture: GETTY

NEWS | IN BRIEF

IEA: Liberalise for lower pricesThe price of essential goods is moreimportant to levels of poverty than dif-ferences in income levels, a leading thinktank said today. Governments obsessionwith misleading poverty targets has ledto an ever increasing welfare budget thatsimply imbeds dependence, the Instituteof Economic Affairs (IEA) said. Instead,protectionist measures like the EUs com-mon agricultural policy should bedropped along with excessive regulation,lowering prices, it argues in the report.More could be done to simplify the taxsystem and incentivise the poor to enterthe jobs market, it found. Peopletrapped in dependency have continued tostruggle as the price of many essential

goods such as housing has risen, saidthe author Kristian Niemietz.

Factory pay settlements edge upDespite the boom in manufacturing seenlast year, wage growth remained stablein the three months to December, it wasannounced yesterday. Pay settlementsincreased to 2.2 per cent from 2.1 percent in the three months to November,manufacturers body EEF reported. One infive settlements are still ending in a payfreeze, reflecting the ongoing downwardpressure on wages, EEF said. The keynow is whether the recent upsurge ininflation results in significant upwardpressure on settlements, said LeeHopley, chief economist at the EEF.

Polish interest rates nudged upIn a bid to tackle above target inflation,

the Polish National Bank increased inter-est rates to 3.75 per cent yesterday.

8/8/2019 Cityam 2011-01-20 book

17/28

PEARSON continued its blistering runof form yesterday, raising its 2010profit forecast for the second time inthree months.

The group, which owns Penguinand the Financial Times, said it nowexpected to report operating profitfor 2010 of around 850m, anincrease of around 20 per cent.

The firm says its improved outlookwas driven by its investments in edu-cation, digital products and emerg-ing markets.

Pearson said its growth cameacross the board, with education per-forming strongly, the Financial Timesdivision set to report substantialprofit growth and Penguin Bookseyeing record results after a strongChristmas.

Its North American educationbusiness also achieved market sharegains following its investment in digi-tal products, setting it up for goodsales growth and margin improve-

ment, Pearson said .Shares in the group closed up 4.47

per cent to an eight month high of10.51 after the upgrade its third forthe year.

Chief executive Marjorie Scardinosaid: For the third successive year,our growth is vigorous even thoughmarket conditions have beenanaemic.

That confirms the soundness ofour strategy and the increasingstrength of our market positions. Weare on the right road and set out on2011 with confidence that we willhave another good year.

Earlier this week the firmannounced it has acquired a majoritystake in Indian online education busi-ness TutorVista.

Pearson hikes

profit outlookfor 2010 again

Autonomy wins big Japan deal

CAMBRIDGE-BASED technology firm Autonomy yesterday announced it

has entered into its largest everlicencing agreement in Japan. The deal, involving its Intelligent

Data Operating Layer (Idol) video soft-ware, is said to be worth seven fig-ures but the firm declined to revealthe exact value.

The FTSE 100 company also said ithas added North American super-market group Safeway to its list of

clients in what it described as a sig-nificant deal, also involving thelicensing of Idol.

Autonomy has seen its shares fallfrom 19.75 in June to 14.24 yester-

day, after a number of analyststurned bearish on the stock.

In October the firm said it would itwould cut its full-year revenue guid-ance by about three per cent after

weaker-than-expected demand, send-ing its shares down 16 per cent.

The firms stock dropped a fur-ther 3.35 per cent in trading yester-day.

Idol is a smart program that isable to analyse and index video con-tent, allowing users to, for example,easily search for specific phrases orincidents in long video files.

The group will release its fourthquarter results next month.

BY STEVE DINNEEN

PUBLISHING

BY STEVE DINNEEN

TECHNOLOGY

CULTURE secretary Jeremy Hunt yes-terday laid out his plans to introduce

a network of local TV stations in theUK.The radical shake-up will see private

firms bid for a new channel that willbroadcast local news for several hoursa day, alongside a national schedule. It

will be funded with advertising andlikely some licence-fee cash.

The move could be good news forITV, which could be given the green

light to strip back or even axe its cost-ly regional news programming.

Hunt says he will ensure the localstation dubbed channel 6 is given a

prominent position in electronic pro-gramme guides.He said: For consumers, what this

will mean is a new channel dedicatedto the provision of local news and con-tent one that will sit alongside otherpublic service broadcasters, offering anew voice for local communities, withlocal perspectives that are directly rel-evant to them.

Jeremy Hunt lays out his visionfor local TV network in the UKMEDIA

BRITAINS largest real estate invest-ment trust Land Securities yesterdaysaid it expected demand from blue-chip tenants to hold up in 2011.

Chief executive Francis Salway saidthe firms plans were bearing fruitas he updated the market on trading.

We expect a wider range of buyingopportunities in 2011, although cur-rent flows of capital into the sectormean that bidding may remain com-petitive,he added.

The first quarter of 2011 is likely tosee mixed news flow around the con-

sumer and the economy, but weexpect occupational demand from

large corporates to remain steady.Salway pointed to City shopping

mall One New Change as an indicatorof the firms success. He said thatdevelopment was commanding rentsin excess of 50 per square foot, a 10increase on what the firm could haveexpected in 2009.

One New Change has let 51 percent of its units, with a further 20 percent in the hands of solicitors, sug-gesting a tenancy agreement is near.

That means the building is practically80 per cent let.

Meanwhile, Land Securities said itplanned to start work on a retaildevelopment in Scotland due to

growing demand.It is our expectation that we will

soon be in a position to start a furtherretail development at the Atlas Site inGlasgow, Salway said.

In November, Land Securities post-ed a 6.7 per cent rise in first-half netasset value.

Land Secs says demand from

blue chips will hold up in 2011

NINTENDO yesterday announced itwill release its much anticipated 3DSin Europe on March 25.

The handheld console will featureone 3D screen and one touch-screen,as well as a motion sensor, a gyro sen-sor and the ability to take 3D photo-graphs.

It will also allow users to downloadgames from a platform similar to

Apples App Store, cashing in on thetrend for classic games, and playgames wirelessly against friends.

Nintendo, which flew JonathanRoss over for the consoles launch in

Amsterdam, did not release pricinginformation but the unit has gone onpre-order at HMV for 229.99.

The Japanese firm behind consolesincluding the Wii and the N64 hadplanned to release the 3DS beforeChristmas but was forced to pushthe date back after developmentdelays.

As a result Nintendo was forced tocut its earnings forecast for the year

by a third. The company trimmed itsprojection for overall DS sales for the

year to 23.5m units from 30m andlowered its estimate for Wii consolesto 17.5m machines from 18m.

Nintendoshows off

new 3DS


BYHARRY BANKS

PROPERTY

MORE NEWSONLINE

www.cityam.com

BEST OF THE BROKERS

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

ANALYSIS lNokia

10.5

9.5

11.5

25 Oct 12 Nov 13 Jan3 Dec 23 Dec

NOK 10.2519 Jan

NOKIAStandard & Poors Equity Research hasmoved the mobile maker from strong buyto hold and downgraded the target priceto 8 from 9 as it feels its board has limit-ed strategy options against competitors

such as Apples iPhone and GooglesAndroid. The broker says Nokias operatingsystems lack exciting apps and it shouldinvest less in developing the platforms.

ANALYSIS lOld Mutual

125

120

130

135

140


p 127.3019 Jan

OLD MUTUALGoldman Sachs rates the savings andinvestment group a buy with a 162p tar-get price as it offers new opportunity fol-lowing a strategic shift back towardsinsurance and is now undervalued. It of fersinexpensive exposure to South Africa, hasvirtually no European sovereign debt expo-sure and the impending sale of its bankingarm Nedbank should clarify its market

ANALYSIS lTesco

430

420

410

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p

403.75

19 Jan

TESCO

Evolution Securities rates Tesco a sell asits performance is deteriorating and it islosing strategic position. The brokerbelieves it should initiate a hefty price warwhen new chief executive Philip Clarketakes over, to reposition itself in the marketand end the current store expansion drivein the sector. Tesco is likely to win a pricewar and should be the first mover, it says.

Autonomy founder andchief executive MikeLynch has seen his f irmsstock slide amid weakerthan expected demand

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p 694.5019 Jan

Pearson chief execu-tive Marjorie Scardinosaid the results set herfirm up for a strongperformance in 2011

BY STEVE DINNEEN

TECHNOLOGY

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NESTL, the worlds biggest foodgroup, will invest about 1bn Egyptianpounds (107.5m) in Egypt over thenext three years in a push to shift itsfocus to emerging markets, an execu-tive said.

The maker of KitKat chocolate barsand Maggi soups wants at least 40 to45 per cent of its business to comefrom markets like Brazil, China,Ghana and Vietnam within 10 years,up from about 30 per cent now, exec-utive vice president Frits van Dijksaid.

In 2009, we saw double-digitorganic growth (in emerging markettop line), and this trend will continue.In emerging markets we will havestrong growth, said van Dijk, who isalso zone director for Asia, Oceania,Africa and the Middle East.

Overall, Nestl is planning to invest$1bn (625.6m) in Africa over thenext two years and open six new fac-tories on the continent by 2012,including one in Algeria and anotherin the Democratic Republic of Congo.

One factory is planned to open inMozambique to take advantage of a

Chinese-built railroad linking thecountrys coast to Zambia, van Dijksaid.

We are seeing time and againwhere infrastructure starts to devel-op, thats where the hinterland isbeing opened up and you see a lot oftrading, and therefore disposableincome becomes available, he said.

He said Nestl sales were flourish-ing in countries including Vietnam,Indonesia, Chile, Columbia andMexico, alongside Brazil, India andChina.

Nestl will invest 450m in Egyptthis year and another 500m over thefollowing two years, compared withabout 1bn over the last decade, vanDijk said.

URANIUM company Forte Energy isplanning to raise A$15m (9.35m) byoffering 120m shares to new andexisting shareholders. The offerprice will be 12.5 cents per share, adiscount of 10.7 per cent to its clos-ing price on the Australian StockExchange on Friday.

Allowing for expenses, the net pro-ceeds of the placing are expected to be A$14.7m. The money raised will be used to advance the companys

uranium projects in West Africa,including an ongoing resource

drilling campaign in Mauritania anda feasibility study in Guinea.Forte said it had received commit-

ments from institutional investorsin the UK, North America, Asia and Australasia, with director MarkReilly commenting that: We arevery pleased to have received such ahigh level of support from new andexisting institutional shareholdersfor this capital raising, which wassignificantly oversubscribed.

Forte to expand in Africathrough 9m share offer

MINING

AMERICAN International Group (AIG)has chosen Bank of America,

Deutsche Bank, Goldman Sachs andJPMorgan Chase to manage the saleof the governments 92 per cent stakein the insurer, according to reports.

AIG and the government held abake off in New York last Thursday,hosting chief executives and bankersfrom 10 of the worlds largest firms topitch for the right to manage thedeal.

JPMorgan and Bank of America were two of the three joint lead

arrangers on AIGs $4.3bn (2.7bn)bank credit lines, while Goldman and AIG have a long-standing relation-ship. The Deutsche Bank connectionis less clear, although AIG is expected

to pitch investors aggressively for alarge, global shareholder base.The winning banks are expected to

split a fee that is less than the 75 basispoints of the offering value the gov-ernment paid last year for the initialpublic offering (IPO) of GeneralMotors. Reports say the fee could becloser to 50 basis points.

That is significantly less than theusual fee for a secondary offering ofthis size, although the banks are

expected to make up for the lost rev-enue with the prestige of managing amarquee deal and the chance atfuture AIG business.

AIGs selection of banks to manage

its share sale left out Citigroup andMorgan Stanley. Citigroup has been arestructuring adviser for AIG and wasalso one of the joint lead arrangers ofa $4.3bn bank credit lines to theinsurer. Morgan Stanley has advisedthe government since the insurersnear collapse in September 2008.

But both banks are likely to beamong the four to eight jointbookrunners to be brought in closer tothe offering, a source said yesterday.

AIG picks banks for share saleBY HARRY BANKS

FINANCIAL SERVICES

Nestl in $1bn

push to up itsAfrican focusBY HARRY BANKS

CONSUMER


SWATCH CELEBRATES RECORD SALES

SWATCH GROUP, the worlds largest watchmaker, gave an upbeat outlook for 2011 as itexpects strong demand for its watches to offset the impact of the soaring Swiss franc. Thegroup, best known for its colourful plastic Swatch watches, notched up sales of 6.4bnfrancs (4.18bn) in 2010 in another record year, as consumers in Asia, Central Europeand the Middle East bought its luxury brands. Picture: GETTY

NEWS | IN BRIEF

Insurers hit by climate changeInsurers are struggling to assess therisks from climate change, industryofficials say, with the floods inAustralia and Brazil highlighting the

potential losses from greater extremesof weather. Overall losses from weath-er-related natural catastrophes rose bya factor of three in the period 1980-2009, taking inflation into account,while insured losses from such eventsincreased by a factor of about fourduring the same period. Total insuredlosses from natural disasters in 2010were $37bn (23.1bn).

ASML up on smartphone salesProfits at Dutch electronic chip-mak-ing equipment group ASML Holding hita record 1.02bn (843m) last year,with sales driven by strong demandfor iPhones and other smartphones,tablet computers and digital cameras.ASML made a net profit of1.022bnin 2010 on net sales of4.5bn, andpredicted sales in 2011 could rise tomore than 5bn. In 2009 it had salesof just 1.6bn and made a net loss of151m.

Accor raises profit goal againEuropes largest hotel group, Accor,raised its 2010 profit goal again yester-day as fourth-quarter sales slightly beatexpectations amid a global recovery indemand for hotel rooms. Accor, thefourth-largest hotel group behind theInterContinental, Marriott and StarwoodHotels, said occupancy rates improved inthe last quarter while the recovery inaverage room rates continued in mostcountries. Accor said it now expectedearnings before interest and tax ofaround 440m (371m) instead of theprevious target of 400-420. Financechief Sophie Stabile said that the trendfor bookings at the start of 2011 wasgood but she remained cautious.

KPMGKPMG has announced the appointmentof Richard Threlfall as its new UK head

of infrastructure, building and construc-tion. Threlfall succeeds FionaMcDermott who will lead KPMGs busi-

ness modelling services.Threlfall has over 15 years experi-

ence in the financing and structuring ofinfrastructure projects. Before joiningKPMG, Threlfall was at Citigroup, andbefore that was employed as a civil ser-vant at the UK Department forTransport where he held positions inthe road, rail and aviation directorates.Between 1996 and 1998 he was pri-vate secretary to the secretary of statefor transport and the deputy PrimeMinister.

ICMAThe International Capital MarketAssociation (ICMA), which represents

capital market participants globally,yesterday announced that JohnSerocold has joined its regulatory policyand market practice team to leadICMAs work on secondary marketpractice.

As the senior adviser with responsi-bility for ICMAs work in the secondarycross-border market for internationaldebt securities, Serocold will play a keyrole in co-ordinating the response ofmember firms to current consultationson the review of the markets in finan-cial instruments directive (MiFID) andother European regulatory reformaffecting the market. He has over 10years experience of financial trade

association work, covering marketstructure, commercial and regulatoryissues.

Barclays CorporateBarclays Corporate has appointed DanBroome as a relationship director with-in its insurance team. Broome joinsfrom Lloyds TSB Corporate Markets,where he spent two years covering theinsurance sector. Broomes core focushas been the non-life insurance marketand he has significant experience ofhigh-profile financing and bankingtransactions in the London and Lloyd'smarkets, within both the underwritingand broking communities.

CITY MOVES | WHOS SWITCHING JOBS Edited by Steve Dinneen

Alvarez & MarshalAlvarez & Marsal, the global professional serv-ices firm, is expanding its European real estateadvisory business in Europe with the appoint-ment of London-based directors, PatrickAnderson and Caspar Vredenbregt. Andersonand Vredenbregt both have over 12 years ofexperience in real estate development, invest-ment and finance. Prior to joining A&M,Anderson was director of international invest-ment and development for London & regional.

+44 (0)20 7557 7245morganmckinley.comTo appear in CITYMOVESplease email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

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Thats the thing aboutmoney: you can never takepeople out of the equation.Master of Finance (MFin)University of Cambridge

Academically rigorous and commercially relevant, the Master of Finance offers an

opportunity to build on an outstanding professional track record through access to

the Universitys excellent teaching faculty and experienced finance practitioners.

One of the leading post-experience programmes of its kind in the world, thisone-year degree will prove invaluable for ambitious finance professionals

seeking positions of influence and leadership in the future.

To find out more go towww.jbs.cam.ac.uk/mfin

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The more nationalities the better for yourcontacts book, writes Jeremy Hazlehurst

Diversity on MBA

courses means thateveryones a winner

DIVERSITY is important for MBAs, not

just because a class made up of peo-ple from varied backgrounds makesfor a better learning experience but

because it improves your prospects after-wards. For many MBAs the most valuablething is a global network of contacts, and

the more diverse, the better. Schools havebeen aware of this for years but as businessgets ever more global they are increasinglyworking to bring in people from placeswhere MBAs are in short supply.

ESMT, the German business school, isleading the way and has recentlyannounced three 58,000 Kofi AnnanFellowships each year, for an emergingleader from a developing country to studyfor a one-year full-time MBA in Berlin. Theschool also has a full-tuition scholarshipfunded by daily newspaper Tagesspiegel

for a German applicant who is a first orsecond generation immigrant, and othersfor students from Central and EasternEurope, Africa, the Middle East, and Asia.

The University of Melbourne has a schol-arship for Indigenous Australians, whileESADE, in Spain, has scholarships for stu-

dents from Mexico and Brazil, CentralEurope and Scandinavia. HEC in Paris hasones for Brazilian, Indian and Senegalesestudents, and the Fondation RainbowBridge Scholarships for women from Asianor African countries affected by naturaldisasters, drought or famine.

At Spanish school IE there are scholar-ships for students from the Middle East, Africa and emerging economies. LisaBevill, director of admissions, full-time pro-grams, says: Students learn from eachother just as much as they learn from our

faculty so its important that the class-room includes individuals with a widerange of backgrounds and experiencesfrom all over the world. On theInternational MBA there are 75 nationali-ties, and 90 per cent are non-Spanish.

Irina Schneider-Maunoury is seniormanager of MBA financing at INSEAD,which has scholarships for women fromNepal, Uganda, Palestine, Turkey and theMiddle East and another for those fromGhana, Nigeria, Togo and Benin, and shepoints out that there are alumni associa-

tions in 42 countries, which gives studentsa massive global address book.

Many people from developing nationsstart their own businesses, she says.Three to 4 per cent of students do sostraight afterwards and many others 10, 15or 20 years after graduating. The strongties that are forged on an MBA coursemean that many students end up as busi-ness partners.

Schools offer scholarships because itsthe right thing to do, but as so often whatsgood is also good for business.

Diversity is goodfor everybody

Picture: GETTY

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Everybody wants toget to the top

Picture: GETTY

Rankings are notthe best way tochoose your MBA

W

HICH is the best MBA course inthe world? According to the

FTs rankings its the one atLondon Business School, fol-

lowed by those at Wharton, Harvard andStanford. Argument over? Not quite. If

you had instead chosen the Economistslist, you would be under the impressionthat Booth School of Business at theUniversity of Chicago is number one, fol-lowed by Tuck and Haas.

The harder you look at MBA rankingsthe less they make sense. Despite its topranking in the Economist, ChicagoBooth is just 10th in the FT. LBS tops theFT rankings, but is a lowly 19th in theEconomist. INSEAD is 23rd in theEconomist but 5th in the FT. Haas, thirdin the Economist, is 28th in the FT. OnlyHarvard, Booth, Stanford and Whartonmake it into both top 10s.

Look at the BusinessWeek list and theconfusion deepens. It ranks US and non-US schools separately, leaving us to won-der whether Harvard, second on the USlist, is better than Queens in Kingston,Canada, which takes the same place onthe non-US list.

And then theres the Forbes ranking,in which Stanford comes out as top USschool while INSEAD, IMD and IE are itstop MBAs outside America. Indeed,INSEAD is the top non-US MBA for bothForbes and BusinessWeek but in theEconomist is ninth. Six schools can justi-fiably claim to be Europes best.

Also interesting are schools moves upand down the rankings. Spanish schoolIESE dropped from first in the Economistin 2009 to fifth a year later. In the same

year Chinese school Ceibs dropped 14places in the FT, from 8th to 22nd.Boston College went up 42 places.Belgian school Vlerick Leuven placed10th in the Economist in 2008, only todrop 37 places the next year.

For most people in Europe the FTsranking is taken most seriously and therelease of the 2011 list on 31 January isone of the biggest events of the MBA

year. But how seriously should we takeit? How useful are its numbers? The firstcriterion it uses is graduates salary. Butas an indicator of quality, that is a blunt

tool to say the least. Salary is dependenton the sectors that graduates go into,rather than their quality those who gointo financial services earn more thanentrepreneurs who may well take a paycut in order to earn more later. Thosegraduating in financial services-heavyparts of the world surely have more earn-ing power than others. Its no shock thatLondon and East Coast schools rank sohighly.

Salary increase is the second majormeasure. Young MBAs who were earninglittle, or who come straight out of anundergraduate degree, will have agreater increase than more experiencedpeople. But who would you rather haveon your course? Many MBAs want tochange careers, and might well be will-ing to take a pay-cut to get a foothold ina new industry.

Thirdly, the FT looks at whether gradu-ates were employed three months aftergraduation. This also depends on sectors,location, and level of experience; high-fliers might not walk into the first jobthey are offered. Also, it tells you nothingabout long-term success.

METHODOLOGY AND MADNESS To understand the lists, you have tounderstand the methodologies they use(see box above right). Two things leap outat you. Firstly, the data is based on infor-mation given by students and schools in the Economists case, 80 per centcomes from schools perhaps not themost objective of sources. As one recent

Schools love to topthe lists, but they tellus little we didntalready know, writesJeremy Hazlehurst

Business Features | MBAs20 CITYA.M. 20 JANUARY 2011

MBA says, students have a vested inter-est to be nice about their schools;

wouldnt you rather have an MBA fromthe fourth best school than the 14th?

Secondly, there is the time-lag. Severallists use data from graduates from anumber of years to help flatten outspikes and troughs, and they also waituntil the graduates have been out ofschools three years. The FTs 2011 list willhave information from those who gradu-ated in 2005-7, while the current Forbeslist has information from MBAs whograduated in 2004. How relevant is thatto those taking an MBA in 2012?

Looking at those who graduatedlonger ago also boosts the earnings col-umn they are less impressive if youknow that some of the data is from those

who graduated six years ago. And again,this number tells you nothing aboutlong-term performance.

So how seriously should we take thelists? Pat Harker, dean of Wharton, said

in 2004 that there is a very strong con-sensus among parties (alumni, facultyand staff of other institutions) Ive con-sulted, that the ranking methodologiesare severely flawed. And that wasntsour grapes Wharton regularly gets top10 rankings.

London business school Casss line isthat business school rankings are oneimportant indicator of quality but arecomposed of an extremely large amountof disparate information and should beread carefully by prospective students.Ross Geraghty, whose TopMBA websitehas a ranking based entirely onrecruiters perceptions of MBAs, callsrankings a necessary evil.

Officially, schools always say that theyshould be taken with a pinch of salt butschools know that a high ranking looksgreat in the marketing material andthey are not shy of using it in their

brochures for years to come. One personwho works in the MBA industry says that

S

OME of the most common ques-tions I am asked by prospective stu-

dents are about how to pay fortheir post-graduate degrees. With

SUSAN ROTH

A lack of funds doesnt have to scupper your business educationthe cost of education coming underscrutiny more than ever, it is entirelyreasonable that students are concernedthey are getting value for money.

What you do need to keep in perspec-tive when weighing up the cost of eitheran MBA or a specialist Masters (MSc)degree is where that qualification cantake you. For example, independent sta-tistics show that MBA students reportaround a 100 per cent increase in theirsalaries three years after graduation.

Prior to the financial crisis it was com-mon for many Executive MBA and part-time MSc students to be either fully orpartially sponsored by their own compa-ny. In this time of austerity many profes-sionals are finding this kind of supportfrom their employers harder to come byand are having to self fund their educa-tion.

All of the top business schools supporttheir students by providing payment

plans where they can pay their fees ininstalments and at Cass we can also pro-

vide advice about securing loans. Forthose students who may not have thespare cash lying around to invest upfront in course fees, there are a variety ofpayment options and scholarshipsoffered by universities and businessschools to help you shoulder the finan-cial burden.

Each school has a variety of differentfull and partial scholarships available forMBA and MSc students which can be spe-cific to the course being studied or thenationality of the applicant.

Sir Stelios Haji-Ioannou sponsorsscholarships for 10 Cass students and afurther 10 at LSE each year. Corporatepartners of schools also often providescholarships and awards to students.One such partner of Cass is Santander

which is a significant supporter of edu-cation generally, funding scholarships

and educational initiatives in over 45 UKschools and universities under the ban-ner of Santander Universities.

Meanwhile, international asset man-ager Threadneedle has recently teamedup with Cass and will shortly announcean award for students wanting to studyan MSc in Investment Management. Inline with Threadneedles out-think, out-perform philosophy, the award will bedecided via an international essay com-petition for students from Europe,Middle East and Africa, and Asia Pacific.

If you do consider finance a barrier to your studies, be sure to use all of theresources available to you and dont beafraid to ask your university or businessschool about how they can help you.Susan Roth is the Head of Internationalisationat Cass Business School, City University London. Visit www.cass.city.ac.uk for more

information about what scholarships andfunding is available to prospective students.

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