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boss: dontregulate us

BY ALISON LOCK

REGULATION

Chancellor Osborne was accused of breaking his promise to tighten controls over sensitive economic data Picture: REUTERS

SENSITIVE data leaked by the Treasurycould have fallen into the wronghands and been used to profit off themarkets, the head of the UKs statisticsoffice said yesterday in a scathing let-ter to the chancellor George Osborne.

The Treasury has sent confidentialinflation data to around 400 recipientsprior to its official release twice thisyear already, provoking the criticism ofOsborne from statistics chief SirMichael Scholar.

An investigation had to be held on athird occasion, after suspicious marketmovements were noticed beforeMarchs surprisingly modest inflationfigure. There is a risk of marketmanipulation if key economic datafalls into the wrong hands before pub-lication, Scholar wrote yesterday.

And there is an inevitable percep-tion among some people outside gov-ernment that, with such widespreadprivileged access, there is opportunityfor political manipulation of the statis-tical outputs.

Osborne has performed a spectacu-lar U-turn since coming to office lastyear, according to the letter. In opposi-tion the Conservatives were againstthe dissemination of sensitive data

within Whitehall prior to release, yetsince coming into power have stuckwith the system for the last year.

Why do 50 or more people need to

OSBORNE HIT BYDATA LEAK ROWBY JULIAN HARRISPOLITICS

www.cityam.comIssue 1,391 Friday 27 May 2011 FREE

BUSINESS WITH PERSONALITY

have the CPI a day ahead of theOpposition, Parliament, the public,and media? Scholar asked Osborne.

There is no good reason Scholarsaid, yet accused successive govern-ments of wanting political advan-

tage so that they have time to spin.The risks of the present pre-releasearrangements are considerable,Scholar said.

The Treasury looked to play downthe incident last night.

This was an accidental breach bythe official side of the Treasury, no min-isters were involved and no-one madepersonal or political profit from this

mistake, a spokesperson said.The Treasury has put in place strin-gent measures to make it less likely thismistake will happen in the future.

While the investigation into allegedmarket manipulation last monthfailed to find evidence of a leak, therecan never be positive proof that the sus-picions were unfounded, Scholarwrote. So the damage to public confi-

dence in these most important eco-nomic statistics remained, he said,urging the chancellor to amend therules over the dissemination of data.

Certified Distribution

04/04/11 - 01/05/11 is 103,899

26May 2011

Iamwritingtoyou aboutaseriouslapse inthe

Treasurys handling ofofficial statistics

Thiswas the secondtimein twomonthsthat

there

hasbeena problemwith the pre-release ofthe

CPI.

thereis aninevitableperception amongsom

e

people outsidegovernmentthat,withsuch wide

spread

privilegedaccess, thereisopportunity for politi

cal

manipulationofthe statistical outputs. Sotrust

inofficial

statisticsdiminishes

FACEBOOK founder Mark Zuckerbergdefended the internets freedom ofspeech to world leaders at the Group ofEight summit in France yesterday.

Smart-suited Zuckerberg (below) andGoogle chief executive Eric Schmidt both hit back at plans by FrenchPresident Nicolas Sarkozy to regulatethe world wide web, arguing that itaided democracy and free expression.

The G8 has proposed that the inter-net is policed more stringently, arguingthat intellectual property and privacyneed to be protected.

But the two internet moguls said reg-ulation would hinder innovation.

At a meeting at the Deauville sum-mit on the issue, Zuckerberg describedthe web as really a powerful force forgiving people a voice.

You cant isolate some things youlike about the internet, and controlother things you dont,he said. Schmidtsaid: The indus-try as a whole isconcerned thatpremature reg-ulation...canshut off wholenew industries,whole new oppor-tunities.G8: PAGE 4

CHAMPIONS LEAGUEFINAL SPECIALEXPERT VIEWS P36-39

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News2 CITYA.M. 27 MAY 2011

Loophole forbanks in BaselBANKS with large insurance armscould sidestep the toughest elementsof the new Basel III capital require-ments, according to not-yet-releaseddraft European Union legislation.

The draft plans to roll Basel III outacross the EU could let banks countmore capital held within their insur-ance arms towards the quota theymust hold, than institutions outsidethe bloc are allowed to.

That would benefits banks such asLloyds Banking Group, which has alarge insurance arm, or French bankssuch as BNP Paribas and SocitGnrale, the Financial Times report-ed yesterday.

The EU draft of the rules would alsoallow banks to continue issuinghybrid capital such as preference

shares or co-co bonds for longer thancurrently anticipated.

Basel III bans banks from countingany hybrid debt instruments issuedafter its new standards were pub-lished in 2010 whereas the EU draft would allow them to include anyhybrid debt issued up until its draftbecomes formal, which is thought tobe in July. That would aid banks suchas Credit Suisse that have continuedto issue co-co bonds despite the rule.

Basel III rules, though set by itscommittee, can be tailored by individ-ual regulators.

BYALISON LOCK

REGULATION

HSBC EMBROILED IN INTERNSHIP ROWHSBC has been accused of nepotismafter its legal department implied itoffered work experience only to thesons and daughters of its own execu-tives. Richard Bennett, group generalcounsel, sent a letter rejecting a young woman who had soughtunpaid work in his department.HSBC does not have a structured work experience programmealthough, occasionally, arrangementsare made for sons and daughters ofHSBC executives, particularly if they work in the legal or compliancedepartments, to gain such experi-ence, he wrote.

GOOGLE REVEALS MOBILE PAYMENTPLANGoogle and a group of partnersincluding Sprint Nextel, Citibank and

MasterCard plan to jump-start themobile payments market in the US

with a system based on a free GoogleWallet app and a technology called

NFC (Near Field Communications.)Today, weve joined with leaders inthe industry to build the next genera-tion of mobile commerce, saidStephanie Tilenius, Googles vice-pres-ident for commerce and payments.

TIFFANY UPBEAT ON RECOVERY OFJAPAN BUSINESSTiffany, the US-based luxury jewelleryretailer, raised its full-year earningsoutlook after first-quarter sales andprofits beat expectations. The compa-ny also said that its Japanese businesshad begun to recover earlier thanexpected. The results lifted Tiffanyshares by 8.6 per cent to $76.05 onThursday in New York, their biggestintraday rise in a year, and the compa-ny called them nothing short of out-standing. Net income rose 26 percent to $81.1m, or 63 cents a share, inthe first quarter from $64.4m, or 50

cents a share, in the same period ayear ago.

NOW ROTHSCHILD TURNS HISATTENTION TO OIL The financier Nathaniel Rothschildand former BP boss Tony Haywardwill launch a new investment vehiclein the next couple of weeks as theylook to raise 1 billion for acquisi-tions in the oil sector. The fund,called Vallares, is expected to publishits prospectus early next month andhas recruited several respected busi-nessmen to sit on its board.

CHINA ADMITS TRAININGCYBERWARFARE ELITE UNITChina today admitted for the firsttime the existence of a super-elite unitof cyberwarriors a team supposedlytrained to protect the PeoplesLiberation Army from outside assaulton its networks. The revelation of the30-strong crack unit, known as the

Blue Army, will confirm the worstfears of governments across the globe.

GERMANS ATTACK BP, SHELL FOROVER-CHARGING FOR PETROLFive big oil companies, including BPand Shell, are in trouble with theGerman regulator for over-chargingdrivers at petrol stations. The Germancartel regulator accused BP,ExxonMobil, Shell, ConocoPhillipsand Total of running an "oligopoly" with a stranglehold on 65pc of themarket.

EUROTUNNEL TO CARRY ELECTRICITYFROM FRANCE TO UKElectricity will flow between Britainand France alongside Eurostar trains,after the operator of the ChannelTunnel unveiled a250m (217m) planto run a cable under the sea.Eurotunnel has proposed an intercon-nector cable with France to helpsmooth volatility in energy supplies.

The 500 megawatt cable will connectto Britains power system in Kent.

EX-NASDAQ MANAGING DIRECTORPLEADS GUILTY TO INSIDER TRADING A former executive at the NasdaqStock Market admitted to using hisposition at the stock exchange toobtain nonpublic information, whichhe used to commit insider trading,prosecutors said. At a hearing in feder-al court in Virgina, Donald Johnson,56 years old, said he purchased andsold the stocks of Nasdaq-listed com-panies based on inside information.

HOUSE VOTES TO BAN GROUND TROOPSFOR LIBYAThe House on Thursday overwhelm-ingly voted to prohibit ground troopsfrom being sent to Libya and only nar-rowly defeated a measure to forcePresident Barack Obama to lay outplans to end the Afghanistan war, inmoves that show the limits of congres-

sional support for military involve-ment in overseas conflicts.

WHAT THE OTHER PAPERS SAY THIS MORNING

Halting our debt binge will be painful

WELCOME to the new normal. For years, the UK economy has beenfuelled by the unsustainable accumu-lation of debt, public as well as private.Now that the cheap money bubble hasburst, and consumers, firms and thegovernment can no longer go on bor-rowing as if there were no tomorrow,Britain will have to learn to live withinits means.

That will mean a much lower long-term rate of growth that reflects theUKs reduced competitiveness, sys-temic skills and attitude problems,and our high-tax, high cost and highly

regulated economy, factors that werecamouflaged during the bubble years.That doesnt mean zero growth or aJapanese-style stagnation; and it cer-tainly doesnt mean a double-dip

recession. But it means that even agood year wont feel that great.Tim Morgan of Tullett Prebon goes

one step further than I do in a fasci-nating paper that destroys the Labourpartys record yet also predicts thatthe coalition will fail to eliminate thedeficit. He estimates that compoundgrowth of 2.8 per cent between 2000and 2008 would have been less than1.4 per cent in the absence of what hecalls Brown bubble borrowing more than half of the growth wesaw was artificial and unsustainable,he calculates. Morgan, who unlikemost City economists doesnt mincehis words, has even launched his veryown Armageddon Project it seeks topredict what will happen if the coali-tion is right about the terrible dangersof a spiralling national debt while itsopponents are also right that the

deficit reduction plan will be under-mined by low growth.

Borrowing has become a way of lifein the UK. During 1996-2002, totalpublic and private borrowing aver-

aged 4.9 per cent of GDP. Between2003-2010, however, this had jumpedto 11.2 per cent and, with the excep-tion of 2008-09 when this fell to 7.8 percent, triggering a collapse in output,annual borrowing never fell below10.4 per cent. The result was fake pros-perity. Over the past decade, borrow-ing drove output in financial services(+123 per cent), construction (+27 percent) and real estate (+26 per cent),while lavish state spending (predicat-ed on a tax base that never really exist-ed) propelled health (+35 per cent),education (+27 per cent) and publicadministration (+22 per cent). Outputin all other sectors is now five per centlower than it was 10 years ago.

Six of the eight largest sectors of theUK economy are dependent on privateor public borrowing: 58 per cent of theeconomy is thus unlikely to grow. If

retail is added to this, the ex-growthproportion of the economy hits 70 percent. To Morgan, meaningful growthis thus mathematically implausible,as is the chancellors hope of slashing

the budget deficit.Im slightly more optimistic. Not allthe borrowing of the past decade wasbad or unsustainable; some of it wascaused by the expansion of financialbalance sheets, not all of which waspernicious. A booming global econo-my ought to allow more growth thanMorgan seems to allow for. But it isclear that the growth rates being pre-dicted in two years time are too opti-mistic. Giving up and attempting toturn the debt tap back on would besuicide. Instead, we must grow by lib-erating Britains supply-side: cut regu-lation, eliminate punitive tax rates,shake-up planning rules, stop bashingthe City and make employing peoplemore profitable. Armageddon can stillbe avoided but time is running out.

[email protected] me on Twitter: @allisterheath

MORALE on the British high streettook a huge leap in May, recordingthe second sharpest rise of all time,the GfK NOP consumer confidenceindex revealed today.

People reported a boost to theirconfidence over personal financesand the general economic outlook.

The last time the headline indexaccelerated this fast was in May 1993.

But before the businesses cele-

brate, it should be pointed out that we are improving from a rock bot-tom position and consumer confi-dence is still deeply in the negative,warned Nick Moon of GfK NOP SocialResearch.

The headline index jumped 10points to a score of -21, yet remainslower than at the same time last year,when it measured -18 points.

The sub-index for sentiment in thegeneral economic outlook spikedupwards, to -15 from -30 in March.

ECONOMICS: P16-17

BY JULIAN HARRIS

UK ECONOMY

High street morale surgesShoppers surprised the economists with a return to the high street in May

NEWS | IN BRIEF

Fed balance sheet hits new highThe US Federal Reserves balance sheetsoared to a new record of almost $2.8trillion (1.7 trillion) in the past week asit pushed ahead with its QE2 bond-buy-ing programme, its data showed yester-day. The balance sheet data, a sign ofthe level of its lending to the financial

system, was up from $2.74 trillion theweek previously. Overnight loans tobanks jumped to $11m per day in theweek to Wednesday, up from just $3mper day the prior week. The Fed expectsto continue the quantitative easing untilJune to shore up the US economy.

Deutsche silent on successionDeutsche Banks board batted awayshareholder questions about who it waslining up to succeed chief executiveJosef Ackermann at its annual meetingyesterday. Angry investors told the bankto end speculation over the lack of asuccessor, which is increasingly seen asa risk to the bank. Ackermann renewedhis contract two years ago when thebank failed to find a replacement, but isexpected to step down before it ends in2013. He also pledged to deal with aspate of lawsuits to hit the bank.

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

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Lloyds Banking Groupchief exec AntnioHorta-Osrio may beable to exploit a loop-hole in Basel III

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News 3CITYA.M. 27 MAY 2011

PANICKING investors dropped theeuro yesterday after comments byEurogroup chairman Jean-Claude

Juncker sparked a bout of anxietyover the fate of the single currency.

Juncker raised the alarm by warn-ing that the IMF might not be able topay out its next instalment of aid toGreece if the sovereign does not havefunding in place for the next year.

The IMF can only be active whenthere is a refinancing guarantee for

12 months, he said, adding that sucha guarantee is unlikely: I dont thinkthat the troika (the EU, IMF and ECB)

will come to this result.He further stoked fears by saying

that should the IMF refuse to con-tribute its third to Greeces rescuefunds, it would be politically difficultfor the EU to plug the gap. Theexpectation of the IMF is that theEuropeans would step in for the IMF

and take upon themselves the IMFsportion of the financing That wont

work, because in certain parliaments Germany, Finland and theNetherlands and others too there isno preparedness to do so.

In response, the euro dropped 12cents against the dollar, 8p againststerling and five cents against theSwiss franc.

Analysts speculated that Junckercould be attempting to scare Greeceinto taking its deficit seriously byindirectly raising the prospect of adefault. The IMF is due to dispense its

share of another 12bn (10.4bn) inaid to Greece on 29 June as part of its110bn bailout package.

But the funds are subject to strictconditions, with the IMF, ECB and EUcurrently in Athens to examine its fis-cal situation. The EU admitted recent-ly that a soft restructuring of

Athens debt is likely, which ratingsagencies have said would effectivelyconstitute a default.

Juncker: IMFcould turn off

aid to AthensBY JULIET SAMUEL

EUROZONE

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Tote bidders

must wait

for decision

MINISTERS failed to reach an agree-ment on the winner of the auction ofstate-owned betting group the Totefollowing final talks yesterday.

The department of culture, mediaand sport was due to announce the

winner of the auction yesterday buttalks were apparently derailed afterchancellor George Osborne waspulled out to take calls withInternational Monetary Fund leader-ship candidates.

However, the lack of a decision alsoindicates that the two final bidders BA chairman Sir Martin Broughtonand the bookmakers Betfred may beneck and neck.

Sir Martins investment vehicle,

Sports Investment Partners, improvedits offer slightly, raising its cash pay-ment to the Treasury to 77m from75m and its annual payment to theracing industry to 11.5m from 11m.

City A.M. understands that Betfredbelieves it offers a 40m higher pay-ment to the government and hashigher estimates of the Totes com-mercial revenues. A decision is expect-ed today or early next week.

BYALISON LOCK

BANKING

SERBIAN FORCES ARREST RATKO MLADIC

RATKO Mladic, the Bosnian Serb general allegedly responsible for the Srebrenica massacreof 8,000 Muslims during the Balkan war of 1992-1995, was yesterday arrested by Serbiantroops after 15 years on the run. Self-dubbed the Serbian God, he is accused of leadingforces in the 43-month siege of Sarajevo while carrying out a programme of ethnic cleans-ing against all non-Serbs in Bosnia. He was found in a village near the Romanian border.

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NEWS | IN BRIEF

BAA chair robbed at knifepointSir Nigel Rudd and his wife Lesley weresaid to be shaken but recovering yester-day after being held up in their Belgraviahome by men armed with knives whostole valuables. The men, wearing stock-ings over their heads, held up the Ruddswhen they returned to their 7m homeat about midnight on Monday after anight out. They forced their way in asthe couple were closing the door, threat-ened them with knives and forced SirNigel to open his safe before taking50,000 of jewellery and a designerwatch.

LSEs Rolet criticises hostile bidLondon Stock Exchange chief executiveXavier Rolet poured scorn on CanadasMaple Group yesterday after it said itwould pursue a hostile bid for theToronto Montreal Exchange (TMX).Rolet dismissed the revised offer asalmost identical to what the TMX boardrejected last week and warned that anydeal would leave the Canadian exchangeamong the most leveraged in the world.If the banks pursue the further takeoverof TMX rival exchange Alpha and clear-

ing group CDS, funded by share capital,the banks could gain more than 50 percent ownership of the final exchange hesaid. Rolet also warned that hostile bidshad proved difficult to execute.

Terra Firma debt talks go slowGuy Hands private equity firm TerraFirma is making slow progress on refi-nancing a complex 5.1bn (4.4bn)securitised loan in its German propertygroup Deutsche Annington, as detailsof the bondholders voting rightsemerge, City A.M. learned yesterday.Terra Firma has started the process ofrefinancing the debt despite it matur-ing only in 18 months. The loan docu-mentation requires an unusual level ofapproval, up to 100 per cent, ratherthan the 75 per cent more oftenaccepted, which is slowing down theprocess. Terra Firma is talking to bond-holders and has hired Blackstone to

advise it. It has owned DeutscheAnnington for 11 years.

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UBS has no plans to move its head-quarters out of Switzerland, chiefexecutive Oswald Gruebel said yester-day in response to a flurry of reportsthat the bank could re-domicile underpressure from Swiss regulators.

But he did not deny reports thatUBS is looking into a way of hiving offits investment bank or other parts ofthe bank to allay Swiss concernsabout being the lead regulator to a

bank with international operationstoo large for the country to bail outagain.

The bank said in its first-quarterresults statement that it isevaluating potential changes to our

booking model and corporate struc-ture in view of developing regulatory

concerns and requirements, not onlyin Switzerland but also in the UK, USand elsewhere. Any structural

changes will in part be aimed at miti-gating the impact of Switzerlands 19per cent core tier one capital require-ments, which are the highest any reg-ulator has so far adopted.

Analysts at broker Credit AgricoleCheuvreux suggested that this couldmean ring-fencing the investment

bank and moving its headquarters tothe domicile that hosts most of its

business, most likely London or NewYork.

Foreign regulators will increasing-ly demand capital to be located wherethe business is as they realise thatonly systemically importantfunctions will be saved in the event ofa crisis, Cheuvreux analysts said in anote.

But any ring-fencing would stillprobably not allow a subsidiary toduck Switzerlands capital require-

ments altogether, due to Swiss bank-ruptcy law that demands enforcedsolidarity within a group.

UBS rebuffsa Swiss exit

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BY JULIET SAMUELBANKING

UK SUPPORT for the ConservativeParty has fallen slightly but most peo-ple do not believe the Labour opposi-tion is ready to govern, blaming it forthe countrys economic woes, anopinion poll showed yesterday.

The May Reuters/Ipsos MoriPolitical Monitor showed Labour up

two points since last month on 42 percent, while support for the

Conservatives, the coalition govern-ments senior partners, fell fivepoints to 35 per cent of those whoplan to vote.

Backing for the Liberal Democratsrose one point to 10 per cent, far

below the roughly 24 per cent whovoted for them a year ago.

Economic optimism was downslightly, with just 29 per cent of

Britons expecting the economy willimprove in the next year.

Support for Conservatives dipsas optimism for economy fades

POLITICS

THE G8 leaders raised the alarm yes-terday about government debts

weighing down the world economybut pledged at a meeting in France tofind funds to help new Arab democra-cies.

Japans deputy chief cabinet secre-tary, Tetsuro Fukuyama, toldreporters the G8 agreed Greece mustdo more to sort out its finances and

work with the IMF to solve its debtcrisis. The Greek government has called

emergency talks with the oppositionfor today as repayment deadlinesloom and European officials have

warned that aid could be withheldfor a country where millions facemany years of austerity at best.

EU sources said Europeanmembers of the G8 Germany,France, Britain and Italy -- as well asEuropean Union officials would com-

mit in a summit statement from theresort of Deauville to continue effortsto rein in the Eurozone debt crisis.

As another Arab state, Yemen,appeared headed for civil war lastnight, leaders of the G8 -- the seven

Western powers, plus Russia -- calledon its president to join those of Egyptand Tunisia in stepping down.

A draft of todays final summitcommunique also contained strongcensure of the Syrian and Libyan lead-ers.

G8 countries to warn Greeceover its massive debt burdenBYHARRY BANKS

WORLD ECONOMY


CITY VIEWS: ARE YOU OPTIMISTIC ABOUT THE G8SOLVING THE GREEK CRISIS? By Shiba Babamiri and Scarlett Archer

Well, Greece needs a stronger economicpolicy and the solution needs to comefrom within the country. As they are

in the EU were obliged to help thembut we cant keep bailing them out.

LUKE WILDS | PICKTHORN

No, I think we should leave them alone aswe cant continue to bail them out. Wetried once and it didnt work. Theireconomy is too weak to be in Europe.

Im not optimistic at all because Greece is

in too much deficit, but as EU members Ithink everyone should pull togetherand help.

RICHARD PIPE | SOVAG INSURANCE

MARCUS RICCOBONI | RSA

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TROUBLED property developerMinerva yesterday confirmed it hasreceived a preliminary cash offer valu-ing it at 194m.

The bid for the Walbrook developeris from a consortium of firms led by

Jamie Ritblats Delancey Real EstateAsset Management.

One Minerva investor told City A.M.the bid is an interesting offer, say-ing: Something has to happen soon,it has to either sell or launch a rights

issue. There have been all sorts ofrumours about a counter bid but thisis the only thing on the table.

Minerva, which is saddled withdebts of almost 860m, says the offeris a 21.4 per cent premium to its pre-announcement closing price of 99.25pand a 53.5 per cent premium to itsprice before it informed the market it

was involved in takeover talks.Minerva has agreed to pay almost

2m to the group if it backs out of thedeal or its board votes it down.

The market was yesterday waitingfor a possible counter bid. Rebelshareholder KiFin, the firm led by theSouth African property investorNathan Kirsh who launched a failed

bid and later a boardroom coup atMinerva last year, is seen as a possiblerival. Others include Dubai-basedinvestor Limitless and Iranian proper-ty entrepreneur David Shamoon.

However, shares in Minerva closedup 14.6 per cent to 113.75p yesterday,

below the proposed cash bid of120.5p suggesting the market didnot expect a counter bid.

A London-based analyst, whodeclined to be named, said the shareprice reflected uncertainty over howlong the offer process would take and

whether the bidder would get conces-sions from Minervas banks on itsdebt facilities.

Minervas debt pile relates to twolarge office developments, the

Walbrook and St Botolphs both ofwhich have struggled to find tenantslarge enough to satisfy the conditionslaid down by Minervas banks.

Minerva gets194m cashtakeover bidBY STEVE DINNEEN

PROPERTY

Focus on Minerva bidCITYA.M. 27 MAY 2011 5

GREENHILL is financial adviser toMinerva. Heading up the team isco-head of European corporateadvisory Brian Cassin.

Cassin joined Greenhill in 1998after working for six years withBaring Brothers International inLondon and New York and fouryears with the London StockExchange. Cassin has long beeninvolved with Minerva, advising iton its long-running negotiationswith KiFin. This included advisingon KiFins offer for the company,which the board rejected.

He also advised Emerson on itsbid for UK power protection groupChloride and was involved in mediagroup DMGTs agreement to sellStudy Group International to fundsadvised by CHAMP private equity.

Joint corporate brokers are Citiand Peel Hunt, where Capel Irwinis heading up the team. Irwin lastyear led the charge in the corpo-rate broking team for HansteenHoldings acquisition of a Germanindustrial property portfolio for330m.

Rothschild is financial adviser onthe other side of the bid, with AlexMidgen and Richard Blackwellworking on the deal.

ADVISER:WHOS ON

THE MINERVA TEAM?

BRIAN CASSIN

GREENHILL

JAMIE Ritblat has long emergedfrom the strong shadow of his prop-erty tycoon father John. He becamea well-known name in the City inhis own right after his successfulmanagement buyout of the pub-licly owned Delancey Real Estate

Asset Management firm in 2001.He has since been behind a string

of high profile property deals

including snapping up Bovey Castle

hotel and golf resort for 26.4m.He received a leg-up from his

father, who was formerly chairmanand chief executive of British Land.

Jamie began working for the firmand moved onto the board in 1993.He left two years later to set up hisown venture, with the backing ofhis father. John is renowned as amaster businessman who madeBritish Land one of the most suc-cessful property firms in the UK.

BY STEVE DINNEEN

PROPERTY

The property dynastyProperty tycoons John (left) and Jamie Ritblat. Jamie is fronting a bid for Minerva.

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PARTNER promotions at the UKs top50 law firms have risen by almost athird compared to last year, accordingto research by Legal Week magazine.

The figures show an upturn in con-fidence throughout the Magic Circlefirms and beyond, with recent finan-cial results supporting the return toform.

Across the top 10 UK firms by rev-enue (see below), there have been atotal of 226 partner promotions this

year, compared to 184 in 2010.The latest numbers are a stark con-

trast to those released during therecession, with promotions to lawfirm partnerships falling by a third

between 2008 and 2009.Among the 50 firms listed, 39 per

cent of promotions were in London, with 191 partners promoted in theCity offices of UK firms.

Of the top ten, Fleet Street-basedFreshfields Bruckhaus Deringer made

the most London promotions, withnine of its 20 new partners based inthe City.

DLA Piper the largest law firm inthe world by number of lawyers advanced 53 to its partnership world-

wide, though just five are London-based.

But the promotion of femalelawyers to partner stayed at a similarlevel to last year, with just two firmsin the top 10 Clifford Chance andEversheds making up more than 30per cent of their partner round withfemale candidates.

Promotions in the Asian offices ofUK firms were particularly numer-ous, as firms continue to grow theirpresence in financial centres such asHong Kong and Singapore.

Clifford Chance for example, theUKs biggest law firm by revenue,made more than 50 per cent of itspromotions in its Asia offices.

Just six firms in the top 50 andnone in the top 10 made fewer pro-motions than last year.

Promotions

up a third atUK law firmsBY ELIZABETH FOURNIER

LEGAL SERVICES

Deputy Prime Minister Nick Clegg yes-terday chose the NHS as a coalition bat-tleground as he insisted that theservice would not change for changessake.

In his first major speech on thehealth service since first signalling hisconcerns over the NHS reforms, Cleggstressed that there were no arbitrarydeadlines for reform.

And in a bid to remind the electorate

of the differences between his party

the Liberal Democrats and theConservatives, Clegg said change would not happen overnight, andmade it clear that GPs would not haveto take over from Primary Care Trustsif they were not ready to do so.

He suggested the NHS reform billmay need to go back to a committee ofMPs for further scrutiny, and reiteratedhis opposition, first voiced last month,to promoting competition in the sec-tor at the sacrifice of collaboration.

Clegg in U-turn onNHS reform plans

POLITICS

Deputy PrimeMinister NickClegg yesterdayinsisted thatchange to the NHSwould not happenovernight, mak-ing it clear thatcontroversialreforms would besignificantlyslowed down and

more private sectorcompetition intro-duced only withgreat care


TOP 50 PARTNER PROMOTION 2011

1 Clifford Chance 23 (22) 4 7 (1) 30.4%

2 Linklaters 18 (14) 6 5 (4) 27.8%

3 Freshfields Bruckhaus Deringer 20 (18) 9 2 (3) 10%

4 Allen & Overy 21 (18) 6 2 (3) 9.5%

5 DLA Piper* 53 (41) 5 11 (15) 20.8%

6 Hogan Lovells 36 (21) 7 10 (4) 27.8%

7 Herbert Smith 13 (18) 6 3 (6) 23.1%

8 Slaughter and May 5 (2) 5 0 (1) 0%

9 Eversheds 22 (19) 4 7 (6) 31.8%

10 Norton Rose 15 (11) 4 7 (1) 46.7%

* Includes at least one non-lawyer partner data from Legal Week

Rank

Global

partner

promotions

2011(2010)

London

promotions

2011

Female

promotions

2011(2010)

Female

promotions

%Firm

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MAN Group reported a jump in assetsand better-than-expected profits yes-terday, as a big fundraising in Japanhelped the worlds largest listed hedgefund firm accelerate its belated recov-ery from the credit crisis.

The firm which now runs $71bn(43.3bn) in client assets, up three percent since March attracted $2bnalone for a new open-ended version ofits flagship AHL fund in Japan, sig-

nalling a sharp rebound in confidencein Mans computer-led strategies.

The fundraising is above the $1.5bnit said it had raised, which hadsmashed analysts forecasts, andcomes despite poor returns from AHLthis month after a commodity sell-off.

The strong fund flow momentumsince year-end is a clear positive, Citianalysts said in a note, while pointingout that unsustainable factors haddriven the forecast-beating profits.

Shares in Man Group closed up 2.4

per cent yesterday at 245p, valuing itat almost 4.5bn.

The phenomenal success of the Japan AHL launch demonstrates theconcerns people had around the ...earthquake and ... tsunami around ourasset-raising were completelyunfounded, said Mans chief execu-tive Peter Clarke.

Man Group said in March thatclients had finally begun to return toits funds, helped by last years $1.6bnacquisition of GLG, ending a two-yearstreak of net outflows.

Japan fund isboost to Manas assets soar ALISON Carnwath yesterannounced she was standing down asMan Groups senior independentdirector after 10 years in the role. She

will be replaced by Patrick OSullivan.Carnwath, who is also a director of

Barclays and chairman of LandSecurities, is staying on the board atMan. Under best practice in corpo-rate governance, directors that havebeen in the senior independent rolefor 10 years are consideredto be no longer suffi-ciently independent andare often expected togive up that position.

Carnwath spent someof her early days in theCity in the corporatefinance departmentat Schroders where

she worked along-side the likes ofCitis David Wormsley, TescosSir RichardBroadbent and M&Schairman RobertSwannell.

She is one of the judges ofCity A.M.sannual awards thattake place this yearin September.

Carnwath givesup senior roleafter decade

Mans Peter Clarke said the Japan fund had phenomenal success Picture: REUTERS

BYHARRY BANKS

FUND MANAGEMENT

CORPORATE GOVERNANCE

Focus on Man GroupCITYA.M. 27 MAY 2011 7

ANALYSIS l Man Group

p

28 Feb 18 Mar 7 Apr 3 May 23 May

290

280

270

260

250

240

230

245.0026 May

Change in fortunes looks here to stay THINGS finally seem to be look-ing up for Man Group.

After recovering from being hitby big outflows throughout 2009and 2010, it has now also man-aged to sidestep the spectre ofthe Japanese earthquake, withthe launch of a Japan version ofits AHL fund attracting $2bn of

investment. The Nomura Global Trend is

performing well ahead of expec-tations even without accountingfor the volatile market, and will be a useful precedent for man-agements stated intention thatthe greatest growth opportuni-ties are with similar open-endedalternatives and institutionalfunds.

If management can maximise

the prospects in alternatives,then it should be able to build onthe rebound of AHL and a pick upin inflows to gain traction onsome much-needed momentum.

That means the gap betweenMan Group and its peers against whom its currently trad-ing at a more than 200 per cent

discount could start to close. While AHL may dominate any

share movement in the shortterm (as evidenced by the two percent lift on yesterdays figures),the planned increase in diversityis likely to prop up longer termgrowth as well.

BOTTOMLINEAnalysis by Elizabeth Fournier

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APPLE is fighting what securityexperts warned yesterday may be themost pernicious types of computer virus to ever target its line of Maccomputers.

The company was forced to issue asecurity advisory warning to cus-tomers about a recent scam thatinfects Macs with malicious softwarethat wrongly tells them their com-puter is infected with a virus. Theultimate goal is to get credit cardnumbers and other valuable person-al information.

It is one of the first major cam-paigns that cyber crooks havelaunched against Mac users. To date,criminals have focused on writingmalicious software for machinesrunning Microsofts Windows oper-ating system, which inhabits morethan nine of every 10 personal com-puters.

But as Macs have grown in num-ber, they have become more attrac-tive targets.

The fake anti-virus malware isdownloaded when people click onlinks from tainted search engine

results for popular queries, accord-ing to anti-virus software makerMcAfee. It also spreads when usersclick on links to malicious sites thatmight be included in emails, Tweetsor Facebook messages.

Apple said it will issue an updatefor its Mac operating system in thecoming days that will automaticallyfind and remove malicious fake anti-virus software. It will also warn Macusers when they download such pro-grammes.

In the meantime, Apple has issuedadvice on how users can clean upmachines that have been infected bythe malicious software, which goes by names including MacDefender,MacProtector and MacSecurity.

It said any web page that looks likea Finder window that claims to bescanning your Mac is fake and users who see these pages should quittheir browser right away and clearany downloads.

The company advised that usersshould turn off the Open safefiles option in their Safari browsersgeneral preferences to keep the filefrom opening automatically if it isaccidentally downloaded, it said yes-terday.

Apple warns

Mac users asvirus appears

THE UK is the only major Westerncountry so far to approve temporarypublic ownership of collapsing banks,a report by law firm Clifford Chanceshows.

In a comparison of resolutionregimes, which allow a regulator totake over and wind up failing financialinstitutions instead of bailing themout, Clifford Chance determined the

UK is the only jurisdiction, out of the

US, Germany and the EuropeanCommission, that will allow tempo-rary public ownership of a failingbank.

The UK is also unusual in not optingfor a pre-funded regime, whereby alevy on banks would fund the costs ofadministering a resolution procedure.Instead, George Osborne is using theUK bank levy for general spending.

However, the regimes devised so farare not final and details could change.

UK resolution plansdiverge from peers

BYKATIE HOPE

TECHNOLOGY

BAKED beansmaker Heinzreported a lowerthan expectedfourth-quarterprofit yesterdayand said it plansto close five facto-ries and cut thou-sands of jobs toraise its long-termearnings growth

target for 2012. Thecompanys netincome rose to 69cents (42p) pershare at the end ofApril up from 60cents a year earlier,down from WallStreets estimate of72 cents.

BY JULIET SAMUEL

BANKING


VIRGIN boss Sir Richard Branson saidyesterday up to three suitors of hisVirgin Atlantic airline are set to bidfor a stake in the company, with anannouncement on the tie-in duewithin the next three months.

Branson, speaking at an event inthe States, said he will remaininvolved with the carrier as a share-holder, even if he decides to selldown some of his stake to a new part-ner.

He added that Singapore Airlines, which holds a 49 per cent stake in

Virgin Atlantic, has not yet decidedwhether to offload some of its hold-

ing as part of the reshuffle.Virgin hired Deutsche Bank earlier

this year to look at options forshoring up the carriers position inthe industry as its rivals team up onroutes to save resources.

British Airways and American Airlines recently joined forces onsome routes over the Atlantic, withBA in turn benefitting from syner-gies with new partner Iberia.

Bransons remarks come less thana day after he said in an interviewthat his banking operation, VirginMoney, is gunning for around 600 branches owned by Lloyds Banking

Group to make the firm a big con-tender on the high street.

Virgin Atlantic expects to unveilnew partnership within monthsTRANSPORT

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ness dealing with the US. As a result, the buildings property

manager James Andrews has given its lat-est leaseholder, environmental consul-tancy RPS, two years rent free.

The company joined Aviva Investors,Vestra Wealth and Russian bank VTB as aCornhill tenant when it signed a ten-yearlease on 20 March, but it will only con-tribute service charges and business ratesuntil 2014, when it will start paying rentof 35 per square foot.

The deal was struck after discussions with the directors of Ashton GlobalInvestments, the British Virgin Islands

vehicle owned by the LIAs sovereignfund Lafico. Jeremy Grey, managingdirector of James Andrew, said:We took the view that it was bet-ter to have someone covering thecosts rather than leaving thespace sitting empty.

If any other City firms needsome cut-price commercialspace, The Capitalisthears thereis still one retail unit avail-able on the Lombard Streetside of 14 Cornhill, marketed byCushman & Wakefield. Form anorderly queue

BLAIR TALKS SHOPWhat does the M&S food hall have todo with conflict resolution inPalestine? A lot, according to Tony

Blair, who made a rare public appearancein London yesterday to discuss the issue

with Apax founder Sir Ronald Cohen at anevent hosted by trade body UK IsraelBusiness and the Portland Trust.

In between some signature Im Tonyhand gestures, Blair paid tribute to audi-ence member Lord Andrew Stone, whohas been working on efforts to get UKretailers to buy Palestinian farm produce.

Blair was keen to assure his audience ofCity grandees, including Sainsburyschairman David Tyler, Deloitte rainmaker

Neville Kahn and former Lloyds boss Sir Victor Blank that cultivating busi-

ness links with Palestine willundermine the desire forextremist politics.

But Ronnie Cohen couldntresist a jab: Politicians tend tofollow public opinion ratherthan lead it, he noted. Wehave that tendency in my pro-fession, Blair agreed cheerily.

MATCH OF THE DAY THE TEAMS have been drawn upfor the Citys fiercest football tour-nament: the five-a-side Diageo CityChallenge in aid of the Stroke

Association on Sunday 5 June.Old scores will be settled on theastroturf at the Bank of EnglandSports Centre in Roehampton: SkyNews City editor Mark Kleinman

versus his BBC nemesis Robert Peston,CNBC clashing with Bloomberg and theFinancial Times taking on the WallStreet Journal not to mention the CityA.M. squad, who are already match fit.

Paddy Powers online betting will openon Monday, when Sky News, the tourna-ments most elderly team, may or maynot have the longest odds.

BRIDGING THE GAPTHE CITI headquarters in Canary Wharfwas the scene of the launch of the YoungEnterprise Build a Bridge Charter, whichaims to help young people cross the

bridge between education and work.Mark Cahill, MD of Manpower and

Nigel Davis, regional director of HSBC,turned out to support the scheme, whichis collecting as many signatures as possi-

ble from the worlds of business and poli-tics to promote enterprise education.Expect to see Enterprise Studies on thecurriculum before the year is out.

MASTERCHEF MENUA BANK Holiday excursion with a difference.City restaurant High Timber is offering a six-course menu this weekend cooked byMasterchef finalist Tom Whitaker (picturedleft), who was snapped up after the show totrain under head chef Justin Saunders. Forreservations for the 75-a-head offer, callHigh Timber on 0207 248 1777.

ALL CHANGEAT LLOYDS

AS IT RINGS25 YEARSIT MAY seem like only yesterday formany City veterans, but today marks 25

years since the first managing agentsmoved into the landmark Lloyds build-ing on Lime Street.

So happy anniversary to the insurancegiant, which still shows traces of morethan 300 years of Lloyds history, such asthe famous Lutine Bell, which was sal-

vaged from the wreck of HMS Lutine, thefrigate that landed Lloyds with one of itsfirst major insurance claims when itsank carrying bullion in 1799.

The bell is rung today by Dave Hughes,one of the insurance firms waiters,

whose role dates back to 1688 at Lloydsfirst incarnation as Edward Lloyds coffeeshop, where marine insurers met to writecover for the ships of the day.

Mobile phones and the internet haveended the days when waiters were thecriers of market-changing news, and theLutine Bell once used to alert the market

whether ships had returned safely or hadbeen found wrecked on the rocks is nowonly used for ceremonies.

The bell rings twice for good news andonce for bad, such as after PrincessDianas death in 1997. We had a condo-lence book and the queue went rightaround the building, Hughes recalled.

Hughes also witnessed the only timethe bell has been rung three times: theday Lloyds celebrated surviving the com-panys near-collapse in 1995 after its3.2bn restoration plan. Sixteen yearslater, and still thankfully a one-off.

BARGAIN BASEMENT THE FALL-OUT from the freezing of theLibyan Investment Authoritys (LIA) assetscontinues, as The Capitalisthears the advis-ers for the LIAs London property portfolioare having a hard time securing tenants.

Ordinarily, office space at 14 Cornhillopposite the Bank of England would beone of the most desirable businessaddresses in the City. But not when allrents paid sit indefinitely in a bankaccount frozen by the Treasury, and theLibyan landlord issue prevents any busi-

Lloyds waiters movethe Lutine Bell to itscurrent resting place

The Capitalist10 CITYA.M. 27 MAY 2011

Sign here: London students with the Charter

The LutineBell has rungthree times

only once inthe history ofLloyds: whenit was savedfrom nearcollapse

EDITED BY

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

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BURBERRY is stepping up spending onnew stores to cash in on a boom indemand for luxury goods in Asia as itmet forecasts with a 39 per cent jumpin full-year profit.

Profit for the 12 months to the endof March were 296m with revenuesup 27 per cent to 1.5bn.

The luxury British retailer said theinvestment would limit growth inprofit margins in the coming year,sparking a retreat in its shares, which

closed 4.6 per cent down yesterday at1,260p, after recent strong gains.

Chief executive Angela Ahrendtssaid she was sure the spending wouldpay back in what she described as verystrong recovery in demand for luxurygoods, led by Chinese shoppers andtourists.

It is time to get our retail footprintup to par with consumers perceptionof the brand, she said.

The group said it would invest 180-200m in 2011/12, up from 108m in

the year to the end of March.About half will go on new shops,

including 20 in fast-growing emerg-ing markets like Brazil, India andMexico, with the rest spent onupgrading and expanding shops inflagship cities like Chicago, Milan,Hong Kong and Paris, as well as dou- bling selling space in the groupshome city of London.

Burberry will spend 320m extend-ing its store in the Knightsbridge dis-trict, as well as relocating andextending its store on major shoppingthoroughfare Regent Street.

Burberry seesprofits surgeas Asia booms

SPORTINGBET yesterday agreed termsfor its acquisition of Australian onlinebookmaker Centrebet, which it willlook to fund by raising 130mthrough the issue of new shares and aconvertible bond.

Sportingbet will issue 154,761,904new shares at a price of 42p each and65m in nominal value of convertible bonds. Chief executive AndrewMcIver said the deal would make itthe leading corporate bookmaker inthe fast-growing Australian market.

Sportingbet saysCentrebet dealterms agreed

BY JOHN DUNNE

RETAIL

LEISURE

Consumer News12 CITYA.M. 27 MAY 2011

ANALYSIS l Burberry

p


1400

1350

1300

1250

1200

1150

1100

1050

1260.0026 May

Burberry chief Angela Ahrendts insisted its spending spree would pay off Picture: GETTY

ANALYST VIEWS: IS THERE MORE GROWTHTO COME FROM BURBERRY ? Interviews by John Dunne

FRASER RAMZAN | NOMURA

Consistent delivery by Burberry management has seen earnings pershare upgraded and the stock re-rate as such accelerated investment should beseen as a potential net positive for the medium term growth rate of the business.The decision to invest furt her makes strategic sense in our v iew.

RICHARD HUNTER | HARGREAVES LANSDOWN

Burberry remains a rare and notable example of a retailer enjoying a

stellar growth trajectory. Indeed, this success story is held back only by valuationconcerns the shares have risen 116 per cent over the last year. As such, the mar-ket consensus is that Burberry remains a hold, albeit a strong one.

NICK BUBB | ARDEN

Burberrys figures are predictably excellent, but have been met withprofit taking, after the strong run in the shares. Burberry is on a very high ratingwhen compared with the likes of Supergroup and although it is a very good, well-run company continuous growth becomes difficult.

RANK Group yesterday stepped up itsdefences against a takeover bid from its biggest shareholder, telling investorsthat Guoco Groups offer substantiallyundervalues the casino and bingo halloperator, and that shareholders shouldreject the offer.

Asia-based Guoco Groups 150papproach, which valued Rank at585.8m, was triggered after the prop-erty and investment manager raised itsholding to 41 per cent.

Rank hits back at586m Guoco bid

LEISURE

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BRITISH American Tobacco (BAT) saidyesterday it had agreed to buy the pri-vately owned Productora Tabacalerade Colombia, the second largest ciga-rette company in Colombia, for$452m (277m).

The London-based second biggestcigarette maker in the world said thedeal will elevate it to second fromthird place in Colombia, Latin

Americas fourth largest cigarettemarket with total industry sales ofaround 17bn cigarettes in 2010.

This investment will strengthenand complement our position in animportant market and fill a strategicgap in our Americas region, saidMark Cobben, BATs director for its

Americas region in a statement.Privately owned Protabaco sold

5.5bn cigarettes in 2010, accountingfor almost one third of the domesticmarket.

Its biggest brand, Mustang, is thecountrys second best selling ciga-rette with a market share of around18 per cent. BAT itself sold 708bn cig-arettes in 2010.

BAT said funding for the cashacquisition will be from the groupsexisting resources.

The deal represents a multiple of11.3 times Protabacos $40m domestic2010 earnings before interest, tax,

depreciation and amortisation(Ebitda) on net domestic revenues of$110m.

The company said the transactionis subject to competition authorityapproval and final confirmatory duediligence.

Last month, BAT posted a five percent rise in first-quarter sales, boosted

by pricing gains, but said volumescontinued to soften and warned ofchallenging trading amid tough glob-al economic conditions.

The companys shares climbed 1.3per cent to 2,717p after the deal wasannounced yesterday.

BAT, which has 200 brands world-wide, including Dunhill, Lucky Strikeand Kent, was advised by investment

bank Rothschild on the Protabacodeal.

One of the companys key aims is tomake acquisitions to grow across theglobe.

BAT in $452m

swoop to buyProtabacoBYHARRY BANKS

CONSUMER

YOUNGS Brewery yesterdayannounced a profit rise fuelled byfood sales and a strong performanceat its managed pub division.

Adjusted operating profit atYoungs Brewery increased by 7.1 percent to 21.7m in the year to 4 April.

The revenues increased nearly 12per cent to 142.6m and the dividendper share was up two per cent at13.26p. Managed house revenue

increased 13.2 per cent to 127.8m,with same outlet like for like revenueup 1.9 per cent, and operating profitup 11.1 per cent. Youngs boughtupmarket pub chain Geronimo Innsfor 60m at the back end of last year,adding 26 strong pubs to its estate.

Chief executive Stephen Goodyearsaid: This has been a productive andexciting year. Overall, Youngs is in

very good shape. Our food sales werealso very strong. We are very pleased

with these results.

Youngs profit is upafter food sales liftLEISURE

Consumer News14 CITYA.M. 27 MAY 2011

ROBERTO Paiva, vice chairman ofRothschild Latin America and a boardmember of Rothschild Mexico, led thedeal team on BATs acquisition ofProtabaco.

Cambridge educated Paiva has 20years experience, ten of those withRothschild and previously Lazards. He

recently handled the 1.2bn acquisi-

tion by MAN of Volkswagens truckbusiness in Brazil. The deal forProtabaco saw negotiations startingin January, with a team of bankers inLondon backing up Chile-based Paiva.He dealt directly with the family own-ers of the Colombian firm, which hadbeen an acquisition target for rivalPhilip Morris. The negotiations weredescribed as smooth and the pricetag was the same as that offered byPhilip Morris two years ago. That bidwas blocked by competition watch-dogs. Paivas success in sealing thedeal now gives BAT a strong footprint

in the Colombian market.

ADVISER: ROTHSCHILD

ROBERTO PAIVA

ROTHSCHILD

ANALYSIS l British American Tobacco

p


2800

2700

2600

2500

2400

2300

2200

2,717.0026 May

NICK Bryan was yesterday

announced as non-executive chair-man at Youngs, taking over fromChris Sandland who has been withthe company for 38 years.

Bryan, 53, a co-founder of drinksdispenser service company Innserve,has also gained experience through

various positions within Courage,including as managing director ofCourage UK.

He was a partner at BDT Capital

Partners and was amember of the man-agement committeeat the private equity

group Investcorp.During this timehe held chairman andnon-executive directorroles at variousInvestcorp companiesincluding Welcome Breakand Gucci.

He began his career

in the finance sector, andis a chartered accountant.

Bryan has been a non-executive member of the

Youngs board since2006.He has also worked at

Lonrho and Hanson. Youngs said yesterday he

already knows the busi-ness and was a natu-

ral choice.

BY JOHN DUNNE

LEISURE

NICK BRYAN

New chairman at helm of brewer

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DAILY Mail & General Trust (DMGT)did nothing to dispel the gloomymood in the UK advertising market

yesterday when it announced its adsales for the last two months havedropped below levels seen last year.

The news sent the firms sharestumbling as much as nine per cent

before settling 7.5 per cent lower at448.6p. The media groups Northclifferegional newspaper division was hard-est hit, with revenues falling nine percent and operating profit plummeting35 per cent, despite an 11 per centheadcount reduction. Ad revenues

were also down nine per cent to 85m.Revenues from national newspa-

pers, which include the best-sellingmid-market tabloid the Daily Mail, fell

three per cent but operating profitrose five per cent.Despite the slowdown in the adver-

tising market, the group saw its rev-enues increase three per cent to991m in the first six months, withprofits rising eight per cent to 144m.

It was buoyed by a strong perform-ance by its business-to-business opera-tions, which include financialinformation, risk-management servic-es and events. Chief financial officerStephen Daintith said he expects full-

year revenue and profit growth tobroadly reflect the first half.

Ad slump hitsDMGT shares

INFLUENTIAL hedge fund managerDavid Einhorn has called forMicrosoft chief executive SteveBallmer to step down, saying the

worlds largest software companysleader is stuck in the past.

The comments by outspokenEinhorn, who made his name warn-

ing about Lehman Brothers financialhealth before the investment banks

collapse, are the most pointed yetfrom a high-profile investor againstMicrosofts leadership.

Einhorn said: His continued pres-ence is the biggest overhang onMicrosofts stock.

Shares in the firm have dropped sixper cent in the last two weeks after itagreed to pay $8.5bn (5.2bn) forinternet phone service Skype.

A Microsoft spokesman declined tocomment on Einhorns remarks.

Hedge fund calls for Microsoftleader Steve Ballmer to leaveTECHNOLOGY

O2 is the UKs best network providerfor mobile broadband, according tonew Ofcom data. Vodafone comes sec-ond, followed by 3, with EverythingEverywhere trailing in last place.

The survey found that 17 per centof households regularly use mobile

broadband, with seven per centrelying on it for all of their online

activity. The survey which used donglesrather than smartphones alsoshowed the gulf between fixed broad-

band speeds and mobile connections.While it takes less than a second toopen a page on an average broadbandconnection, it takes more than eightseconds when using a mobile device.

The average download speed on amobile connection was 1.5 megabitsper second, compared with 6.2

megabits per second on a fixed con-nection. Users in London, while gen-erally achieving faster speeds, aremore likely to find their connectionslagging during peak times.

Ofcom also formally banned three-year broadband and phone contracts,with providers now only able to offercontracts of up to two years, bringingthe UK in line with new EuropeanCommission rules. Providers mustalso offer 12 month contracts.

Ofcom finds O2 is best formobile broadband speedsBY STEVE DINNEENTELECOMS


ANALYSIS l Daily Mail and General Trust

p


580

560

540

520

500

480

460440

448.6026May

17%of UK households

use mobile

broadband

7%use it as their onlymeans ofinternet

access

1.5Mbit/sis the average

mobile downloadspeed

8.5seconds to

download basicwebpages on a

mobile

0.5seconds to down-load a page withfixed broadband

MOBILE BROADBAND | IN NUMBERS

BY STEVE DINNEEN

MEDIA

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HOPES for a strong Americanrecovery were dashed yesterday bydisappointing GDP figures and asurprising upturn in the numberof new people claiming unemploy-ment benefits.

First-quarter growth came in atan unchanged 1.8 per cent for theUS, below the expectations of econ-omists who had anticipatedgrowth to be revised above the twoper cent mark.

Growth is down from 3.1 percent in the final three months oflast year, with worse news lying inthe breakdown of yesterdays data.

Annual consumption growth was revised down to 2.2 per cent

(from 2.7 per cent). While offsetpartly by stronger inventories, thismeans we could now see a sharperrun down in inventories in the sec-ond quarter, said Paul Ashworthof Capital Economics.

The US Federal Reserve has fore-cast that the economy will expand

by over three per cent this year.Initial jobless claims jumped to

424,000 last week, from an upward-ly revised 414,000 (from 409,000) inthe prior week, pointing to apainfully slow improvement in thenations job markets.

Many economists had expected adecline in the number of fresh job-less claims. The four week movingaverage for claims eased slightly to438,500 from a revised 440,250.

Employment growth of less than

200,000 for this month is beinganticipated by many economists.Our model suggests that payrollemployment increased by around150,000 in May, Capital Economicssaid yesterday.

That would be the smallestincrease since January and would

be especially disappointing afterApril's healthy 244,000 gain.

There is no doubt the economyhas slowed, said Robert Dye of PNCFinancial Services in Pittsburgh,

which is expecting a rise in payrollsof around 180,000 to 200,000 forthe month.

We will call the first half of 2011as a soft patch. We should seegrowth accelerate in the secondhalf in the three per cent to 3.5 percent area.

US outlook knockedby slow GDP growthBY JULIAN HARRIS

US ECONOMY

BONUSES in the financial sectorhave held up this year but remain

below their pre-recession peak, withevidence of regular pay being boost-ed instead.

Bonuses averaged 901 a week inFebruary and 760 a week in Marchthis year, it was revealed today,roughly on a par with the same fig-ures from last year (975 and 714respectively).

Strong pay growth at around

five per cent and above (roughlydouble the UK average) in financial

services may also suggest that earn-ings growth in the sub-sector hastransferred from bonuses to regularpay, Incomes Data Services said.

Along with strong bonuses in thefactory industry, the finance sec-tors payouts have propped up aver-age bonus season rates to roughlythe same level as 2010.

However, bonuses in the con-struction and retail sectors have fall-en year-on-year.

Payments are significantly high-er than in the recession-hit bonus

season of 2009, but have still notquite reached the levels seen before

the crash, the report concluded.Across the UK, the average weekly

bonus came in at 72 in March,three per cent higher than the sametime last year.

City bonuses fail to reach pre-slumppeak as regular pay boosted insteadEMPLOYMENT

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Economics16 CITYA.M. 27 MAY 2011

NEWS | IN BRIEF

BBC staff get private healthcareThe BBC has spent over 2.1m on pri-vate health insurance for its staff in thelast three years, the Taxpayers Alliance(TPA) will reveal today. A further150,000 has been spent by the Welshlanguage channel S4C, to fund privatehealthcare cover for some of its employ-

ees. Viewers already pay for the NHSthrough their taxes and if its goodenough for us then its good enough forthem, said the TPAs Matthew Sinclair.

Concerns rise over price pressuresInflation expectations sprang back up inMay, according to a survey by YouGov.The median for inflation expectations inthe year ahead rebounded to 3.4 percent in May, having fallen from 3.5 percent in March to 2.9 per cent in April.The consumer price index hit 4.5 percent last month.

French high street morale liftsConsumer confidence edged up inFrance this month, it was revealed yes-terday. A leading index of sentimentrose by one point to 84. Meanwhile thenumber of people claiming unemploy-ment benefit fell by 6,300, in anotherpositive data release for the country.

German imported inflation slowsGerman import price inflation slowed to9.4 per cent annualised in April, downfrom 11.3 per cent in March.

FAST INTERNET CONNECTION HELPS CHILDREN

THE internet encourages social interaction for children and adolescents, a German think-tank claimed last night. The researchers refute the myth that the internet isolates peoplesocially, the Munich-based Ifo institute said. A fast internet connection can result in chil-dren doing more sport and extra-curricula activities, Ifo found.

A CITY broker attacked governmentgrowth forecasts as overly optimistic

yesterday and warned of an excep-tionally bleak outlook in a damningassessment of the economys progressover the past decade.

Tullett Prebon, the brokerage led byinvestment maverick Terry Smith,issued a doom-filled prediction thatgovernment growth forecasts wouldprove unachievable as the UK weaneditself off debt-fuelled spending.

The bearish forecast claimed thatthe past decade of expansion waspropped up by personal and govern-

ment overspending. That has left theeconomy skewed towards sectors thatdepend on either private or public bor-rowing, global head of research TimMorgan argued in a strategy note.

These sectors, including financialservices, construction and real estate,as well as health and education, nowaccount for 58 per cent of UK GDP andso leave the economy vulnerable asgovernment funding stops.

Six of the eight largest sectors ofthe UK economy are dependant eitheron private borrowing or on publicspending, Morgan said. These sectorsare now set to contract rather thanexpand, which renders aggregate eco-nomic growth implausible.

Ignoring international and inde-pendent forecasts for 1.7 per cent UKgrowth in 2011, Morgan rubbishedchancellor George Osbornes view thatgrowth will drive the UKs recovery.

We see no reason whatever toassume this, he said. If this doesnthappen and we are convinced that itcant the deficit reduction plan willcome apart at the seams.

Osbornes growthforecasts slammed

by Tullett PrebonBYALISON LOCK

ECONOMICS

ANALYSIS l Bonuses remain belowtheir pre-recession peak

pw

2000 2003 2005 20092007 2011

2,000

1,600

1,200

800

400

0

Bonuses

Regular pay

Source: Incomes Data Services

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Economics 17CITYA.M. 27 MAY 2011

THE number of people migratingaway from the UK has plummeted by20 per cent, data from the Office forNational Statistics showed yesterday.

In the 12 months to September lastyear, 344,000 people departed Britishshores for a life elsewhere. This com-pares to the year to December 2008,

when 427,000 people left.Government plans to cut net immi-

gration to tens of thousands weredealt another blow by the data.

The rate of immigration actuallydropped from December 2008 toSeptember 2010, yet the lower numberof people leaving the UK resulted in anet increase in the figures.

A net migration target makes nosense as we cannot control emigra-

tion, commented Chris Nicholson,head of the Centre Forum thinktank.

Net immigration increased to anannual rate of 242,000, up from163,000 over the same period.

Immigration for studying rose to241,000 in the year to September 2010,a 30 per cent rise on the previous year.

Overseas students should beexcluded from the governments tar-get, Nicholson added.

Number of people leavingthe UK plummets by 20pc

ANALYSIS l The number of people migrating away from the UK has fallen since 2009

Source: Office for National Statistics

Migration (thousands)Immigration

Emigration

Net migration

Dec 2006 Jun 2007 Dec 2007 Jun 2008 Jun 2009Dec 2008 Dec 2009 Mar 2010 Jun 2010 Sep 2010

700

600

500

400

300

200

100

0

BY JULIAN HARRIS

MIGRATION

NEWS | IN BRIEF

Italian business morale takes a dipItalian business confidence sank by morethan expected this month, according todata from the ISTAT office released yes-terday. The index measured 101.3 in May,

from a downwardly revised 102.6 inApril. It is important for Italy that for-eign orders stay on an upward trajecto-ry, said Fabio Fois of Barclays Capital.The economic recovery has been led by

exports contributions. Going forward, theoutlook for the euro will be key. In fact,Italy has one of the largest export elas-ticities to its exchange rate, Fois added.

Small businesses avoiding failureFewer small companies became insolventin April than the same time last year,data from Experian revealed yesterday.The number of failing UK companiesdropped by 0.55 per cent year on year.

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CHILEAN copper miner Antofagastaposted a 30 per cent rise in core earn-ings in the three months to March, ashigher prices for the red metal andmarginally higher volumes offsetincreased costs.

Earnings before interest, tax, depre-

ciation and amortisation (EBITDA) inthe first quarter climbed to $811.9m

(495.8m) from $623.4m a year ago.Revenue rose just over 29 per cent to$1.27bn. Copper prices have fallen backin recent weeks after hitting a recordhigh of $10,190 in the first-quarter, butconcerns over tight supply remain.

The worlds largest mine, ChilesEscondida, said on Wednesday thatoutput slipped in the quarter on the back of maintenance and lower ore

grades, adding to mounting evidenceof a potential shortfall this year.

Antofagasta, the worlds 11th largestcopper producer, said earlier thismonth that copper production for thefirst-quarter came in about 29,000tonnes below initial targets.

Antofagasta said it had concludednegotiations with the plant union atLos Pelambres for a new 44 monthlabour agreement. It struck a dealwith the main union last November,

agreeing a new 46 month labouragreement.

Antofagastas earnings jump 30 per cent

BRITISH property investor London &Stamford yesterday said it saw invest-

ment opportunities in retail, logisticsand London residential for its 1bn war chest, after reporting a rise in2010 net asset value (NAV).

The company, which moved fromthe London Stock Exchanges junior

AIM market to the main board lastOctober, said its NAV per share for the year to 31 March was 122.4p, up 1.4per cent from 120.7p last year.

We see the potential for outperfor-

mance in the central London residen-tial market, the distribution sectorand in prime retail investments asexciting opportunities for the furtherinvestment of our 1bn of firepower,executive chairman Raymond Mould

said.London & Stamford said its revalua-

tion surplus, including share of associ-ates, was 51m, down 50 per centfrom 101.9m the previous year. It

reported 1.5bn assets under manage-ment.Net income was 41.8m, up 160 per

cent from 16.1m the previous year,due to three portfolio acquisition dur-ing the year, the group said.

London & Stamford to invest 1bn

BYHARRY BANKS

PROPERTY

BRITISH waste management compa-ny Shanks yesterday posted a better-than-expected six per cent rise inunderlying pre-tax profit, and said ithad seen an improvement in themarket for its services in recentmonths.

The company, which makearound half its sales in theNetherlands and recently won a con-tract with Unilever to recycle its waste there, said it was confidentthat good growth could be achievedin the current financial year.

Overall trading was expected to bein line with its expectations, it saidyesterday.

While market conditions remainchallenging, our trading in the finalquarter and early into the new finan-cial year gives us encouragementthat the market for our services isimproving, the company said in astatement.

Shanks said it had faced the mostchallenging conditions in many yearsduring the last 12 months.

In the year to the end of March,group revenue rose five per cent to717m and underlying profit before

tax grew six per cent, or 10 per centat constant currency rates, to 35.2m,boosted by cost cuts.

The company raised its dividend byeight per cent to 3.25p a share.

Trading andprofits riseat Shanks

GLOBAL infrastructure group BalfourBeatty has decided to hold a beautyparade of advisers ahead of a likelychange in its corporate brokers.

The groups current broking advis-ers are JP Morgan Cazenove and RBS, who have served the company formany years.

Group chief executive Ian Tyler (pic-tured) is believed to feel that it is timeto ring the changes, especially sincethe group has changed significantly inrecent years, with almost one third ofits revenues now coming from the US.

The existing brokers will be pitchingbut they will be joined by a list of othermajor investment banks, includingBank of America Merrill Lynch andCiti.

Brokerships often tend to be lossmakers for the investment banks butthey can often lead to key roles onmajor corporate finance transactionsthat bring in commissions.

Balfour Beatty has been a FTSE 100company but it is currently in the FTSE250.

There have been lots of changes atthe company in the recent past and Ithink management feel it is right toreconsider external advisers, said onesource.

RBS has ahost of big cor-porate broker-ships, mainlythrough itsownership ofHoare Govett.

Balfour setto reshuffleits advisers

UNITED Utilities, Britains largest list-ed water utility, yesterday reported alower-than-expected drop in annualprofits, after it was ordered by regula-tors to cut prices as part of a sectorreview.

The company said revenue fromregulated activities dropped four per

cent, reflecting a similar four percent decrease in prices. United

Utilities said underlying pre-tax prof-it fell 32 per cent to 329.2m, due pri-marily to lower revenue following theprice review, as well as higher infra-structure renewals expenditure andproperty rates.

However, this was still better thanestimates of 311.8m, according to apoll.

Shares in United Utilities closed at

617p yesterday, valuing the businessat nearly 4.2bn.

United Utilities tops viewsUTILITIES

London & Stamford boss Raymond Mouldis looking for investments Picture: GETTY

BYDAVID HELLIER

INFRASTRUCTURE

BYHARRY BANKS

MINING

BYHARRY BANKS

SUPPORT SERVICES

ANALYSIS l London & Stamford Property

p


134

132

130

128

126

124

131.0026 May

ANALYSIS l Shanks

p


125

115

105

121.3426 May

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BRITISH defence technology companyQinetiQ reported a better-than-expect-ed full-year operating profit, driven bya strong performance from its globalproducts unit, and said it wouldresume paying dividends.

QinetiQ, which makes high-tech

military equipment such as bomb dis-posal robots and sniper detectors, said

yesterday underlying operating profitrose 21 per cent to 145.4m in the yearto the end of March.

That was ahead of the average fore-cast of 140m.

The group said revenue from theglobal products division grew by 66per cent, boosted by demand for its Q-NET vehicle survivability product tosupport operations in Afghanistan.

That helped it offset the impact ofspending cuts in Britain and US.

QinetiQ, formerly Britains state-owned defence research agency, said it would resume paying dividends hav-ing slashed its debt during the year fol-lowing a restructuring andcost-cutting measures which reducedoperating costs by 10 per cent.

Our reshaping of the businesses,together with the reduction and refi-nancing of the debt, all contribute to a

leaner and more agile group, chiefexecutive Leo Quinn said.

Car armour helps QinetiQ trump forecasts

SONYS forecast of its first annual netprofit in four years is being viewed as

optimistic, as the consumer electron-ics giant struggles with the aftermathof the March earthquake and a seriesof network security breaches.

Havoc to supply chains and thephysical damage caused by Japans

earthquake and tsunami forced Sonyearlier this week to take a charge ontax credits that resulted in a $3.2bn(2bn) net loss for the business year just ended, its biggest deficit since

1995 and the second worst on record.Sony yesterday predicted an 80bnyen net profit for the year that started1 April, compared with analysts con-sensus of 105bn yen.

It expects to make an operating

profit of 200bn yen this business year,reiterating guidance given earlier inthe week, which helped its shares rise.

Looking at its forecast, it appearsSony is expecting a recovery in the lat-

ter half of the year, which is a bullishforecast, but theres a lot of uncertain-ty and there is a risk it comes in belowthat expectation, said Koji Takeuchi,senior economist at Mizuho ResearchInstitute.

Upbeat profit outlook at SonyBYHARRY BANKS

TECHNOLOGY

AUSTRIAN lender Raiffeisen BankInternationals first-quarter net prof itfell nearly a fifth amid a hit fromtaxes but still beat market expecta-tions as provisions for bad loans fellby more than a third.

Emerging Europes third-biggestlender by assets reiterated yesterday itexpected its non-performing loan(NPL) ratio to peak later this yearamid robust economic growth in theregion.

The ratio fell 37 basis points in thequarter to 8.6 per cent amid netreleases in all segments except south-eastern Europe.

High margins have allowedRaiffeisen to remain profitable inemerging Europe, but investors arelooking for a clear reversal of the bad-debt cycle.

RBI group profit fell 19.1 per cent to270m (232.8m), ahead of the aver-age estimate of 256m in a poll ofanalysts. The company said provisionsfor bad loans fell 35.9 per cent to208m, compared with a poll averageof278m.

Our profit before tax for the peri-od increased by three per cent com-pared with the same period last year,above all because of satisfying devel-opments in both net interest incomeand net fee and commission income,chief executive Herbert Stepic said.

Raiffeisencheers asbad loans fall

INDIAS Tata Steel yesterday warnedrising raw material costs could hurtmargins for a couple of quarters afterposting its highest-ever annual netprofit, bolstered by a surge in pricesand demand in Asias third-largesteconomy.

The worlds seventh largest steel-maker, whose European operationsaccount for two-thirds of its globalcapacity of about 28m tonnes, saidtepid demand in Europe was a causefor concern although it was seeingsome positive turnaround signs.

The outlook for 2011 is positive onthe back of faster recovery in Europeand strong growth in emerging mar-kets, said Tata Steels finance chiefKoushik Chatterjee.

But the environment remainschallenging because of higher rawmaterial prices, he said.

Tata Steel said its consolidated netprofit after taxes, minority interestand share of profit of associatesjumped about 72 per cent to 41.78bnrupees (573m) in its fiscal fourth-quarter, up from 24.34bn a year earli-er. Net sales for the year rose nearly 15per cent to 1.17 trillion rupees.

Last week, the company said it willcut about 1,500 jobs in Britain as partof a restructuring of its loss-makinglong products unit, and cut capacityat a plant in northern England.

Tata Steelwarns onrise in costs

COPIER and printer maker Ricoh willcut nearly 10 per cent of its staff to tryto boost profits, a move that showsunderperforming Japanese companiesare stepping up efforts to competewith global rivals.

Ricoh said yesterday the restructur-ing included slashing 10,000 jobs from

its global workforce of 109,000, cuttingunprofitable products and consolidat-

ing factories.The earthquake has ended any lin-

gering complacency at Japanese com-panies that have been behind thecurve in restructuring and in M&A,said Macquaries Peter Eadon-Clarke.

Ricoh is targeting operating profitof 210bn yen (1.5bn) in the financialyear to March 2014, more than triplethe 60bn yen it posted in the past year,

ending in March, when sales fell fourper cent.

Ricoh to cut 10,000 jobsMANUFACTURING

Sony chief executive Sir Howard Stringerexpects an 80bn yen net profit for the year

BYHARRY BANKS

INDUSTRIALS

BYHARRY BANKS

MINING

BYHARRY BANKS

FINANCIAL SERVICES

ANALYSIS l Sony


3000

2800

2600

2400

2200

2000

1800

2,239.0026 May

ANALYSIS l Raiffeisen

7 Mar 21 Mar 4 Apr 18 Apr 16 May2 May

44

42

40

38

36

36.6426 May

ANALYSIS l Tata Steel

R


640

620

600

580

560

540

520

572.6026 May

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