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www.cityam.comIssue 1,389 Wednesday 25 May 2011 FREE

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A ROW between airlines and aviationofficials broke out yesterday over fearsthe volcanic ash cloud blowing infrom Iceland could cause a repeat oflast summers mass flight disruptions.

Planes due to fly to and fromScotland were grounded yesterday,including flights from London air-ports. However, late last night, UK airtraffic control service NATS said flightswould not be affected from today.

Irish carrier Ryanair had blasted theUK Met Office and the Civil Aviation Authority (CAA) for the creation ofred zone areas designated as unsafe

for aircraft to fly in.There is no safety threat to aircraft

in this mythical red zone, which isanother misguided invention by theUK Met Office and the Civil AviationAuthority, the airline said.

The operator was amongst severalcarriers in the UK to cancel flights,including BA, easyJet and KLM.

Shares of airline firms slumped onthe news, as well as on fears of furtherdisruption.

Ryanair had conducted a test flightin Scottish airspace yesterday morn-ing. The airline claimed it had flown within the red zone and had foundno evidence of volcanic ash.

But authorities last night ques-

tioned the accuracy of Ryanairs testflight.

Radar tracking has shown that atno point did the Ryanair flight flydirectly through the notified area ofhigh ash contamination over Scotlandso it is unsurprising that it found noash, a department for transportspokesperson said.

Transport secretary PhilipHammond rushed to calm fears theimpact of the eruption would cause arepeat of last years travel chaos.

We are in a much better place thisyear because we have worked with air-lines and regulators to build a regimethat puts safety first, but with farmore flexibility, he said.

BY RICHARD PARTINGTONAVIATION

AIRLINES HITAS ASH CLOUDREACHES UK

ANALYSIS l EasyJet

p

28 Feb 18 Mar 7 Apr 3 May 23 May

365

360

355

350

345

340

350

345.0024 May

Goldman Sachs: oil pricewill bounce back to $120

GOLDMAN Sachs, which caused acommodities sell-off last month when it predicted the short-termpeak of the market, said yesterdaythat investors should pile back in.

Analysts said the risk/rewardonce again favours being long com-modities following a 10 per centaverage dip in a basket of materials

including crude oil, copper and plat-inum.A note to investors said the mid-

cycle pause in global economic

recovery is nearing a trough, creat-ing upside to metal prices, and thatbrent crude is now expected to endthe year at $120 a barrel, up from anearlier prediction of $105.

The bullish note came as a UK par-liamentary committee raised con-cerns about anti-competitive tradingon the London Metal Exchange.

The science and technology com-mittee said it would refer the matter

to the Office of Fair Trading, after itnoted that the same companies thatdominate the metal trade also storethe materials.

BY RICHARD PARTINGTON

ENERGY

ANALYSIS l International Consolidated Airlines Group

p


260

250

240

230

220

210

230.8024 May

ANALYSIS l Ryanair Holdings


3.7

3.6

3.5

3.4

3.3

3.2

3.1

3.4024 May

TWEETDECK SALE NETSENTREPRENEUR MILLIONSTWITTER BUYS UK START-UP P13

BARACK Obama will today meet with David Cameron in Downing Street to discuss the use ofmilitary force in Libya, as well as the war in Afghanistan and the global economy. The USpresident is on the second day of his state visit to the UK. Last night, he attended a banquethosted by the Queen. Earlier in the day, he visited a south London school with the PrimeMinister, where the two gave each other a high five (above) after a game of table tennis.

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News2 CITYA.M. 25 MAY 2011

UK deficit hitsan April highOUT of control government spendingsent the deficit soaring to a recordhigh for the month of April, officialdata exposed yesterday.

Current spending by the centralgovernment (excluding capex) hit54.1bn last month, a five per cent jump from the same point last year.Government borrowing for Aprilstruck 10bn, up from 7.3bn in April2010.

Chancellor Osbornes target ofreducing borrowing by 30bn in 2011-12 looks more stretching than ever,especially with economic growth look-ing likely to disappoint, said Nida Aliof the Ernst and Young Item Club.

Tax receipts fell slightly compared-with the same point in the last fiscalyear, said the Treasury citing a one off

bank payroll tax which distorted thefigures for April 2010.

The governments new bank levywill show up in the figures over thecourse of this fiscal year, it said.

It is clear from the downward revi-sion to last years borrowing figuresthat the governments deficit reduc-tion strategy is making headway indealing with our unsustainabledeficit, a spokesperson hit back.

The deficit for 2010-11 was reviseddown to 139.4bn; yet governmentdebt now totals 910.1bn, equivalentto 60.1 per cent of Britains GDP.

BY JULIAN HARRIS

UK ECONOMY

POLL SHOWS MAJORITY OFINVESTORS USE VOTESAlmost eight in 10 UK institutionalinvestors exercise their voting rightsin all the companies in which theyown shares, according to a survey bythe Investment ManagementAssociation. The finding, in a reportsetting out the extent of shareholderinvolvement in the early days of thestewardship code of conductlaunched last year, confirms the UKas the market where shareholders aremost likely to engage with the compa-nies through voting.

BRUSSELS URGED TO MORE FLEXIBLEOVER BASEL RULESBrussels is being urged to giveEuropean Union countries more flex-ibility when it tries to implement thenew Basel III rules on banking capital

across the 27-country bloc later thisyear.

TPG POACHES GOLDMAN CHINADEALMAKER SUN

TPG has poached one of GoldmanSachs Chinese dealmakers as the USprivate equity group seeks to rebuildits team in China following a numberof recent defections. Steve Sun, a prin-cipal in Goldmans private equityfirm in Hong Kong, is set to join TPGsChina group alongside Sing Wang,also a former Goldman executive, andRicky Lau. Sun has been offered theprospect of a percentage of the profitson any deal he completes.

BUY-OUT GROUPS IN RECORD SALESSPREEPrivate equity groups have cashed ina record amount of money by sellingcompanies in the past two months asthey aim to hand cash back toinvestors to attract them into theirnext funds. The value of companiessold by buy-out groups worldwidereached a high of $85bn (52.5bn) in

April and May, data by Preqin, whichcollects industry data, shows.

TOP JUDGE TO FACE MPS IN SEARCHFOR SOLUTION TO PRIVACY LAWCRISISBritains most senior judge couldappear before a committee to tacklethe crisis over privacy laws in anattempt to defuse the situation. LordJudge, the Lord Chief Justice, said yes-terday that the judiciary would assistthe new parliamentary committeeset up by the Prime Minister to lookinto the current crisis over privacyorders imposed by the courts.

HOTELS TO CASH IN ON CHINASRUNAWAY GROWTHInterContinental Hotels Group isabout to unveil a deal with a state-owned Chinese property group todevelop six hotels costing more than350m in total. It expects China toaccount for a quarter of all new

rooms globally over the next fiveyears.

CHINESE TOURISTS BRING 200MWINDFALL FOR LONDON RETAILERS A sharp jump in the number ofChinese tourists has brought a 200m windfall for retailers in centralLondon, the government willannounce today. The Chinese arealready outgunning their Russiancounterparts spending an average of600 each time they walk into a store - but they cannot yet match the eye-watering largesse of the Arabs, whospend 1,800 on average.

EUROPE DEBT CRISIS POSES THREAT TOUS RECOVERY, SAYS FEDERALRESERVES JAMES BULLARD The intensification of Europes debtcrisis poses a threat to the US econom-ic recovery, a senior official from theFederal Reserve has warned. The tur-moil in financial markets leading up

to Greeces bail-out last May may haveadded to a slowdown in US growth.

VOLKSWAGEN CONSIDERS BUILDINGUS AUDI FACTORY Volkswagen AG will decide in thenext 12 months whether it will buildAudi luxury cars in the US in addi-tion to VWs it is churning out at anew factory here, the companyschief executive said yesterday. TheGerman auto maker hopes to dramat-ically increase US sales of VWs andAudi luxury cars over the next five years. It is counting on its newChattanooga plant to lower produc-tion costs of a key VW sedan.

SEC DEEPENS PROBE OF FOREXTRADINGFederal securities regulators are tak-ing a deeper look at the role of bigbanks in executing currency tradesfor clients. The SEC is examiningwhether two major banks made prop-

er representations to pension-fundclients about currency trading.

WHAT THE OTHER PAPERS SAY THIS MORNING

Britains long journey back to sanity

HERE is a little test for you, dear read-er. How much do you think publicspending has been cut over the past year? Five per cent? 10 per cent?Maybe 20 per cent? Im afraid you willbe disappointed. Total spending is up by well over four per cent in cashterms and by more than the publicsectors special inflation measure,according to the latest data for April2011 released yesterday by the Officefor National Statistics.

In fact, current spending was thehighest it has ever been last monthand up five per cent. Spending on

interest shot up 26.6 per cent; butmost other kinds of expenditure alsorose. In April alone, the UK govern-ment borrowed 10bn, the most everfor that particular month, equivalent

to 333m every single day. The excheq-uer was caught by a double whammy:total receipts fell slightly, primarilybecause 3.5bn was raised a year ago ina special one-off bank tax, while spend-ing went up in all categories exceptcapex, which fell by 200m.

Eventually, debt must be repaid:the bill will fall on us taxpayers aswell as on our children unless thegovernment tries to inflate its liabili-ties away, which will only work fornon-indexed gilts and which will endup costing all of us dear throughhigher interest rates. Public sector netdebt (excluding financial interven-tions) was 910.1bn (equivalent to60.1 per cent of GDP) at the end ofApril 2011. This compares to 765.5bn(53.0 per cent of GDP) as at the end of April 2010. So next time you hearsomebody claiming that the coalition

is cutting the UKs debt, dont forgetto laugh out loud. It is merely reduc-ing the rate at which more debt isbeing accumulated.

There was some good news in the

figures for George Osborne, the chan-cellor. Public sector net borrowing(excluding financial interventions) was revised down to 139.4bn in2010/11, down from 156.5bn last year. The Office for BudgetResponsibilitys March Economic andFiscal Outlook had forecast net bor-rowing of 145.9bn, so the chancellorhas done better than expected. Thetrend is down, something which themarkets are focusing on.

But next time you are told thatOsborne is imposing savage, recklesscuts on the UK, remember that thefigures tell a different story. So far,spending is still going up. The plan isfor total spending to go up in cashterms overall this financial year andto fall by 0.6 per cent in real terms(the measure that really matters). Thiswill hurt, especially given that debt

interest payments are soaring, reduc-ing the funds available for public serv-ices by a lot more than the 0.6 percent overall cut. But this should alsobe put into context. Barack Obama,

who was in London yesterday, wantsto cut public spending by 3.8 per centnext year, more than the 3.7 per centpencilled in over four years byOsborne. In other words, Obamascuts which many in the US want tomake even larger are four timeslarger than the average annual cutsproposed by slowcoach Osborne.

So it is no wonder really that theUKs credit rating was downgradedyesterday by (wait for it) Chinese rat-ing agency Dagong, which cut the UK by one notch to A+, from AA-, andplaced it on a negative outlook. Youmay snigger but unless the UK isable to deliver on its fiscal austeritynot just this year but for the nextfour, our creditors will soon start pan-icking again, with good reason.

[email protected] me on Twitter: @allisterheath

LONDON 2012 organising committeechair Lord Sebastian Coe hasimplored the British public to steerclear of unofficial ticket websites asthe clamour to attend high-profileOlympic events intensifies.

Earlier this week it was revealedthat British fans were attempting toutilise foreign-based websites in orderto purchase tickets on a first-come-first served basis.

But Lord Coe has advised those des-perate to secure coveted tickets notto panic and insisted they shouldnot be tempted to visit sites whichmay not be authentic.

Do not panic, he said. Do not betempted to go to [fake] websites. Youshould punch in urls (web links) onour website to check if they areauthentic but I doubt whether thatsthe case.

There is no perfect system. Thereis no ticket process of this scale. Thisis an extraordinary scale.

BY JAMES GOLDMAN

BUSINESS OF SPORT

Olympic ticket warning Lord Sebastian Coe warned against unofficial tickets Picture: Micha Theiner/City A.M.

NEWS | IN BRIEF

AIG share sale hands US $8.7bnThe sale of shares in insurance giantAmerican International Group (AIG)has raised $8.7bn (5.3bn), taking thestate-backed firm closer to independ-ence after its 2008 bailout. A com-bined total of 300 shares of thecompany were sold by the US Treasury

and AIG at $29 per unit. The govern-ment, which retains a majority stake inthe firm, needed to sell shares at about$28.7 per unit in order to recover a$47.5bn investment. The sale repre-sents the governments first steptoward exiting its ownership of thefirm, which received more than $182bnin aid during the financial crisis.

Diageo eyes Jose Cuervo for $2bnDrinks maker Diageo is in talks to buytequila brand Jose Cuervo for more than$2bn (1.2bn). Cuervo is in exclusivetalks with Diageo, which has the firstoption to buy the company because ofits international distribution rights tothe brand. Casa Cuervo, the maker ofthe worlds best-selling tequila brand, isrenegotiating a distribution deal withDiageo, which could have led to the saletalks.

EDITORS LETTER

ALLISTER HEATH

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

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowNight Editor Katie HopeBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

Editorial StatementThis newspaper adheres to the system of

self-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the EditorsCode of Practice, a copy of which can be found atwww.pcc.org.uk

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

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

Aprils record highdeficit provided aheadache for the UKchancellor GeorgeOsborne.

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News 3CITYA.M. 25 MAY 2011

GREECE could be forced to sell up to50bn (44bn) in state-owned assets byEuropean officials, as the nation triesto mend its battered finances.

European leaders want to push formeasures to ensure the Greek govern-ment completes its promised 50bnprivatisation drive, but believe a stateasset sale programme could ultimate-ly net it between250bn and300bn almost all of Greeces outstandingdebt.

But there are fears over Greecesresolve to carry out the privatisationplan which EU officials see as theonly way for the beleaguered countryto avoid insolvency.

Yesterday the biggest oppositionparty in the country rejected PrimeMinister George Papandreous bid to build support for 78bn of budgetmeasures and asset sales a key condi-tion for extra European Union finan-cial assistance.

Underlining public hostility to fur-ther austerity, Greeces public sectorunion called another 24-hour strikefor June.

One solution for officials could beto place the Greek asset sale in thehands of a specially formed independ-ent international body, possibly led bythe International Monetary Fund

(IMF). Dutch finance minister Jan Keesde Jager said that Greece should setup a privatisation authority along thelines of the Treuhand agency thatsold off state companies in the formerEast Germany after unification in1990. We could package their statecompanies into a fund, with inde-pendent advisers or IMF oversight, hesaid, adding that state assets could beused as collateral for loans.

Delays in the state asset sell-off willjeopardise both payment of the rescuepackages next instalment, of12bndue in June, as well as ongoing talksover a second bailout, of as much as60bn. The European Central Bankhas already made it clear that it isagainst a fresh restructuring of greekdebt.

Moodys became the latest agencyyesterday to warn of a chain reactionof severe consequences for the 17-nation euro area if Greece wereallowed to default next month, whenit faces a 13.4bn funding crunch.The political wrangling came as VinceCable, business secretary, became thefirst UK politician to admit openlythat Greece has no option but torestructure its 330bn of public debt.What they are going to have to do isto have a rescheduling of their debtand it can be done in a soft way or ahard way, and thats what the currentdebate is about, he said.

Greece pushed

to sell assetsBYRICHARD PARTINGTON

EUROZONE ECONOMY

US regulators launched one of thebiggest ever crackdowns on oil pricemanipulation yesterday, suing twowell-known traders and two tradingfirms owned by Norwegian billion-aire John Fredriksen for allegedlymaking $50m by squeezing marketsin 2008.

The Commodity Futures TradingCommission (CFTC) said traders James Dyer of Oklahomas ParnonEnergy, and Nick Wildgoose ofEurope-based Arcadia Energy,

amassed large physical positions at akey US trading hub to create the

impression of tight supplies thatwould boost oil prices.

Later they dumped those barrelsback onto the market, causing pricesto crash and racking up profits fromshort positions they had accrued infutures markets, the suit said.

Defendants conducted a manipu-lative cycle, driving the price of WTI(crude) to artificial highs and thenback down, to make unlawful prof-its, the lawsuit filed in New Yorksaid. The civil suit comes after threeyears of heightened scrutiny into oilprice speculation by the CFTC, and asPresident Barack Obama seeks to reas-

sure Americans he is trying to curbhigh US gasoline prices.

US regulators sue traders in newblitz on oil price manipulationREGULATION

FRENCH finance minister ChristineLagarde is expected to formallyannounce her bid to run theInternational Monetary Fund (IMF)this morning.

The European Union is said to havereached a consensus on backing herto replace Dominique Strauss-Kahn,

who quit last week over sexual assaultcharges.

Lagarde is seen as the frontrunnerfor the job, although she faces strongopposition from developing nations.

IMF directors for five key emergingmarket economies yesterday hit outat what they call an obsolete unwrit-ten convention that the head of theorganisation should be a European.

Directors from China, Brazil, India,

South Africa and Russia, or BRICcountries, argued that the conven-tion undermines the legitimacy ofthe IMF as a global institution.

If the Fund is to have credibilityand legitimacy, its managing directorshould be selected after broad consul-tation with the membership, theIMF directors said, adding that thenew boss should be chosen on thebasis of competence, not nationality.

Lagarde set to formally enterrace for top role at the IMFBYRICHARD PARTINGTON

WORLD ECONOMY

HEIR TO ARCELORMITTAL EMPIRE

ADITYA Mittal, the sonof Britains wealthiestman Lakshmi, yester-day moved a step clos-er to succeeding hisfather as chief executiveof the worlds largeststeelmaker. He has

been handed control ofthe biggest and mostproblematic unit FlatCarbon Europe insteadof Flat CarbonAmericas, as well asremaining chief finan-cial officer, putting himon course to head upArcelorMittal when hisfather, Lakshmi Mittal,60, steps down.

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BANKS will see their implicit subsidyfrom the state significantly cut downif the government implements recom-mendations from the IndependentCommission on Banking (ICB), its chair

John Vickers (pictured) said yesterday.Our measures would have a major

effect on reducing the subsidy,Vickers said when speaking before theTreasury Select Committee yesterday.His views appeared to be well-support-ed by Moodys decision to launch a

review into the credit ratings of theUKs major banks (see left).

But Vickers added that it is impossi-ble to solve the too big to fail prob-lem entirely: Total abolition isunlikely. There are always going to becircumstances when the government

will feel committed to come to the res-cue of banks.

Later, at the ICBs first public hear-ing on its interim report, released last

month, Vickers said that while remu-neration is not directly within thecommissions remit, some of theissues were focusing on could well

bear on that kind of issue (bonuses).He added that the report sought to

protect ordinary, core banking, butdid not detail what that includes.

He also told members of the publicgathered to discuss banking: If banksdo ... get into trouble its got to bemuch easier to sort themout.

The ICB is con-sulting on propos-

als in its interimreport, which rec-ommended aringfence aroundthe retail opera-tions of majorlenders toinsulate themfrom globalf i n a n c i a linstability.

Vickers: ICBplans will cutstate subsidyBY JULIET SAMUEL

REGULATION

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Police quizHuhne overdriving row

EMBATTLED cabinet minister ChrisHuhne was last night interviewed bypolice over allegations that he askedsomeone else to take driving licencepenalty points on his behalf.

The energy secretary is fighting forhis political life over the accusations,made by his estranged wife VickyPryce, that he made her accept thepoints incurred for a speedingoffence.

The alleged offence is said to haveoccurred in March 2003 while Huhne

was returning from Stansted Airport.Huhne was a member of the

European parliament at the time andregularly travelled between hisLondon home and the Essex airport,

where he would fly in from Brussels.Essex police also interviewed Pryce

last night, according to her lawyer.No arrests have been made by the

police force in connection with theinquiries.

A spokeswoman for Huhne said:Chris Huhne helped Essex police

with their inquiries today and looksforward to an early resolution of thisissue.

BYRICHARD PARTINGTON

POLITICS

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ww.c

ityam.c

om

NEWS | IN BRIEF

One Finsbury Circus is soldThe former City headquarters of BP hasbeen sold to a real estate fund for141.5m, the vendors said yesterday.One Finsbury Circus has been snappedup by Invesco Real Estates pan-European fund after months of bidding.Hermes Real Estate and LaSalle, whichacted on behalf of the sellers, said thesale of the multi-let, 210,000 squarefoot building allows their clients tospend on new investments. GM RealEstate acted for the joint owners, whileKnight Frank represented Invesco.

Armani rules out sales or listingDesigner Giorgio Armani yesterday ruledout selling or listing his company as itposted annual revenues up 4.6 per centto 1.59bn (1.4bn). Net profit jumped81 per cent to 161m and cash was arecord 604m. I have always associat-ed good cash liquidity with the conceptsof independence and solidity, saidArmani, 76. He also did not exclude pos-sible acquisitions.

Yandex surges on first dayShares of Russian internet company

Yandex surged more than 40 per cent intheir debut yesterday, in the largest USinitial public offering in the internet sec-tor since Google. Yandex raised $1.3bn(803m) in its IPO on Monday by selling52.2m shares for $25 each. The offeringvalued the overall company at about$8bn. Morgan Stanley, Deutsche Bankand Goldman Sachs led the underwrit-ers on the offering. Shares were up 40per cent at $35, after pricing at $25.

Google to reveal phone paymentsGoogle will take the wraps off a mobilepayment system tomorrow that letsconsumers pay at checkout with phonesinstead of cards, a source said, hoping tobeat Visa and others to the punch. TheInternet search and advertising leaderwill work with MasterCard, the worldssecond-largest credit and debit cardprocessing network, to launch the sys-tem. It has now signed up retail part-

ners Macys, American Eagle Outfittersand Subway.

MOODYS has put 14 of the UKsbiggest banks on review for a ratingsdowngrade due to regulatory efforts toresolve the too big to fail problem.

The move could significantlyincrease borrowing costs for banks asregulators draw up plans to reduce thelikelihood that taxpayers will have to

bail out failing banks in future.Those under review include Lloyds

TSB, NatWest, HBOS, RBS andSantander UK, while the outlook on

Barclays senior debt was revised tonegative. HSBC has escaped a change

but remains on a negative outlook.Moodys said that the review was

sparked by regulators desire to createresolution plans that will make it easi-er to wind up collapsing banks ratherthan bail them out. Current levels ofsystemic support account for two tofive notches of uplift for the large UK

banks, the agency said.

Moodys puts 14 UK bankson negative rating outlook

BY JULIET SAMUEL

BANKING

MOODYS ESTIMATE OF IMPLICIT CREDIT SUBSIDY FOR UK BANKS

Barclays A3 3 Negative

HSBC A2 2 Negative

Lloyds Baa1 4 Under review for downgrade

RBS Baa2 5 Under review for downgrade

NatWest Baa2 5 Under review for downgrade

Santander UK Baa1 2 Under review for downgrade

Bank Baseline Systemic Outlookcredit rating uplif t

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Heres one little reason

why we make tyres that stop

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BRITISH banknote printer De LaRue yesterday reported a 68 percent drop in full-year profit due topaper production problems andsaid it was unable to predict theoutcome of talks with the key cus-tomer still affected.

De La Rue said production ofbanknote paper for one of its topcustomers -- named by a sourceclose to the matter earlier this yearas the Reserve Bank of India -- wasstill suspended after faults werefound with it in July, at a cost of

35m.Discussions remain ongoing

with the principal customer con-cerned and the authorities, andtherefore there remains uncertain-ty as to the ultimate outcome ofthese issues, including their finan-cial impact, the company said yes-terday.

De La Rue, which produces over150 national currencies and securi-ty documents including passports,said pre-tax profit before exception-al items for the year to 26 Marchfell to 33.3m from 104.1m in theprevious financial year.

In January, Frances Oberthur

Technologies walked away from a bid for De La Rue after a higherindicative offer failed to engage the

banknote printers board in talks.

De La Rue plans cutsas production fadesBYHARRY BANKS

FINANCIAL SERVICES


MORE NEWSONLINE AT

www.cityam.com

Give us your views on NHS reforms

In association withPoliticsHome.com

Apply to join today atwww.cityam.com/panel

Our latest questions for our panel ofbusiness professionals are online now- apply to join at cityam.com/panel togive us your views on the proposedchanges to the how the NHS is run:Do you have private healthcare?I rely solely on NHS servicesI have a private healthcare planthrough workI have my own private health planThe health reforms propose that anywilling provider could provide NHSservices. Do you support this plan?YesNo

MaybeDo you support plans for a regulatorto promote competition in the NHS?YesNoDont knowWhich of the below do you approve ofmost in handling of NHS reforms?David CameronEd MilibandNick CleggAndrew LansleyAndy BurnhamNoneOther

PoliticsHome.comPoliticsHome.com

ANALYSIS l De La Rue

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838.4524 May

TROUBLED fire engine providerAssetCo is being pursued by one ofits banks for repayment of a 1.3moverdraft facility, it said yesterday.

Northern Bank has filed a credi-tors petition but AssetCo said it

would not pay it while it was stillrenegotiating its banking arrange-ments. This effectively seeks toimprove the banks position, and theposition of its guarantor, ahead ofother banks and creditors, it said.

City A.M. understands AssetCo wasexpected to repay the loan from pro-ceeds of its 16m share placement.

One source told City A.M. formerchief executive John Shannonremains the overdraft guarantordespite being sacked in March, and

AssetCo was trying to force the bankto collect on Shannons guarantee

rather than repay the loan. AssetCos executive chairman

Tudor Davies told City A.M. he didnot know who the guarantor was.

AssetCo facesnew paymentcall from bank

SUPPORT SERVICES

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GLENCORE saw its share price closeup 2.14 per cent in its first day ofpublic trading on the London StockExchange yesterday in what the LSEconfirmed is Londons largest everfloat, with $10bn raised.

The stock closed at 525p, failing tobreak above its original float price of530p when conditional trading

began last week.Some questioned why the share

price was not above its float price

given that the order book was said to be many times oversubscribed lastweek.

But most analysts were moderate-ly positive on the stock, with manysaying that successfully launching ahuge float in the current volatilemarket for commodities was in itselfimpressive.

I dont think its been a disap-pointing week given the softness inthe commodities space sinceGlencore announced its float, said

Numis Securities Andy Davidson,metals and mining analyst. I thinkthe best we could hope for was stabil-ity and we seem to have got that sofar. Its still early days.

RBC Capital Markets Tim Huffsaid: I think its going pretty well its traded in line with the sector.

With a market cap of $59.2bn atthe close of its first days trading,Glencore will be the first company to

be fast-tracked into the FTSE 100index in 25 years. It could see itsprice rise today on the back ofdemand from index-trackers.

Glencore rises2pc in firstdays trading

Glencore chairman Simon Murray and colleagues at the LSE yesterday

BY JULIET SAMUEL

CAPITAL MARKETS

NewsCITYA.M. 25 MAY 2011 7

ANALYSIS l Glencore

p

19 May 20 May 23 May 24 May

550

540

530

520

510

500

525.0024 May

A sorely neededIPO success story

Londons float market badlyneeded a success story after arun of false starts and post-ponements this year. And

Glencores moderate price move-

ment during its first days tradingseems to have supplied just that.Observers looking for a superstar

rally, to fit hype from bankers lastweek that a five to 10 per cent rise was expected on day one, wereunderstandably disappointed. Butas one analyst put it: Its a miner,not a tech company.

Of course, Glencore is not a pureminer and in fact derives the lionsshare of its revenues from commod-ity trading, where it has close to a50 per cent market share in a rangeof commodities. The companystrading arm uses its global scale totake advantage of price differencesfaster than rivals, shipping materi-als across the world in bulk to meetdemand.

This makes it more complex thana FTSE 100 miner, as it benefitsfrom commodity price volatility,

not just rises. Its trading operationhas been criticised for being ablack box without enough infor-mation telling investors how it

works. But as Numis SecuritiesAndy Davidson said: The momentwe do know exactly how it works,then Glencore will lose its edge.

BOTTOMLINEAnalysis by Juliet Samuel

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MARKS and Spencer (M&S) yesterdayunveiled a far reaching shake-up of itsstores which will see branches in rich-er areas being stocked with moreexpensive lines.

Chief executive Marc Bolland saidthe move based on the spendingpower and demography of a localarea would see products betterreflect the requirements of shoppers.

Announcing a catalogue of sweep-ing changes he also said M&S would be

opening a series of pilot stores to testnew layouts. Allied with the storerevamps he said the retailer wouldfight competitors to become a heavy-weight online retailer.

He said the fact that online retailerstrading only three years were sellinggoods in the US while M&S laggedbehind signalled that its web offeringneeded an overhaul. Our business ischanging and we must change withit, he said.

International growth overall will be

powered by China, India and Europewhile Bolland said any move to the USwold be long term.

M&S made profit before tax andone-off items of 714.3m in the year to2 April, a rise of 13 per cent on the pre-vious year.

But Bolland warned that times would remain tough on the highstreet. He said: The consumer is con-cerned about job security. April wasgood but that was a distortion becauseof holidays, nice events and sunshine.

Its shares closed 2.9 per cent lowerat 385.6p yesterday.

M&S in storerevamps asprofit climbs TESCOS market share rose for thefirst time since November last year,according to Kantar Worldpanel mar-ket share data.

For the 12 weeks to 15 May Tescosmarket share rose to 30.7 per cent,from 30.6 per cent. The only otherretailer in the top four to increase itsshare was fourth-placed Morrisons. Itsshare rose for the third consecutiveperiod to 11.9 per cent, from 11.8 percent a year earlier.

Sainsburys, the UKs third-largestretailer by market share, saw its mar-ket share unchanged at 16.3 per cent.Up until March, Sainsburys marketshare had increased consecutively for25 periods. Asda, the second biggest,saw its market share slip to 17.2 percent, from 17.5 per cent. Outside thetop four, Waitroses market share rose

to 4.3 per cent, from 4.1 per cent,according to Kantar, which monitorshousehold grocery purchasing habits. The collective market share of dis-count retailers Aldi and Lidl rose tosix per cent, from 5.4 per cent a yearearlier. Edward Garner, communica-tions director at Kantar, said that inthe four weeks leading up to 15 Maythe year-on-year grocery growth raterose to 7.8 per cent, fuelled largely byEaster shopping, the good weatherand, the Royal Wedding.

Tesco marketshare rises asAsda sees dip

M&S boss Marc Bolland is planning to tailor his stores to their location

BY JOHN DUNNERETAIL

RETAIL

Consumer News8 CITYA.M. 25 MAY 2011

ANALYSIS lMarks & Spencer

p


410

400

390

380

370

360

350

340

330

320

385.6024 May

DO YOU SHOP AT MARKS AND SPENCER, AND DO YOU THINK THESTORES NEED A REVAMP? Interviews by Shiba Babamiri and Phoebe Torrance

I dont shop there because I find it is very oldfashioned and hard to find what you are look-ing for. I think the stores need a revamp toattract a younger range of customers.

STEVE HART | SAGICOR

Yes I am a big fan, the food is great quality. Arevamp could be a good idea because thestores should provide what the area needs butoverall the stores are very well organised.

ELLIOT CAPLAIN | ASPEN INSURANCE

I shop in Marks and Spencer for food but notfor anything else. The stores are prettystraightforward but they could expand on thevariety of the food they offer.

RORY DUNCAN | FARADAY INSURANCE

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HOMESERVE founder Richard

Harpin (pictured) yesterday saidpenny wise homeowners keen toavoid costly disasters such as boil-er breakdowns helped it grow lastyear.

Revenues at HomeServe,which repairs and protects sys-tems such as plumbing andheating, increased by 27 percent to 467.1m in the year toMarch 2011 compared with2010, as it sold 15 per centmore insurance policies.

That pushed pre-tax profit at

the Midlands-based firm up 16 percent to 117.1m, while earnings pershare rose 17 per cent to 25.9p.

Its reinforcing the fact that people

are living busier and busier lives, saidHarpin. And particularly in difficulteconomic conditions when people arefeeling a bit hard up its so they canavoid the cost of a big repair bill.

He is no exception: his house datesfrom 1660 and hes had more thanmy fair share of HomeServe claims. Ithink on average Ive had at least aclaim a year, he sighs.

Harpin has grown HomeServe to a

multi-country giant with access to68m households, but says there is stillvast room for growth. Only 22-23 percent of UK homes have plumbing and

drainage protection while just 30 percent have boiler cover comparedwith 65 per cent of people that havevehicle breakdown cover, he said.

Harpin says HomeServe has oldercustomers that have older properties,they worry about things going wrong,and they want to have somebody tosort it out. They are also loyal morethan 80 per cent are repeat customers.

While UK new customers were up

four per cent to 3m, it is expanding farfaster in its international markets suchas the US, France and Spain. In the USnew policies rose by 55 per cent to

450,000 and it delivered 6.1m operat-ing profit, up from 1.5m in 2010.HomeServes next steps will be to use

its high cash generation up to 86.1min 2011, from 26.3m the previous year to buy the in-house service books ofestablished utility companies in newand existing markets. Harpin says it iscurrently negotiating deals in Belgium,Germany, and Canada and will targetmore, at up to 20m, this year.

Busy lives and tight belts drive HomeServe growth

BYALISON LOCK

SUPPORT SERVICES

ANALYSIS l HomeServe

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GLENCOREBOSSS BRIEF

ENCOUNTERAT CHELSEAIT WAS unseasonably cold at the preview ofthis weeks Chelsea Flower Show so theQueen, mindful of her constitution, didntstop to admire every single show garden.

However, she did manage to drop in onthe Royal Bank of Canadas New WildGarden, designed by Nigel Dunnett of

The Landscape Agency, where LynnPatterson, the banks director of corpo-rate responsibility and John Burbidge,chief executive of RBC Capital Marketsfor Europe and Asia, were deeply hon-oured to meet her Majesty.

Burbidge stayed on for the eveningsgala dinner, where he and Ross Jennings,director of RBC Wealth Management,

hosted a client party alongside RBCCapital Markets Patrick Meier, head ofinvestment banking for Europe, and JoshCritchley, head of equity capital markets.

Elsewhere at the Chelsea show-grounds, Stephen Hester, group CEO ofRBS, braved the wind to admire theaward-winning flowerbeds, as formerChannel 4 chairman Luke Johnson andITV chairman Archie Norman retreatedinside the marquee for a bit of a chatin a more sheltered corner.

A very tall power trio from the

tured below) was already halfway to Asiaon a plane to Hong Kong.

STOCK EXCHANGEON THE subject of Glasenberg, TheCapitalist hears there was an amusingexchange of presents yesterday betweenthe Glencore chief and Xavier Rolet of theLondon Stock Exchange (LSE).

Before hotfooting it to Hong Kong,Glasenberg took time to celebrateLondons largest-ever flotation with someof his extremely athletic-looking manage-

ment team at the LSE headquarters.Glasenberg presented Rolet with a huge

toy truck to represent the commoditygiants heritage, which Rolet duly prom-

ised to give pride of place among thestocks exchanges other topmementoes.

It sounds like Glasenberg got agood deal, though, since Rolet

then presented him with a1996 bottle of Boerl & Kroffchampagne, thought to beworth around 1,000.

shows sponsor M&G Investments and itsowner Prudential Prudential chiefexecutive Tidjane Thiam, chairmanHarvey McGrath and M&G chief execu-tive Mike McLintock held court for t he

evening, while Deutsche Bank managingdirector Charles Wilkinson hosted aparty for the new CEO of software firmSage, Guy Burruyer, on his first Chelseaouting as a FTSE 100 leader.

Former PM John Major was on goodform, as was the charming formerBarclays chairman Sir Peter Middleton,

who attended the gala with his wife.Also escorting his other half was Citis

head investment banker DavidWormsley, fresh from his banks co-advi-sory role on Glencores float this month,

who caught up with spinner GuyLamming of Finsbury, which handles thePR for the commodities giant. Wormsleyalso no doubt had a word with Glencores

boss Ivan Glasenberg himself (pictured

right), who made his flower show debutat the Monday night gala.

Did Glasenberg try and buy theflower show? wondered one moleof the commodities billionaire.

An interesting question, butThe Capitalist will have tofind that out anothertime by the time thedust settled on this

years horticulturalpower gathering,Glasenberg (pic-

RICHARD FARLEIGHS

100 TRADING STRATEGIESA FREE FOREX SEMINARMonday 6th June from 8:30 -11:30The Grange Hotel, 10 Godliman Street, London EC4V 5AJ

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Shortly aftercelebratingLondons

biggest-everflotation,Glasenbergwas straighton a flight toHong Kong

The Capitalist10 CITYA.M. 25 MAY 2011

EDITED BY

HARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist

Nigel Dunnett and Lynn Patterson at RBCs New Wild Garden Picture: Micha Theiner/CITY A.M.

8/6/2019 Cityam 2011-05-25

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Twitter is the winner in super-injunction saga

WHO has done well out ofthe super-injunction saga? Those celebrities whosenames have now been

revealed? Not at all. The lawyers?Presumably.

But what of Twitter? The social

media platform deemed to havechanged the dynamics of the sagaand elevated freedom of speech todazzling heights: the conqueror oftyrants and celebrities who would

rather their lives remained private.

GOOD YEAR FOR TWITTER MINDSHAREIn terms of mindshare it has been agood year for Twitter. It started 2011with an attention score of 26 i.e. aquarter of people were hearingsomething about them (whethergood or bad) and got a small bump(to 31) from the beginnings of theArab Spring.

It trended around this level forthe next four months before the

super-injunction controversies sawit rise again, this time to 39.

GOOGLE AND FACEBOOK HIGH PROFILE This has enabled it to move from

6th to 2nd in terms of the mosttalked about online brands edgingabove Google, with only Facebookabove it.Despite this rise in profile, Twitterhas yet to really see a significantgain in terms of sentiment. Its over-all impression scores have edged upthrough May from -7 to -3 but it will want to see the increased mind-share get it bigger gains than thatand it still remains down in 20thposition out of 25 online brands on

that measure.So good news for Twitter in terms

of making noise but when we com-pare its impression score withFacebooks +19 or Googles remark-

able +68 we can see that it still has along way to go in terms of turningthat noise into positive sentiment.

Stephan Shakespeare is chief executiveof YouGov

BRANDINDEX

STEPHAN SHAKESPEARE

ANALYSIS l Attention chart ANALYSIS l Impression chart

3 Jan 7 Feb 7 Mar 4 Apr 2 May 23 May 2 May 5 May 10 May 13 May 18 May 23 May

60.0

50.0

40.0

30.0

20.0

10.0

0

80

70

60

50

40

30

20

10

-10.0

0

-20.0

Twitter

Twitter

Google

GoogleFacebook

Facebook

NEWS | IN BRIEF

Microsoft fights EU fineAn899m (783m) EU antitrust fine wasexcessive and undeserved, Microsoft told anEU court yesterday in a case which coulddraw a line under a decade of legal battles.

The 2008 European Commission fine arecord at the time penalised Microsoft forfailing to comply with the regulators orderfour years earlier to provide informationthat would allow other products to workwith computers running its software.

Chrysler repays $7.6bn loanChrysler yesterday paid back $7.6bn(4.7bn) in US and Canadian governmentloans from its 2009 bailout, a move thatallows the US automaker to distance

itself from an unpopular bailout anddeepen its ties with Italian automakerFiat SpA. Chrysler said it transferred$5.9bn to the US Treasury and $1.7bn tothe governments of Canada and Ontarioto repay loans it received in June 2009.

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Cell,cell,cell.

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To download, simply search for IG Indexin the App Store today.

LONDON real estate investor GreatPortland Estates (GPE) yesterdayreported a 78 per cent rise in profitsto 50.4m, as it unveiled planningapproval for its Hannover Square proj-ect and the sale of some of its stake in100 Bishopsgate.

The firms West End-focused prop-erty portfolio gained 15.5 per cent in

value to 1.65bn over the year to theend of March, while rental growthrose 10.8 per cent, beating consensusanalyst forecasts by seven per cent.

Westminster City Council has giventhe green light to GPEs 500m luxu-ry flats and office space in HanoverSquare, which is due for completionin 2016 to tie in with nearby Crossrailconstruction.

But GPE said it hoped to sell offsome of its stake in the 100Bishopsgate tower, a 40-storey block

expected to deliver almost 1m squarefeet of City office space.

GPE said during an analyst presen-tation that more than one investor isinterested in buying some of its 50per cent stake in the site, to take itsstake down to a quarter and reducingits costs to 152.9m.

The names of the potential buyers were not disclosed. Existing partnerBrookfields declined to comment on

whether it would increase its stake.

New projectssteal the showat PortlandBYMARION DAKERS

PROPERTY

STRONG demand for rented accommo-dation helped push profits up at buy-to-let specialist Paragon, with thecompany yesterday predicting furthergrowth in lending for the rest of the

year.Pre-tax profit for the six months to

the end of March rose 34.8 per cent to

39.5m and the company also raisedits interim dividend by 12.5 per cent,

lifting it to 1.35p.The groups performance contin-

ues to be strong, with excellent profitgrowth, credit performance and cashgeneration during the first half of thefinancial year, said chief executiveNigel Terrington in a statement. Newlending has progressed well, with astrong application flow building to ameaningful pipeline of business.

Paragon shares jumped nearly oneper cent yesterday to 190p.

Paragon leads the way with risein lending and 35pc profit jump

PROPERTY

A PANEL of planning and architectureexperts will today meet to decide

whether to push for listed status of theBroadgate estate near Liverpool Street.

English Heritage is due to announceshortly afterwards whether plans toknock down two buildings on theestate should be put on ice, pendinggovernment approval.

British Land, which owns theBroadgate complex of 16 buildings in ajoint venture with Blackstone, wantsto keep UBS on its estate with a 340mpurpose-built headquarters, due forcompletion in 2016.

But conservationists want the site tobe protected as a leading example of1980s architecture.

English Heritage declined to com-ment on confidential proceedings yes-terday.

English Heritage tojudge on UBS office

BYHARRY BANKSPROPERTY


UBS and the site owners are due to learn English Heritages decision as soon as today

ANALYSIS l Great Portland Estates

p


430

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410

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390

380

370360

413.1024 May

English Heritagehas called the

Broadgate estateamong the bestof its type and

period

Developmentcost of up to

340mfor the new

building

British Land hassaid a listing

sends a terriblesignal and thatthe case for list-

ing is weak

BROADGATE

LISTING SPAT

Q.WHO DECIDES WHETHER TOLIST BROADGATE?A.The final decision will rest withthe culture secretary, JeremyHunt. He is obliged to consider whatEnglish Heritage wants, as it is astatutory adviser on conservation

matters. It is unusual for a listing todefy English Heritages wishes, butnot unheard of for example, whena stakeholder, owner or other state

body disagrees with its findings.

Q.IS A LISTING LIKELY?

A. It is not standard practice to listbuildings less than 30 years old,though exceptions can be made if asite is under threat.

QA&

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NICOLAS Sarkozy urged internet

leaders gathered in Paris for the e-G8talks to work with governments andshare fairly the benefits of a revolu-tion he compared to the discoveriesof Columbus, Galileo and Newton.

Opening a forum at whichGoogles Eric Schmidt and FacebooksMark Zuckerberg will be among thespeakers, Sarkozy heaped praise onan industry that has democratisedinformation and helped enable therevolutions of the Arab Spring.

Sarko urges webcooperation

TECHNOLOGY


ANALYST VIEWS: WHAT DO THE RESULTSMEAN FOR INVESTORS? Interviews by Steve Dinneen

MORTEN SINGLETON | INVESTEC

Results headlines look absolutely fine. The headlines all came in at orabove consensus expectations. The full-year dividend has been held at 4.5p despitesome anticipation in the market of a possible cut. There are no major catalystshere, but no disasters either.

KEITH BOWMAN | HARGREAVES LANSDOWN

Overall there wasnt a great deal of excitement in there but no majordisappointments either, which has allowed investors to breath a sigh of relief aftera bit of a rocky patch which has effectively seen a couple of profit warnings. Thereis also some improvement in free cashflow.

MANOJ LADWA | ETX CAPITAL

Cable and Wireless Worldwide impressed on all fronts as it comfort-ably exceeded all analyst expectations. Bolstering its US operations with a new

senior hire will allow the business to shift some focus from the UK where itderives the bulk of its revenue.

RISING Endemol star Tom Toumaziswill become the new chief executive

of European publisher Mecom whenStephen Davidson, currently execu-tive chairman, steps aside in August.

Toumazis (pictured) has worked inthe media industry since 1983 andhas held senior international and UKpositions in print, online, TV andradio.

He served as chief commercialofficer at Endemol from 2009,

where he headed up its worldwide

commercial activities. His remitincluded the expansion of the com-panys distribution business and

worldwide salesHe was previously executive vice

president with Walt Disney, wherehe was in charge of programming,new media and channel distributionfor Europe, the Middle East, Africaand Canada.

He also held senior roles at UK-based publisher Emap.

He said of his new role: Mecomhas an impressive European foot-print, which combines powerfulnational and local print media posi-

tions with rapidly growing onlineand new media operations. It hasconsiderable potential to developits multi-media platforms and

build strong digital revenues

and I am excited to be given theopportunity to lead the compa-ny.

Davidson, who became exec-utive chairman after the for-mer boss of Mirror newspapersDavid Montgomery steppedaside over a row with share-holders, will stay on as non-executive chairman of thefirm.

Endemol star to take over Mecom

BY STEVE DINNEEN

TECHNOLOGY

CABLE & Wireless Worldwide(C&WW) yesterday released a work-manlike set of results that reassuredinvestors who had been spooked by atorrid few months.

The firm slashed costs to push pre-tax profit up 23 per cent to 143m onslightly lower revenues of 2.3bn.

Shares in the firm, which concen-trates on the global corporate marketand has a large presence in the UK,closed 4.91 per cent higher. They havelost more than 40 per cent of their

value since the demerger.The business, which split from the

former Cable & Wireless Group in2009, turned cashflow positive for thefirst time. It reported free cash flowgeneration of 61m. In 2006 it was

burning through well over 400m incash.

The firm says it now expects trad-ing cashflow to continue to improvenext year but Ebitda to remain broad-

ly flat.It maintained its dividend at 4.5p a

share, reassuring investors whofeared it could be cut.

Chief executive Jim Marsh said:This year we passed the importantmilestone of turning cash positive forthe first time. The movement tocloud, along with the ongoing con-

vergence between mobile and fixedline communications and the rapidgrowth in global data traffic creategood opportunities for our business.

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TELECOMS

ANALYSIS l Cable & Wireless Worldwide

p


75

70

65

60

55

50

45

52.1024 May

TOM TOUMAZIS

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Economics18 CITYA.M. 25 MAY 2011

GERMAN business confidence hasdefied expectations by holding strongthis month, despite drops in Frenchand Belgian morale and tumblingindustrial orders across theEurozone.

Sentiment in the business climatestuck at 114.2 in May, according to thehighly regarded survey from Munich-

based think tank Ifo.And the index measuring the cur-

rent business situation climbed to afresh high of 121.4, from 121 in April.

The news coincided with officialdata confirming that the Germaneconomy grew 1.5 per cent in the firstthree months of year.

It is important to emphasise justhow elevated these indices are, espe-cially in the context of the bad run ofnews in recent months, said EoinOCallaghan of BNP Paribas, citinghigh oil prices and knock-on effectsfrom the Japanese earthquake.

Germany cannot be immune to

these dynamics, but there is verystrong momentum in the economy.

German manufacturing saw adecline for the third consecutivemonth, however, from 28.7 to 27.8 inthe sub-index.

In France the business climateamong factories also dropped, for thesecond straight month, according tothe statistics office INSEE.

The index slipped from 109 in Aprilto 107 in May, yet remains above itslong term average.

A sharper drop was recorded inBelgium, where a confidence indexplummeted from 2.8 to -0.5, draggeddown by the manufacturing sector.

Its reached its lowest level sinceOctober 2010, said BNPs Steven

Vanneste. At current levels, the indi-cator is indicative of growth aroundtwo per cent, a notable slowdownfrom the three per cent registered inthe first-quarter.

New industrial orders dropped by1.8 per cent in March across theEurozone, according to a separatedata release from the Eurostat office.

Germany still

on track withhigh morale

UKs retail sales hold steady

ACTIVITY on the UK high street is sub-

dued, but steady, according to the lat-est research by the Confederation ofBritish Industry (CBI).

Retail sales are holding up about aswell as can be expected, the CBI saidyesterday, after announcing that saleshave remained surprisingly resilientthis month.

A positive balance of 18 per cent ofretailers reported a higher volume of

sales, compared to 21 per cent in Aprilwhen sales were boosted by the RoyalWedding.

Price pressures eased very slightly in

May, yet remain extremely high by his-torical standards.A positive balance of 65 per cent of

traders said they were selling at higherprices in the three months to May, aminimal drop.

We are still anticipating higherinflation later in the year, said CBIeconomist Lai Wah Co.

High inflation, taxes and sluggish

wage growth have squeezed Britishhouseholds and placed pressure onretailers.

Family spending power is at a very

low level, and with the continuing biteof rising utilities and fuel, we are notlikely to see an improvement in thissituation any time soon, said JudithMcKenna, chief financial officer for

ASDA.Given these challenging consumer

conditions, it is good news that retailsales growth is stable, not falling, con-cluded CBI chief John Cridland.

BY JULIAN HARRIS

EUROZONE ECONOMY

BY JULIAN HARRIS

RETAIL

THE UKs credit rating was downgrad-ed yesterday, by Chinese rating agencyDagong.

Chinas first domestic credit ratinggroup cut the UKs rating by one levelto A+, from AA-, and placed it on a neg-ative outlook.

The agency cited a reduction in theUKs capability to repay debts coincid-ing with extremely disappointing

deficit figures.

The British economy will expand byjust 1.3 per cent this year and 1.5 percent next year, Dagong expects.

Conversely, the outlook for Chinaseconomy was also cut yesterday, in astatement from Goldman Sachs.Chinas double-digit growth will slowthis year to 9.4 per cent, the bank nowpredicts, and drop to 9.2 per cent in2012.

Dagong slashes UK creditrating over new debt fear

WORLD ECONOMY

BANKS FISHER IN NO HURRY TO RAISE RATES

BANK of England rate-setter Paul Fisher showed a dovish outlook yesterday during a speechon the UKs economic outlook. Downside risks to growth have prompted Fisher to pause toconsider when policy should start to be normalised or even whether further loosening mightbe justified, he said, insisting that rate hikes were not urgently needed. Picture: GETTY

NEWS | IN BRIEF

Investment to London keeps upLondon attracted more foreign directinvestment in 2010 than every Europeancountry apart from France, Germanyand Russia, a report from Ernst andYoung revealed today. The UK as awhole continues to attract the highest

level of investment in Europe, up sevenper cent in 2010 from the previous year.While almost half (46 per cent) of exist-ing investors would like to invest more,the UK could do more to attract fundsfrom upcoming emerging economies, thereport said.

Private equity exits at fresh highPrivate equity firms have been cashingin on their investment at a record level,analysts Preqin revealed yesterday.Preqin announced 201 private equity-backed exits already in the second-quar-ter of this year, valued at $85bn(52.5bn). This is already five per centhigher than the final quarter of 2010,according to the report. European exitvalue has reached $57.9bn, double thefirst-quarter of the year, and almost fivetimes the $12.7bn in exits seen duringthe same quarter in 2010.

Norwegian GDP growth slowsNorways mainland GDP grew slowerthan the market expectation in the firstthree months of the year. The economyexpanded by 0.6 per cent, after 0.3 percent growth in the final quarter of lastyear.

New home sales pick up in USThe US housing market showed signs ofimprovement in April, data showed yes-terday. Sales of new homes increased by7.3 per cent to 323,000 in April from arevised 301,000 in March.

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NESTLE, the worlds biggest foodgroup, has agreed to buy US gas-trointestinal diagnostics firmPrometheus Laboratories for an esti-mated $1.1bn (680.5m) as part ofthe Swiss groups drive into healthsciences.

Nestle said Prometheus, which isexpected to have annual sales ofaround $250m in 2012, makes teststo help doctors diagnose conditionssuch as inflammatory bowel dis-eases, including Crohns diseaseand ulcerative colitis.

Nestle, maker of Nescafe coffee,KitKat chocolate bars and Maggisoup, hopes Prometheuss salesforce will push its hospital nutrition

products like Peptamen andNovasource.

While Nestle declined to givefinancial details, analyst Jean-Philippe Bertschy at bank and assetmanager Vontobel estimated Nestlemight have paid more than 1bnSwiss francs ($1.1bn) for the compa-ny.

The combined entity will be ableto leverage the products and geo-graphic presence in gastrointestinaldiagnostics. We see that acquisitionas a decisive step for Nestle, he said.

Luis Cantarell, head of Nestleshealth science unit created at thebeginning of the year, said the com-pany hoped to develop personalisednutrition offerings withPrometheuss diagnostics andexpected the buy to accelerate its

own research.We will incorporate the nutri-

tion dimension through existingproducts and new products we aregoing to develop, he said.Significant innovations in the next12 to 24 months will be added to theexisting platform.

Nestle makes $1bnmove in US pharmaBYHARRY BANKS

M&A

SONYS shares bounced from two-month lows yesterday as expecta-tions were raised that it might haveput its troubles behind it after it saidthis years operating profit wouldmatch last years, easing worriesabout the impact of the March earth-quake.

In its first estimate for the year toMarch 2012, Sony said its operatingprofit would come in around 200bnyen (1.5bn), prompting Macquarie

to upgrade its rating on the stock tooutperform from neutral.

Morgan Stanley, Credit Suisse andUBS reiterated their overweight,buy and outperform ratingsrespectively.

Analysts said Sony had providedmarkets with a realistic view of theimpact of the quake and aPlayStation network hacking inci-dent, both of which had weighed onthe shares. Sony expects to report anet loss of 260bn yen for the yearended 31 March, its third straightannual net loss, after writing of taxcredits following Japans earthquake

and tsunami.The outlook came as Sony admit-

ted its websites in three countrieshad been hacked, with 8,500 Greekuser accounts compromised.

Sites in Thailand and Indonesiahad also been affected, it said.

The Japanese entertainment andtechnology giant said data takenfrom Greek accounts included emailaddresses, telephone numbers,names and passwords but that creditcard data had not been stolen in thelatest attacks.

Sony has seen a series of hackingattacks that have exposed more than

100m accounts on its online gamingnetwork to possible data theft.

Sony shares rise on upbeat outlookdespite fresh hacking of online infoTECHNOLOGY

The Royal AscotGolf Day and Charity Ball

hosted by Derek Thompson and horseracing stars

in aid of Cancer Research UK

yedchariteristegchUKis a researcerRancCales (1089464) andinWainEngland&

otland(SC041666)cS

NEWS | IN BRIEF

Pennon flush with profitWaste and water company Pennon yes-terday reported a pre-tax profit rise of1.5 per cent to 188.5m for the firstthree months of the year and recom-mended a final dividend per share up 9.9per cent to 17.15p. The company says itis well positioned in the current econom-

ic conditions with South West Watercontinuing to improve its operationalperformance while revenues from itswaste management segment Viridorsoared by 13.6 per cent.

Victrex plastics has strong salesHi-tech plastics company Victrexannounced a rise in pre-tax profit of 57per cent to 48.3m boosted by strongsales of its polymer products used in air-craft components and car parts. Thecompany, whose revenues increased asmajor markets showed a significantrecovery, raised its dividend by 25 percent for the first-half of 2011 and said itwould pay 8p per share compared to6.4p one year ago.

Extended use for Roche drugsRoches cancer drug MabThera has beenrecommended as a maintenance drugfor NHS patients with follicular non-

Hodgkins lymphoma by the NationalInstitute for Health and ClinicalExcellence (NICE). NICE said it couldpostpone the spread and growth of can-cer by up to four years.

TOSHIBA said yesterday it may notreach its target of 39 orders for nuclearreactors until two to three years laterthan expected, and that it wouldincrease focus on renewables as the cri-sis rumbles on at the FukushimaDaiichi nuclear plant.

Despite the setback, Toshiba said itaims to more than double its operatingprofit to 500bn yen (3.7bn) by the yearto March 2014.

Engineers are still battling to bringthe Fukushima nuclear plant undercontrol more than two months afterthe earthquake and tsunami that dev-astated a swathe of Japans coastline.

If everyone around the world isagainst nuclear power, there is no pointin us saying it is a pillar of our strategy,Toshiba president Norio Sasaki said.

Toshiba has been trying to lower its

dependence on nuclear power byinvesting in renewable energy sources.

It now targets sales of 350bn yen insolar, hydroelectric, geothermal andwind power, 900bn yen in smart gridproducts and 800bn yen in low-powerconsumption motors and batteries.

It said it could spend more thanthree trillion yen on capital outlays,research and M&A through 2014.

Toshiba shifts focusfrom nuclear to

offset order delaysBYHARRY BANKS

ENERGY

TOKYO Electric Power (Tepco), theoperator of the Fukushima Daiichinuclear power plant disabled by the 11March earthquake and tsunami, con-firmed yesterday that there were melt-downs of fuel rods at three of the

plants reactors early in the crisis.It had said earlier this month that

fuel rods in the No.1 reactor had melt-ed, but officials of the utility confirmed yesterday that there were also melt-

downs of fuel rods at the plants No.2and No.3 reactors early in the crisis.

The disaster has triggered a drop ofmore than 80 per cent in TokyoElectrics share price and forced thecompany to seek government aid as itfaces compensation liabilities thatsome analysts say could top $100bn.

The Tepco officials said damage to

the No.2 reactor fuel rods began threedays after the quake. A delegationfrom the International Atomic Energy Agency (IAEA) will present a report,based on their inspection, on 20 June.

BYHARRY BANKS

ENERGY

Tepco admits rod damageTepco has admitted that meltdowns occured at three reactors Picture: REUTERS

ANALYSIS l Toshiba


520

510

500

490

480

470

460

450

440

430

420

432.0024 May

ANALYSIS l Nestl SA

CHF

26 Apr 3 Mar 10 May 17 May 24 May

44.545.546.5

48.547.5

49.550.551.552.553.554.5

43.542.541.5

54.6024 May

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LogicaLogica has appointed Himanshu Rajaas chief financial officer and executive

director of the Logica board, witheffect from 5 September. Raja hasspent the last ten years at BT, most

recently as chief financial officer ofBT Global Services.

ArqivaThe communications infrastructure firmhas appointed Phil Moses as chieffinancial officer. Moses joins from BT,

where he was chief financial officer ofBTs Openreach business, an operationwith a turnover approaching 5bn.

Midmar CapitalDariusz Sliwinski has been appointed bythe asset management firm to join theinvestment team of Michael Nicol andAlistair MacDonald. Previously,Sliwinski was a director at Martin

Currie Investment, where he also heldthe role of head of emerging markets.

CAPCOThe business technology consultancyhas appointed Alex Corsi as partner inthe firms London office. Corsi was

formerly executive partner ofAccentures Capital Markets.

TNT PostManoj Parmar has been appointed asgroup finance director for the privatepostal sector operator. Parmar qualifiedas a chartered accountant with PWC,and joins TNT Post UK from a privateequity-backed technology business,

where he was chief financial officer.

Religare Capital MarketsThe investment bank has appointedGautam Trivedi as managing directorand head of institutional equities forIndia. Trivedi joins from Goldman

Sachs, where he was head of sales.

VTB CapitalThe investment bank has appointedAtanas Bostandjiev as its chief execu-tive for UK and international.Bostandjiev, who was formerly a part-ner at Goldman Sachs, will be responsi-ble for the banks operations at aninternational level, based in London.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

May GurneyMargaret Ford, Baroness Ford of Cunninghame,will become non-executive chairman at the com-panys AGM on 7 July 2011. In the interim shewill be appointed to the board as a non-execu-tive director, with immediate effect. Gurney, 53,

recently retired from Serco as senior independ-ent director and has extensive public companyexperience, including Grainger Trust and EnglishPartnerships. She replaces outgoing chairmanDavid Sterry, who will stand down in July.

+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

Manufacturing dipaffects US shares

US stocks dipped in light volume

yesterday as lingering concernsabout a slowdown in growthmore than offset gains in ener-

gy shares.Investors kept trimming large-cap

technology positions, pushing the

tech-heavy Nasdaq Composite lower.The S&P energy sector index rose1.3 per cent, while its industrialsindex slipped 0.6 per cent, sendingthe market down for a second day.Sectors associated with cyclicalgrowth have suffered recently, withindustrials down more than 5 percent so far this month.

I dont see any strong positivemomentum, said Kim CaugheyForrest, senior equity research analystat Fort Pitt Capital Group inPittsburgh.

The S&P 500 closed at its lowestlevel in over a month and endedbelow its 50-day moving average for asecond straight day. The 50-day MA,now at 1,324.59, could turn into ahurdle for the benchmark to reestab-lish a strong uptrend.Occidental Petroleum, rose 3.6 percent to $102.50, while Joy Global fell1.8 per cent to $85.96.Following much weaker-than-

expected New York and PhiladelphiaFed manufacturing surveys last week,the Richmond Fed survey showed yes-terday that manufacturing in the cen-tral Atlantic region stalled in Mayafter expanding for seven months.

We dont really have jobs strength-ening, Forrest said.

Energy shares were helped by anear 2 per cent rise in US and Brentcrude futures. Oil rallied afterGoldman Sachs raised its forecastprice for the commodity and as theeuro erased some of the previousdays losses.

The Dow Jones industrial averagelost 25.05 points, or 0.20 per cent, to12,356.21. The Standard & Poors 500Index dropped 1.09 points, or 0.08 percent, to 1,316.28. The NasdaqComposite Index fell 12.74 points, or0.46 per cent, to 2,746.16.

Gold miners stocks advanced as bullion rose to its highest in aboutthree weeks on concerns about aspreading debt crisis in the Eurozone.Freeport-McMoRan Copper & Goldgained 3 per cent to $48.82.

Volume was light, with roughly6.6bn shares traded on the New YorkStock Exchange, NYSE Amex andNasdaq, below last years estimateddaily average of 8.47bn.

Decliners outnumbered advancerson the NYSE by a ratio of about 8 to 7, while on the Nasdaq, about eightstocks fell for every five that rose.

Shares of Russian Internet compa-

nyYandex surged as much as 68 percent in their debut.

BRITAINS top shares rose yester-day as rallying commoditystocks helped the index recoversome of its poise, but the

advance may be short-lived asinvestors find themselves hemmed inby Eurozone debt concerns.

The FTSE 100 closed up 22.52

points or 0.4 per cent at 5,858.41, hav-ing hit a two-month closing low onMonday after a downgrade of Greekdebt, a ratings outlook warning onItaly and doubts about austeritymeasures in Spain.

Weve got quite a lot of negativesentiment out there ... if traders aregoing to take on a bit of risk, itsmainly with a view to just a veryshort-term bounce and nothing morelong-term than that, JoshuaRaymond, market strategist at CityIndex, said.

Bargain hunters moved in on min-ers, which recovered along with met-als prices after Mondays falls, withAntofagasta among the best off, up3.1 per cent.Glencore added 2.1 per cent butremained below its issue price asunconditional trading began in thecommodity traders stock.

Integrated oil stocks found favouras crude rose after Goldman Sachs

hiked its oil price forecasts, led by a2.5 per cent advance in BG Group asthe same broker hiked its target pricefor the company.Cairn Energy added 4 per cent inheavy trading as the oil explorerannounced a drilling campaign off-shore Greenland.Marks & Spencer was the biggestblue-chip faller, off 2.9 per cent afterthe food and clothing retailer said ithad made a good start to the newfinancial year but expected tradingconditions in the year ahead to bechallenging.

Primark owner Associated BritishFoods slipped 1 per cent and super-market chain Tesco drifted 0.4 per-cent lower.

We remain very wary of directexposure to the UK consumer, in par-ticular the retail sector, said JamieSeaton, manager of the 64.6m SVGUK Focus Fund, run by SVGInvestment Managers.

With upward pressure on con-sumers non-discretionary spend, bor-rowing costs, energy bills, petrol etc,this is putting a significant squeezeon disposable income.

Banks were out of favour after cred-it rating agency Moodys said it mightcut its rating on 14 British financialgroups, including Lloyds and RoyalBank of Scotland, off 2.2 per cent and1.1 per cent respectively.

While there is certainly a fairamount of credibility to Moodys

actions, we also note the capital posi-tion of the UK banks is among the

best in Europe, Espirito SantoInvestment Bank said in a note.British Airways ownerInternational Airlines Group fell 1.8per cent as f lights in northern Britainand elsewhere in north Europe werecancelled over worries about a vol-canic ash cloud from Iceland, thoughofficials reckoned the disruptionwould not be as bad as last year.

In Europe, shares edged up yester-day, with miners among those recov-ering some ground lost in a sharpsell-off in the previous session,though analysts said markets might

struggle to make much progress inthe short term.The pan-European FTSEurofirst 300

index of top shares rose 0.2 per centto close at 1,118.76 points, having fall-en 1.7 per cent on Monday. The indexremained below its 50-day movingaverage, a bearish signal.

It is just below the middle of arange defined by the 2011 high of1,190.51, hit in mid-February, and alow of 1,066.62, hit in mid-March.

FTSE rallys on commoditiesbut Eurozone doubts lingerTHELONDONREPORT

THENEW YORKREPORT

24 Feb 11 Mar 21 Mar 20 Apr 16 Mar

6,100

5,800

5,700

5,600

5,500

5,900

6,000

ANALYSIS l FTSE 5,858.4124 May

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

ANALYSIS lBT205

195

185

175

p

7 Apr28 Feb 18 Mar 23 May3 May

196.6024 May

BTUBS has upgraded the telecommunications company to a buy and hasraised its target price to 230p. The broker has raised its earnings per shareforecast ahead of consensus, and notes the firms positive earnings growth,which contrasts with mobile-driven earnings cuts for other telecoms firms.UBS is also upbeat about BTs pensions deficit, forecasting a more opti-mistic dividend outlook from 2012.

ANALYSIS lSABMiller2,300

2,200

2,100

2,000

p


2,210.5024 May

SABMILLERCiti rates the brewer buy and has a target price of 27. The broker seespotential for bolt-on acquisitions but unless the firm makes a significantacquisition in the next year, it thinks that buybacks could be on the agendaat an annual rate of $1.5bn (722m). Citi adds that SABMiller is unlikely tobe interested in buying Fosters at a premium to its current price, leavingearnings per share growth to continue at a rate in the mid-teens.

ANALYSIS lGo-Ahead1,550

1,450

1,350

p


1,450.0024 May

GO-AHEAD GROUPMorgan Stanley has upgraded the transport provider from underweightto equalweight on the back of improved trading, and has raised its targetprice by 290p to 1535p. The broker thinks the current share price reflectsstrong passenger growth, now forecast at 1.5 per cent a year, and believesGo-Ahead can work to offset lower state subsidies for bus routes over thenext few years.

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Forex traders

can get a freeeducation ifthey go onlineThe internet offers a wealth of information andaccess to learn from the best, says Philip Salter

about the FX market and can reallyenhance your knowledge about the FXmarket. She adds: It also has a tradingforum that allows you to discuss tradingideas and strategies with your peers andenhance your trading style by learningfrom the success, or mistakes, of others.Brooks says that Forex Factory hasforums, communities and conversationthreads where you can post a question ormake a statement and get instant feed-

back.

FUNNY MONEYFor a forex site with a slightly satirical

bent, ForexLive (ww.forexlive.com) comeshighly recommended. For those new toforex trading, it offers an easier and moreentertaining read than the jargon-swamped commentary aimed at thosefamiliar with the various forex dialects.New Yorker Jamie Coleman launchedForexLive. He used to be chief dealer atBaring Securities, until Nick Leeson lost827m down the back of the futures mar-ket. The best way of keeping up with thecontent of ForexLive is to sign up to itsemail bulletin.

TRADING IDEASMost of the major trading platformproviders have plenty of free educationalmaterials to tap into. For example, GFTsFX360.com has regular commentary from

its directors, Kathy Lien and BorisSchlossberg, as well as access to charts,

videos and technical analysis. Your tradingplatform can also provide you withresearch through a third party.

Among others, Alpari and IG both offeraccess to Trading Central, which suppliesplenty of detailed technical commen-taries.

TWEETING TRADERSTo plug into IGs analysis of the four majorcurrency pairs follow @IG_ForexFocus on

Twitter, which is updated around theclock by their offices globally. Ian

THERE is no shortage of online infor-mation for forex traders, whetherthrough newswires, providers, dedi-cated websites, blogs or Twitter. Our

favourite, of course, is cityam.com, whichyou should all visit. Here are some others.

WORD ON THE FX STREETKathleen Brooks of Forex.com says theReuters market reports along with FXStreet and the Bloomberg currencies sec-tion are a great way to get up-to-date on

which currencies are moving and howthey have performed. Richard Nehme ofInternational FX also recommends FXStreet (www.fxstreet.com). He likes its eco-nomic calendar, which shows the impor-tance of the release relative to currencies,as well as good synopses of what thereleases are about, making it good fortraining junior traders.

FREE RANGE TRADINGFor the more advanced trader in need ofsome actionable ideas, Brooks suggests acouple of blogs dedicated to FX fans. Sheparticularly likes Trade2Win(www.trade2win.com) and Forex Factory(www.forexfactory.com). She says:Trade2Win has a section with articlesfrom FX experts that discuss topics such ashow to read candlestick charts to learn

various correlations that exist within mar-kets. These articles give you extra detail

SPREAD BETS | CFDs | FOREX

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