cityam 2011-02-09book

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BUSINESS WITH PERSONALITY

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THE LONDON Stock Exchange (LSE) lastnight revealed it was in advancedmerger talks with Canada’s TMXGroup to create one of the world’s

biggest market platforms. The merged company would have a

market capitalisation of £4.3bn, mak-ing it the seventh-biggest exchange inthe world and the largest in terms of number of companies listed.

The London Stock Exchange has asecondary share listing in Toronto,

which it could use to acquire TMX. The deal is the first major strategic

move made by chief executive XavierRolet, who is battling to restore the LSEto its former glory, and creates a miningand resources-dominant exchange at atime of surging commodity prices andunprecedented exploration activity.

Some of the largest mining compa-nies in the world are listed on the LSE,

whilst the Canadian bourse’s TSXexchange hosts several of the largestgold miners.

The combined group would be co-headquartered in London and Torontoand would continue to be overseen by regulators in both countries.

Rolet, who joined the LSE two yearsago, is poised to take the reigns of themerged bourse.

TMX chairman Wayne Fox would become chairman of the new entity, whilst the Toronto-based exchange’schief executive Thomas Kloet would bepresident.

Backers of the LSE are expected tosupport the merger.

Bourse Dubai, the Londonexchange’s largest shareholder with a20 per cent stake, as well as Italian

banks UniCredit and Intesa Sanpaoloare in favour of the deal. The QatarInvestment Authority, which holds a 15per cent stake in the LSE, also backs theplans.

TMX Group operates three bourses; Toronto Stock Exchange, the MontrealExchange and the Calgary-based TSX

Venture Exchange, together valued atC$2.97bn (£1.86bn).

The LSE is valued at £2.4bn, based on

last night’s closing share price of 892pper share. Shareholders in LSE wouldtake 56 per cent of the combined unit,

which would become the second biggest exchange for shares traded and would overtake the Nasdaq in terms of annual revenue.

The deal comes as exchanges worldwide attempt to consolidate in the faceof increasing competition from alter-native trading platforms such as Batsand Chi-X Europe.

Singapore exchange SGX last monthagreed a $7.8bn (£4.8bn) takeoverapproach for Australia’s ASX, creating

Asia’s fourth-largest stock exchange.In 2007, an early wave of consolida-

tion saw the New York Stock Exchange buy pan-European trading platformEuronext, Nasdaq buy OMX andDeutsche Borse buy the InternationalSecurities Exchange.

The London Stock Exchange hasfaced a number of takeover approachesin recent years from foreign bourses,including German exchange DeutscheBorse in 2004, Australia’s Macquarie in2005 and Nasdaq in 2006.

The deal, which will requireapproval from the Canadian authori-ties, will see the group co-headquar-tered in London and Toronto.

www.cityam.comIssue 1,318 Wednesday 9 February 2011 FREE

BOARDROOMREVOLT

HEALTHCARE

LOCUMS FOUNDER

GOES TO WAR P3

LAMPARD SET TO CAPTAINENGLAND IN DENMARK

BLUES STAR FULL OF PRIDE P28

BUSINESS WITH PERSONALITY

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GEORGE Osborne’s shock move tohike his special tax on banks’ balancesheets was slammed by institutionsand economists yesterday. They

warned it would exacerbate theuncertainty hanging over the sector,making it harder for banks to budget,and constraining their ability to lend.

The rate hike means the financialsector will have to pay an extra£800m in taxes this year after thechancellor deemed the sector had

recovered enough to afford a levy of 0.075 per cent on bank balancesheets. The original plan would haveseen the levy set at 0.05 per cent this

year, rising to 0.075 per cent in thethree successive years of the life of the parliament.

There were fears that the unexpect-ed hike would undermine ongoingtalks – dubbed Project Merlin –

between the government and HSBC,Barclays, Royal Bank of Scotland andLloyds, to thrash out a deal toincrease their lending to small andmedium-sized businesses and possi-

bly to limit the size of bonuses.But bankers told City A.M. yesterday

that the expected peace deal – due to be announced within the next week –remained on track.

“We had ideas of the cost for 2011-2012. It’s just amended our chargethis year,” said one bank boss.

“If the view is that this is part of Merlin and that there would not beadditional levies or taxes then thiscould be viewed as a bit of a preemp-tive strike,” added an industry source.

RBS yesterday confirmed to City A.M. that it had agreed to limit cash

bonuses to a maximum of £2,000 aspart of Project Merlin. The rest will bepaid in equity.

A source close to UKFI, which man-ages the taxpayers’ shareholding inthe bank, said: “There’s a goodchance there will be some sort of cash cap, that’s likely, as there waslast year.”

However, the British Bankers’ Association slammed Osborne’smove. “Constant chopping andchanging” of the tax regime “risksmaking the UK a less attractive placefor businesses to operate,” it warned.

Geoffrey Wood at Cass BusinessSchool also said the “unpredictability”

was “unhelpful”. “It simply makes theconduct of business more difficult,and banks more likely to hold morereserves, instead of lending; makesthem be more cautious,” he added.

“At the margin it reduces the prof-its available to boost banks’ capital,and tends to constrain lending overthe medium term,” addedHenderson’s Simon Ward. However,he noted that the “fairly modest”amount made the impact “minimal”.

ALLISTER HEATH: P2, MORE: P4-P5

BY JULIAN HARRIS AND JULIET SAMUEL

BANKING▲

LSE chief executive Xavier Rolet is set to head the combined group Picture: REX

LONDON STOCK EXCHANGEIN £4.3BN MERGER TALKS

BY RICHARD PARTINGTON

FINANCIAL MARKETS▲

Thomas Kloet, currentlychief executive of TMXGroup is set to be thepresident of the newlymerged company

CITY SLAMS TAX RAID ON BANKS

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News2 CITYA.M. 9 FEBRUARY 2011

CBI: UK mustcut its deficit THE government must persevere with plans to cut the UK deficit, theConfederation of British Industry (CBI) said yesterday, ahead of today’slaunch of its economic forecast.

“You cannot underestimate thecalming effect of ‘Plan A’,” comment-ed Ian McCafferty, the CBI’s chief economist. A ‘Plan B’ of fiscal relax-ation could harm confidence anddamage the economy, he said.

The CBI said the “restoration of fis-cal health” was of prime importanceto its members, which total almost aquarter of a million businesses.

The deficit will hit £149.7bn thisfinancial year, the CBI forecasts – amore pessimistic outlook than themost recent predictions of the gov-ernment’s own fiscal watchdog.

And while the CBI wants a “neu-tral” budget next month, it called fora “signal” from George Osborne thatpersonal tax rates will be cut in thefuture. The UK will deter key entre-preneurs if it is seen as a high taxcountry, CBI director general JohnCridland said.

The economy will grow by 1.8 percent this year, the CBI forecast, and2.3 per cent in 2012. The forecast isdown from its previous estimate, butMcCafferty blamed changes in GDParithmetic, “rather than a fundamen-tal change in the outlook.”

BY JULIAN HARRIS

ECONOMICS▲

The economics of perpetual motion

WOW. This government has finally cracked it. It has rewritten the laws of economics: there is now such a thingas a free lunch, the elusive El Doradopursued so assiduously since timeimmemorial. I’m talking aboutGeorge Osborne’s special tax on the balance sheets of large banks operat-ing in London, hiked by another£800m to £2.5bn a year yesterday.

Please bear with me, dear reader, asI try to recount what passes for com-mon sense at the Treasury. “The banks” are back in the black, so they can afford to pay more – and given

that they remain weirdly enamoured with London, they will put up withever-higher taxes and continue as if nothing had happened. There will (of course) be no adverse effect on lend-

ing volumes, interest rates charged,the cost of services (such as advisory or fundraising work), the employ-ment of staff in London, dividendspaid to institutional shareholders oranything else that matters. The only changes will be that profit and com-pensation will be reduced (with nonegative effect on the incentives of shareholders or staff, obviously, andno knock-on effects) – and that thegovernment will collect more money. A faultless scheme, the budgetary equivalent of perpetual motion.

The Labour party agrees that taxing banks doesn’t have any disadvantagesor unintended, perverse conse-quences: it just thinks the UK shoulddo even more of it, and specifically tax profits and bonuses even harder(the government doesn’t really dis-agree; it hints it will do that if the

Merlin talks collapse). It’s a firmly entrenched new consensus, shared by most of the media and virtually all of the public, who want banks “to pay their fair share” (a moving target, but

one which it increasingly seems tomean close to 100 per cent of profitsand pay). As Voltaire’s Candide mighthave put it, it’s all for the best in the best of all possible worlds.

Ok, so I’m being just a little sarcas-tic. But how can it be assumed thatsuch a tax will have no bad effects, without any proper thought orresearch? One might have expected adetailed cost-benefit analysis to work out who would end up actually pay-ing (academic studies of tax incidenceusually reveal that consumers pick upa good chunk, and sometimes evenall, of the bill from any new tax). There has evidently been nothing of the sort – rather, the chancellor madeup the policy on the hoof ahead of akey clash with his shadow Ed Balls.

This near-universal view that finan-cial firms and their staff don’t pay

much tax is equally baseless. The toprate of direct tax on earnings above£150,000 will hit 52 per cent from April, including employee nationalinsurance contribution. Employers

must also pay a tax on jobs – employ-ers’ national insurance – of 13.8 percent. So close to 58 per cent of thetotal cost to firms of bonuses will bedirectly transferred to HMRC – with-out this contribution, the tax on therest of society would be even higher.Financial services firms paid £53.4bnin tax in 2009-10; Goldman Sachsalone paid £2.3bn in UK tax in 2010. The top one per cent of earners pay 26per cent of all income tax.

I am not a banker, have never beenone and will never be one. It’s muchmore interesting to be a newspapereditor. But if I were Bob Diamond orany of the other bank CEOs, I wouldtear up the Merlin deal and walk away. Why bother? Nothing will everassuage those baying for their blood.

[email protected] Follow me on Twitter: @allisterheath

THE former head of the London Stock Exchange, Dame Clara Furse, has beenappointed to head a government study into high-frequency trading.

The Treasury sponsored investiga-tion led by the government office forscience aims to explore the futurechallenges posed by computer generat-ed trading.

High-frequency trading caused con-cern following the “flash crash” in the

US on 6 May, when the Dow Jonesplummeted 1,000 points in 20 min-utes before recovering.

The London Stock Exchange esti-mates that more than a quarter of itstrades are executed via high-frequency systems.

Dame Clara said: “I really welcomethe opportunity to chair this impor-tant project.

“[Electronic trading] is a fundamen-tal issue for the efficiency and integri-ty of global financial markets and theeconomies they serve.”

BYRICHARD PARTINGTON

FINANCIAL MARKETS▲

Furse heads trading probe Dame Clara Furse is to head a government study into electronic trading.

NEWS | IN BRIEF

PM seeks trade driven recoveryPrime minister David Cameron will todaylaunch a plan aimed at creating the rightconditions for an export-driven economicrecovery. A trade and investment whitepaper, launched today, will encourageBritish businesses to trade abroad byimproving trade finance and insurance

products. The paper pledges more govern-ment support for exporters and increasedlobbying in Europe to improve regulation.David Cameron said: “Strong trade poli-cies and strong trade outcomes are of theutmost importance for our economy.”

Unite union to ballot BA staff The union representing British Airwayscabin crew said yesterday it planned toballot members again on taking strikeaction after saying a recent vote waspotentially invalid. Cabin crew voted lastmonth to hold further strikes. The dis-pute has cost the airline some £150m.

Warner Music results not a hitWarner Music Group posted deeperthan expected losses yesterday, sendingthe company's shares down more than11 per cent. First quarter revenue fell 14per cent to $789m (£491m).

EDITOR’S 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

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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 Editor’sCode of Practice, a copy of which can be found at www.pcc.org.uk

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CBI chief economistIan McCafferty saysthe government shouldstick to its plans forcutting the deficit

BRUSSELS URGED TO END BIG FOURDOMINANCEFour international accountancy networks have taken the unusual step of jointly calling for changes to theaudit market in Europe and arguingthat regulatory intervention is need-ed to dilute the power of the profes-sion’s biggest operators. BDOInternational, RSM International andGrant Thornton International, the world’s fifth, sixth and seventh- biggest networks by fees, according toInternational Accounting Bulletin,have allied with smaller rival Mazarsto lobby the European Commission.

TOURRE TO ARGUE US CANNOT TRYHIM FOR FRAUDFabrice Tourre, the Goldman Sachs banker facing civil fraud charges overa mortgage-backed security, will next

week ask a judge to dismiss the regu-lator’s lawsuit, arguing that US

authorities cannot pursue casesinvolving foreign investors. The move

by Mr Tourre, who branded himself “Fabulous Fab” in e-mails, is beingopposed by the Securities andExchange Commission, which filedcivil fraud allegations against himand Goldman last April.

BG WARNS OVER DEMAND FOR GAS The global energy industry faces a“huge supply” challenge to bringonline enough new gas to meetdemand, according to BG Group’schief executive. Frank Chapman saidthe industry would need $2,000bn(£1,240bn) in investment to find anddevelop gas supplies equal to 20 timesthe current production of Norway to2020.

SMARTPHONE SHIPMENTS SURPASSPCSManufacturers shipped more smart-phones than personal computers in

the fourth quarter of 2010, accordingto research.

IRISH OWNERS JOIN OXFORD STREETSALES Two prized buildings on London’sOxford Street have been put up forsale for a combined £250m, as theirIrish owners move to cash in on highinvestor interest. Boots’ flagship storeand headquarters – Sedley Place at361 Oxford Street – and JubileeHouse, let to the retailers RiverIsland, Next and New Look, are to beofficially brought to the market next week by CB Richard Ellis. A syndicateof Irish investors is thought to be sell-ing the 145-year leasehold interest inSedley Place for about £80m.

SAINSBURY’S ABANDONS HOPE OFARRIVAL AT KING’S CROSS A lack of buyers for its lavish Holbornheadquarters in Central London hasforced Sainsbury’s to abandon plans

to cut costs by relocating to King’sCross.

WIKILEAKS: NO 10 URGEDCOMMANDER TO PLAY DOWNAFGHANISTAN FAILURES A senior adviser to Gordon Brown putpressure on the commander of Natoforces in Afghanistan to play downthe “bleak and deteriorating” situa-tion to reduce criticism of his govern-ment, leaked documents disclose.Brown, the prime minister at thetime, visited the country and met GenStanley McChrystal, the US military commander.

DAVID CAMERON MEETS DAVIDHASSELHOFF IN PARLIAMENTDavid Cameron met an unlikely namesake as former Baywatch starDavid Hasselhoff took a tour of thePalace of Westminster. The PrimeMinister ran into Hasselhoff – andposed briefly for a photo –as the actor

walked near the clock tower housingBig Ben.

CITI UNITS MUST PAY $6.4M OVERMUNI-ARBITRAGE LOSS Two units of Citigroup have beenordered to pay $6.4m to a group of investors, including the head of aChicago-area investment-bankingfirm, for losses they incurred in afamily of municipal arbitrage funds. The award by a divided securitiesarbitration panel represented a par-tial victory for the investors, whoincluded D. Theodore Berghorst,chairman and chief executive of Vector Securities LLC in Deerfield Ill.

DISNEY PROFIT JUMPS 54 PER CENT,HELPED BY NETWORKS, PARKS Walt Disney’s fiscal first-quarterearnings rose 54 per cent, led by strong gains at its media networks, while its parks division benefitedfrom higher attendance and spend-

ing, and the film division got a boostfrom DVD sales of “Toy Story 3”.

WHAT THE OTHER PAPERS SAY THIS MORNING

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THE SUSPENDED executive vice chair-man of Healthcare Locums, the med-ical staffing firm, has resigned andlaunched a bid to sack the chairmanthat disciplined her.

Kate Bleasdale, who is also thefounder of the company, has used her11 per cent stake in the business to callan extraordinary general meeting tooust chairman Alan Walker, followinghis decision to suspend her after “seri-ous accounting irregularities” were

discovered at the firm.Several other key shareholders,

including Permian Master Fund, have backed the meeting which proposesthat Walker and all other directors arereplaced.

The investors, who together repre-sent over 30 per cent of voting rights inthe company, have lost faith in the

board following a steady decline inshare price.

Healthcare Locums said the develop-ment was “an welcome distraction”

with “only minority support.” The meeting could result in the

appointment of Andy McRae, the headof Healthcare Locums’ Australian busi-ness, as chief executive.

McRae previously worked forBleasdale as her chief operating officerin 2009.

Michael Sinclair, whose SinclairMontrose family investment vehiclehas links to businesses previously ran

by Bleasdale, could replace Walker asnon-executive chairman.

Healthcare Locums suspendedBleasdale, as well as finance director

Diane Jarvis, at the end of last month. The company launched an investiga-

tion into accounting irregularitiesrelating to its financial performancelast year.

The latest turmoil at the recruiterhas raised concern amongst analysts.

Adrian Kearsey, analyst at EvolutionSecurities said: “Evidence of infightingand possible interruption to the inves-tigation that this brings could well fur-ther damage the operationalperformance of the business.”

Plot to oust

Healthcare

Locums chair ANGLO Irish Bank (AIB) said it expect-ed to make a loss of €17.6bn (£10.9bn)in 2010, breaking its own record lossfor an Irish corporate, after it releasedunaudited financial information yes-terday.

The grim forecast follows “anotherexceptionally difficult twelve monthperiod for both the Bank and the Irisheconomy,” said AIB in a statement.

AIB also revealed that it has cut itsheadcount by 16 per cent over 2010 to1,296 people, yet overall costs rose 14.5per cent to €354m.

It warned that it “continues to rely on Government and monetary sup-port mechanisms” due to the gru-elling conditions in the wholesalefunding market.

The forecast loss includes impair-ment charges of €7.8bn and a loss of

€11.5bn from handing assets to NAMA. The nationalised lender, which the

government is in the process of wind-ing down, posted a loss of €12.7bn forthe 15 months to December 2009, thelargest in Irish corporate history at thetime.

The news follows Bank of Ireland’sannouncement that it is in talks withthe Irish government to help it raise itsCore Tier 1 capital up to nearly €2.2bn

before the central bank’s deadline of 28 February.

AIB predicts arecord €17.6bnloss for 2010

Suspended Kate Bleasdale wants to oust Healthcare Locums’ chairman Alan Walker.


SUPPORT SERVICES▲

BANKING▲

News 3CITYA.M. 9 FEBRUARY 2011

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GEORGE Osborne yesterday announced an £800m hike in this year’s bank levy, in a surprise movedesigned to “clear the decks” beforethe government signs a flagshipagreement on lending and bonuses with the banks.

The chancellor initially planned tointroduce the £2.5bn-a-year levy at areduced rate in 2011, yielding £1.7bnfrom the Treasury and allowing banks to rebuild their capital buffers.

But yesterday Osborne shocked the banks by announcing he would intro-duce the levy at the full rate this year,costing the industry an extra £800m.

The chancellor’s aides insisted themove had not been designed to

wrong-foot the banks, who are lockedin talks – codenamed project“Merlin” – with the government over boosting business lending this year.

One source close to the chancellor

said: “We didn’t want to agree Merlinand then subsequently announce ahigher bank levy – that isn’t in thespirit of Merlin. And we couldn’t tellthe banks privately, because the infor-mation is market sensitive.”

The source added that “everythingis out there on the table” in terms of extra taxation on banks, providingthat HSBC, RBS, Lloyds, Santanderand Barclays agree to new lending tar-gets this year.

However, aides insist the chancelloris willing to introduce further taxesshould the Merlin talks fall through.One option repeatedly talked up by the Treasury is a financial activitiestax, which would be levied on profitsand remuneration.

Sources close to the Merlin talkssaid the banks were “not overjoyed”

by the decision to hike the levy with-out consultation, but that the movehad not totally derailed the negotia-tions.

“We’re still hopeful of getting a

deal within the next week,” said onesource.

Osborne made the surprise moveafter he decided he was losing politi-cal points to Labour in the populist battle over bank remuneration. Aidesfelt he was particularly vulnerable toopposition claims he had handed the banks a “tax cut”, after they wereforced to shell out for AlistairDarling’s one-off bonus levy last year, which raised £3.2bn.

Yesterday, Osborne claimed the£2.5bn levy will raise more than the£3.2bn bonus tax, because the latterpolicy had a detrimental effect on cor-poration tax receipts.

And he pointed out that the levy – which will raise £10bn over the nextfour years – was permanent, whereasLabour’s tax was only ever intended

to be a one-off measure.However, shadow chancellor Ed

Balls dismissed the levy as a “dampsquib” and said Labour would repeatthe bonus tax if it were in power.

Merlin talks still ontarget, says TreasuryBYDAVID CROW

BANKING▲

Herbert Smith, Exchange House, Primrose Street, London, EC2A 2HS

Listen to experts from industry | Network | Learn | Debate | Enjoy

and

Focus on bank levy4 CITYA.M. 9 FEBRUARY 2011

THIS was it. The day Ed Balls had been waiting for, his first one-to-oneagainst Osborne, and you could seeit in his flushed cheeks, his tightly clasped hands, the spark of joy inhis piggy eyes. A shame then, tofluff the first joke by stumbling onthe words: “Good thing I didn’t haveone this morning,” he said of his

breakfast meetings, “or I would havemissed this morning’s hurried budget!” Not a bad line, but deliv-ered a little too eagerly, with a bittoo much mania, like a rabid dog indenial of the impending sedative.

On the government benches MPspopped up like whack-a-moles toremind the House of what “thatman” did then or what “the member over there” thought in that year.“This is a man with a past!” Osborne whined, standing stiff, as if in mid-strut, at the despatch box.

Balls sat almost trembling, cheekstaut over a grin, moving betweenincredulous leer, a chin-thrustingpout and a surprisingly constantstream of low-level heckling. “Dearoh dear!”, one of his favouriteretorts, could be heard punctuating

questions and answers. “Blimey,George!” for variety. “Talk about reg-ulation,” he said darkly at one point.

As the questions went on, he began ominously folding a piece of paper, ironing it flat between fingerand thumb as if crushing insectsand consigning it to a brown enve-lope, which he massaged closed,gazing at enemy lines, perhapsimagining George’s head in his pos-session.

“There’s new management incharge at the Treasury!” saidGeorge, winning an instantresponse as Balls restarted heckling. The chancellor otherwise sat quiet-ly. Perhaps he was beginning tosense that, for one nimble enoughto avoid its bite, a rabid animal ismore dangerous to its own pack.

Gleeful and rabid, Balls wasunable to contain his mania

CITY VIEWS: XXTRTRXRTYXRTXTRYXRTYXTR YXRTYXR? Interviews by Xxxxx Xxxxxx

“There is already a trickle-downeffect from the banks to the tax-payer anyway.And it’s hard totell how wellthought-outthis latest levyis.”

CAROLYN BENNETTAQUA FINANCIAL SOLUTIONS

“I think banks should do their bitto help the economy,and the govern-ment is raisingmoney fromwherever it canwhile it has themoral highground.”

MALCOLM FISHLLOYDS BANKING GROUP

“It’s not something that’s going tobe felt by the banks’ bottom lines,and I doubt it willimpact on theirdecision to stayin the UK. But Iam wary of atax creep onthe banks.”

PAUL NOBLEMARATHON TAX

DO YOU THINK THE BANK LEVY HIKE IS THE RIGHT THINGFOR THE GOVERNMENT TO DO? Interviews by Marion Dakers

IN ASSOCIATION WITH

Save or Borrow peer to peer at RateSetter.com

CITY COMMENT

JULIET SAMUEL

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This week: NYSEwith expert commentary on

the world’s largest stock

exchange from Paul Inkster

of Barclays Stockbrokers.

FOR THE SECOND

INSTALMENT OF OUR

GLOBAL EXCHANGES SERIES.

SEE PAGES 22-23

Focus on bank levy 5CITYA.M. 9 FEBRUARY 2011

WHAT DO YOU THINK ABOUT OSBORNE’S DECISION TOINCREASE THE BANK LEVY?

“

GRAEME LEACH | INSTITUTE OF DIRECTORS

The increase confirms our concern that the levy would ramp up overtime and risk undermining the competitiveness of the City. Let’s hope this is

the last increase.

”“

CHUKA UMUNNALABOUR

Ministers have alreadybeen boasting that the banklevy will raise £2.5bn a year, sothis is little more than a re-announcement.

”

“

ANGELA KNIGHT |BRITISH BANKERS’ ASSOCIATION

The levy is complexand will hit our most globalbanks hardest as they operateand pay tax across nationalboundaries.

”

George Osborne(main pic) and Ed Balls (below)clashed over thelevy in theCommons yesterday Pictures: PA

THE government is likely to sell itsstakes in state-backed banks LloydsBanking Group and Royal Bank of Scotland in several tranches, a sen-ior Treasury civil servant said.

“As and when these shares aresold into the market, just the sheerscale of the holdings will make this,I think, the biggest UK share saleever,” Nicholas Macpherson, perma-nent secretary to the Treasury, tolda parliamentary committee yester-day.

“I do not want to prejudge the

future, but my guess is you woulddo it in a series of tranches and you

would be very much trying to testthe market,” he said.

Asked about bonuses some RBSstaff were likely to receive, Treasury official Tom Scholar said it was nec-essary to pay market rates to keepskilled staff and, ultimately, securea decent return for taxpayers.

“Maintaining shareholder value iscritical to getting value for money for the taxpayer,” Scholar said.

“If we want to sell our sharehold-ing and make a decent return on it,

we need top quality management... because of the market in whichthese people operate, I am afraid we

have to pay them more than thePrime Minister’s salary.”

Government is likely tostagger bank stake salesBANKING

▲

CHANGES TO THE BANK LEVY

Q.WHICH BANKS WILL BE HIT BYTHE LEVY?

A. The revised levy will apply to UK banks on all equities and liabili-

ties after a £20bn allowance isreached. It applies the same rules tothe UK operations of foreign banks.

HOW MATERIAL IS TODAY’S CHANGE?Initially, the rate that banks pay will

be increased to 0.1 per cent for short-term chargeable liabilities and 0.05per cent for long-term chargeableequity and liabilities, to offset thelower top rate of 0.05 per cent and0.025 per cent respectively that wascharged in January and February.

After 30 April, this will drop back down to 0.075 per cent for short-term chargeable liabilities and0.0375 per cent for long-term charge-able equity and liabilities. Accordingto early analyst estimates the totallevy could cost HSBC £500-600m,Barclays, Lloyds and RBS about£400m, and Standard Charteredabout £100m.

HOW DOES THIS DIFFER FROMLABOUR’S ONE-OFF BONUS TAX?Labour’s bonus tax, which ran fromDecember 2009 to April 2010, applied

a 50 per cent levy toall bank bonusesover £20,000. The coali-tion’s follow-up levy, which kicked inat the start of January this year, shiftsthe charge to the bank’s whole bal-ance sheet and was initially set at0.05 per cent. Labour says its tax

brought in £3.5bn, but the coalitionclaims the actual figure was £2.3bn,once a reduction in income tax andcorporation tax receipts was takeninto account.

WHY NOW? The Treasury says that according to aDecember report on f inancial stabil-ity by the Bank of England the “near-term outlook and resilience of theUK banking sector has improved”.

This, it says, means that banks aremore able to afford the incrementalincrease, and the government hasmodified its plan to delay the fullimpact of the levy until next year.Labour will be keen to claim victory though, after leader Ed Milibandargued in mid-January that the gov-ernment was effectively handing

banks a tax cut by applying a lowerrate, making the amount raised lessthan Labour’s one-off bonus.

Q A&

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UBS EXPECTS to win more clientmoney for its wealth management

business in 2011 and sees a rebound inthe investment banking division, itsaid yesterday as it unveiled fourthquarter results.

Switzerland’s biggest bank said ithad seen improvement across private

banking in the fourth quarter -- withtotal net new money of SwFr7.1bn(£4.6bn). The bank won client cash inthe Asia Pacific and Americas regionsand among Swiss customers, but bleda small amount of assets both onshoreand offshore in Europe, where coun-tries have chased tax evaders.

Fourth quarter profit wasSwFr1.3bn, missing consensus expecta-tions of SwFr1.54bn, although this waslargely due to a series of one-offs,including a charge relating to its owncredit.

Wealth management revenues rosetwo per cent in the fourth quarter,though the unprecedented strength of

the Swiss franc partly offset increasedclient activity.

The Americas business attractedSwFr3.4bn francs of new money,demonstrating it was rebuilding clienttrust after a tax dispute that forcedUBS to hand account data to USauthorities.

UBS said its Tier 1 capital ratio roseto 17.7 per cent from 16.7 per cent theprevious quarter, and it reiterated thatit did not plan to pay a dividend for2010 or for some time to come. The

bank also cut its bonus pool by 10 percent to SwFr4.3bn.

UBS predicts

rebound asprofits rise

NAB gains on borrowing rise

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NATIONAL Australia Bank (NAB), thenation’s top lender, picked up mar-

ket share in home and businesslending in the December quarterand said it expects business creditdemand to pick up in late 2011.

NAB reported an 18 per cent risein first-quarter cash profit yesterday,

just ahead of analysts’ forecasts, onlower bad debt charges and as itsstrategy of slashing fees and keepingrates lower than rivals helped it win

new business in a subdued environ-ment.

Investors saw the result as positivefor NAB and the bank sector,although uncertainty remains over

the Australian government’s plansto curb the big banks’ clout and theregulator’s plans to implement thenew Basel III capital buffer rules.

“It does sound like NAB is gainingmarket share and growing a little

better than the system,” said Craig Young, analyst at TyndallInvestment Management.

NAB’s December quarter cash

profit of A$1.3bn (£822m) was aheadof analyst forecasts for around

A$1.23bn and put NAB on course fora record half-yearly profit.

NAB’s market share in home

loans grew by 31 basis points to 13.6per cent, while its business bankingmarket share grew by nearly onepercentage point to 23.8 per cent inthe quarter, outpacing a decline in

business lending in the banking sec-tor.

NAB reported that its capital posi-tion remains strong with a Tier 1ratio of 8.96 per cent.

BYHARRY BANKS

BANKING▲

BYHARRY BANKS

BANKING▲

SWEDISH lender Swedbank set moreaggressive targets yesterday forreturning money to investors afterreporting a bumper fourth quarter,driving its shares higher.

The bank was back in the black forthe full-year thanks to a recovery inthe crisis-hit Baltic market, whereheavy loan losses had resulted in agroup operating loss of almost 10bn

Swedish crowns (£968m) in 2009.Swedbank made an operating prof-

it in the last three months of 2010 of 3.4bn crowns, more than 20 per centabove what analysts had expected.

Swedbank will start to return someof that extra capital via a 2.10 crownsa share dividend for last year, morethan the two crowns expected by ana-lysts, after skipping payouts for 2009.

It also announced a buyback of upto 10 per cent of outstanding shares.

Swedbank plans buybackas it returns to the blackBANKING

▲


The tanker is finally facing the right way WHEN Oswald Grübel came out of retirement in February 2009 to takethe helm at UBS, he quickly set him-self gruelling targets. The bank

would be booking at least SwFr15bn(£9.7bn) in annual profits, he said, atsome point between 2012 and 2014.

After yesterday’s results, which saw the bank return to the black with aSwFr7.2bn annual profit, such a goalno longer seems laughable, althoughGrübel still faces a long slog.

The fourth quarter was one of slow but sure improvement. Although the bank missed expectations at the bot-tom line, this was largely due to a raftof one-offs, including SwFr230m of legal fees and a SwFr509m chargerelated to its own credit.

Net new money inflows across its wealth management divisionimproved markedly, standing atSwFr7.1bn in the fourth quarter, com-pared to an outflow of SwFr56.2bn a

year earlier (when fears over the UStax clampdown hit fever pitch).

And the investment bankingdepartment saw revenues more thandouble to SwFr910m againstSwFr422m in the third quarter,thanks to higher market activity andimproved market share. In the fixedincome, currencies and commodities

business, revenues grew by six percent to SwFr920m. Although head-line investment banking profitlooked meagre at SwFr75m, this wasthe division that took the SwFr509m

own credit hit. Taken together, these numbers

suggest that a nascent recovery has begun. Think of UBS as a huge army tanker, which was hurtling at highspeed in the totally wrong direction

when Grübel took the controls. Firsthe had to bring it to a halt, by stop-ping the firm hemorrhaging clientcash in the face of the US tax assaultand preceding financial crisis; thenhe had to turn it around (yesterday’snumbers suggest he has); now he hasto rev it up again.

That could prove the hardest of allthree.

BOTTOMLINEAnalysis by David Crow

Oswald Grübelcame out of retirement tolead UBS in 2009 Picture: REUTERS

ANALYSIS l UBS

17

16

15

14

SwFr

Nov Dec Jan

18.258 Feb

Fourth quarternet profit

SwFr1.3bn

Four quarterinvestment bank

pre-tax profit

SwFr75m

2010 bonus poolcut by 10 per

cent to

SwFr4.3bn

8/7/2019 Cityam 2011-02-09book


THE ABI, the voice of the UK’s insur-ance and investment industry, isonce again looking for a director of Investment Affairs following theshock decision of Jonathan Davis notto take up the role as agreed inNovember.

Davis said that his other commit-ments made it difficult for him tocommit sufficiently to the job. Davisis the founder and publisher of aninvestment publication Independent

Investor and a director of a Brazilianfarmland project called Agrifirma

Services.Davis said yesterday he was “disap-

pointed” not to be taking up the new role, where he would have succeededPeter Montagnon. But he added: “Ihave plenty of other things to do.”

Those with long memories willrecall that this is not the first timeDavis has inadvertently let downexpectant new employers.

In the 1990s the then Independentnewspaper’s business editor ChrisHuhne (now energy secretary) agreedto make Davis his City Editor only to

be told shortly before the starting

date that the new recruit would bedoing something else instead.


TWO hedge fund managers werearrested on insider trading charges yes-terday, while another portfolio manag-er and an analyst agreed to plead guilty in connection with the probe, the lat-est development in a broad investiga-tion of hedge funds’ trading activities.

The charges were announced by fed-eral prosecutors, who are investigatingthe ties between hedge funds and con-sultants for so-called expert network-ing firms that are accused of improperly leaking confidential corpo-rate information to investors.

The latest charges involve a portfoliomanager and an analyst who bothonce worked for hedge fund titan SACCapital Advisors. SAC itself has not

been charged with any wrongdoing. Yesterday’s charges mark the expan-

sion of the probe beyond expert net- working firm consultants andemployees to hedge fund employees

who allegedly were recipients of secrettips on technology stocks. Expert net-

working firms match industry consult-ants to hedge funds seeking

background on certain sectors.Hedge fund managers Sam Barai,

head of Barai Capital Management,and Donald Longueuil, who previously

worked for SAC and later for a fund notidentified in court documents, werearrested, authorities said.

The other defendants, who havereached plea deals according to courtdocuments, are portfolio managerNoah Freeman, a former analyst athedge fund Sonar Capital in Bostonand later a portfolio manager at SACCapital, and Jason Pflaum, an analyst

who worked with Barai.Barai, a former hedge fund manag-

ing director at Citigroup’s Tribeca

Global Management, launched BaraiCapital Management in 2008. Thefund, which focuses on technology andmedia companies, is in the process of closing.

US hedgies hitin insider caseBYHARRY BANKS

HEDGE FUNDS▲

GERMAN carmakers BMW and Audihave reported record January sales,

boosted by demand for luxury vehi-cles in Russia and China.

Audi, the high-end brand owned by Volkswagen, said it deliveredaround 95,400 cars to customers

worldwide last month, an increaseof 22.6 per cent on the same periodlast year.

Munich-based BMW, the world’s biggest luxury car manufacturer,saw sales increase 28 per cent lastmonth.

It delivered 105,177 cars and sport-utility vehicles worldwide in

January, up from 82,150 for the sameperiod a year earlier.

The strong sales come as global

demand for premium cars acceler-ates, despite tough trading condi-tions across much of Europe.

Audi sales in Russia jumped 48.4per cent in January compared to thesame period a year earlier, whilstsales in China rose 32.1 per cent.

Audio sales chief PeSchwarzenbauer said: “based on thecurrent order situation, we expect astrong first quarter in 2011.”

BMW experienced a 70.4 per centincrease on January sales in Chinaon the previous year, shifting 20,308Mini and own-branded cars.

The carmaker’s sales and market-ing boss, Ian Roberston, said: “We

want to reinforce our global positionas the leading supplier of premiumautomobiles.

“We expect growth rates to remainstrong over the next few months.”


MANUFACTURING▲

BYDAVID HELLIER

INVESTMENT▲

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It’s a No Show for Davis,the ABI’s new non-recruit

BRAZIL AND RUSSIA HURT AVON’S SALES

AVON Products the world’s largest direct seller of cosmetics, posted a steeper-than-expected drop in quarterly profit yesterday, hurt by poor performance in Brazil and Russia. Avon, led by Andrea Jung (above), earned $229.5m (£142.6m), or 53 cents per share, inthe quarter, down from $269.4m, or 62 cents per share, a year earlier.

McDonald’sboosted byEuropeans

MCDONALD’S yesterday reported astronger-than-expected sales reboundin January in Europe, its biggest mar-ket for revenue.

Sales at restaurants in Europe openat least 13 months jumped seven percent last month, well above the 3.7 percent analysts had expected. This wasalso a significant improvement fromDecember, when sales in Europe fell0.5 per cent, rattling investors who

worry that austerity measures will cutinto spending in the region that con-tributes about 40 per cent of McDonald’s revenue.

Worldwide, McDonald’s Januarysame-restaurant sales were up 5.3 per-cent, above the 4.4 per cent analysts

had expected. In the US, where highunemployment continues to weigh onthe fast-food business, sales rose 3.1per cent –below the 4.4 per cent gainforecast by analysts.

BYHARRY BANKS

CONSUMER▲

8/7/2019 Cityam 2011-02-09book


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8/7/2019 Cityam 2011-02-09book


The Capitalist10 CITYA.M. 9 FEBRUARY 2011

EDITED BY

JULIET SAMUELGOT A STORY? [email protected]

“HEAVY business” in the House of

Lords detained former HSBC chair-man Stephen Green, but the British-Israel Chambers of Commercepartied on anyway last night at theBritish-Israeli business awards din-ner.

Universities minister David Willetts stepped into the breach withGreen’s speech in hand to extol theUK economy’s virtues as an exporterof everything “from whiskey tofinance” (and their intersection, nodoubt).

Taking the opportunity to make

fun of his absent peer, he recalledone lord who, upon arriving at theHouse of Lords had demanded: “And what is the pension?”

The confused stewards looked atone another. “The House of Lords isthe pension,” they said. “But maybeStephen doesn’t need that arrange-ment,” Willetts observed wryly.

His speech, and a generous maincourse, gave ample time for starspeaker Shai Agassi, founder of Better Place, the world’s biggest elec-

tric car company, to write what

appeared to be his speech on a scrapof paper at the top table.

But the notes scribbled under the wing of a model EL Al airlines planeplaced amid the flowers on eachtable didn’t prevent him from wow-ing the international crowd of busi-nessfolk ranging from hoteliers toshipping magnates.

Agassi didn’t quite ditch the jacketand roll up the sleeves Blair-style, buthe shunned the podium in favour of a free-form motivational talk: “The

Stone Age didn’t end because they ran out of stones,” he exclaimed.“And we will not end the oil age by running out of oil but by findingsomething better.”

But he was keen to reassure the

business-minded audience: “I didn’tstart as a greenie. I’m a capitalist pig,”he said, although he couldn’t resist adig at big oil, referring to his compa-ny, Better Place, as “the other BP”.

Most of the illustrious crowdmight have been revved up by Agassi’s optimism, but it didn’t takeeverywhere, it seems – ex-Lloydschairman Sir Victor Blank was seensnoozing into his napkin.

No such rest for Lord Green: hehad a vote to cast.

Left: Nick Fletcher,chief executive of Saunderson Housewith Marc Worth,CEO of Stylus MediaGroup and incoming chairman of the

British-IsraelChamber of Commerce.

Left: Tory treasurer Howard Leigh withbillionaire Vincent Tchenguiz.

Right: Two grand- sons of shipping

magnate SammyOfer either side of acheerful Bank Leumi

UK chief executive Larry Weiss (centre).

Far right top fromleft: Mike King,

Martin de Forest- Brown and Senator Freddy Cohen, all of

the Jersey government.

GOING GREEN AS GREEN GOES AWOL

Top: David Willetts MP, universities minister. Below: ex-Lloyds chairman Sir Victor

Blank with Tim Fallowfield, company secretary of Sainsbury’s.

8/7/2019 Cityam 2011-02-09book


MINER Xstrata beat expectations tomore than quadruple its pre-tax profitin 2010, the firm said yesterday, on the

back of a runaway rise in commodity prices.

Xstrata’s pre-tax profit rose to $6.6bn(£4.1bn) up from $1.53bn a year ago, onrevenues that rose 34 per cent to$30.5bn.

Copper prices, which have jumped30 per cent in the last 12 months, con-tributed $2.2bn to Xstrata’s $7.7bnoperating profit, which was 75 per centup on last year.

The firm unveiled a higher thanexpected dividend payment for the

year, to 25 cents compared to eightcents a year ago, in a demonstration of the board’s confidence in its plans forthe year.

Sanford Bernstein analyst PaulGalloway said the dividend “puts down

a marker for cash return for other min-ing companies”.Xstrata repeated its plans to increase

overall production by 50 per cent before the end of 2014, and said it wason track to continue 20 new or expand-ing projects in 2011.

Xstrata said last week that thermalproduction had been hit by the f lood-ing in Queensland, Australia, but chief executive Mick Davis said yesterday theoutlook was less bleak. “As we stand atthe moment we do not see any signifi-cant impact on 2011 results,” he said.

Mining rivals Rio Tinto and BHPBilliton are due to report results onthe 10 and 16 February respectively.

Xstrata posts$6bn profit ascopper soarsBYMARION DAKERS

MINING▲

GAS explorer BG Group beat analystforecasts yesterday with a 13 per centrise in fourth-quarter earnings, withhigher gas and oil prices offsetting adip in production.

Earnings for the last three monthsof 2010 rose 13 per cent to $1.06bn,(£659m) though pre-tax profit fell 2.7per cent to $1.45bn on last year,

including charges from disposals andimpairments.Revenues rose one per cent to

$4.3bn, supporting an 11 per cent risefor the year to $17.2bn.

Production volumes fell slightly short of forecasts, falling two per centin the quarter to 60.7m barrels of oilequivalent, but a 22 per cent rise inglobal gas prices more than made upfor the drop.

The firm has raised its full-year div-

idend by 10 per cent to 21.6 cents pershare and repeated its goal to grow by six to eight per cent a year until 2020after raising estimates for its US shalegas and Brazilian explorations.

Morgan Stanley said: “Investors canfocus on what is again an exceptional-ly positive strategy update… targetsand resource numbers have not just

been reiterated, but in many casesraised by some margin.”

BG shares rose 2.1 per cent to 1,470p.

BG Group offsets productiondrop with higher gas pricesBYMARION DAKERS

ENERGY▲


Xstrata chief executive Mick Davis said the Queensland floods would not impact 2011 results

ANALYSIS l Xstrata

1550

1475

1400

1325

1250

p

8 Nov 26 Nov 16 Dec 10 Jan 28 Jan

1,492.508 Feb

$6.6bnpre-tax profit -up 331 per cent

$30.5bnTotal revenue- up 34 per cent

$2.2bnout of $7.7bn operating profitfrom copper price rise

$7.6bnnet debt - down38 per cent

$10bncashgeneration 20 New projects now

under construction

2010 RESULTS

8/7/2019 Cityam 2011-02-09book


LLOYD’S insurer Beazley is still eyeingdeals despite paying out $60m(£37.2m) in dividends and keeping a$20m chest for potential share buy-

backs, chief executive Andrew Hortontold City A.M. yesterday.

Beazley’s share price rose morethan 6.6 per cent to 127.7p after itreported a 60 per cent rise in pre-taxprofit and a 21.4 per cent return onequity in its 2010 results.

But while it remains keen on M&A after its failed bid for rival Hardy Underwriting last year, Horton said itis not targeting Lloyd’s two currentlikely sales, Chaucer and Novae.

“Novae and Chaucer are in lines of business that we don’t understandand don’t have an interest in goinginto,” he said.

Beazley will focus instead on Lloyd’ssyndicates that match its strengths inproperty, marine and specialty insur-ance and firms in the US, where it

writes 60 per cent of its premiums.

“We are big in the US and in Lloyd’sso we would definitely look at both of those. We also want to increase ourEuropean footprint,” he said.

In its 25th unbroken year of prof-itability it saw pre-tax profit rise to$250.8m, up from $158.1m in 2009,delivering 27.4p earnings per shareand paying a 10p total dividend.

Beazley, which wrote $1.7bn in pre-miums in 2010, saw growth in rein-surance, US data breach insurance,energy insurance – after BP’s

Transocean spill – and in life, acci-dent and health lines.

Beazley eyes

M&A afterstellar results

Hands joins Chaucer bid fray

GUY Hands’ Terra Firma buyouthouse confirmed it was in the bid

race for Lloyd’s insurer Chaucer yes-terday following feverish speculationover the potential bidders.

Sources familiar with the situationtold City A.M. that at least one further

bidder is also in talks with the insur-ance company.

A US trade buyer is reportedly intakeover talks, while US private equi-ty firms are also in discussions over

making a bid, the sources said.In a statement, Terra Firma said it

“notes the recent speculation con-cerning a possible offer for Chaucerand confirms that it is currently con-

sidering making an offer for theentire issued and to be issued sharecapital of Chaucer.”

Chaucer, which has a market capi-talisation of about £300m, has

bounced back from a tough recessionthat saw it lose £72m of assets in thefinancial crisis and resort to a £75mrescue rights issue in 2009.

It is now considered a well-man-

aged firm and has been a sales targetfor two years, with names such as BritInsurance, Amlin and Novae alllinked to merger talks.

Private equity firm Pamplona

Capital owns 9.9 per cent, but alsohas an interest over a further six percent stake previously owned by UShedge fund Och Ziff. However, theFinancial Services Authority has notallowed Pamplona, which is financed

by Russia’s Alfa Bank, to raise its stakein Chaucer above ten per cent.

Private equity firms have a growinginterest in insurers.

BYALISON LOCK

INSURANCE▲

BYALISON LOCK

INSURANCE▲


Beazley chief executive Andrew Horton

NEWS | IN BRIEF

Senator calls for SEC hack probeA key lawmaker called on US securitiesregulators to work with criminal author-ities to crack down on hackers followingreports that cyber attackers haverepeatedly tried to break into tradingsystems run by Nasdaq OMX Group.

Senator Bob Menendez, a Democratfrom New Jersey and a member of theSenate Banking Committee, sent a letterto the Securities and ExchangeCommission urging the agency to take acloser look into hacking incidents andwhat can be done to prevent them.

US enviro review of drillingThe US Interior Department said yester-day it will conduct a review on the envi-ronmental impact of leasing certain oiland natural gas tracts in the Gulf of Mexico as part of its next five-yeardrilling plan. The environmental impactstatement will cover all proposed leasesales that would be held off the coastsof Texas, Louisiana, Mississippi andAlabama during the 2012-2017 period.The Obama administration previouslypulled tracts in Florida waters and off the Atlantic Coast for future drillingbecause of safety concerns raised afterlast year’s BP oil spill in the Gulf of Mexico.

WaMu rejigs its bankruptcy planWashington Mutual yesterday scrappeda rights offering after hedge fundspulled out of a settlement at the heartof the company’s latest plan to exitbankruptcy. The company is trying toresolve the criticisms of a bankruptcycourt judge, who rejected the previousplan last month. Washington Mutualneeds approval so it can begin distribut-ing over $7bn (£4.4bn) to creditors.

ANALYSIS l Beazley

123

119

115

111

108

p


127.708 Feb

ANALYST VIEWS: DID BEAZLEY’S RESULTSMEET YOUR EXPECTATIONS? Interviews by Alison Lock

“

NICK JOHNSON | NUMIS

The return on equity in a difficult year vividly high-lights the quality of Beazley’s underwriting. These results willlook relatively better and better as its peers report.

”

“

JOANNA PARSONS | RBS

These were good results. We now expect morequestions on the group’s strategic aims post-Hardy, as wellas its $240m surplus and unused bank facilities.

”

“

STUART DUNCAN | PEEL HUNT

The special dividend was slightly lower than hopedbut it produced an impressive combined ratio and its liquidinvestment portfolio is well positioned for rate rises.

”

William Hill: bought in 1997 for £700mBought by Nomura when Hands ran its pri-vate equity arm. Hands tried to float it in1999 but abandoned the plan after a lack of interest. Sold to CVC Partners and Cinvenfor £825m for negligible return.

Thresher: bought in 2000 for £225mBought by Hands in his Nomura days, the

off-licence chain was sold to a private equi-ty consortium in June 2007. Hands made anundisclosed sum said to be a small profit onthe buy price.

Le Meridien: bought in 2001 for £1.9bnThe hotel chain was bought in a highly-leveraged deal just before the slump in trav-el post-9/11. In 2003, creditor banks took

TIMELINE | GUY HANDS’ PREVIOUS INVESTMENTS

control of it and restructured and re-capi-talised it. Finance providers were paid backby 2005 and it was sold to a trade buyer.

Odeon & UCI: bought in 2004 for£582mHands merged two cinema firms to createEurope’s largest chain. The company is nowvalued at about £1bn. Private equity firms

reported to have bid for it last year butHands said no sale process was under way.

EMI: bought in 2007 for £4.2bnBought at the height of the buyout boomwith £2.6bn of debt from Citigroup. Cititook control of it this year after its debtreached an unsustainable £3.4bn and willsell it. Terra Firma investors lost £1.75bn.

8/7/2019 Cityam 2011-02-09book


TALKTALK lost 25,000 broadband sub-scribers in its third quarter, as prob-lems with its labyrinthine mergercontinued to bite.

Billing issues were at least partly responsible for the churn, which left

TalkTalk with 4.22m subscribers.However, the firm said this was

partly offset by an increase in averagerevenue per user.

Customers spent an average of

£24.90, up from £23.80 a year earlier,keeping revenues flat at £444m.

The company reaffirmed its guid-ance of growing revenue for the year

by six to eight per cent, helped by unbundling its customers from BT’sexchanges, which enables it to keepmore revenue.

Around 85 per cent of customersare now unbundled with Hardingaiming for 93 per cent by 2013.

Harding said the company wouldstep up the promotion of its mobile

services, which operate on Vodafone’snetwork, and would add YouView tel-evision when the internet-connected

TV service launches later this year.Chief executive Dido Harding said:

“One of the reasons why we are notfocused on driving our customer baseup is the opportunity to increase ourrevenue as customers take more prod-ucts from us.

“We are seeing our average revenueper user growing on the back of morecustomers taking our fully unbun-dled phone and broadband package.”

Revenue flatat TalkTalk asusers leaveBY STEVE DINNEEN

TELECOMS▲

NewsCITYA.M. 9 FEBRUARY 2011 13

ANALYSIS l TalkTalk

170

160

150

140

130

p


154.008 Feb

DIDO Harding is a keen racehorseowner whose horse Cool Dawn

won the Cheltenham Gold Cup in1998.

But perhaps the biggest gambleof her career was leaving the sectorshe had become synonymous withto take the reins at TalkTalk.

Harding made her name insupermarkets, first as an executiveat Tesco, which she left in 2007 tohead up Sainsbury’s conveniencestore division.

She took the TalkTalk helm afterit was demerged from Carphone

Warehouse at the start of last year.It is thought her appointment

was recommended by another Tesco graduate, John Gildersleeve, with the other demerged firm –BestBuy Europe – also being run by

former Tesco high-flyer Scott Wheway.

Harding had a food backgrounddating back far beyond Tesco. Shegrew up on a working farm inDorset, specialising in pigs andcider apples.

She studied politics, philoso-phy and economics at Oxford

before completing an MBA at Harvard.

Before Tesco she held senior

management positions at Woolworths, Kingfisher and Thomas Cook. She has also servedon the board of property company British Land.

She has long been marked as ashrewd businesswoman, named inseveral surveys as a leading light of British executivetalent.

BY STEVE DINNEEN

PROFILE▲

Dido’s gamble meanswhite flag isn’t likely

DIDO HARDING, TALKTALK

NEWS | IN BRIEF

Wolfson continues recoveryWolfson Microelectronics continued torecover in the fourth quarter as its chipswere designed into more products in thefast-growing smartphone, gaming andebook sectors. Wolfson, whose chips arein Samsung’s Galaxy S smartphone andAmazon’s Kindle ebook reader, reported

underlying operating profit of $1.3m(£800,000), against a $4.3m loss a yearago, on revenue up 67 per cent to $46m.The group said it expects revenue forthe first quarter of 2011 to be between$38m and $44m.

ARM suffers after bad noteARM shares dropped 2.62 per cent yes-terday after Barclays Capital downgrad-ed the stock from ‘overweight’ to‘equalweight’, saying that, for the firsttime in years, the firm’s stock was fairlyvalued. He also raised his target for thestock from 370p to 650p. The down-grade followed a massive sale of stockby ARM chief technology officer MikeMuller, who raised over £2m by selling350,000 shares at 579p each.

CCC to sell $750m in notesPrivate equity-owned radio and outdoordisplays company Clear Channel

Communications plans to sell $750m(£467m) of notes due 2021, it said in afiling with the Securities and ExchangeCommission yesterday. It also said it isseeking to amend its senior securedcredit facilities in part to give it greaterflexibility to incur new debt. SanAntonio-based Clear Channel, bought byprivate equity firms THL and BainCapital in 2008 in a $17.9bn leveragedbuyout, said it would use proceeds fromthe offering in part to repay debt due in2011.

8/7/2019 Cityam 2011-02-09book


PREMIER Foods yesterday said that itsold its canned grocery division –including the brands Crosse &Blackwell and Fray Bentos – to rivalPrinces.

The £182m deal is aimed at cuttingPremier’s debt and is the second dis-posal in less than a month after thecompany sold its Quorn business for£205m.

Premier said it also sold the busi-ness because it wanted to concentrateprimarily on branded products, suchas Mr Kipling cakes and Bisto gravy.

The company yesterday dismissedsuggestions it had appointed advisersto help sell its Hovis business.

Premier’s canned grocery divisionhas two manufacturing sites inLincolnshire and Cambridge, andemploys 1,600 people.

The deal cuts Premier’s debt to below £1bn from its peak of £1.7bn

in 2008. The company will report resultsnext week with analysts expectingannual earnings of around £300m.

Premier chief executive RobertSchofield said: “Selling the (cannedgrocery operations) simplifies ouroperations and allows us to concen-trate our efforts on our current port-folio of great British brands.”

Meanwhile Princes said it was notplanning any job cuts as result of thedeal.

Premier Foods sells off can division to Princes

BY JOHN DUNNECONSUMER▲

Consumer News14 CITYA.M. 9 FEBRUARY 2011

Premier chief executive Robert Schofield has canned the tins

STAMFORD Partners specialises in theEuropean food and drink and relatedconsumer industries.

It has offices in London andAmsterdam and founder RaymondDuignan was in charge of the PremierFoods deal. The company prides itself on the personal touch and close con-tacts in the industry.The Bristol University and Sorbonne

educated executive set up the compa-ny in 1997. He previously worked forCitibank and before that NatWestMarkets. He has worked on deals forthe likes of Unilever and Pepsico.

RAYMOND

DUIGNAN

STAMFORD

CAPITAL

8/7/2019 Cityam 2011-02-09book


TOUR operator Thomas Cook warned yesterday that political unrest in holi-day destinations Egypt and Tunisia

would dent second-quarter profits by around £20m.

Cities in Egypt including Cairo, Alexandria, Luxor and Suez have become virtual no-go zones fortourists, starving the travel firm of

valuable revenue from the area. Themisery has been exacerbated afterriots in Tunisia also took their toll.

Thomas Cook’s first quarter figuresto 31 December showed revenues upseven per cent to £1.8bn.

The company sells a million holi-days to Egypt and an estimated600,000 to Tunisia every year.

Chief executive Manny Fontenla-Novoa said: “The situation in Tunisiaand Egypt is fast-moving and ourprincipal concern is for the well-beingand safety of our customers.

“We continue to monitor the situa-tion closely and contingency planshave been implemented to redirectour holiday programme to other des-tinations and help mitigate the finan-cial impact.”

On a more upbeat note, the compa-ny said that summer bookings for2011 were healthy. In the UK they areup six per cent and average sellingprices up five per cent –the highest of any of its markets, it said.

The company recently announcedplans to axe 500 back-office roles inthe UK to help cut costs by up to£50m.

Rival and Thomson Holidays owner TUI Travel said last week that the dis-ruption in the two countries couldcost it up to £30m in lost earningsafter it it was forced to cancel trips.

Thomas Cook’s merger with theCo-op’s travel outlets has beenreferred to competition watchdogsand is under review.

Thomas Cook

in £20m blowfrom unrest

POLITICAL instability in Africa is beginning to affect revenues at AirFrance-KLM, the airline group warned

yesterday, despite reporting a 4.8 percent rise in overall January passengertraffic.

Europe’s largest airline group by sales said the proportion of seats sold,or passenger load factor, rose 1.1 per-

centage points to 79.2 per cent in January. The growth in traffic out-stripped a 3.3 per cent rise in capacity,or seats on offer.

Growth was boosted by afavourable comparison with January last year when operations were hit by snow and a two-day air traffic controlstrike. January cargo traffic rose 3.4per cent on a 3.3 per cent increase incapacity and the load factor forfreight was stable at 64.3 per cent.

Howcan theCoalitionget Britaingrowing?

MAJOR CONFERENCEMonday 14th February, 1pm until 5pm, 2011

Commonwealth Club, Westminster

Keynote Speakers:DAVID WILLETTS MP,

Minister for Universitiesand Science at the

Department for Business,Innovation and Skills.

DAVID GAUKE MP,Exchequer Secretary to the

Treasury. JOHN REDWOOD MP,

Chairman of theBackbench Conservative

Committee on EconomicPolicy.

The day will conclude with a Q&A

session with an expert panel:

GRAEME LEACH, Chief Economistat the Institute of Directors;MARK LITTLEWOOD, DirectorGeneral of the Institute of

Economic Affairs and former Headof Media for the Liberal Democrats;IAIN MARTIN, Deputy Editor of

the Wall Street Journal Europe.NADHIM ZAHAWI MP, Member of the House of Commons SelectCommittee on Business.

WHAT DOES GEORGE

OSBORNE NEEDTO DO TOHELP BRITISH

BUSINESSCOMPETE IN

THE WORLD?

One month before GeorgeOsborne’s second Budget the

‘Going for Growth’ half-dayconference will examine whether the Coalition has the right business-friendly policies onbanks, tax, education and skills,infrastructure, science,immigration and regulation.

Tickets for theConservativeIntelligence Conferencecan be purchased at £119 via Amiando.com/GoingforGrowth.htmlif you enter Promotion Code CORP01or by calling 020 7227 0427.

Air France-KLM ishit by Africa crisis

BY JOHN DUNNE

LEISURE▲

Manny Fontenla- Novoa said summer bookings werelooking positiveafter a winter hit by unrest in somekey holidaydestinations.

Picture: REX

BYHARRY BANKSAVIATION▲

Consumer News 15CITYA.M. 9 FEBRUARY 2011

NEWS | IN BRIEF

Fitness First eyes floatLondon-based private equity firm BCPartners has appointed three banks tomanage its £1bn float of gym chainFitness First. Credit Suisse, JP Morganand Asian-based bank CLSA will overseethe planned flotation on the Singaporestock market in a move that will be ablow to the London Stock Exchange.The appointment of the three bankscomes as BC Partners attempts tofinalise its own efforts to raise €6bn(£5bn) for a new spending fund.The flotation is due to launch in the thirdquarter of this year and will leave theprivate equity firm with more than 60per cent of the l isted group.

WH Smith buys 22 new shopsWH Smith expanded its high street pres-ence yesterday as it spent £1.05m on 22

stores from the administrators of failedretailer British Bookshops and

Stationers. The company, which beganlife as Sussex Stationers in 1938, calledin Zolfo Cooper in January after strug-gling with snow and cashflow difficul-ties. Smiths will add the stores and staff to its 573 existing High Street outlets.

McBride hit by rising costsA second wave of commodity priceincreases and a deteriorating Britishgrocery market will hit profits at clean-ing products maker McBride, it said yes-terday. McBride, Europe’s biggest makerof own-brand household cleaning prod-ucts for retailers, said a surge in theprice of plastics and vegetable oils inrecent weeks could add around £7m toits costs in the second half of its fiscalyear, after an £8m hit in the first half.“In recent weeks, we’ve seen a secondwave coming ... an additional raw mate-

rial spike which we will have to dealwith,” said chief executive Chris Bull.

ANALYSIS l Thomas Cook

205.0

197.5

190.0

182.5

175.0

p


197.808 Feb

8/7/2019 Cityam 2011-02-09book


Economics16 CITYA.M. 9 FEBRUARY 2011

INFLATION in UK shops rose to 2.5 percent in January – from 2.1 per cent inDecember -- despite retailers absorbingmuch of the hike in VAT, a comprehen-sive survey revealed today.

Even more price pressure could spillthrough to consumers in the comingmonths, the British Retail Consortium warned.

“Retailers generally took the VAT hiton behalf of customers,” said the BRC’sStephen Robertson.

“But with a range of other cost pres-sures squeezing margins, retailers willstruggle to go on absorbing it.”

The annualised rate of inflation fornon-food goods was up by just a fifthof a per cent, to 1.3 per cent.

The bulk of the rise was due to spik-ing food prices, which increased 4.6per cent compared to January 2010 –the sharpest rise for 19 months.

“The rise in food inflation is beingdriven by surging food commodities inglobal markets,” the report said.

“On the demand side, the growth inconsumption from emerging

economies continues to push priceshigher -- in particular, economicgrowth in China, India and Brazil.”

In China, food inflation topped 10per cent in November to push con-sumer price inflation to 5.1 per cent.

And yesterday the Chinese central bank responded to inflationary pres-sures by increasing interest rates by aquarter-point to 6.06 per cent, its sec-ond increase in just over a month.

“The January CPI must have hit afresh high,” speculated Shenzhen- based economist Xu Biao.

In the UK, many observers expectthe Bank of England to follow suit andincrease rates. Fixed mortgages ratesrose to a six month high, Moneyfactsrevealed yesterday, as lenders price inan expected increase in the Bank rate.

WEALTH MANAGEMENT: P20-21

FRENCH business confidence spikedto a three-year high in January, theBank of France revealed yesterday.

The surge prompted the Bank toforecast growth of 0.8 per cent for thefirst quarter of this year.

Such an expansion in GDP would be the fastest quarterly growth rate inseven years and more than double what many analysts are forecasting.

The index for French industry morale, gathered for the Bank,

jumped to 110, from 107 in January.In services, the indicator rose abovethe 100 mark to 101, from December’sscore of 99.

“These numbers confirm that therecovery is still on track in the secondlargest economy of the Eurozone,”responded ING’s Oscar Bernal.

“We expect GDP growth in Franceto remain just below two per cent this year,” he added. Although some econ-omists consider this too ambitious,president Nicolas Sarkozy’s conserva-

tive government has based its 2011 budget on a growth rate of two per

cent.Meanwhile, the Eurozone’s largest

economy, Germany, suffered a severeknock from the December snow.Industrial production fell by 1.5 percent compared to November, largely due to a devastating 24.1 per centcrash in construction – a “weather-related” shock, according to Ben May of Capital Economics.

“Despite this disappointment, theindustry was the backbone of theGerman recovery last year, growing

by almost 10 per cent,” added ING’sCarsten Brzeski.

French businesses start the year on ahigh as German industry is hit by snow

AMERICA’S monetary stimulusshould be withdrawn at the “earliestsign” of core inflation pressures tak-ing hold, Richard Fisher of theFederal Reserve said last night.

And no extension of quantitativeeasing (QE2) is warranted, he said. It was “hard to envision a scenario where I would not formally dissentagainst another tranche of monetary accommodation,” Fisher stated.

Fisher’s Fed colleague Jeffrey Lacker added to the hawkish sounds

at a separate meeting in Delaware. The Fed should halt QE2 once the

recovery is strong enough, Lackersaid. “The distinct improvement inthe economic outlook since the pro-gram was initiated suggests takingthat re-evaluation [of bond purchas-ing] quite seriously,” he said.

However, in yet another speech by asenior Fed official, Dennis Lockhartplayed down the risk of inflation, sug-gest a reverse of QE2 was unnecessary.

“Underlying inflation is currently

below the level that I would define asprice stability,” he said.

Quantitative easing muststop, say top Fed officials

US ECONOMY▲

VAT shock yet

to be passedto consumersBY JULIAN HARRIS

WORLD ECONOMY▲

BY JULIAN HARRIS

EUROZONE ECONOMY▲

China’s online shoppers set confident example

THE British online consumer is asnegative about the domestic eco-nomic outlook for the nexttwelve months as the Chinese

online consumer is positive, accordingto Bloomberg/YouGov’s HouseholdEconomic Activity Tracker (Heat).

Fifty-four per cent of Chineserespondents to Bloomberg/YouGov’sonline poll of consumers answeredthat they expected their householdfinancial situation to improve over the

next twelve months, compared with20 per cent of British people polled. Infact, a majority (51 per cent) of Britishconsumers expected their householdfinancial situation to get worse overthe coming year, while only 14 percent of Chinese feared the same.

These contrasting attitudes wereconsistent with each nation’s expecta-tions on the future value of its homes.Chinese homeowners are much more bullish – with homeowners expectingthe price of their dwelling to increasesix per cent over the next 12 months

versus UK homeowners who each believe their homes will fall three percent in value over the same period.

More striking is the uniformity of opinion in China. In the UK, 54 per

cent of homeowners expect prices tofall versus 34 per cent expecting anincrease (net -20); China, though, sees84 per cent expecting an increase ver-sus seven per cent expecting adecrease. The 12-to-1 difference of opin-ion in China gives a reason for pause. The near-unanimity among China’sconsumers prompts speculation thatChina’s real estate surge is peaking.Prices rose nearly 50 per cent in Beijingsince 2006, and the government intro-duced China’s first home-ownershiptax in the cities of Chongqing and

Shanghai on 28 January.Bloomberg//YouGov interviewed

online consumers across the UK andChina during December and January (a representative sample of internet

users were interviewed in each) on a

broad range of macroeconomic andmicroeconomic behaviour. Results were weighted to both online popula-tions to make them comparable.Stephan Shakespeare is founder and chief

executive of YouGov.

ANALYSIS l Government spending in the last two fiscal years

53

51

49

47

45

£bn

Source: Reuters EcoWin / Fathom

2010/11

2009/10

JunApr Aug Oct Dec Feb

NEWS | IN BRIEF

Businesses need help to exportMore needs to be done to get Britishcompanies exporting, the British

Chambers of Commerce (BCC) saidtoday. In a survey of 8,000 companies,nearly 70 per cent were not current orlikely exporters, it said. And among com-panies that do export, 15 per cent stillface difficulties accessing trade financeand insurance. Most businesses – 65 percent – were unaware of the government’sExport Credits Guarantee Department,the BCC found. “Too many of our compa-nies lack an exporting culture, eventhough they produce high quality goodsand services,” said the BCC’s David Frost.

Britons downbeat over economyPeople in emerging markets are amongthe most optimistic about the economicrecovery in the world, research fromIpsos MORI revealed yesterday. Overhalf the respondents in two of the“BRIC” nations – Brazil (78 per cent)and India (61 per cent) – expect theireconomy to get stronger in the next sixmonths. In China 44 per anticipate eco-nomic strengthening. Britons were farmore pessimistic, with only 13 per centrating the economy as “good” and onlyone in 10 optimistic about the future of their local economy. In Europe, people inGermany and Sweden were the mostpositive in their economic outlook.

American job openings slowUS job openings slipped in December,according to official data released yes-terday, but a decline in layoffs supportedviews of a gradual labour market recov-ery. Job openings, a measure of labourdemand, eased 139,000 to 3.1m, accord-ing to a monthly labour market survey.“Yet the overall trend of this series stillappears to be upward,” said TheresaChen of Barclay’s Capital.

BRANDINDEX

STEPHAN SHAKESPEARE

FAILING to reduce the government’sdeficit could see bond markets rapidly closing in against the UK, a City basedeconomic forecaster will say today.

And costs of servicing the govern-ment’s debt will soon exceed publicspending on education, according tofinancial consultancy Fathom, whichholds its monetary policy forum inLondon this morning.

Servicing general government debt will cost £57.8bn by 2013-14, it said, at which point education spending willhave increased to £56.6bn.Government spending has continuedto rise in this financial year.

Describing the austerity measuresas “essential and urgent,” the forecastdismissed shadow chancellor Ed Balls’call for a “Plan B” that relaxes fiscalconsolidation.

“We have very little time for thosearguments,” it said.

Public debt payments toexceed education budget

BY JULIAN HARRIS

UK ECONOMY▲

Zhou Xiaochuan’s Bankof China increasedinterest rates againyesterday, to tacklerising inflation.

UK

China

100 20 30 40 50 60

ANALYSIS l Expected change in householdfinancial situation, 12 months from now

Better No Change Worse

UK

China

12 Nov200 40 60 80 100

ANALYSIS l Expected change in valueof current dwelling

Down 11%+ Down 1-10%

Up 1-10% Up 11%+

8/7/2019 Cityam 2011-02-09book



TOYOTA has lifted its annual fore-casts beyond market expectationsas cost cuts and sales exceeded itsplans, but a heavy reliance onexports will keep it a laggard aslong as the yen stays strong.

The world’s top automaker post-ed a smaller-than-expected fall inthird quarter profits and hiked itssales forecast for the year to 31March by 70,000 vehicles to 7.48m,thanks to better than expectedsales in Asia, Japan and Russia.

It kept its forecasts unchanged inNorth America, however, as uncer-tainty over the impact of its worst-ever recall lingers, and losses in its Japanese operations continue.

Toyota, which stayed ahead of General Motors as the world’s biggest automaker by a thinnermargin last year, lifted its operat-ing profit forecast for the year to550bn yen (£4.2bn) from 380bn yen, well above the 489bn yen con-sensus in a survey of 23 analysts.

Toyota expects cost-cutting toadd 170bn yen to annual operatingprofit, 30bn yen more than it hadexpected three months ago, andalso expects to save 20bn yen by trimming research and develop-ment and other spending.

“Our efforts to improve our prof-itability came through faster than we expected,” said senior manag-ing director Takahiko Ijichi. “Our break-even point has undoubtedly fallen and our earnings power is

gradually improving.”Underlining its exposure to the

yen, which hit a 15-year highagainst the dollar in the October toDecember reporting period, themaker of the Prius hybrid andCorolla sedan built nearly 3.3m vehicles in Japan.

Toyota lifts outlookdespite fall in profitBYHARRY BANKS

AUTOMOTIVE▲

TEVA Pharmaceutical Industries,the world’s biggest maker of generic drugs, reported a one-third rise in adjusted quarterly earnings that fell short of fore-casts as US generic sales slipped.

As expected, Teva saw strongsales of its branded multiple scle-rosis (MS) drug Copaxone, whichraked in a record $938m (£582m)in the period, up 26 per cent year-on-year.

Copaxone, given by injectionand the leading MS therapy in

the US and globally, now facescompetition from Novartis’s new pill Gilenya.

“Copaxone will be with us formany years and it will be prof-itable,” chief executive Shlomo Yanai said yesterday.

“It won’t last forever becausetechnological advances bringnew products, includingLaquinimod.”

Teva’s quarterly net income before certain items was $1.25per share, up 33 per cent on the

2009 period, on sales up 16 percent at $4.4bn.

Teva earnings fail to hitforecasts as sales slipPHARMA▲

NEWS | IN BRIEF

Faurecia shows strong growthFrench car parts maker Faurecia postedstrong growth in Asia and North andSouth American sales yesterday and saidit would focus on expanding in thosemarkets, sending its shares to a three-year high. Posting its first full-year netprofit in four years, the maker of seats,

exhausts and emissions control systemssaid 2010 total sales rose 48 per cent to€13.80bn (£11.7bn).

Elan expects earnings jumpIrish drugmaker Elan expects to post a20 per cent jump in 2011 adjusted coreearnings after a five per cent increase in2010 revenue and cost cuts enabled it torecord its first operating profit since2001. Elan, in which US group Johnson& Johnson is an 18 per cent shareholder,reported a five per cent increase in full-year revenue to $1.2bn (£745m) yester-day, close to the $1.16bn forecast.

Statoil misses forecastsPetrol and convenience-food sellerStatoil Fuel & Retail fell short of fourth-quarter profit expectations as motoristsin Scandinavia and eastern Europe failedto hit the road with much enthusiasmeven as their economies recover.

The company’s shares fell 1.7 per cent inearly trading after it posted quarterlyadjusted earnings of 729m crowns($125.9m) before income tax, deprecia-tion and amortisation.

RECORD GAINS FOR OPTIMISTIC SWATCH

SWATCH Group, the world’s largest watchmaker, said yesterday that it was confident on 2011 despite the strong Swiss franc after strong demand for its timepieces in Asia helpedit post a record net profit for 2010. Net profit rose 42 per cent to SwFr1.08bn (£649m)compared to the previous year.

ARCELORMITTAL, the world’s largeststeelmaker, has forecast a faster thanexpected recovery in demand andprices at the start of 2011 after a mar-gin squeeze in the fourth quarter.

The Luxembourg-based company, which makes six to seven per cent of the world’s steel, said yesterday coreprofit would improve in the firstquarter by more than the marketconsensus, following an unexpectednet loss in the final three months of 2010.

Finance chief Aditya Mittal said ArcelorMittal was seeing a strong

recovery in the US, moderate growthin China and restocking in Europeeven though end-user demand was barely increasing there.

Mittal said the company expected

2011 to be a better year than 2010 and would raise capital expenditure by more than 50 per cent this year.

He said the second quarter should be stronger than the first, when ArcelorMittal’s furnaces would runat 76 per cent of capacity, compared with 69 per cent at the end of 2010.

ArcelorMittal, whose production ismore than double that of its nearestrival, said it expected core profit torise to between $2bn (£1.2bn) and$2.5bn in the first quarter after aslump to $1.85bn in the final quarterof 2010.

Arcelor predictsrise in core revenue

after 2010 slumpBYHARRY BANKS

INDUSTRIALS▲

Aditya Mittal said the

steelmaker is expect-ing to raise capitalexpenditure by 50 percent this year

ANALYSIS l Toyota

3,600

3,400

3,200

3,000

¥


3,490.008 Feb

NORWAY’S Telenor took a freshswipe at its estranged Russian affil-iate Vimpelcom yesterday as itreported earnings, saying the com-pany has taken its eye off the ball athome as it pursues expansionabroad.

Telenor’s adjusted earnings were7.18bn crowns (£769m) in Octoberto December, compared with6.93bn a year earlier and a 6.92bnaverage forecast.

Telenor is battling to stop 36 percent-owned Vimpelcom’s bid to buy

Italian mobile group Wind and con-trol of Egypt’s Orascom Telecom.

Telenor upbeaton 2011 gains

TELECOMS▲

8/7/2019 Cityam 2011-02-09book


Syndicate Asset ManagementThe fund management group’s wealth

management subsidiary, SavoyInvestment Management, is expandingits team in Stockport by hiring James

Bowles.He was previously responsible for

new business development with theAnglo Irish Bank.

Niche GroupThe investment company has made

Nigel Little non-executive chairmanwith immediate effect, replacingChristopher Stainforth.

Earlier, Little was vice-chairman of Canaccord Capital and executive presi-dent of its UK and European operations.

Renaissance Asset ManagersInvestment management firm

Renaissance Asset Managers has hiredSimon Fentham-Fletcher as director of portfolio management, private clientgroup based in Moscow. Fletcher joinsfrom Raiffeisen.

Barclays Corporate

The corporate banking division hasstrengthened its cash managementteam with the appointment of RicardoSoto, Joerg Pinkernell and RavindraMadduri to key senior roles.

Soto joins as head of internationalliquidity management, Pinkernell joinsas global head of financial institutionproduct management, and Madduri will

head up Barclays Corporate solutionsadvisory function for corporate cashmanagement across the globe.

Alexander ProudfootThe operational improvement consul-tancy has appointed John Sharman to

head its global procurement practice.Sharman joins Alexander Proudfoot fol-lowing five years as a senior level con-sultant on operational issues, gainingexperience over a range of industry sec-tors.

Prior to that, he spent thirty years atIBM, where he became global procure-ment practice executive.

CITY MOVES | WHO’S SWITCHING JOBS Edited by Juliet Samuel

Alvarez & MarsalThe global professional services and turn-around consulting firm managing the LehmanBrothers Holdings bankruptcy has strength-ened its European financial services groupwith the appointment of managing directorNils Melngailis (pictured), who joins from

Parex Bank.Senior directors Agnès Hugot and Jose deOchoa and senior associates Heiko Logisch andArdeshir Mistri also join the firm.

+44 (0)20 7557 7245morganmckinley.com

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

in association with

Dow rise fuelledby McDonald’s lift

THE Dow notched a seventh-straight day of gains yesterday, but light volume suggested thatinvestors don’t believe the more

than five-month rally has the legs tokeep going.

Surprisingly strong sales by

McDonald’s boosted optimism onconsumer spending and drove theDow’s gains on what turned out to bethe quietest day of trading so far in2011, with total volume about 17 percent below last year’s daily average.

The light volume, “textbook wise,tells you this market is running onfumes,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York. “But that doesn’t mean it can’tcontinue.”

Weakness in energy shares limitedgains in the S&P 500 and Nasdaq afterChina, the world’s second-biggestenergy consumer, raised interest ratesfor the second time in six weeks. Themove pressured commodities on fearsof lower demand but had little mar-ket impact outside that sector.

McDonald’s shares surged 2.6 percent to $75.36 after its January same-store sales beat expectations, led by a

rebound in European demand. TheS&P consumer discretionary index

was up 1.2 per cent and was by far thetop performer among S&P sectors.

The Dow Jones industrial average was up 71.52 points, or 0.59 per cent,at 12,233.15. The Standard & Poor’s500 Index was up 5.52 points, or 0.42per cent, at 1,324.57. The NasdaqComposite Index was up 13.06 points,or 0.47 per cent, at 2,797.05.

Just 6.99bn shares traded on theNew York Stock Exchange, the American Stock Exchange anNasdaq, well below last year’s daily average of 8.47bn.

In extended trading, Dow compo-

nent Walt Disney shares jumped 3.2per cent after it reported forecast- beating first-quarter earnings and rev-enue, as consumers travelled to itstheme parks and businesses boughtup ad time on its T V networks.

The S&P energy sector was by farthe weakest S&P sector, down 0.5 percent. US crude for March delivery set-tled down 0.6 per cent.

Merger activity continued for a sec-ond straight day with KindredHealthcare’s planned acquisition of RehabCare Group to create a post-acute healthcare services company.

Kindred Healthcare jumped 28.3per cent to $25.00 and RehabCaresoared 45.5 per cent to $37.05.

On the downside, US-listed sharesof generic drugmaker TevaPharmaceutical Industries’ fell 5.4 percent to $52.02 after it reported resultsthat fell short of forecasts. Avon

Productsposted a steeper-than-expect-ed drop in quarterly profit.

BRITAIN’S leading share index

jumped higher yesterday, end-ing at levels not seen since May 2008, supported by rallies from

banks and miners, and by gains inenergy issues following results fromBG Group.

At the close, the FTSE 100 index

was up 40.30 points, or 0.7 per cent at6,091.33, its fifth gain in the last sixtrading sessions.

Banks were higher, led by part-nationalised Lloyds Banking Groupup 2.1 per cent, sidestepping newsthat Britain has slapped an extra£800m tax on lenders.

The British government said yeser-day it will impose the full amount of a planned levy on bank balancesheets this year, instead of phasing itin.

“It is likely to remain more of apolitical football than one actually affecting investors’ views towards themajor UK banks,” said Ben Critchley, asales trader at IG Index.

Integrated oils also lent theirstrength to the blue chips, led by BGGroup which gained 2.1 per cent afterposting forecast-beating fourth-quar-ter results.

Miners rallied after early falls, withAfrican Barrick Gold up 3.4 per cent

as the gold price rose on short-cover-ing, and as a surprise rate hike fromtop commodity consumer China wasshrugged aside.

“The move by China to hike interestrates ... is a move to curb spirallinginflation and normalise growth, notimpede it,” said Joshua Raymond,market strategist at City Index.

Raymond noted that traders con-tinued to buy into both mining and banking weakness, despite the raterise, indicating a “bullish bias”.

“That said, whilst the US marketscontinue to hit new 52-week highs

and the DAX hits a new three yearhigh, the FTSE 100 is stuck in a trad-ing range. Traders are likely to needto see the FTSE break out of its cur-rent range and trade consistently above nearest resistance levels of 6,117 before they can be convincedthat the UK Index can follow itsEuropean and US peers,” he added.

Xstrata gained 1.7 percent after theminer beat forecasts with an 86 per-cent jump in full-year profit onstronger commodity prices, gave apositive outlook for 2011, and set itsfinal dividend at 20 cents.

“This reflects a return to pre-finan-cial crisis levels and confidence in themedium-term outlook, and under-scores our buy recommendation,”said Daniel Harris, head of dealing atCFD and spread betting firm H2OMarkets.

Among individual stocks, engineer

GKN was the top blue chip gainer, up5.6 per cent reflecting strength in

European carmakers ahead of upcom-ing sector results, and vague underly-ing bid speculation, said traders.

Smiths Group, ahead 2.1 per cent,also saw a return of bid chatter, withUS firm Honeywell once again seen asa possible predator, traders said.

Inmarsat added 3.6 per cent asHarbinger Capital Partners sold itsremaining stake in the satellites oper-ator, clearing an issue overhangingthe stock, and prompting upgradesfrom BofA Merrill Lynch andGoldman Sachs. Retailer Marks &Spencer rose 3.8 per cent after poach-

ing Tesco’s Laura Wade-Gery to headup its Internet business. Tesco fell 1.5per cent on the move.

Oil explorer Cairn Energy was a top blue chip faller, down 2.4 per cent.India wants state-run Oil and NaturalGas Corp’s concerns over royalties to be addressed before approving a$9.6bn sale of control of Cairn India’sassets to Vedanta Resources. India-focused miner Vedanta shed 0.8 percent.

FTSE shrugs off bank levy taxas it surges to 32-month highTHELONDONREPORT

THENEW YORKREPORT

ANALYSIS l FTSE

6,100

5,950

5,800

5,650

5,500

p


6,091.338 Feb

BEST OF THE BROKERS To appear in Best of the Brokers email your research to [email protected]

ANALYSIS l Shire Plc

1,550

1,500

1,600

1,650

1,700

17 Nov 19 Jan7 Dec 29 Dec

p1,692.00

8 Feb

SHIREJP Morgan Cazenove (JPM) rates the pharma group “neutral” with a£16.40 price target. The broker expects revenue growth forecasts of around 12 per cent when the firm reports fourth quarter results tomor-row, along with margin expansion of around 200 basis points. For thequarter, JPM expects revenue of $910m (£565.9m) and core operatingprofit of $260m, slightly ahead of consensus estimates.

ANALYSIS l BNP Paribas

50

46

54

58

17 Nov 14 Jan 3 Feb7 Dec 27 Dec

€56.81

8 Feb

BNP PARIBASStandard & Poor’s rates the bank “buy” with an increased 12-month tar-get price of €70 (£59.31) ahead of BNP’s fourth-quarter results on 17February. The broker believes BNP’s diversified business model and recentefforts to reduce risk put the group in a good position for the economicrecovery. S&P adds that BNP is the least-affected French bank after theBasel III rules, given its 9.0 per cent Tier 1 core capital ratio.

ANALYSIS l Tesco

410

400

420

430

440

17 Nov 19 Jan7 Dec 29 Dec

p396.00

8 Feb

TESCOSeymour Pierce rates the grocer “buy” with a target price of 480p. Thebroker sees the loss of online chief Laura Wade-Gery, who has beenpoached by M&S, as a real blow for Tesco that opens up questions aboutcracks at the top of the business. Seymour Pierce believes Wade-Gery wasa potential future candidate for the chief executive role, and had alreadybeen picked to run the commercial side of non-food at Tesco.


8/7/2019 Cityam 2011-02-09book


these are good housekeeping tips for any business.

BUSINESS PLANSBut most, if not nearly all, law firms of any size already do all of these things.

Some better, some worse. We have goneon the Harvard/Cranfield/AN-Other busi-ness school training at vast expense. Wehave analysed our clients and writtendetailed strategic business plans. We havesenior strategy meetings and pore overdetailed diagrams showing client valueand profitability. We outsource office serv-ices and employ professional office man-agers. Why? Because lawyers are businesspeople just like their clients.

The article truly refers only to those law practices where the “pile it high, sell itcheap” approach will work. Quill tippedconveyancing pens scratching in the can-dlelight which can be done in bulk by “Tesco Law”, cheaply outsourced to India. The mythical legal factory in an industrialpark. If it was such a good idea why haven’t things gone that way already? It was possible before the Legal Services Act. And for many of those who have tried thatmodel it has not always been a happy

experience. Remember conveyancing wholesalers Hammonds Direct? They

went into administration. The truth is that most legal firms do

not do this kind of work. And if they do,they add value with services that areeither deeply personal or provide wideradvice and guidance. More the adviser or

friend than the conveyancer. In the City,most law firms undertake bespoke com-plex work that would not fit into a Tesco, buy-it-off-the-shelf model. Clients will notand do not pay for piles of documents.Good lawyers don’t just draft – indeed the best lawyers draft very little.

In my own firm, I spend far more timeadvising on how complex finance is to beraised in different ways to the past, con-necting clients with people they need toknow for the future success of their busi-ness, thoughtful solutions to tricky busi-ness problems and making it easier for businesses to operate day to day. My expe-rience is that there are two key themes tomaking money: the trusted adviser andthe innovator.

Trusted business adviser has been thedominant theme for most establishedfirms for the last few years. It meansunderstanding your client’s business,making sure that you are helping them to

make the right decisions for their busi-ness. Not just legally but in terms of mar-

ket trends and opportunities. It means being involved in planning and strategy,not just execution. Giving strategicadvice. Not just responsive advice.

Innovation and creativity are not wordsgenerally associated with lawyers! Yet to

lead the market, lawyers have to beextremely creative and innovative to helpcreate new products and find ways to gen-erate wealth for our clients. Last week, I won a major legal award for innovation(the “Hot100”). My innovation is to set outa blueprint for bringing new sources of finance into housing associations whenpublic money is in short supply. In addi-tion, I designed a legal structure for aclient where you can buy a home withouta deposit or conventional mortgage.

When mortgage funding is scarce andfirst time buyers can’t raise a largedeposit, and where it doesn’t look likethat situation will change very quickly,new ways of getting people into homeownership are required. We achieved thisthrough collaboration and cross-practicegroup thinking. As a firm we aren't alonein creating solutions for our clients and itis time that the outdated perception of the legal sector changes.

Natalie Elphicke is a partner at Stephenson Harwood. [email protected]

Lawyers are bad at business? Think again

Business Features | Law19

Clarity on plea bargaining is needed

Innospec with the SFO and the US author-ities. He expressed that it will “rarely beappropriate for criminal conduct by acompany to be dealt with by means of acivil recovery order” and suggested that it was constitutionally unsound of the SFOto have agreed a division of the penalty (the SFO accepted $12.7m of the totalpenalty) with the US authorities.

This was soon followed by the case of Robert Dougall, a former executive of DePuy International Limited who wasinvolved in unauthorised payments toGreek healthcare officials. At first

instance, Mr Justice Bean refused to pay heed to the agreement reached betweenthe whistleblower and the SFO andimposed a custodial sentence. While thatdecision was overturned by the UK Courtof Appeal, it too also cast doubt on the useof plea agreements. The Lord Chief Justice,Lord Judge, said that an agreement on sen-tencing was not envisaged in the Attorney General’s guidelines on plea negotiations:“Responsibility for the sentencing deci-sion in cases of fraud or corruption is vest-ed exclusively in the sentencing court.”

In October 2010, the case of JulianMessant, a former insurance broker forPWS International Limited, appeared toreflect a change of heart, with the UK court accepting the terms of an agree-ment with the SFO and sentencingMessant to 21 months imprisonment forhis role in a series of corrupt payments toCosta Rican officials. But things swung back the other way once again with thecontroversial BAE Systems case, whichconcluded just before Christmas, whichonce again saw the judiciary criticising what was described as a “loosely and per-haps hastily drafted” deal with the SFO which saw BAE pleading guilty to account-

Good solicitors don’t just draft,they innovate and advise too

THIS paper recently ran an article

warning that for lawyers “doom isnigh” and that they should shapeup or ship out. The context was the

Legal Services Act and its welcome shakeup of the way in which legal services can be delivered.

The article had many solid, good mes-sages: in summary, cutting overheads andoffice costs, analysing profitable andunprofitable clients, understanding

clients’ businesses and planning yourgrowth in harmony with their own. And

ing errors in exchange for a £500,000 fineand £29.28m compensation to Tanzania.

While the UK courts in all of these caseseventually upheld the agreementsentered into with the SFO, the criticismsand comments create doubt as to whetheragreements entered into with the SFO(and international regulators) will always be accepted by the judiciary. Unless anduntil the SFO clarifies its guidelines inlight of these decisions, corporates caught within the scope of the UK anti-bribery regime are left in limbo as to whether self-reporting is the best strategy. This state of uncertainty will only increase when theBribery Act 2010 finally comes into force,

given that the scope of the Act is extreme-ly broad and key areas of it will be left toprosecutorial discretion.

Richard Alderman, Director of the SFO,recently commented that he would like tosee judges either taking part in the pleanegotiations or supervising the process. Whether the UK judiciary would acceptsuch input remains to be seen and basedon present judicial comment appearsunlikely, however it certainly appears to be a sensible and pragmatic way to lendsome clarity to the perplexing world of plea bargaining with the UK authorities.

Alistair Graham and Sona Ganatra work for City law firm White & Case

Carrots: to be

served with sticks

Picture: SXC

WHATEVER the final shape of theBribery Act, which was onceagain delayed last week, onearea that needs to be clarified is

the question of plea bargaining. A numberof cases have sown confusion in the mindsof British businesses. Clarity on plea bar-gaining is now sorely needed.

The confusion dates to July 2009 when,following the earlier successful negotia-tion of a multi-million pound settlement by Balfour Beatty, the SFO formally announced that it wanted companies toself report misconduct. As a “carrot”, the

SFO proffered the possibility of civil ratherthan criminal sanctions.

The benefits of such co-operation areclear. It provides corporates embroiled in wrongdoing greater control over the inves-tigation and the ultimate sanctionsimposed; it speeds up the process of inves-tigation; and, importantly, opens up thepossibility of global settlements withdomestic and international regulators. The ability to negotiate a civil sanction isespecially important for those operatingin the public sector, given the conse-quence of debarment from public con-tracts for those convicted of criminaloffences.

Despite the SFO’s best efforts to encour-age co-operation, however, the ability tonegotiate a plea is riddled with uncertain-ty given the UK judiciary’s reluctance toaccept the SFO’s power to enter into suchagreements.

In March 2010, the British chemicalfirm Innospec pleaded guilty to conspira-cy to corrupt in relation to the introduc-tion of lead-free fuel in Indonesia and Iraqin exchange for a total penalty of $40.2m.But Lord Justice Thomas criticised theglobal settlement that had been agreed by

NATALIE ELPHICKE

British business are currently in judiciallimbo and the Bribery Act will not help,write Alistair Graham and Sona Ganatra

8/7/2019 Cityam 2011-02-09book


Getting a rise out of

the Bank of England

AUSSIE PARITYIS DEPENDENT

ON JOBS DATABORIS SCHLOSSBERGDIRECTOR OF CURRENCY RESEARCH, GFT

Donata Huggins asks if FX traders should begoing long on sterlingO

VER the past months the land down under hasbeen hit by climatological disasters of near bibli-cal proportions. At the start of the year, eco-nomic activity in the state of Queensland was

brought to a virtual standstill after floods covered anarea larger than France and Germany combined with ablanket of water. Then a cyclone nearly as big as thecontinental United States swept through, wreakingfurther havoc. However, when the dust settled, thedamage from all of the disasters was relatively minor,totalling approximately AUD$20bn. The impact on thecurrency markets was smaller still, with the Aussiequickly recovering to surge above parity once again.

The Reserve Bank of Australia’s (RBA) persistentlyhawkish bias has been the primary reason for the unit’s

surprising strength. Last week, the Australian centralbank signaled that it will largely look past the recentnatural disasters and focus on the “medium prospectsfor economic activity and inflation”. Traders interpret-ed that by pricing in yet another 25 basis point ratehike by May.

However, the currency markets may be too opti-mistic about the prospects for another rate increase.Australian domestic demand has been tepid, with theretail sales figures on Monday printing at 0.2 per centversus 0.5 per cent forecast.

Despite the lacklustre conditions of the retail front,labour markets remain vibrant, with ANZ job adver-tisements rising by 2.4 per cent from 1.2 per cent themonth prior. Labour demand will be the key factor indetermining the RBA’s view on rates as the centralbank carefully analyses the latest employment num-bers due tonight at 12.30am. If the labour data showsfurther job creation, the RBA will ignore the weak retailsales numbers as a temporary slowdown and will mostlikely maintain its hawkish posture. On the other hand,if the employment data misses its mark of generating20,000 new jobs or, worse yet, shows an unexpectedcontraction, the Aussie could see a much more signifi-cant correction, dropping back below parity as traderstemper their expectations of any RBA hikes in the fore-seeable future.

tion could start to spiral as workersdemand higher wages, leading to higherprices.

The market certainly thinks the MPC’shand will be forced by September. Shortsterling September future contracts havepriced in a 1.25 per cent rise, and marketshave priced in a 100 per cent chance of a0.25 per cent increase by May.

IG Index’s chief currency strategist,David Jones warns that going long on ster-ling-dollar in the hope of a rise might not

be that simple: “It’s a tug of war for atten-tion. The US economy is doing better thanthe British economy, so depending on thenews, currency will flow between the two.”

Currency traders keen to make a profit

should watch out for the flow of the news, but keep their eye on inflation. A rate risemight not come on Thursday, but mostthink it is coming soon.

S TERLING bulls are probably the only group of people who love inflationright now. Traders have been flock-ing into the pound in anticipation of

a rate rise since May. Those eager rate-risersnow pin their hopes on the two votes for arise on the Monetary Policy Committee(MPC): Andrew Sentance and Martin Weale.Since the last meeting, the gap between the

inflation rate and the target has widenedto 0.4 per cent, supporting calls for a raterise. The last quarter’s GDP figure was ashocker, but sterling has been climbingagainst the dollar over the last month (seechart below), leaving traders wondering if they should be jumping aboard this rally ahead of Thursday’s big MPC meeting.

The question is: is a rate hike feasible? The MPC would need three extra membersto tip the scales in favour of raising rates.Investec economist, Philip Shaw, says: “Inour view it is not impossible, but it does notlook likely.” If there were to be a shift,Investec analysis says it will probably comefrom Paul Tucker, Spencer Dale and DavidMiles since the rest of the committee havegone on the record suggesting that they still support Mervyn King’s argument overthe last few weeks. Neil Mellor, a currency strategist at the Bank of New York Mellon,says: “The committee really want to keeprates on hold to see if their argument will

bear out. For want of a better way to phraseit, they’re too embarrassed to make a U-turn this quickly.”

The shadow MPC of the Institute of Economic Affairs thinks the official ratesetters are going to have to raise rates soon.

They voted earlier this week 5-4 for a 50 basis point rate increase in the official UK bank rate to 1 per cent. The five economists who said it was time to raise rates arguedthat if the off icial committee did not moveto deal with inflation their credibility

would be damaged and they fear that inf la-

The Monetary Policycommittee meets onThursday

ANALYSIS l The performance of sterling-dollarover the last month

1.60

1.61

1.59

1.58

1.57

1.56

24 Jan17 Jan 31 Jan

$

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Wealth Management | ForexCITYA.M. 9 FEBRUARY 2011

8/7/2019 Cityam 2011-02-09book


FOREX ANALYST PICKS

FOREX STRATEGISTILYA SPIVAK

My pick: Short euro-US dollarExpertise: Global macroAverage time frame of trades: 1 week to 6 months

My pick: Long dollar-yen at ¥82.75. Short euro-kiwi dollar at NZ$1.7525

Expertise: Fundamental and technical analysis and risk managementAverage time frame of trades: 1 day to 1 week

My sterling-yen short from last week would have come within a stone’sthrow of hitting its target; but was instead stopped out; while the

Australian dollar-US dollar short never materialised. Trading conditions maystruggle for trends in the week ahead; but there is opportunity out there. Ilike a shorter-term US dollar-yen breakout with a 100 point buffer; while aeuro-New Zealand dollar reversal below NZ$1.7525 can handle a 125-point

stop and first target.

The recent rally in EURUSD looks corrective, with prices retesting support-turned-resistance at a rising trend line set from the swing low in June. The

61.8 per cent Fibonacci retracement of the downswing from December’sswing high ($1.3741) reinforces the upside barrier. A pair of Doji candles belowthis juncture points to indecision. I will look for a corrective bounce toward$1.3730 to look for an attractive opportunity to enter short, initially targetingthe $1.30 figure with a stop on a daily close above $1.3860.

FOREX STRATEGISTJOEL KRUGER

My pick: Short Kiwi dollar-US dollar at $0.7735Expertise: Technical analysisAverage time frame of trades: 1 to 6 weeks

Rallies continue to be very well capped above $0.7800 and the markethas once again stalled out above the figure in favor of yet another

bearish reversal. From here, we see risks for additional declinestowards $0.7525 over the coming sessions, with any intraday ralliesexpected to be well capped ahead of $0.7750 on a close basis. Below$0.7525 should accelerate declines and open the door for deeper set-backs.

FOREX STRATEGISTJOHN KICKLIGHTER

21CITYA.M. 9 FEBRUARY 2011 Wealth Management | Foreign Exchange

CHINESE interest rate rises are, itseems, rather like coffee. The effectgets smaller with each extra dose. When the People’s Bank of China

(PBoC) first announced an interest rateincrease in mid-October last year, the trade- weighted dollar strengthened 1.7 per cent. The second rate rise, announced onChristmas day, produced a smaller reac-tion, but still something. Yesterday, howev-

er, the PBoC raised interest rates by afurther 25 basis points and the markets barely budged. Only the Australian dollardipped back, by about 0.5 per cent againstthe US dollar.

Yet the World Bank estimates that a 1 percent drop in Chinese growth would cutglobal growth by 0.5 per cent. Are traders alittle too sanguine about China’s tighten-ing shift?

Probably not. As Stephen Gallo, head of market analysis at Schneider ForeignExchange said: “It’s only 25 basis points. A 50 or 100 basis point rise might have had aneffect, but not 25.” Gallo argues that whileearlier rate rises signalled a significantreversal of China’s monetary stimulus,markets mostly interpreted yesterday’s riseas part of an ongoing (and anticipated)trend of tightening. As a result, the implica-tions for commodity prices, and for Chinasensitive currencies such as the Australianand Kiwi dollars, were small.

Kit Juckes, a foreign exchange strategistat Societe Generale, said much the samething: “It’s going to take a lot more thanthis to shake us out of stupor . . . China’smonetary policy is not tight. An interestrate rise is just plain sensible.” Juckesargues that the reactions to rate hikes inDecember and October actually providedtraders “a chance to get stuck in” and buy commodity currencies. Yesterday’s surprise

move thus failed to change much. As Richard Wiltshire of ETX Capital said,

“The fact that the PBoC has successfully delivered two interest rate increases inthree months should serve to answer somedoubt about the Chinese government’sability to ‘fine-tune’ the economy in 2011.” Wiltshire even suggests that the Chinesegovernment perhaps ought to really betightening further. “The Chinese authori-ties have been reluctant to tighten mone-tary policy because they are worried aboutthe rising financial burden on projectsstarted under the stimulus, and about capi-tal inflows.”

But Gallo argues that further rate hikesare now quite likely. “Traders are making amistake if they’re don’t see this as an appe-tiser,” he said. “The Chinese are deeply wor-ried about inflation, and especially foodprice inflation. They’re going to control itas best they can.” Gallo argues that it is very risky buying into currencies like the

SPECULATION about Swedish interest

rates and growth has pushed theSwedish krona to a 10-year highagainst the euro. The krona has been

attracting investors as Sweden’s budget sur-plus in January came in higher than forecastsand the belief is that interest rates will risefaster than the Eurozone. This has been a longlasting trend but on the hourly chart euro-krona has just broken back above its 20-peri-od moving average. This is a sign a reboundcould be imminent. Capital Spreads quotes aprice of 8.7657kr–8.7737kr.

A successful auction of Greek T-bonds yes-terday helped bolster confidence in the euroalthough euro-dollar remains somewhatbelow last week's highs. Although on the faceof it the Eurozone sovereign debt concerns doseem to be fading, there's clearly still a lot of battles to be fought by those nations on theperiphery to get spending under control. Thiscould easily ensure gains remain modest forthe time being. The current IG Index price oneuro-dollar is $1.3660-$1.3662.

Since a weather-driven GDP contraction inthe fourth quarter of 2010, sterling pairshave rallied strongly –all against a backdropof continuously elevated inflation. Thismonth’s MPC’s decision will be crucial notonly for the economy but also for the Bank’scredibility. In the recent past, the MPC hasnot shied away from surprising against allexpectations which indicates a willingness toact, even if that action creates adversevolatility in the financial markets.

Futures markets are pricing in a 20 percent chance of a rate rise this week and a100 per cent chance of a hike by 5 May. Priceaction is likely to be most extensive in ster-ling-yen and euro-sterling given Japan’s ultra-low policy stance and the European CentralBank’s hesitation to take firmer policy stepslast week. The Alpari UK spread on euro-ster-ling is £0.8484–£0.8486. On sterling-yen,Alpari UK offers a spread of ¥132.45–¥132.47.

Daniel Knowles

THE

TIPSTER

THE SWEDISHKRONA IS ONTHE WAY UP

The screws aretightening, but it’snot torture yetChina’s interest rate rise yesterday failed toshock the forex markets, says Daniel Knowles

Australian dollar, at least in the short run. “By the second quarter, the Aussie could drop to$0.97.” But that seems unlikely to happen all thatsoon. Traders will just have to keep watching –sometimes kicks can take a while to get going.

You get used to itfast

Picture: SXC

ANALYSIS l The Chinese inflation rate has been much higher10

8

6

4

2

0

-2Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011

Source TradingEconomics.com

% per year

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Wealth Management22 CITYA.M. 9 FEBRUARY 2011

The New York Stock Exchange,or NYSE, is the world’s largeststock exchange by market capi-talisation.

Figures from December 2010 show that the value of its 3,923 listed com-panies was $13.39 trillion (£8.31 tril-lion).

This in itself makes it an exchangethat should not be ignored by UK investors looking for global diversifi-cation.

The origins of NYSE can be tracedto 1792, when the Buttonwood Agreement was signed by 24 stockbrokers under a buttonwood tree on Wall Street, hence the name.

In 1817, it was renamed the New York Stock Exchange & Board, becoming simply the New York Stock Exchange in 1863.

It is now operated by NYSEEuronext, which was formed by theNYSE's 2007 merger with Europeanstock exchange company Euronext.

NYSE Euronext manages sevenequities exchanges and seven deriva-

tives exchanges in five countries,including France, Belgium and TheNetherlands.

The total market capitalisation of NYSE Euronext-listed companiesaround the world was at $22.2 tril-lion at the end of September 2010, while its equity exchanges transactan average daily trading value of approximately $96bn as of 30September 2010.

When it comes to companies,NYSE Euronext markets offer theopportunity to trade in more than8,000 issues from 55 countries, with70 of the world’s 100 largest compa-nies listed on its markets.

Among these are many of thelargest US companies, includinghousehold names such asMcDonald’s and Walmart.

But it is not just US-based compa-nies that recognise the value of list-ing on an exchange with the size anddepth of NYSE.

Many of the largest companiesfrom around the world choose to list

and trade on NYSE due to theamount of liquidity in the market.

HSBC and oil giant BP are just twoof the well-known UK companies with dual listings in London andNew York, and many companieschoose it as the location of their ini-tial public offerings (IPO).

Christiaan Brakman of NYSEEuronext said: “The liquidity of NYSEmakes it one of the leading marketsfor IPOs, simply due to the amountof money available.

In the second part of our series on globalexchanges, Jessica Bown examines what

the world’s largest exchange has to offer

The world lists in New YorkUS and Chinese firms mix onthe NYSE, writes Jessica Bown

America is home to many of the world’s biggest compa-nies. However, as mentionedabove, NYSE Euronext has a

truly global reach.Leading business from Asia, Latin

America and Europe choose theexchange for their primary or sec-ondary listings.

And this includes many of theUK’s largest blue chip businesses.

The top five UK companies listedon NYSE in terms of market capitali-sation are: miner BHP Billiton, which has a market cap of $264.45bn; Royal Dutch Shell at$215.00bn; HSBC at $199.19bn; BP at$145.80bn; and Rio Tinto at$145.07bn.

Most of these companies, leadersin their fields, are well known to UK investors.

However, while the names of someof the biggest US companies – Exxon

Mobil, Walmart, Chevron andGeneral Electric – may be familiar,other such as financial servicesgiant Berkshire Hathaway are per-haps less well known outside the US.

Other large US-based NYSE list-ings include pharmaceuticals com-pany Johnson & Johnson, Bank of America, McDonald’s and invest-ment bank JPMorgan Chase.

Meanwhile, Chinese companiesthat can be traded on the exchangeand are currently being tipped by analysts include fairly recententrant to the market China Ming Yang Wind Power Group, internet

content and marketing firm BitautoHldg Ltd and E Commerce ChinaDangdang Inc, which has beendubbed the Chinese Amazon.

Other non US-based companies

listed on NYSE include car manufac-turer Toyota, pharmaceutical giantPfizer and the UK’s Prudential.

You can even invest in NYSEEuronext itself, which is listed in both New York and Paris.

While technology giants such asMicrosoft and Apple are listed onthe NASDAQ exchange, rather thanNYSE, there are lots of tech firms, big and small, on the main index.

Christiaan Brakman at NYSEEuronext said: “There is no longersuch a clear cut difference betweenthe companies listing on NASDAQ and NYSE, with huge technology play-ers such as IBM listed on NYSE, as wellas many smaller technology compa-nies.”

Next week: the third part of our series on global exchanges will continue with a lookat Canada’s largest exchange, the TorontoStock Exchange (TSX), where more mining

and oil and gas companies are listed thanon any other exchange in the world.

TOP FIVE NYSE-LISTED UK COMPANIES BY MARKET CAPITALISATION

Ticker Company Market Market CapSymbol $ billion

BHP BHP Billiton NYSE 264.45

RDSA Royal Dutch Shell NYSE 215.00

HBC HSBC Holdings NYSE 199.19

BP BP NYSE 145.80

RIO Rio Tinto NYSE 145.07

8/7/2019 Cityam 2011-02-09book


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23CITYA.M. 9 FEBRUARY 2011 Global Exchanges: NYSE

“It is also the place many of the banks that needed to recapitaliseafter the global financial crisis cameto raise money via secondary list-ings.

“London, on the other hand, hasseen a downturn in IPO activity overthe last few years.”

He also points out that investingin companies from China, for exam-ple, through NYSE gives you theadded security of US shareholderrights.

Other New York-based marketsowned by NYSE Euronext that could be of interest to UK investors include ARCA, which lists more than 1,000Exchange Traded Funds (ETFs) and AMEX, which is for startups andsmaller companies that do not quali-fy for the main exchange.

Meanwhile, when it comes toindices, you have the choice betweenthe NYSE US 100 Index, the NYSEInternational 100 Index and NYSE World Leaders Index, among others.

ANALYSIS l The NYSE US 100 index over the last year

4,800

5,000

5,200

5,400

5,800

5,600

6,000

Jan 2011Nov 2010Sep 2010Jul 2010May 2010Mar 2010

TRADING ON THE AMERICAN DREAMBRINGS DIVERSITY TO A PORTFOLIO

PAUL INKSTERHEAD OF PRODUCT,BARCLAYS STOCKBROKERS

For many investors, the Americandream is still alive and kicking. Asmore retail investors look overseasfor portfolio growth and income, the

US is a common first port of call.Many investors gain exposure to the

US market using instruments such asexchange-traded funds (ETF) and man-aged funds. One extremely popular ETF isthe iShares S&P 500, which tracks theperformance of the Standard & Poor’s500 Index, a broad-based US equity mar-ket index. Whilst ETFs are both incrediblyuseful and very efficient, there are also

considerable possibilities in picking indi-vidual stocks.

Last week, the S&P 500 reached itshighest level since August 2008, buoyedby positive consumer spending and mar-

ket sentiment. Those who invested in anS&P ETF two years ago would have justseen their investment recover to where itwas at the time of purchase. On the otherhand, stock-picking investors could poten-tially have made a far better return.

On 4 August 2008, IBM shares weretrading at $129. At the time of writing,early February 2011, those shares arenow trading at $164. Investors who spot-ted this opportunity could have made a 27per cent increase in the value of theirinvestment, dealing costs aside. In thesame week, McDonald’s shares tradedaround $65. Today, the figure is $73.

There are many others that fall into thesame category, that of outperforming theindex, but it is important to rememberthat individual stock picking does notalways work out positively. For example,since August 2008, shares in Yahoo havefallen from $20 to $17. This translates intoa 15 per cent loss for investors.

The key is portfolio diversificationbased upon thorough research in order to

ensure investors are not overly exposedto any individual stock. This is all themore crucial, given that currency fluctua-

tions too can have a significant impact onthe value of overseas investments.Another challenge for UK investors is

the over-concentration of dividends with-in FTSE 100 companies: 61 per cent of dividend payments come from just 15 of the businesses. As a result, investorschasing yields run the risk of becomingoverly concentrated in just a handful of shares. If and when a shock occurs, forexample the BP crisis, this can have a dis-proportionately large effect on a portfo-lio.

This could go some way to explainingwhy retail investors continue to lookoverseas for alternative investmentopportunities – there is most certainly anincreased interest amongst our clients.

● LOCATION11 Wall Street, Manhattan, New York

● OPENING ANDCLOSING TIMESOpens: 9.30amCloses: 4.30pmNB: While usually open Monday to Friday each week, theexchange is closed for American holidays not observed inthe UK such as Labor Day, which this year falls onSeptember 5, and Thanksgiving on November 24.

● CURRENCYUS dollar

● NUMBER OFLISTINGS3,923 (as of December 2010)

● VOLUME$3,925,946,000 (as of Feb 4, 2011)

●MARKETCAPITALISATION$13.39 trillion (£8.31 trillion)

● HISTORYOriginally founded in 1792, it took the name New YorkStock Exchange in 1863.

● OPERATORNYSE Euronext (since 2007)

A neoclassical facadeconceals the NYSE’smodern trading floor

Picture: GETTY

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Sporty, sexy and full of zoom

Lifestyle | Motors

25

WORDS BYRYAN BORROFF

B ACK in 1969, Nissan created a hell of stir when it began selling its Zsports car, a two-seat GT coupe that

was not only great looking: it wasalso fast, reliable and very affordable.

This is the 370Z, its spiritual successor,albeit in roadster guise and, I’m glad tosay, still true to the original concept of sexy, fast and cheap. Squat looking thanksto its long bonnet and short-deck at therear, it may be Japanese but it looks asCalifornian as can be (it was designedthere).

Sadly I’m driving it in the Lea Valley,not the Napa Valley. But the roof is down,albeit with the heat blowing at methrough the 370Z’s stylish and (thankful-ly) efficient vents and the seat heaters ontoo. And despite the cold, the cockpit of the 370Z is really a great place to be.

Its predecessor, the 350Z, was criticised

for lacking in interior quality but thereare no such gripes with this one. In factit’s very good thanks to its GT Pack trim.

The power seats and steering wheel are inleather and the door is black suede.Details such as an aluminium finish onthe dials and switchgear, and aluminiumpedals and footrest create some nice con-trast. Perhaps the only area where thingsgrate are the door pulls – which still feel alittle plasticy. The steering wheel controlsare easy to reach and simple to use andthe Bose audio system is certainly goodenough, though I suspect it plays LedZeppelin rather better than Mahler 2.

Outside the sharp styling with its spin-ning blade-like 19” alloys and similarly sharp lamp design (front and rear) suggestthe hardcore nature of the drive. Theengine is a brutish 3.7-litre V6 which pro-duces 328PS but more importantly makes

a fantastically loud noise that contributesto the exhilaration of what is undeniably powerful acceleration. This model has aseven-speed automatic gearbox, though

with a manual shift mode which isaccessed by magnesium paddle shiftersthat sit just behind the steering wheel. Ifind I like them a great deal and I am notalways positive about paddles.

Acceleration time is 5.8secs but unusually it feels quicker, even with the roof up.

The front engine rear wheel drive setupis considered to be the best option there isfor sports cars and I find the car has bagsof grip and (in my amateur hands at least)gets nowhere near its limits even whenI’m pushing as hard as I can go. Yet bril-liantly, if you floor the throttle at stand-still, there is still the sense that the car hasenough power to cause its rear wheels tolose grip. This makes a nice sliding drift a

real possibility. Such that I lament the lim-ited time we have together and the public– as opposed to closed, private – roads I’mdriving on. The ride is very firm, which tome seems to be entirely the point, thoughI am sure it wouldn’t suit some drivers.

I could tell you that it takes just 20 sec-onds to power down the 370Z’s fabrichood. But really nobody cares. Moreimportantly, even with the roof downthere is no flex in the car’s body, or so lit-tle as to defy my senses in any case. This is

because, unusually, the car has been engi-neered from scratch as a convertible. Andit’s quiet enough with the roof up thatany noise you hear comes from the tyresand not through the roof.

Which all in all makes for as entertain-ing a drive as £37k can buy you. Oh,

yes…the price. That’s not a misprint. Thespirit of the Z-car is safe.

CAR TALK BY RYAN BORROFF

ASTON V8 VANTAGE SAston Martin has released details of its new V8 Vantage S. The S

version has an extra 10bhp over the N420 V8 which means its 4.7litre V8 now produces 430bhp. The car has quicker steering and achassis with new springs and dampers and wider rear wheels. Animproved seven-speed Sportshift transmission means gear changesare up to 20 percent quicker and a new exhaust muffler meanseven the legendary exhaust note is improved too.

MILESTONE FOR MAZDA’S BELOVED MX-5Mazda has sold 900,000 MX-5 roadsters making it the world’s

best-selling two-seater sportscar and is now due for a new entry inGuinness World Records. Reaching this milestone 21 years and 10months after the first MX-5 was built in April 1989, the MX-5 isthe longest-running model in the Mazda's line up. The iconic littleroadster is considered by many to provide the most driving fun youcan have. Which makes for an awful lot of happy people.

VW’S TIGUAN: A HINT OF WHAT IS TO COMEJust as the rest of the car world seems committed to making its

cars look more and more aggressive, VW continues to head in theopposite direction. The first pictures of the revised Tiguan compact4x4 have been released ahead of its Geneva Motor Show launchnext month and horizontal lines dominate the car’s new front end,along with intricate headlights which feature daytime running LED.Couldn’t be softer.

THE VERDICT:DESIGN hhhhi

PERFORMANCE hhhhi

PRACTICALITY hhhii

VALUE FOR MONEY hhhhi

THE FACTS:NISSAN 370Z ROADSTER

PRICE: £37,3000-60MPH: 5.8secsTOP SPEED: 155mphCO2 G/KM: 254g/kmMPG COMBINED: 25.9mpg

A roaringengineand niftydesignmake thisroadster avery niceoptionindeed

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T E R

R E S T R I A L

A HISTORYOF ANCIENTBRITAINBBC2,9.00PM

NeilOliver exploresthe origins ofBritainand its people, beginning with anexaminationofthe last iceage andwhathappened when the climate changed.

LIVE INTERNATIONAL FOOTBALLITV1, 7.00PM

Denmark v England (Kick-off 7.15pm).All the action from Copenhagen, wherethe sides prepare for their Euro 2012qualifiers next month.

MARY PORTAS: SECRET SHOPPERCHANNEL4, 9.00PM

The presenter focuses on estate agentsandis granted accessto a northLondonoffice to try to improve their servicesto customers. Last in the series.

BBC1

SKY SPORTS 17pmSky Sports News atSeven 7.30pm Live NationsCup Football 10pm You’re onSky Sports! 11.30pm Football’sGreatest 12am Nations CupFootball 1.30am FIFA FutbolMundial 2am You’re on SkySports! 3.30am Nations CupFootball 5am Football’sGreatest 5.30am-6am FIFAFutbol Mundial

SKY SPORTS 27pm IRB Rugby Sevens 9pmEuropean Tour Weekly 9.30pmInside the PGA Tour 10pmTrans World Sport 11pm Insidethe PGA Tour 11.30pmEuropean Tour Weekly 12amIRB Rugby Sevens 2am MaxPower3am Trans World Sport4am-5am Fed Cup Tennis

SKY SPORTS 37pm Inside the PGA Tour7.30pm European Tour Weekly8pmBowls 10pm Ultimate

Challenge MMA 11.30pm FedCup Tennis 12.30am Bowls2.30am-4am UltimateChallenge MMA

BRITISH EUROSPORT7pm Wednesday Selection7.10pm Show Jumping8.10pm Riders Club 8.15pmPGA Tour Golf 9.15pmEuropean Tour Golf 9.45pmGolf Club 9.50pm Yacht Club10pm Alpine Skiing 11pmCycling 11.30pm-12.30amEuro 2012: All Access

ESPN6.45pm ESPN Press Pass7.15pm NBA Tonight 7.45pmLive International Football10pm International Football11.45pm FIS Alpine Ski WorldCup Report 12.15am ESPNKicks: Extra 12.30am ESPNPress Pass 1am PremierLeague World 1.30amBaseballTonight2am Live NBABasketball 4.30am FIS Alpine

Ski World Cup Report 5amESPN Game of the Week5.30am-6am ESPN Press Pass

SKY LIVING7pm Ghost Whisperer 8pmFour Weddings US 9pmBones10pm Grey’s Anatomy 11pmCriminal Minds 12am CSI:Crime Scene Investigation2.40am Charmed4.20am FourWeddings 5.10am-6am Maury

BBC THREE7pmThe Real Hustleon Holiday7.25pm FILM Lemony Snicket’sA Series of Unfortunate Events 2004. 9pm Come Fly with Me9.30pm Come Fly on the Wall10.30pm Family Guy 11.15pmBeing Human 12.15amAmerican Dad! 1amCome Flyon the Wall 2am AmericanDad! 3.50am The Lock Up4.20am Young, Jobless andLiving at Home 5.20am-5.30am The Real Hustle onHoliday

E47pmHollyoaks 7.30pm Friends9pmFILM The Italian Job 2003. 11.15pm Alan Carr12.20am Scrubs 1.20am DirtySexy Money 2.10am Alan Carr3.05am Beauty and the Geek3.45am Style Her Famous4.10am Life Unexpected4.50am-6am Switched

HISTORY7pmHeir Hunters 8pmAx

Men 10pm IRT DeadliestRoads 11pm Ax Men 1am IRTDeadliest Roads 2amCities of the Underworld 3am MegaDisasters 4am UFO Files 5am-6am Ancient Discoveries

DISCOVERY8pmHow Do They Do It?8.30pm How It’s Made 9pmWorld’s Toughest10pmWalkingthe Amazon 11pm Swords12amBearGrylls1amDeadliestCatch 2am Future Weapons3amHitler’s Henchmen

3.50am World War Two in HDColour 4.40am Nasa’s GreatestMissions 5.30am-6am HowDoes That Work?

DISCOVERY HOME &

HEALTH7pm A Baby Story 8pm EatYourself Sexy with Gillian9pmMystery ER 10pm HospitalSydney 11pm Trauma Team12am Mystery ER 1amHospitalSydney 2amTrauma Team

3am Eat Yourself Sexy withGillian 4am Bringing HomeBaby 5am-6am A Baby Story

SKY18pmDream Lives for Sale 9pmLouie Spence’s Showbusiness10pm A League of Their Own:Best of 11pm Football’s Greatest12am 99 Most Bizarre 1.50amMyths, Magic and Monsters2.40am Justin Lee Collins: 1803.30am The 4400 4.20amDon’t Forget the Lyrics5.10am-6am Sell Me the Answer

BBC2 ITV1 CHANNEL4 CHANNEL5

S A T E L L I T E &

C A B L E

TVPICK6pm BBC News6.30pmBBC London News7pm The One Show7.30pm Rip Off Britain:BBC News8pm Waterloo Road9pm Forgotten Heroes:Panorama10pm BBC News

10.25pm Regional News10.35pm The National LotteryWednesday Night Draws10.45pm Film 2011 with ClaudiaWinkleman: National LotteryUpdate 11.25pmFILM Diabolique:Thriller remake, starring SharonStone. 1996; Weatherview 1.15amSign Zone: Country Tracks 2.10amNatural World 3.10am Save MyHoliday 3.55am-6am BBC News

6pm Eggheads6.30pmOne Man and HisCampervan7pm Escape to theCountry: Searching for aproperty in Somerset.8pmMadagascar: New series.David Attenborough narratesthe story of the island’s wildlife.

9pmCHOICE A History of Ancient Britain10pm Have I Got OldNews for You10.30pm Newsnight: Weather11.20pm Mad Men12.10am The ChineseAre Coming1.10am BBC News4am-6am BBC Learning Zone

6pm London Tonight6.30pm ITV News7pmCHOICE LiveInternational Football: Denmarkv England (Kick-off 7.15pm).9.30pm Harry Hill’s TV Burp:Comic review of the week’ssmall-screen highlights.10pm ITV News at Ten

10.30pm London News10.35pm I Was There Whenthe Beatles Played the Cavern11.35pm International Football12.35am The Zone;ITV News Headlines2.35amFILM The Thing:Sci-fi horror remake, starringKurt Russell. 1982. 4.25am-5.30am ITV Nightscreen

6pm The Simpsons6.30pmHollyoaks7pm Channel 4 News7.55pm 4thought.tv8pmBeauty and the Beast:Ugly Face of Prejudice9pmCHOICE Mary Portas:Secret Shopper10pm The Joy of Teen Sex

11.05pm Shameless12.05am Music on 4: Soundsfrom the Cities12.40am Music on 4: TheAlbum Chart Show Spotlight12.55am Mercury Prize Sessions1.10am My Family’s Crazy Gap Year2.05am AnimalMadhouse 3amFood:What Goes in Your Basket? 3.55amER 5.20am-6.05am Countdown

6pm Home and Away6.30pm Zoo Days6.55pm Meals in Moments7pm Five News at 77.30pm Monkey Life:Five News Update8pmCowboy Builders:Five News at 99pm NCIS

10pm Law & Order:Criminal Intent10.55pm Law & Order:Special Victims Unit11.55pm Poker12.55am SuperCasino4.05am The FBI Files4.55am Animal RescueSquad 5.10am Wildlife SOS5.35am-6am House Doctor

8 29

24 11

17 16 10

28 13

37

3 9

36

12 34

16 6 15

10 27

30 7

35

12

18

30

8

26

20

28

8

23

6

12

41

11

16

11

15

34

28

16

Fill the grid so that each block

adds up to the total in the box

above or to the left of it.

You can only use the digits 1-9

and you must not use the

same digit twice in a block.

The same digit may occur

more than once in a row or

column, but it must be in a

separate block.

COFFEE BREAKCopyright Puzzle Press Ltd, www.puzzlepress.co.uk

KAKURO

QUICK CROSSWORD

LAST ISSUE’SSOLUTIONS

KAKURO

WORDWHEELUsing only the letters in the Wordwheel, you have

ten minutes to find as many words as possible,

none of which may be plurals, foreign words or

proper nouns. Each word must be of three letters

or more, all must contain the central letter and

letters can only be used once in every word. There

is at least one nine-letter word in the wheel.

SUDOKU

Place the numbers from 1 to 9 in each empty cell so that each

row, each column and each 3x3 block c ontains all the numbers

from 1 to 9 to solve this tricky Sudoku puzzle.

SUDOKU

QUICK CROSSWORD

ACROSS

1 Imperial capacity

measure equal tofour pecks (6)

6 Beefeater (6)

7 Water tanker (6)

9 Continue (7)

10 Guilty of betrayalor deception (11)

16 Capital of Kenya (7)

18 Call forth (6)

19 Musical compositionof three or fourmovementsof contrastingforms (6)

20 Fireball (6)

DOWN

1 Small lynx of North

America (6)

2 Waste matter carriedaway in drains (6)

3 Harp used by ancientGreeks (4)

4 Easier, lessrestricting (6)

5 Capital of theBahamas (6)

8 Large-scale (4)

11 Rationality (6)

12 In a foreign country (6)

13 Extremely wicked (4)

14 Prophet (6)

15 Area, zone (6)

17Shaft of light (4)

V

I

O

G

DE

R

N

U

M I N S K F I V E S

A H S M L

N O V A T R A U M A

U A L O E G Y

A X L E A D E P T

L V D H D

S E R I F M O L E

B A A B E T F

A N T I C S C O M A

R T T C C

N E P A L B A D G E

8 4 9 7 7 2 9 1

6 2 1 3 9 4 8 6

7 1 9 8 5 1

9 3 8 3 1 9 5

4 5 6 3 1 8 2

8 2 5 6 9 4 3 7 1

9 5 6 8 7 2 4

4 1 1 5 2 3 1

1 2 4 6 9 3

7 1 2 4 8 4 6 2

9 8 6 7 9 7 8 5

WORDWHEELThe nine-letter word was

IGNORANCE

Lifestyle | TV& Games CITYA.M. 9 FEBRUARY 201126

8/7/2019 Cityam 2011-02-09book


LORD TRIESMAN, the former chair-man of the Football Association, haslaunched scathing attacks on the gov-erning body and the Premier League.

Speaking about the FA for the firsttime since his departure in May, Triesman accused the organisa-tion of failing to exercise author-ity in anything other than theodd yellow card or suspension.

In an appearance before MPs ata culture, media and sport selectcommittee investigation intothe state of the Englishgame, he said the FA’sgovernance was“thoroughly unsatis-factory”.

Triesman added:“Apart from on-field discipline,[the FA] has backed out of reg-ulating.”

He also reignit-ed a row with thePremier League,

and its chairman Sir Dave Richards, by accusing him of adopting anaggressive approach in order to block the FA’s attempts at submitting a blueprint for change to the then cul-ture secretary Andy Burnham.

“My experience is he will put hispoint politely in board meetings but

discussions outside are extreme-ly aggressive discussions, real-

ly aggressive discussions,points are made in a very

colourful way,” he said. “I wouldn’t use that language.”

Triesman said the FA’s blueprint was scrapped

after discussions thatlasted “a maximum of two minutes”.

He also claimedthat the PremierLeague, which hasfive representativeson the 12-man FA board, used itsfinancial muscle toinfluence the sevenmembers from theamateur game.

Triesman: FAfailing to rule

OLYMPIC PARK LIFE: TOTTENHAM UNVEIL PLANS FOR NEW STADIUM

TOTTENHAM have released images of how they hope the Olympic Stadium will look if they win the fight to take over the venue after the London 2012 Games. Spurs, who are vying with Premier League rivals West Ham for the £537m venue, and their bid partner, theentertainment giant AEG, hope to rebuild the stadium as a 60,000-seater football-only arena. The artists’ impression released shows theStratford ground on a non-matchday, with volleyball, judo and street-dancing going on around the stadium itself. The Olympic Park Legacy Company is expected to make a decision on their preferred bidder this week.

ESSEX batsman Ravi Bopara has beencalled up to England’s World Cup

squad as a replacement for theinjured Eoin Morgan. The Irishman missed the final one-

day international of the recent seriesagainst Australia after fracturing themiddle finger of his left hand, aproblem he first became aware of in

the fourth one-day match in Adelaide.

The Middlesex left-hander has beenan integral part of England’s one-day batting unit since he made his debut

two years ago.He is regarded as one of the mostinnovative batsmen in the game, areputation that played a part inKolkata Knight Riders paying$350,000 at the 2011 Indian PremierLeague (IPL) auctions for his services

over the next three years. Bopara,however, should prove a more thansatisfactory replacement. The 25-year-old is a versatile batsman and hismedium-pace bowling, which has

improved substantially over the past year will prove useful on the slow, low pitches of the subcontinent.

“No one is irreplaceable,” saidEngland coach Andy Flower. “RaviBopara is a very talented and excitingplayer. He will also bring a bit of medi-

um-pace bowling to help out.”Captain Andrew Strauss added: “Welike what Ravi can bring to the game:his bowling and his batting, his abili-ty to clear the ropes .”

England bowlers Stuart Broad, TimBresnan and Graeme Swann, meanwhile, are all expected to have recov-ered from the injuries which cutshort their involvement in Australiain time for England’s first World Cupgame on 22 February.

Bopara named as injured Morgan’s replacementBY JAMES GOLDMAN

CRICKET▲

WALES boss Warren Gatland hasdropped experienced fly-half Stephen Jones and handed the No10 shirt to James Hook for Saturday’s RBS 6Nations trip to Scotland.

Hook switches from full-back, where he played in Friday’s defeat toEngland, while Jones, who suffered a blow to his neck in that match, has been named on the bench.

“James has a real opportunity,” saidGatland. “There is a certain amountof risk involved as he hasn’t started atfly-half this season, but the decision was made easier [by Jones’ injury].”

Lee Byrne replaces Hook and Ryan Jones comes in at No8 for Andy Powell.

Wales switchHook to fly-half

for Scots clash

Olazabal will have two wild cards

EUROPEAN Ryder Cup captain JoseMaria Olazabal will only have two wildcard picks when he selects histeam for the 2012 match.

Olazabal asked for the changes –previous skipper Colin Montgomerie was given three wildcard picks aheadof the clash at Celtic Manor last year which Europe won by a point – and

said he was “very pleased” the tourna-ment committee had agreed.

“I just felt this would give the teamthe best chance to keep the RyderCup. That’s what we all want,” hesaid.

In another change, the Europeanmoney list will now count ahead of the world points list for automaticqualifying.

“I looked over the last few qualifi-cation processes, going back to 2004,and was satisfied that my proposal would give me the strongest team,”

he added. “I would like to thank thecommittee for their support.”

BY JAMES GOLDMAN

GOLF▲

SPORT | IN BRIEF

Hala’ufia handed lengthy banRUGBY UNION: London Irish forwardChris Hala’ufia has been banned for eightweeks for a dangerous tackle on

Northampton Saints’ Shane Geraghtyduring an LV= Cup match last month.Hal’ufia pleaded guilty before an RFU dis-ciplinary panel and now won’t be eligibleto play again until 6 April.

Republic too good for sorry WalesFOOTBALL: New Wales boss Gary Speedbegan his reign as manager with a disap-

pointing Nations' Cup defeat against theRepublic of Ireland in Dublin. Wales wereundone with second half strikes forDarren Gibson and Damien Duff in the

space of seven minutes. Kevin Faheyscored the third from a free-kick.

New Barca contract for GuardiolaFOOTBALL: Barcelona boss JosepGuardiola has agreed a new contractwith the Spanish champions. The dealwill take Guardiola, appointed in 2008,through to the end of next season.

Results

email [email protected]

Sport 27CITYA.M. 9 FEBRUARY 2011

Former chairman strongly critical of governingbody and reignites row with Premier League

FOOTBALL▲

MORGAN: Caps 61, Runs 1904, N/O 11,Average 38.08, HS 115, SR 88.19,Hundreds 4, Fifties 10

BOPARA: Caps 54, Runs 1140, N/O 10,Average 28.50, , HS 60, SR 73.45,Hundreds 0, Fifties 4

HEAD-TO-HEAD | MORGAN V BOPARA

BYFRANK DALLERES

RBS6 NATIONS

8/7/2019 Cityam 2011-02-09book


FORMER Sky Sports presentersRichard Keys and Andy Gray, who leftthe broadcaster last month amid asexism storm, are to be reunitedat talkSPORT.

The duo, set to make theircomeback on 14 February, leftSky last month after off aircomments made about assis-tant referee Sian Massey madetheir way into the publicdomain.

Both men were caught

making demeaningremarks about the offi-

cial, who was making her first tele- vised top flight appearance inLiverpool’s 3-0 win at Wolves, and sev-eral clips of them making sexistremarks subsequently cropped up on

YouTube.Keys and Gray (left) will

replace Mike Parry, who is toleave the station having worked there since its launch11 years ago, and MikeGraham in the 10am to 1pmslot every weekday.

Keys resigned in theaftermath of his bun-gled apology, which

he made in an hour-long interview on

talkSPORT, where he claimed “dark forces” played a part in his Sky down-fall.

Keys began his career in radio as asports editor on Piccadilly Radio.Since 1992 he fronted PremierLeague coverage on Sky Sports along with Gray.

He said: “This is the start of some-thing new and exciting for Andy andmyself. We are delighted to be join-ing the talkSPORT family and can’t wait to get going.”

Gray, the former Scotland interna-tional and Aston Villa assistant man-ager, added: “It’s an ideal

opportunity for Richard and me to do what we do best, talk about sport.”

Keys and Gray given chance to relaunchcareers after sexism row by talkSPORT

ENGLAND midfielder Frank Lampard insists captaining the side

for the first time tonight againstDenmark will represent one of theproudest moments of his stellarcareer.

The 32-year-old, a veteran of 83caps and three major tournaments,

will wear the armband in theabsence of Rio Ferdinand and StevenGerrard.

The plans of manager FabioCapello have been hindered severely ahead of an awkwardly timed friend-ly as a result of a number of high-profile withdrawals. But despite hisprominent role in Chelsea’s three-pronged quest for honours, Lampardinsists his desire to represent hiscountry remains as strong as ever.

He said: “It is great to be captain.It is a huge honour personally, oneI’ve been hanging around a longtime for. I am very proud and it isone to tell the kids and the grand-children about.

“My appetite for England is asgreat as ever and it always will beuntil the day they don’t want me orthe day it becomes clear I’m notgood enough anymore.

“I will always be available forEngland. Some people talk aboutretiring but I’m thinking how many more years can I play and I’ll alwayshave that mindset.”

Lampard will line-up in midfieldalongside Arsenal’s precociousteenager Jack Wilshere, whose rapidemergence this season could acceler-

Sport28 CITYA.M. 9 FEBRUARY 2011

BOPARA’S WORLD CUP CALLMORGAN’S INJURY OPENS

DOOR FOR ESSEX STAR: P27

Europe’s top clubslosing patience withFifa over schedulingof friendly matches

EUROPE’S top clubs last nightslammed world governing body Fifafor scheduling a round of internation-al fixtures this week, calling the deci-sion “nonsense”.

The European Club Association(ECA), which represents 197 teamsincluding Manchester United, Arsenal

and Chelsea, is lobbying Fifa for agreater say in how the game is run.

And one of the top items on its agen-da when delegates gathered yesterday for its general assembly was the inter-national calendar, and the timing of games such as England’s friendly inDenmark tonight.

“There is not a national team man-ager or a club manager who is happy there is an international friendly match tomorrow. It's just nonsense,”said Umberto Gandini, a director of ACMilan and vice-chairman of the ECA.

“The national managers do not havethe players for long enough and theclub managers are left with three orfour players for training before this

weekend’s matches and the restart of the Champions League next week.

“We suddenly realised that Fifa canalter the international calendar whenthey like. This week’s friendlies are theresult of Fifa’s poor logical planning.”

The ECA says it has major concernsover Fifa’s governance and the confu-sion over issues such as whether the2022 World Cup in Qatar will be heldin winter or summer.

“I wouldn’t say we are at war -- theclubs are very patient -- but we haveour limits,” said Barcelona presidentSandro Rosell.

“We hope Uefa and Fifa will hear what we have to say to them. We haveno doubt they will listen to us and con-sider that what we are asking for is log-ical and fair.”

FOOTBALL▲

Frank Lampard will winhis 84th cap tonight.

Pic: ACTION IMAGES

BY JAMES GOLDMAN

FOOTBALL▲

lMidfielder relishing the chance to captain sidel No plans to retire from international footballlWilshere tipped to shine against Denmark

LAMPARD’S ENGLAND PRIDE

BY JAMES GOLDMAN

FOOTBALL▲

ate Lampard’s slide towards theinternational retirement theChelsea star maintains isn’t on hisagenda.

Wilshere, 19, is set to make hisfirst senior start tonight andLampard expects the elegant left-footer to be a fixture for years tocome.

He said: “I’m looking forward toit. He is a top, top young player. Yousee him at Arsenal and you don’teven want to call him a young playeranymore because he looks estab-

lished. You can see at 19 he has got what it takes.”

And those sentiments wereechoed by Capello, who believes

Wilshere represents the very best of England’s new breed.

He said: “Some players I moni-tored during this period, who are

with the Under-21s, are good butthey not ready to play with us.

Wilshere will be a really importantplayer. Jack Wilshere represents the

very best of the young players. Hehas played with a lot of confidence.”

Stricken Kubica requires two more

operations in fight to his save career

RENAULT driver Robert Kubica willundergo two more operations in thenext seven days as doctors fight tosave one of the most promisingcareers in motorsport.

Kubica’s team said he wouldremain in hospital for most of themonth while he recovers from hand,arm and leg fractures sustained whenhe crashed during the Ronde di Andora rally in Italy on Sunday. The26-year-old, who needed a seven-houroperation to save his partially-severedright hand, is due to have an operationon his shoulder and foot tomorrow.

Kubica will then go under the knifeagain at his hospital in Pietra Ligure,

near Genoa, on Sunday or Monday inorder to stabilise his shoulder.

“He has reacted well to the newsabout his condition and is ready tofight for his comeback,” read a state-ment from the Renault team.

Doctors admit it is too early to say whether Kubica will race again.

Meanwhile, Bruno Senna, Vitantonio Liuzzi and Nick Heidfeldare in the frame to replace injuredPole.

“We will look for Kubica’s substi-tute: the names considered areSenna, Liuzzi and Heidfeld,” saidRenault’s team principal EricBoullier. “The team is close to Robert, we wait for him with open arms and

we hope he can come back before theend of the season.”

BY FRANK DALLERES

FORMULA ONE▲

8/7/2019 Cityam 2011-02-09book


cityam 2011-02-09book

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