cityam 2011-06-08

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FTSE 100 ▲5,864.65 +1.49 DOW ▼12,070.81 -19.15 NASDAQ ▼2,701.56 -1.00 £/$ 1.64 unc £/¤ 1.12 unc ¤/$ ▲1.47+0.01

FEUDING has broken out between all

the key players within the City of London’s crucial fundraising business,in a development that threatens todevastate confidence in London’s fal-tering flotations market. Key advisers,investors and bookrunners are at log-gerheads and briefing against eachother, in the worst breakdown in rela-tions in the City in living memory.

According to numerous sources who have spoken anonymously to City A.M. banking consultants such as STJ Advisors, hired sometimes secretively by private equity groups wishing to off-load companies on the London mar-ket, are clashing with the bulge bracket investment banks that areresponsible for bringing flotations tothe market.

Meanwhile, another key group of City financiers – the buy-side firmsthat invest in newly floated firms – arecontinuing to warn that new sharesare being offered at too high a price.

BlackRock, traditionally one of the big takers of new issues, issued ascathing statement recently about thestate of the London IPO market, sayingrecent events had been “frustrating”.

It argued that companies shouldexpect to float at a discount to theirpeer group, that bookrunning syndi-cates of investment banks have growntoo large and, crucially, that advisers were being appointed “on indicationsof valuation that are unrealistic”.

However, one banker said that the bookrunners are caught in the middleof an unholy row between the invest-ing institutions, the private equity groups that are wanting to sell out andtheir advisers. These people are accus-ing them of trying to sell stock toocheaply.

The banker told City A.M : “People like

STJ accuse the banks of misleadingclients over valuation. They say we’retoo partisan and too close to the invest-ment community.”

The banker said that the investment banks feel they are constantly being“second guessed” by private equity groups’ advisers, whose main objec-tive is to achieve as high a valuation aspossible for the selling company.

“Their goal is to have large syndi-cates so that they can take control of things. They try to make the banks

compete against each other and it iscarnage.“We have always brought together

buyers and sellers in the market but

now we are being trashed,” said the banker. “But we are always trying toget deals done.”

Documents seen by City A.M. show that STJ, in particular, has aggressively marketed its services as being able toadd up to 30 per cent in valuation for acompany wishing to float.

In the documents, STJ accuses the

bulge bracket investment banks, whotraditionally occupy the bookrunningroles during a flotation, of talkingdown investor sentiment in order to

drive down valuations. Yesterday STJ’s John St John

declined to comment on the chargesmade by STJ in the documents.

Adam Young of independent adviso-ry Rothschild agrees that syndicateshave grown in size in recent months:“It’s crucial to co-ordinate and counter- balance joint bookrunners who are

always fiercely competitive with eachother, but ultimately responsibility and accountability for getting dealssold well must lie with them,” he said.

Despite nervousness about the com-modities market, Glencore recently succeeded in getting its $11bn flota-tion away, but other smaller high-growth companies such as Edwardsand the payments service group Skrillfailed to float amid talk of a buyers’strike. There are fears that unless con-ditions improve and relations between

the different vested interests thaw somewhat, London will lose out tomarkets such as Hong Kong.

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BlackRockSchrodersJO HambroM&G

EdwardsSkrillMerlin

STJ Advisors

Lazard

Rothschild

Goldman SachsBarclays CapitalDeutsche Bank

SPECIAL INVESTIGATION

BUSINESS WITH PERSONALITYwww.cityam.com FREEIssue 1,398 Wednesday 8 June 2011

lAdvisers blame each other for seizure of IPO market l

FRICTIONInvestors claimcompany sharesare too expensive

BY DAVID HELLIER AND JULIET SAMUEL

EXCLUSIVE▲

INSTITUTIONALINVESTORS

COMPANIESTHAT FAILEDTO FLOAT

IPO ADVISERS

BOOKRUNNERS

FRICTIONSTJ Advisorsaccuses investmentbanks of talkingdown valuations

8/6/2019 Cityam 2011-06-08


IT is time for the City to get its acttogether: it is in danger of ceasing tofunction as a proper, efficient plat-form for raising money for firmsseeking to go public, an untenablesituation. As our special investiga-tion on pages 1-4 of today’s newspa-

per demonstrates, the market forcorporate floats has almost groundto a halt, with the City breaking outinto feuding factions. Everybody is

blaming everybody else and trusthas evaporated. Financiers we havespoken to say that the bad blood

between the warring groups is worsethan anything seen in living memo-ry, perhaps because tensions thatcould have been papered over duringthe boom years have now becomeunbearable in tougher economicconditions.

Buy-side firms (the fund managers)are angry, claiming that investment

banks are giving false hopes to firmsseeking to float and pricing theirshares too high; some advisers to pri-

vate equity firms are briefing againstinvestment banks, claiming that new floats are actually being priced toocheaply (yes, really); those seekingfunds or to float their firms are upsetat the cost of bankers and at the fail-ure to find buyers for many floats;and the investment banks deny thatthey are operating excessively large,cartel-like syndicates, that the mar-ket is insufficiently competitive, thatthey are too powerful or that they areimposing fees that are too high onfirms that are floating while takingon insufficient risk.

There have always been tensions between these four groups of City folk – but they have exploded as aresult of the tougher economic and

STJ Advisors, the St James’s Place- based firm, is accusing the big banksthat run the flotation process of charging high fees and of “distorting

investor feedback” in order to getcompanies to lower their valuation,according to a sales document seen

by City A.M. The document claims that “banks

are conflicted” in the IPO process.It argues that the banks, who offer

a wide range of services, always havea motive in delivering good valueshare issues to institutional clientsand therefore have a tendency tooffer shares too cheaply.

Its strongest criticism is reservedfor the way the banks, or bookrun-ners as they are known in flotations,use the investor feedback they takeduring an IPO process.

In an extraordinary attack over twographically illustrated pages purport-ing to demonstrate the distortion of investor feedback, STJ argues that“pricing feedback is distorted by thesystematic removal of many of the

investors providing reference data.”It also says that the “pricing feed-

back is manipulated by showing low-est valuations given to joint bookrun-ners and ignoring higher valuationsgenerated.”

In the examples used, STJ namesDeutsche Bank, Barclays Capital,Goldman Sachs and others as

bookrunners in question. The banks declined to comment when contacted by City A.M..

STJ, which has just been appointedalongside Lazard to assist with theflotation of Bankia, a Spanish bank-ing group, said in the document thatits proven techniques are designed tooptimise value. It says its role can beeither “visible” or “invisible”.

STJ’s main competitors in the racefor IPO advisory roles includes blue-

blooded firms such as Rothschild andLazard.

In it sales document, STJ says thatits independent, specialist advice canensure success in “mission critical”capital markets transactions. It saysits techniques are designed to opti-mise value and it states that there isstrong evidence of underpricing inIPOs.

It claims to offer unique manage-

ment of the marketing process, a skillthe bookrunners also offer. It then

says it offers transparency and con-trol throughout an IPO.

“We work with the banks, notagainst them,” STJ says, althoughsome of the banks we spoke to dis-agree with that sentiment.

STJ says that its services, which are

largely provided to private equity groups wishing to sell into a flota-tion, do not add extra cost. It says thatfees are largely payable for successand are structured out of overall syn-dicate fees.

Some bankers who spoke to City A.M. in the past few days agreed thatthere can be a role for so-called IPOadvisers who perform the kind of rolethat STJ does.

But they said that often, in the caseof STJ, there was tension betweenthem and the banks.“They can createa lot of grief and workload,” one

banker said.One source said that the likes of

Rothschild and Lazard did a lot of preparatory work on flotations that

was useful but that STJ most oftencame in at the end of a process andtinkered with issues like the distribu-tion of stock. “That’s where we find

them trying to second guess the pro-ces.”

Big banks accused of talking down valuesBYDAVID HELLIER

CAPITAL MARKETS▲

EDITOR’S LETTER

ALLISTER HEATH

7th Floor, Centurion House,24 Monument Street, London, EC3R 8AJ

Tel: 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 OwenHead of Distribution Nick Owen

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

market conditions and the failure of a number of high-profile floats. Asthe documents we reproduce show,the language used by some has

become excessively heated. I don’t believe the claims made in thosedocuments. I’m more sympathetic tothe argument made by fund man-agers complaining that banking feesare too high – but I feel that the mar-ket is less closed to new entrantsthan they seem to think and is there-fore not fundamentally uncompeti-tive. But insults are flying and thereis much bad blood. All of this needsto stop.

The extent of the initial publicoffering (IPO) market’s woes has

been camouflaged by the spectacu-

lar success of Glencore’s huge float, which propelled the energy traderstraight into the FTSE 100 and show-ered everybody involved on the sell-side with huge riches. It is theexception that confirms the rule.London isn’t New York any longer:there is no long list of sexy compa-nies such as Groupon preparing tofloat and set to deliver immediateand massive windfalls to investors.

The “City” is a complex ecosystem which many outsiders simply don’tunderstand. It includes all varietiesof bankers, wealth managers, tradersand financiers, as well as lawyers,accountants, marketers, businessservices professionals, corporateexecutives, technology experts, otheradvisers and the like. So it wasalways a nonsense to talk of the City as if it were monolithic.

But as our story today also shows,the City’s financiers themselves aremore deeply divided than t hey have

been for years. In many ways, of course, this is a good thing: buy-sidefirms need to be at odds with sell-side firms, investors need to holdexecutives to account and so on. But

what we are getting now is not theright kind of creative, competitivetension that is required for progress;

but instead a debilitating eruptioninto useless conflict.

Unless investors trust that sharesare being offered to them at a sensi-

ble price, and that various advisersagree than they can work with eachother, the only outcome will be stale-mate and a rush by investors to floaton easier, more manageable marketssuch as New York or Hong Kong. Thischaos is especially unhelpful toLondon given that its overall compet-

itiveness is already in decline as aresult of higher tax, increased regu-lation, necessary deleveraging, exces-sively high inflation and an overall

weak economy. This is not an issue that govern-

ments can fix. Not all problems havepolitical solutions. What is neededinstead is a cultural shift, for expec-tations to be readjusted to reality and for trust to reappear.

Somebody should sit the biggestfund managers, private equity firms,investment banks and other advisersin one room and try and knock heads together. Perhaps this could bea task that Xavier Rolet, the LondonStock Exchange’s boss, may want totake on – or if not him, another City grandee. But something needs to bedone, and this nonsense halted, forthe sake of London’s long-term pros-perity.

[email protected] Follow me on Twitter: @allisterheath

SPECIAL INVESTIGATION | CITY AT WAR

Company Date Expected proceeds from

New Look Budget Clothing February 2010 £650m

New Look Budget Clothing March 2011 £650m

Perform Group Media Rights April 2011 £146m

Edwards Vacuum Technology April 2011 £441m

Skrill Online Payments April 2011 £179m

TIME LINE | FAILED OR CONTROVERSIAL FLOTATIONS

Carl McPhail, former chief executive of New Look Picture: Rex Edwards chief Matthew Taylor pulled his firm’s floa

➤ ➤ ➤ ➤ ➤

Why all sides need

to stop and relax

News2 CITYA.M. 8 JUNE 2011

8/6/2019 Cityam 2011-06-08


We fly from Gatwick and Stansted. Price correct as at 24 May 2011 for travel between 6 June and 4 August 2011.Variable charges for hold baggage apply and some payment methods attract a handling fee. See website for details.

London toCopenhagen from

single

inc. taxes

£33.99

News 3CITYA.M. 8 JUNE 2011

London IPO market is close to seizure

GLENCORE recently pulled off a$11bn flotation, London’s largestever, but the past few months haveotherwise been pretty desultory interms of new companies coming tomarket.

Some blame last year’s flotation of Ocado, the online grocer, for startingthe rot. Ocado’s share price hasrecovered well from its early post-IPO

malaise but bankers say that

investors felt at the time that they were sold a pup and that they havenot forgotten that in a hurry.

In the last few months, aroundhalf of the Russian companies thatplanned to raise money in Londonhave been forced to withdraw theirplans, as investors balked at the valu-ations and general corporate gover-nance issues.

But it hasn’t just been Russiangroups that have failed to whet the

appetite of the UK investment com-

munity. Solid UK groups likeEdwards, the vacuum technology company, and online payments serv-ice Skrill, were also forced to pulltheir issues.

As Skrill chairman Bob Wigley putit to City A.M. earlier this week: “TheUS market is alive and on fire andthe London market is in effectclosed. So perhaps there are factorsother than market dynamics at

work.”

BYDAVID HELLIER

CAPITAL MARKETS▲

utcome

lled float due to “market conditions”

ain pulled float

ated at 260p but plummeted immediately to under 230p on the f irst day

lled float citing poor “market conditions”

lled float citing poor “market conditions”

Skrill chairman Bob Wigley saw his company’s IPO shelved in April

➤ ➤ ➤ ➤ ➤ ➤ ➤ ➤ ➤ ➤

8/6/2019 Cityam 2011-06-08


THE ROW over banks’ IPO activities was first ignited after BlackRock, the world’s largest institutional investor,sent an explosive letter to severalleading investment banks.

The devastating broadside on the way company listings on the stock market are handled exposed how some banks were providing clients

with unrealistic valuations for theircompanies in order to win business.

“We are concerned that companiesare appointing advisors based on indi-cations of valuation that are unrealis-

tic,” the letter said.It also criticised the structure of

fees to reflect the price achieved onthe first day of trading, as well as a

whole series of other practices.Penned by highly-respected

BlackRock managing directors LukeChappell and James Macpherson, theletter brought into the open tensions

within the City community.It raised concerns that the number

of banks on the syndicate for an IPOdid not “appear to benefit the processof price formation”.

BlackRock added that it is likely to

be much less constructive on IPOs with large syndicates.

The US institutional investmenthouse hit out at the informationmade available on companies lookingto float, criticising limited meetingtime with firms. It also said there wasa “disparity” between investors and

banks on expectations of governance.“It is in all of our interests for

London to remain at the centre of athriving capital market. However,recent developments in the IPO mar-ket have, at times, been frustrating,”the letter said.

BlackRock sparked IPO rowwith explosive open letter

CAPITAL MARKETS▲


We all need to show thatLondon is open for business

WE need to take seriously any concerns that firms find theUK a more difficult place in

which to raise capital. There is no doubt that other finan-

cial centres have long sought to repli-cate London’s world leading success

and, in so doing, to capture some of the market share.

Should they succeed in achievingthese ambitions, there are concernsthat London’s competitive advantagemay be eroded and that the percep-tion of London as a welcoming busi-ness environment in which to raisecapital may be diminished.

What is vital is that all of the key stakeholders involved in this process– especially institutional investorsand investment banks – act in such a

way so as to demonstrate to the inter-national business community thatLondon remains well and truly openfor business.

Stuart Fraser is the Policy Chairman,City of London Corporation.

CITY COMMENT

STUART FRASER

ROTHSCHILD is one of the world’slargest independent advisories on capi-tal-raisings, having been on 111 dealsraising €185bn in equity since 2009.Notable transactions includePetrobras’ $70bn float in Sao Pauloand Porsche’s €5bn rights issue.

Adam Young co-heads its equity

advisory service and says that one of the keys to an independent advisor’srole is to manage increasingly largesyndicates effectively.

"It's about lots of little turns of thedial, making sure that the whole thingis done really professionally,” he says.That includes sifting through and fil-tering information about the marketreceived from book-runners.

Rothschild takes on work both inthe early planning stages of a deal andduring the execution, prioritising “adetailed flow of information”.

INDEPENDENT ADVISER

ROTHSCHILD

LAZARD prides itself on seeing

clients as “a client for life”, prioritis-ing relationship-building over gener-ating a constant flow of fees.

The bank has worked on somemajor capital-raisings this year, suchas AIG’s $8.7bn re-listing and the

$3.8bn float of HCA Holdings, andits client list includes behemothssuch as Kraft and Virgin.

Unlike many large investmentbanks, Lazard keeps origination of deals and execution of them in oneplace, so that clients have a consis-tent relationship and contact point

with the bank.It also pitches that it offers “inde-

pendent, trusted and unbiasedadvice”, adding that “we limit ourparticipation in conflicting businessactivities”.

INDEPENDENT ADVISER

LAZARD

STJ Advisors operates as a partner-ship led by John St John, a capitalmarkets banker who has spent 25

years at various investment banks inthe capital-raising business.

He co-founded the firm, which was originally known as FredericksPlace Advisors, in 2008, after a careerthat included stints at Nomura,Citi/Salomon Smith Barney andDresdner Kleinwort Benson.

STJ focuses exclusively on capitalmarkets deals, in both debt and equi-ty, and makes a point of the “objectiv-ity of our advice”. The bank’s pitch isthat it offers “advice and services

which the integrated investment banking model cannot provide”.

One former colleague called St John “great to work for”, but othershave criticised STJ’s overly “interfer-ing” way of managing book-runners.

And in one apocryphal story, themedia-shy St John was so pleased

with a bumper bonus from his work at Dresdner Kleinwort Benson thathe had the bank’s logo emblazonedacross his swimming pool tiles.

STJ is not St John’s first independ-ent capital markets enterprise. In2000, he left his role in equity capitalmarkets (ECM) at Lehman Brothers to

become chief executive of the newly launched EO, an online platformthat offered float services. However,the firm went bankrupt two yearslater as part of the fallout fromthe dot.com crash.

In addition to his man-aging partner role at STJ,St John is also a director

of Ingenious FilmPartners, one of the

backers of the movie Avatar, and is an ambas-sador for the charity Build Africa.

The media-shy mastermind behind

an aggressive boutique operationBY JULIET SAMUEL

CAPITAL MARKETS▲

JOHN ST JOHN

SPECIAL INVESTIGATION | CITY AT WAR

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STOCKS in the US dropped last nightafter Federal Reserve chief BenBernanke acknowledged a slowdownin the economy, but offered no sug-gestion of a third round of quantita-tive easing (dubbed QE3).

The Dow Jones industrial averagefell 0.16 per cent to end at 12,070.81,

while the Standard & Poor’s 500 Indexslipped 0.09 per cent, to finish at

1,284.94. The Nasdaq composite indexshed 0.04 per cent, to close at 2,701.56.Bernanke noted “slower than

expected” growth this year and “frus-tratingly slow” progress in the labourmarket, yet remained defiant over theFed’s controversial asset-buying pro-grammes (QE and QE2).

“The Fed’s actions in recent yearshave doubtless helped stabilise thefinancial system, ease credit condi-tions, guard against deflation, andpromote economic growth,” Bernanke

concluded. Growth “seems likely topick up in the second half of the year”, the Fed expects. Yet conditionsare still bad enough “to warrantexceptionally low” interest rates,Bernanke stressed.

Inflation, which has reachedaround 3.5 per cent in the US, is theresult of “transitory” factors beyondthe Fed’s control, Bernanke insisted.

Commodity prices will ease as glob-al supply picks up, with oil pricesunlikely to spike again, he said.

US stocks dip after Fed’sBernanke talks down QE3BY JULIAN HARRIS

US ECONOMY▲


CONCERNS have been raised over theindependence of the new body beingset up to spot potential crises in theBritish economy by an influential

committee of MPs. The Treasury select committee said

it was “not so clear” whether AlistairClark, a former Bank of Englandemployee, would be sufficiently inde-pendent to sit on the Financial Policy

Committee (FPC) – the advisory panel being drawn up as part of sweepingregulatory reforms.

The committee, which will today grill Barclays boss Bob Diamond andthe chiefs of three other large UK

banks, wants an additional independ-

ent member to join the FPC as aresult.

The development will be a fresh blow to the reforms, after former CBIchief Sir Richard Lambert had already turned down a role on the panel.

MPs raise concerns overnew panel’s independence

Barclays boss Bob Diamond will today face the influential Treasury select committee

BYRICHARD PARTINGTON

REGULATION▲

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STRUGGLING music retailer HMV agreed to give its banks a five per centequity stake in return for a costly last-ditch loan refinancing yesterday.

The refinancing deal struck withlenders RBS and Lloyds gives HMV £220m in two loans and a revolvingcredit facility and wins it breathingspace as it fights for survival.

But the package of three loanscomes with high fees including anexit fee upon repayment, and bars

HMV from paying a dividend while a£90m term loan is outstanding.

“The rate at which the exit feeaccrues will start at an amount equalto five per cent per annum and willratchet upwards on April 1 2012 toeight per cent per annum and againon January 1 2013 to 14 per cent perannum,” HMV said in a statement.

Analysts warned that HMV’s fallingsales and weak cash flow may cause itto struggle to repay the debt. PeelHunt analyst John Stevenson said the

exit fee was “a clear incentive to pay down the debt quickly” but warnedthat “short of an equity fundraising,

we struggle to see HMV generatingsufficient cash flows to repay thedebt in the required timescale”.

HMV had a £79m free cash outflow cash flow in the four months toOctober 2010. Like for like sales fell 15per cent in the four months to theend of April and it said it was contin-uing to trade in line with this.

Arden analyst Nick Bubb said theinterest rate charge alone would wipeout any earnings for HMV this year.

HMV securesbank loan butcedes equity

LLOYDS could be pressured into sell-ing the 620 branches it has on the

block to a bank that already has a pres-ence on the High Street, City A.M.understands.

A Treasury source said that the bank could be asked to sign a deal with an existing “challenger bank”that has enough branches to rival theindustry’s incumbents, who are for-

bidden from buying the branches.Narrowing the field of buyers to a

bank that would threaten the status

quo could go some way to satisfyingthe Independent Commission onBanking (ICB), which has said thatLloyds must sell “substantially” more

branches than currently planned.But it could make it difficult for

potential bidders like Spain’s BBVA, Virgin Money and NBNK Investmentsto buy the branches alone becausethey might face rivals that already have a high-street presence, such asNational Australia Bank or a numberof building societies.

Although the Treasury says it is“reasonable” for Lloyds to proceed

with the the sale of 620 branches as

planned, it has not ruled out steppingin at a later stage to make it sell more.

Lloyds is already obligated to makesure that the branches, which it hasto sell under EU competition law,come “ready to use”, with a manage-ment and IT system in place.

The bank is currently finalising thedetails of an information memoran-dum that will kick off the saleprocess when it is sent to potential

bidders in the next couple of weeks.Prospective buyers have told City

A.M. that once the memorandum isreceived, it could become difficult andcostly to change the terms of the deal.

BYALISON LOCK

RETAIL▲

BY JULIET SAMUEL

BANKING▲


ANALYST VIEWS: HOW GOOD A DEAL IS THISREFINANCING FOR HMV? Interviews by Alison Lock

“

NICK BUBB | ARDEN PARTNERS

This seems to us to be a triumph of hope over experience. We expect thehigher interest charge to wipe out any earnings before interest and tax this yearand we note from the statement that current trading still remains very poor. HMVis now trading on nearly 4.5 times EBITDA and that is much too high.

”

“

KATE CALVERT | SEYMOUR PIERCE

The banks clearly have the company over a barrel, which is not surpris-ing given that current trading remains in-line with the 17 weeks to April 30. Weare maintaining our Sell recommendation as we believe that the business is avalue trap and t he Waterstone’s deal is expected to be dilutive to earnings.

”

“

JOHN STEVENSON | PEEL HUNT

We fear this is an interim pause before the next step down. Short of anequity fundraising, we struggle to see HMV generating sufficient cash flows torepay the debt in the required timescale. Nonetheless, this removes a key distrac-tion for the business allowing management to focus on restructuring.

”

HMV DEBT

REFINANCING

Q.WHAT DOES THIS HMVREFINANCING INVOLVE?

A.HMV’s lenders RBS and Lloydshave agreed to supply two term

loans of £70m and £90m thatmature in September 2013, and a

£60m revolving credit facility. Thedeal refinances its previous £240mdebt facility with £220m of freshdebt. The banks will charge HMV interest of four per cent over theLondon Interbank Offered Rate, cur-rently about 0.8 per cent. They willalso levy an exit fee on full repay-ment of the £90m loan, and bar HMV from paying any dividends until it isrepaid. Finally, HMV has agreed togive them share warrants that can beconverted into equity equivalent tofive per cent of HMV’s total sharecapital any time after 30 June 2012.

Q.ARE THE FEES REASONABLE?

A. The interest rate is reasonable but the exit fee has a sting in its

tail. The banks will charge HMV anexit fee of five per cent, or £4.5m, if itrepays before 1 April 2012. That rises

to eight per cent after April 2012 andto 14 per cent – or £12.6m – if theloan is not repaid by 1 January 2013.

Q.HOW SIGNIFICANT ARE THEWARRANTS?

A. Warrants are often a first step by banks towards taking control of

a company. The backers of retailer Jessops also exercised warrants whenthe companies were unable to repay debt. While five per cent is not large,there is potential for it to grow.

Q A&

ANALYSIS l HMV Group PLC

18

12

8

10 May14 Apr25 Mar7 Apr 31 May

p

10.507 June

Lloyds faces branches headache

HMV has handed a five per cent stake in the firm to its lenders

WHAT THE OTHER PAPERS SAY THIS MORNING

EVERCORE SET TO ENHANCE ITS ROLEIN EUROPE WITH £86M LEXICON BUYEvercore Partners, the US investment

bank, is set to bolster its position inEurope with a deal to buy LexiconPartners, the London-based advisory firm co-founded by Andrew Sibbald,for about £86m.

UBS IN PAY PLEDGE TO TRY AND STEMDEFECTIONSUBS executives have reassured senior

bankers that it will raise pay toattract and retain top staff after suf-fering a spate of defections from itsUS investment bank.

BA AGREES $89M CLAIM OVER ANAIRLINE CARGO CARTELBritish Airways has agreed to pay damages to cargo customers in theUnited States after admitting that ithad been part of a price-fixing cartel.

SYKES IN RETREAT AS OLIGARCHSSTRIKE FEAR INTO COPPER GIANTSir Richard Sykes offered to stepdown from the board of EurasianNatural Resources last week after a

boardroom dispute led to fears thatthe company’s Kazakh shareholders

would try to oust its independentdirectors.

8/6/2019 Cityam 2011-06-08


LIFE insurance asset buyer Resolution yesterday pledged to return £500mcash to shareholders over the next

year, starting with £250m of share buybacks that kick off today.

Resolution, which is restructuringlife insurance books bought fromFriends Provident, Axa and Bupa, willreturn the second £250m to share-holders in the first half of 2012 aftermaking £235m in capital synergiesthis year.

In a statement its board also ruledout further overseas acquisitions,

which it had suggested at previousmeetings but found shareholders

were largely opposed.“The UK life project remains on

track to deliver its targeted returns;and the board confirms thatResolution will be exclusively focusedon the UK life project,” it said.

Resolution has been sitting on acash pile of more than £1bn in recentmonths. Investors have been expect-

ing it to outline its plans to returnthat since February, when it said it

was highly unlikely to buy any moreUK life insurance policy books.

However, the firm warned the syn-ergies – a result of consolidating thethree life companies into one, moreefficient whole – are subject to bothregulatory and delivery approvals.

The £500m is on top of £400m of annual distributable cash it already intends to return. It also hopes torelease more cash as it clarifies itsSolvency II needs, which may require itto hold less capital than at present.

Resolution to

return £500m

to investors

THE HOSTILE bidder for Toronto bourse operator TMX Group is intalks with new members, as it looks

to derail an agreed merger with theLondon Stock Exchange.Desjardins Financial Group, GMP

Capital and Dundee Capital are closeto an agreement to join the Mapleconsortium of Candian banks andpension funds to bolster its $3.7bn(£2.4bn) hostile takeover bid for TMXGroup.

They are threatening to derail theLSE’s friendly $3.5bn bid.

LSE rival biddereyes new firms

Resolution was founded by insurance veteran Clive Cowdery Picture: REX

BYALISON LOCK

INSURANCE▲

CAPITAL MARKETS▲


ANALYSIS l Resolution

31 May23 May16 May9 May 7 Jun

p310

300

290

280

270

307.557 June

Cowdery’s buyout fund is dead manwalking but shares still worth a look WHEN Clive Cowdery returned with the second incarnation of Resolution, his life insurance con-solidation vehicle, he had ambi-tions to match the firm’s moniker.

To be frank, he hasn’t resolved very much and today’s £250m buy-

back suggests he doesn’t plan toeither. February’s “pause” on new acquisitions is now looking like afinal stop. The zombie fund labelcouldn’t be more apt.

Still, shareholders can comfortthemselves with the £500m of cashthat will be returned over the next12 months (a second tranche of £250m will come in the first half of 2012).

There could be more share buy-

backs or special dividends to come. Analysts at Barclays Capital reckonResolution will return a further£500m in 2012, with even moreshould Resolution start disposingof its assets.

Assuming that buybacks hit

£1.2bn and Resolution sellsLombard and Friends Provident,BarCap has a 418p upside valua-tion.

Cowdery might have given up onhis grand plan but the shares stillhaven’t had their day.

[email protected]

BOTTOMLINEAnalysis by David Crow

COMMERZBANK, Germany’s second

largest lender, has raised €5.3bn(£4.7bn) from a rights issue in order torepay state aid.

The transaction, priced at a 45 percent discount, is part of a series of stepsto repay the German government forthe cash it injected to support the bank during the financial crisis.

Commerzbank has now raised €11bnto repay the aid. Together with €3.3bnfrom excess regulatory capital, thelender will have paid €14.3bn towardsthe €18.2bn it owes the government.

Commerzbankraises €5.3bn

BANKING▲

8/6/2019 Cityam 2011-06-08


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8/6/2019 Cityam 2011-06-08


SHARES in stockbroker CharlesStanley jumped 7.3 per cent yester-day after it unveiled a 29 per centhike in profits in the year to March.

The wealth manager’s adjustedpre-tax profit rose to £17.7m from£13.7m in 2010, beating marketexpectations by about seven percent, while earnings per share of 28.4p rose from 21.2p in 2010.

However, it was hit with a £2.6mlevy from the Financial ServicesCompensation Scheme to compen-sate investors for losses incurred when investment firms fail – mostnotably the collapse of financialproduct provider Keydata in 2009.

Its chairman Sir David Howardattacked the “unfairness” of thescheme in a statement, and calledfor better regulation of misbehavingfirms and the products they sell.

“These appear to be rogue busi-nesses, operating in areas of theindustry unrelated to us, marketingproducts or services that shouldhave been stopped at inception,” hesaid.

“We join with the many compa-nies, professional bodies and trade

associations that are calling for ahigh-level enquiry into how such athing, on such a scale, could possibly have been allowed to happen.”

However, he praised the broker’sperformance and outlined an opti-mistic outlook. “The future remainsas uncertain as ever. But we are wellplaced to move forward. So my guarded feeling of confidence aboutthe outlook remains undaunted,” hesaid.

Funds under management rose 13per cent to £14.5bn, from £12.8bn inMarch 2010, while fee and commis-sion income rose 21 per cent to£50m from £41.4m, as investmentmanagement fees increased by 18.9per cent to £27m.

Boss of Charles

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BYALISON LOCK

FINANCIAL SERVICES▲

MARK Field, the MP forthe Cities of Londonand Westminster,has thrown his weight behind ourcampaign to allow anew developmenton the Broadgateestate.

Field, whose constituency is home

to the 1980s development, said

English Heritage was wrong to recom-mend the site for a Grade II* listinglast week.

If culture secretary Jeremy Hunt decides tofollow the advice of English Heritage andprotects the estate,then investment bank

UBS will have to aban-don plans to build a new

£340m headquarters on the site of

two buildings earmarked for demoli-

tion.“I don’t think it makes sense to listthe Broadgate site. Great though it was, it is now 25 years old and weneed to show London is open for busi-ness,” Field told City AM.

Field stressed that planning deci-sions were “rightly a matter for thelocal authority”, in this case the City of London, which has approved plansfor a new 700,000 square foot build-ing to house UBS.

City MP throws his weightbehind Broadgate campaign


ANALYSIS l Charles Stanley


p 341.757 June

340

330

320

310

300

HSBC said it has agreed to pay $62.5m (£38m) to settle a classaction brought against it in theUnited States over its role in provid-ing administrative services to a fundthat placed cash with Wall Streetswindler Bernard Madoff.

The action was brought by

investors in Thema International

Fund, which transferred a net$312m to Madoff, the bank said yes-terday.

Madoff is serving a 150-year prisonsentence after pleading guilty inMarch 2009 to orchestrating what isconsidered to be the biggest Ponzischeme in history.

HSBC said it continued to “vigor-ously” defend itself in other Madoff-related proceedings brought against

it and its subsidiaries.

BYHARRY BANKS

FINANCIAL SERVICES▲

HSBS settle US classaction over Madoff

Mark Field MP said the Broadgate site should not get Grade II* listed status

BYALISON LOCK

BROADGATE CAMPAIGN▲

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8/6/2019 Cityam 2011-06-08


GOVERMENTGIVES ARK

FUNDRAISER£1M BOOST TOMORROW night’s Ark hedge fund galahas moved to the centre of the politicalagenda, after the government agreed tomatch private donations to the tune of £1m for the charity’s vaccination pro-gramme in Zambia.

Led by development secretary Andrew Mitchell, the pledge is part of the govern-ment’s commitment to increasingBritish taxpayer contributions to the UN- backed Global Alliance for Vaccines andImmunisations – the body set up by Microsoft founder Bill Gates – ahead of GAVI’s international conference startingin London next Friday.

“This is a great financial boost and a

hugely significant endorsement,” said aspokesperson for Ark, which has commit-ted $5.5m over three years to vaccinating160,000 infants in Zambia against diar-rhoea caused by Rotavirus. The virus killsmore children under five in Africa than AIDS, malaria and measles combined.

Guests who bid for the auction lot to buy vaccines – one of 18 charity and luxu-ry lots on the night – will each contribute£3,000. This sum was previously enoughto immunise 100 children, but will now stretch further following this week’s

acterful London landmark.” Although it could be all change again,

following yesterday’s reports that thegroup’s minority shareholders are plot-ting a £1.74bn takeover for the chain, which would make the pub’s new land-lords the billionaire Spurs stakeholder JoeLewis with the Irish racing tycoons JPMcManus and John Magnier.

With that level of f irepower behind the venue, The Capitalist is sure The Engineer’sfamed wine list wouldn’t suffer too badly.

GONE WALKABOUTHEAD to Hyde Park on 18 June to supportthe London Walkabout, a 5k loop startingfrom Hyde Park undertaken by senior bankers to raise funds to buy wheel-

chairs for the developing world. The event is organised by former

Goldmans banker CarolinaGonzalez-Bunster (left) who set up The Walkabout Foundation whenher brother was paralysed in a caraccident in 1994. Email london- [email protected] for more details.

announcement by GlaxoSmithKline andMerck & Co that they will lower theirRotavirus vaccine prices.

So a f lying start for this year’s fundrais-ing efforts. Ark told The Capitalist that it will be happy if tomorrow’s gala raises “in

the low double-digit millions” for itsinternational projects. But the boost fromthe government has given it the best pos-sible chance of beating 2010’s £14.1m,troubled economic climate or not.

TIME AT THE BARCLIENT meetings may never be the sameagain for Tim Beale, litigation partner atSJ Berwin, as his favourite gastropub, TheEngineer in Primrose Hill, is fighting tosave itself from reoccupation by its land-

lord Mitchells & Butlers.“It’s almost home from home,” Beale

told The Capitalist , who said he will stopentertaining clients at the pub if theFTSE 250 firm takes back the lease inOctober from current lettee Eddie Francis,

because he fears “the extraordinary levelof detail and care” won’t be replicated by the corporate chain.

Over to Mitchells & Butlers, which insists it will continuerunning the venue as “aunique, warm and welcomingcommunity pub”. “We have nointention of converting TheEngineer into any sort of brand-ed operation,” said a spokesper-son. “It will continue as adistinctive, individual and char-

Guests at tomorrow’s Ark gala can bid £3,000 to support the Rotavirus vaccination programme

Last orders: The Engineer in Primrose Hill

The Ark galahas beengiven a £1m

boost by thegovernment,which willmatch privatedonations inthe auction

The Capitalist12 CITYA.M. 8 JUNE 2011

EDITED BY

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

8/6/2019 Cityam 2011-06-08


8/6/2019 Cityam 2011-06-08



NEWS | IN BRIEF

HTC sees May profits doubleTaiwanese smartphone maker HTC saidyesterday sales for May reached £860m,more than double the same month a yearearlier. The monthly sales compared with£400m a year ago and £820m in the

previous month. The handset manufac-turer has seen its sales rocket since itstarted to predominantly produce hand-sets for Google’s Android mobile operat-ing system.

Ofcom 4G plan worries phone firmEverything Everywhere has raised freshconcerns over 4G spectrum auction plansproposed by Ofcom. The communicationswatchdog has set strict limits on theamount of 4G spectrum –used to power

next generation mobile internet – eachplayer can buy, partly in a bid to protectthe UK’s smallest operator 3. EverythingEverywhere is worried proposals couldbenefit its rivals.

Santander still failing to satisfy its customers

A T the start of the year welooked at how Santander’sBrandIndex scores had nose-dived during 2010 taking it

from competing with HSBC as the best perceived of the big banks to

competing with RBS as the worst per-ceived.

We saw that this decline was cus-tomer led (the biggest hit had beenon recommendation) and from

TellYouGov data we could see thatpeople were spontaneously tweeting,emailing etc every day to let us know how poor the bank’s customer serv-ice was.

We said that improvements wereneeded to reverse this decline and,approaching the mid-point of 2011, itis a good time to take a look at how they’ve done.

Since the start of the yearSantander’s recommendation scores

have varied in a range between -6 and-13 (currently standing at -11) withthe overall index (a combined scorefrom six different perception meas-ures) even steadier, never going high-

er than -5 or lower than -8 (it iscurrently -8).

DECLINE HALTED BUT NO REBOUNDSo there is some good news in onerespect; the slow but steady declinecertainly seems to have been halted but there is, as yet, no sign of arebound.

With a recommendation score 17points below HSBC and an indexscore 14 points below there is a long

way to go before they get back to where they were 15 months ago inthe spring of 2010.

Poor service comments still domi-nate on TellYouGov – 86 of the last

100 comments have been negative –

and while that remains the case,Santander is likely to continue to beperceived as one of the worst ratherthan one of the best banks.

Stephan Shakespeare is chief executive of

YouGov

BRANDINDEX

STEPHAN SHAKESPEARE

ANALYSIS l Banks' recommendation score

10.0

5.0

0.0

-5.0

-10.0

-15.0

-20.0

1 Jan 2010 1 Jan 2011 1 Jun 2011

15.0

Royal Bank of Scotland

Santander

HSBC

ANALYSIS l Banks' Brand Index score

10.0

5.0

0.0

-5.0

-10.0

-15.0

-20.0

-25.0

1 Jan 2010 1 Jan 2011 1 Jun 2011

15.0

Royal Bank of Scotland

Santander

HSBC

8/6/2019 Cityam 2011-06-08


8/6/2019 Cityam 2011-06-08



Apple strengthens its grip on music

Sony unveils new console andapologises for elephant in room

THE other big announcementfrom LA was from Sony, whichfinally released details of its new portable console.

After issuing a grovelling apolo-gy to its users over the security breach that brought itsPlayStation Network (PSN) to itsknees, Sony showed off the Vita,calling it its biggest release sincethe PlayStation 3 five years ago.

The console, which has a fiveinch touch-screen display, will

allow users to compete over the

internet against both fellow Vitausers and PlayStation 3 gamers.

It is expected in the UK sometime before Christmas and can bepre-ordered for £230 for the wi-fionly version, and £280 if you wantthe optional 3G connectivity.

Sony will need the Vita toinstantly perform after a dreadful year that has rocked its reputation both inside and out of the gamingcommunity. Priced higher than itsrival the Nintendo 3DS, which went on sale earlier this year, it will certainly have its work cut

out.

TECHNOLOGY▲

T

HAT Apple was ready to launcha cloud-based music service has

been the worst-kept secret sincea certain Welsh footballer triedto keep his name out of the newspa-pers.

Exactly what Apple’s latest venturemeans for the industry, however, isonly just becoming clear. Steve Jobs’insistence on returning from medicalleave to show it off on Monday showsthat the Cupertino-based firm sees

this as more than just a pumped-upsoftware update.

While the free version of the cloudservice will offer a useful syncing andstoring solution, the iTunes tie-in is where it gets interesting.

Anything downloaded from theiTunes Store will be made availableacross all your devices for free. But for$25 a year, iTunes Match will takeevery song from your iTunes library –including those ripped from your CD

collection and any that may have fall-en off the back of a virtual lorry – and

correlate them with a version storedon its servers. You will then be able todownload them onto youriPhone/iPad/Mac/PC without spend-ing hours making the transfer. Anything not included in Apple’s18m-strong library will be uploadedseparately. Altogether Apple will let you stash 20,000 songs in its cloud forthe annual fee.

Apple has paid out $100m to themajor record labels to get the go-

ahead for the service, which smellslike a pay-off for allowing potentially illegally downloaded content intothe cloud. What it gets in return,aside from the subscription fees, is yet another reason for customers toremain inside the Apple eco-sys-tem – and shell out for more shiny hardware. Updates to its mobile plat-form that allow you to manage yourmusic through your iPhone also weaken the tie to a “mother ship”computer, giving you one less reasonto buy a Windows PC.

So the iCloud will help continuethe slow erosion of Microsoft’s mar-ket share. But it could also spell trou- ble for rival cloud services including Amazon’s Cloud Drive andGoogle’s Music Beta. While both arecheaper than Apple’s offering, they do not have the same complimenta-ry hardware – in short, if you

already own an iPhone or iPad it’s ano-brainer.

Spotify will breathe a tentativesigh of relief that Apple did notrelease a full music subscriptionservice, as some predicted.

What Apple has done is bringiTunes further into the centre of your musical life. It also makes asubscription service more likely tostick, if and when Apple decides tolaunch one.

But iCloud is essentially another reason to buy firm’s hardware, says Steve Dinneen

BIG NEWS FROM THE E3 GAMES EVENT

THE highlight of yesterday’s E3gaming showcase event in Los

Angeles was the resumption of the console wars, with

Nintendo unveiling the follow-up toits blockbuster Wii.

When the W ii launched in 2006Nintendo said it would change theface of gaming. It did, drawing in a whole new demographic andknock ing Nintendo out of a decade-long rut. The Wii U hopes to contin-ue this trend. At first glance, thetablet-like, motion-sensing con-troller is frankly baffling. Featuringa whopping 6.2 inch touch-screen it looks like a consolein its own right ( which itcan be, with some games,and apps from theNintendo store, playableon the unit alone). Itcan also be combined with the traditionalm o t i o n - s e n s i n g

Wiimote controller for multi-playergames.

Although technical specs (as wellas a launch date) were thin on theground, Nintendo confirmed it willanswer one of the ma jor criticismsof its predecessor and offer HDgraphics. T he innovative consolecertainly looks like a risk – but with Apple confirmed as a majorforce in the gaming industry, and both Microsoft’s Xbox and Sony’sPlayStation 3 eroding its marketshare, the Wii U might just be worth it.

iTunes Match ($25)For $25 a year, iTunes Match willtake every song f rom your iTuneslibrary and match it up with ahigh quality version stored on

Apple’s servers. This evenincludes songs downloaded fromsites not verified by Apple (readLimeWire, IsoHunt et al). You canthen download these songs ontoyour iPhone, iPad etc, makingmanaging your music far easier.The $25 allows you to store up to20,000 songs in the cloud.

8/6/2019 Cityam 2011-06-08


BUSINESS travel demand is holdingup better than increasingly price-sensitive leisure travel, according tothe chief economist for theInternational Airport Travel Association (IATA).

IATA, which accounts for ninety-three per cent of global air traffic, isforecasting annual growth in rev-enues this year of around eight percent to $600bn (£366bn).

Sparking confidence in renewedeconomic recovery, its chief econo-mist Brian Pearce said yesterday that airlines expect renewedgrowth in air cargo demand in thesecond half of this year, as move-

ments of capital goods and high- value components have started topick up.

Chinese domestic traffic, oftenregarded as a barometer of thecountry’s growth, has dipped tem-porarily as the authorities moved tohead off inflation.

But Pearce said that aviation traf-fic would return to a path of f struc-tural growth and that the aviationindustry outlook in Asia, excluding Japan, remained positive.

BOEING vowed yesterday to defend itssuccessful 777 wide-body aircraft andsignalled it feels under no immediatepressure to respond to a reportedchallenge from European rival Airbus.

Industry sources revealed onMonday that Airbus planned to placea bigger engine on one variant of its

future A350 plane in a bid to compete with Boeing’s 365-seat mini-jumbo.

But Jim Albaugh, head of Boeing’scommercial planes unit, yesterday expressed no concerns over thealleged competition from Airbus: “Wehave time to analyse the situationand at some point in time we’ll doeither a derivative or a new plane tomake sure we secure what I’ll call thehigh ground in the markets weserve,” he said.

Business traveldemand hold

up, says IATA

Boeing says it will defendthe supremacy of its 777

Boeing’s Jim Albaugh said there was “no pressure” to make an Airbus rival Picture: REUTERS

TOURISM▲

NewsCITYA.M. 8 JUNE 2011

BY SCARLETT ARCHER

AVIATION▲

17

iCloud (free)The free version of the servicewill sync information fromsources including your con-tacts, calendar, email anddownloaded apps across up to10 authorised devices.Anything downloaded from theiTunes Store will be availableacross all your devices.

l NEWS FROM IATA AIRLINE INDUSTRY CONFERENCE

8/6/2019 Cityam 2011-06-08


FOOD prices at UK stores rose againlast month, the British RetailConsortium (BRC) revealed today.

Food costs were 4.9 per cent higherthan in May 2010, up from April’sannualised food inflation rate of 4.7per cent.

Soaring prices of fresh foods werethe main driver, with year-by-yearinflation jumping to 4.2 per cent,from April’s rate of 3.3 per cent.

Fresh food was half a percentage

point more expensive than in April.“Recent volatility in the cost of key

commodities, linked to dry weatherand global demand, is now workingthrough to the shop price of somefood,” explained Stephen Robertsonof the BRC.

Corn and wheat are up 112 per centand 72 per cent respectively com-pared to the same time last year, theBRC report said.

“Rising gas and electricity pricesare pushing up costs at every stage of the supply chain,” Robertson added.

Price pressures across the economy,combined with the squeeze of hightaxes and below-inflation wage rises,are actually forcing some other shopprices down, the BRC has found.

Non-food sales slipped 0.2 per centin May compared to April, just 0.8 percent above last year’s level. Overall,

shop prices were 2.3 per cent higherthan last year, down from 2.5 per centin April.

The BRC will today launch a vigor-ous defence of large retailers. Bigstores “bring the footfall so desperate-ly needed” to high streets, it will say.

Commoditiesstill drivingup food costs

HOUSE prices rose just 0.1 per cent inMay, the latest Halifax index revealed yesterday, barely recovering from asharp 1.4 per cent drop in April.

The underlying decline in prices was shown by a 1.2 per cent fall in thethree-monthly measure, which ironsout some of the monthly volatility inthe figures.

Prices in the three months to May were 4.2 per cent lower than at thesame time last year.

“Low earnings growth, higher taxesand relatively high inflation are all

putting pressure on householdfinances,” said Halifax economistMartin Ellis.

“These factors are probably con-straining housing demand and apply-ing some downward pressure onprices.”

The number of houses sold in theopening four months of the year wasdown five per cent compared to last year, according to official data listedin the report.

However, there are “tentative signsof an improvement in activity”,Halifax said.

Companies hit the brakeson recruitment in May

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PERMANENT employment in the UK grew for the 22nd month in a row inMay, yet the rate of jobs growthslowed to its weakest level sinceOctober last year, a report revealedtoday.

Temporary jobs continued to rise, yet at a remarkably sluggish rate. Thepurchasing managers’ index (PMI) fellto 52.4 for temporary roles, from 56.6in April, and 2011’s peak of 61.5.

Scores above the no-change mark of 50 signal growth.

Some of the drop was attributed to April’s late bank holidays, whichdelayed recruitment procedures.

Yet fears for the economy are tem-pering the drive for new recruits, thereport said.

“The latest figures are worrying – because they reveal a marked slow-down of the UK jobs market,” saidBernard Brown of KPMG, which com-piled the data along with Markit.

“We’ll need to see whether this is atrend or a blip,” Brown added.“Employers across all sectors are becoming more cautious about hir-ing new staff.”

Growth in overall job vacanciesslowed to a five-month low of 57.7 inthe index, down from a PMI score of 59.3 in April.

UK house prices indownward trend

BY JULIAN HARRIS

RETAIL▲

RENT hikes in London have begun toslow, according to a Homelet indexreleased yesterday.

Rented accommodation in the cap-ital cost 0.42 per cent more in May than April, yet this was the slowestrate of growth seen this year.

Demand is being dented by highinflation, particularly in areas such asthe north west, the report said. In theface of rising price pressures many young people are choosing to stay inparents’ accommodation, promptinglandlords to cut rents, the report said.

London’s risinghousing rentsbegin to slow

HOUSING▲

HOUSING▲

EMPLOYMENT▲


NEWS | IN BRIEF

Rise in UK’s foreign acquisitionsBritish companies boosted their acquisi-tions abroad in the first three months of the year, official data showed yesterday.The total value of acquisitions jumped to£18.3bn in the first quarter, from just£3.8bn in the last quarter of 2010, hit-ting the highest reported value for out-

ward investment since late 2007. Totalacquisitions of UK companies from over-seas fell slightly to £6.4bn, from £7bn inthe fourth quarter of 2010. Spending byUK companies on intra-UK acquisitionsfell to £1.2bn, from £6.3bn in the previ-ous quarter.

Uptick in Eurozone’s retail salesHigh street sales across the Eurozonestunned economists yesterday, soaringby 0.9 per cent in April, compared withMarch. However, the spike merely paredthe sharp 0.9 per cent monthly drop insales recorded in March. Compared tothe same time last year, sales were up1.1 per cent in April. Across the widerEU area, retail sales were up 1.9 per centannualised.

German factory orders recoverGerman factory orders climbed 2.8 percent in April compared to the previous

month, reversing the 2.7 per cent dropseen in March. “Assuming the currentreading persists in May to June, factoryorders would be 1.5 per cent above thetheir quarter four [2010] level, providinga favourable indication for productionoutput,” commented Barclays Capital.

HAVE YOU NOTICED AN INCREASE IN FOOD PRICES?Interviews by By Phoebe Torrance and Shiba Babamiri

“I haven’t really noticed a largeincrease because everything in theCity has always been expensive.

I try to use cheaper brands which are just as good as expensive ones, ratherthan cutting down.”

DARREN LOCK | KIRKLAND AND ELLIS

“Yes, I have found the price hasincreased a lot, but I do tend to eatout a lot. I often try to buy just what isneeded rather than spending moneyon luxury items.”

“The price is always fluctuating, Ihave already switched to supermar-ket brands, which are cheaper, butthere is always a catch with the spe-cial offers which draw you in andmake you spend more.”

JULIE FABIAN | QBE INSURANCE

ELAINE NUTTALL | BLACKMORE BORLEY

8/6/2019 Cityam 2011-06-08



UTILITY firm Scottish Power will hikeits domestic power and gas tariffsfrom 1 August in response to rising

wholesale energy prices, it announced yesterday, becoming the first of thepower companies set to raise house-hold bills this summer.

Gas bills for Scottish Power cus-tomers will increase by an average of 19 per cent, while power bills will be10 per cent more expensive, a rise that

will affect 2.4m UK households.“Prices for gas and electricity have

increased significantly since the endof last year and continuing unrest inglobal energy markets means futureprices are volatile,” said ScottishPower’s retail director Raymond Jack.

He said costly government pro-grammes for meeting environmentaland social targets and high transmis-sion expenses were also reasons forthe tariff rises.

The utility’s 70,000 most vulnerablecustomers can receive a discount on

bills through a dedicated scheme. The company also said it was invest-

ing £4bn between 2010 and 2012 intorenewable energy, smart grid technol-ogy and upgrading power networks.

MPs and energy regulator Ofgemhave criticised Britain’s six largest util-ities for passing on wholesale pricegains to customers more quickly thanfalling prices.

Richard Lloyd, executive director of Which?, said: “These price hikes fromScottish Power will be a shock for itsmillions of customers already strug-gling with the rising cost of living,and warnings from other supplierssuggest that more bad news is tocome.

“This is yet another example of theBig Six blaming the wholesale energy market for increases to domestic cus-tomers’ bills, but energy companieshave a lot of work to do to convinceconsumers that energy prices are fair.”

Consumer Focus head of energy Audrey Gallacher added: “Companieshave been softening customers up forprice rises for months but customers

will shocked at the scale of this rise.“Every household in the country

will now be bracing themselves forimpact.”

NEWSPAPER and magazine distribu-tor Smiths News yesterday announced it will buy leading aca-demic book supplier DawsonHoldings for £20m in a cash deal toexpand its book business.

The deal comes two years afterSmiths News entered into the books

business through the acquisition of Bertrams, and it now aims to

expand the scope of its activities with access to Dawson’s academic

libraries and e-book platform. The academic market is now

worth £70m per year with Dawsonleading the market share with 33per cent. Smiths News currently gets 7.5 per cent of its revenue fromthe books business.

The deal is expected to add £4.5mto Smiths’ earnings before tax,depreciation and amortisation inits first financial year.

Chief executive Mark Cashmoresaid the acquisition represents “an

excellent opportunity” to strength-en one of their core businesses with

the transaction creating immediate value for their shareholders whilstcontinuing to focus on long termstrategy to diversify revenues andprofits.

The deal is expected to be com-pleted by early September and thecompany hope that the scale of itscombined entity will help with costsavings of £3.8m by the end of financial year 2014.

Smiths News, which bought 20Dawson News depots from Dawson

Holdings in 2009, said it would pay 17.72p for each share.

Smiths News buys Dawson Holdingsto increase presence in books market

ACTELION, Europe’s largest biotechcompany, changed its managementstructure and appointed a chief oper-ating officer yesterday in a move thatanswered demands from its activistinvestor Elliott Advisors.

Actelion promoted its head of busi-ness strategy and operations OttoSchwarz to COO, allowing chief execu-tive Jean-Paul Clozel to focus more onstrategic matters.

The company saw off a challengefrom hedge fund Elliott at its annual

meeting last month, but analysts saidthe top-level changes were a sign it wasreacting to shareholder pressure.

Elliott, Actelion’s largest sharehold-er, had urged the Swiss biotech groupto consider seeking a buyer after astring of product setbacks and accusedit of pursuing a high-risk strategy thathurt shareholder value.

Elliott also called on Clozel – a for-mer Roche scientist who founded

Actelion in 1997 – to step down fromthe board on governance grounds,

arguing he had too many top man-agers reporting directly to him.

Actelion shakes up boardin a bid to appease ElliottHEALTHCARE

▲

Scot Powerhikes its gasbills by 19pcBYHARRY BANKS

ENERGY▲

BY SHIBA BABAMIRI

PUBLISHING▲

NEWS | IN BRIEF

Pennon buys Storm RecyclingWaste and sewerage group Pennon hasbought Storm Recycling for £1.7m, in a

bid to expand its waste managementservices. Storm specialises in the recy-cling of cardboard and plastics, and runsa depot in Cheshire that handles around20,000 to 25,000 tonnes of recycling ayear. The acquisition was made byPennon’s subsidiary Viridor WasteManagement, “in line with the Group’sstrategy of expanding its waste man-agement activities, particularly in therecycling sector”, the group said.

Profits and sales drop at FindelHome shopping and education suppliesgroup Findel reported a fall in profitsyesterday. The dynamic multi channelretailer saw a 2.6 per cent drop in salesto £532.6m from £547m in the year to 1April. Findel was hit by the discovery of accounting irregularities at the educa-tion supplies division followed by anemergency debt refinancing in July,despite a fall in profits Findel has said itwas confident it had established asecure platform for future growth.

St-Gobain plans to list VeralliaFrance’s Saint-Gobain plans to bravetough conditions in the European mar-ket for initial public offerings and list itsglass packaging unit in order to focus onhome and construction products. Theglassmaker said it would sell 40 percent of Verallia to investors, raising up to €958m (£855m). It could raise theamount to 46 per cent if demand wasstrong enough, leading to proceeds of asmuch as €1.1bn. Verallia, which makesbottles and jars for food and drink prod-ucts, said it would extend its businessinto emerging markets and look atacquisitions there as it grapples withslow recovery in its European markets.

OIL rig services group Lamprell hassaid that its performance so far this year has matched management expec-tations, following a strong perform-ance in 2010 boosted by high oil prices.

The company, which builds mobile jack-up rigs, said it had also seen aturnaround in the new-build marketsince the spill at BP’s Macondo oil rigin April last year.

“We continue to see evidence of improvements in our operating mar-kets and our bid activity remains at ahistorically high level. We are experi-

encing renewed activity in the rigrefurbishment and upgrade market,

representing a strong improvementfrom the lower levels of expenditureexperienced in the second half of 2010,” said chairman Jonathan Silver.

At the end of April, Lamprell’s order book was around £567m, mostly fromits engineering, construction and pro-curement projects.

In May, Lamprell made an offer forUnited Arab Emirates-based MaritimeIndustrial Services (MIS) from itsNorwegian owners for £208.1m, in amove to broaden its engineeringcapacity.

Lamprell sees improvingmarket for its oil servicesENERGY

▲BP yesterday insisted that it had noplans to sell down its half share in

Russia’s third-largest oil producer TNK-BP, denying comments fromsources close to its partners that itthreatened such a move.

The oil giant said its focus in Russia was on developing its TNK-BP ven-ture, and denied it was preparing toreduce its interest.

“BP has taken no decision to sellany of its shareholding in TNK-BP, andthere is no current intention to doso,” a spokesman said.

Sources close to AAR, a group of Soviet-born billionaires that owns 50

per cent of TNK-BP, said BP executiveshad indicated on Monday that it wasready to sell down its stake.

AAR interpreted the comments asa possible negotiating tactic to

advance BP’s hopes for a tie-up withKremlin-controlled Rosneft, thesources said.

BP signed a £10bn share swap and Arctic exploration deal with Rosneftin January, but AAR blocked the dealin court on the basis the TNK-BPshareholder agreement obliged BP touse TNK-BP as its primary vehicle forinvestment in Russia.

The deal was supposed to mark aturning point for BP after the Gulf of Mexico oil spill in April 2010.

Sources close to BP and AAR said

that as part of the talks to allow theRosneft tie-up to proceed, BP lastmonth told AAR it could sell part of its stake in TNK-BP to Rosneft if AAR did not lift its opposition to the deal.

Such a move could negate the TNK-BP shareholder agreement, thusremoving a bar on BP partnering

with Rosneft, sources close to bothsides said.

AAR fears that if Rosneft gained afoothold in TNK-BP, AAR’s effectivecontrol of the company would bechallenged.

“AAR would be deeply, deeply unhappy with it,” one source close tothe billionaires said, adding that if BPdid this, AAR could revive its litiga-tion against the Rosneft tie-in.

BP denies plan to sell TNK-BPBYHARRY BANKS

ENERGY▲

THE Japanese government said yester-day that it will set up an independentnuclear regulatory agency, breakingthe widely criticised ties between the

Japanese utility industry and officialsoverseeing its safety.

In a report that will be presented tothe International Atomic Energy

Agency, the government calls for over-hauls in how Japan operates its

nuclear plants. Japan has also been criticised for not

disclosing key information about theplant and the amount of radiationthat successive explosions produced.

The report said that there is a possi- bility that melted fuel has penetratedthe reactor pressure vessels in threeunits and dropped into the primary containment vessel, after the nuclearsafety agency said its estimate of theradiation released so far during the cri-sis was double its earlier estimate.

Japan vows to overhaulnuclear safety reporting

President Naoto Kan has submitted a report to the IAEA Picture: REUTERS

BY PHOEBE TORRANCE

ENERGY▲

8/6/2019 Cityam 2011-06-08



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BRITAIN’S top share indexclosed marginally higher yes-terday as UK insurerResolution’s bumper cash

return helped boost insurance-relat-ed firms, while integrated oils

weighed on the downside. The market reacted positively to

Resolution’s commitment to return£500m to investors.

“One would encourage share buybacks in a modest way because if acompany is cancelling its shares and

you remain a shareholder you would benefit from the earningsaccretion,” said Paul Mumford, whomanages a £25m fund at Cavendish

Asset Management.

Office space supplier Regus said it would withdraw its £60m offer forMWB Business Exchange if the com-pany’s majority shareholder andrival bidder, MWB Group Holdings,did not engage in talks by 13 June.

The FTSE 100 closed up 1.49 pointsat 5,864.65, having edged 0.1 percent higher on Monday. The indexfell 1.4 per cent last week, because of

worries over Europe’s debt prob-lems.

Resolution cash returngives boost to the FTSE

Bernanke’s bearish talkextends US losing streak

US stocks extended a losingstreak for a fifth day on yester-day on mounting concernsabout the economy after bear-

ish comments from Federal ReserveChairman Ben Bernanke.

The market, which started off on apositive note after the S&P 500 hit atwo-month low in the previous ses-sion, reversed course to turn negativeafter Bernanke started speaking. Heacknowledged a slowdown in the

economy, but offered no suggestionthe central bank is considering any

further monetary stimulus to sup-port growth.

Bernanke also issued a stern warn-ing to lawmakers in Washington whoare considering aggressive budgetcuts, saying they have the potential toderail the economic recovery.

A batch of weak economic datarecently, especially in the job market,has pushed major indexes below theirsupport levels. The S&P 500 is down4.2 per cent from a month ago.

The Dow Jones industrial averageslipped 19.15 points, or 0.16 per cent,to end at 12,070.81. The Standard &Poor’s 500 Index declined 1.23 points,or 0.10 per cent, to 1,284.94. TheNasdaq Composite Index shed 1.00point, or 0.04 per cent, to finish at2,701.56.

Volume was thin with a below-aver-age 6.59bn shares traded.

ANALYSIS l FTSE 100

6,100

5,900

5,700


5,864.657 June

THENEW YORKREPORT

THELONDONREPORT

BEST OF THE BROKERS

ANALYSIS l HSBC

1Mar 1Apr 1May 1Jun

p623.20

7 Jun670

660

650

640

630

620

HSBCGoldman Sachs rates the bank “buy”with a target price of 920p. The bro-ker has raised its earnings forecastsfor 2011-13 by up to seven per cent,arguing the market underestimatesHSBC’s shift to growth markets.

ANALYSIS l Weir Group

1Mar 1Apr 1May 1Jun

p2,000.00

7 Jun2,000

1,900

1,800

1,700

1,600

WEIR GROUPJP Morgan rates the engineer “over-weight” and has raised its targetprice to 2150p. The broker has raisedits earnings per share forecast bytwo per cent, expecting growth inWeir’s service pump business.

ANALYSIS l William Hill

1Mar 1Apr 1May 1Jun

p

217.007 Jun220

210

200

190

180

WILLIAM HILLCiti rates the bookmakers a “buy”and has raised its target price from230p to 260p. The broker prefers thefirm to rival Labrokes, with WilliamHill continuing to gain market shareon the back of online sales growth.

Dolphin Capital InvestorsThe emerging markets resorts investorhas appointed professor ChristopherPissarides to the board as an inde-pendent non-executive director, asNicholas Moy, independent non-execu-tive director of Dolphin, resigns.

Pissarides is a professor of economicsat the London School of Economics.

Merlin EntertainmentsThe world’s second-largest visitorattraction operator has appointedGerry Murphy as a non-executivedirector of the company. Murphy is

currently a senior managing director inBlackstone’s corporate private equitygroup and chairman of The BlackstoneGroup International Partners, which isa 34 per cent shareholder in Merlin.

Landmark

The boutique serviced offices providerhas appointed Kirstin Donoghue asclient liaison manager for its flagshipserviced office centre in Heron Toweron Bishopsgate, prior to its openingnext month. Kirstin currently works asclient liaison manager at Landmark’s125 Old Broad Street centre.

+44 (0)20 7092 0053morganmckinley.com

To appear in CITYMOVES please email your career updates and pictures to [email protected]

SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

KPMGDavid O’Hara hasbeen appointed as aprincipal investmentconsultant to leadKPMG’s newlyestablished Scottish

advisory team.O’Hara, who will bebased in Glasgow,

joins from HymansRobertson, where he provided invest-ment advice to a range of private andpublic UK pension schemes.

CITY MOVES | WHO’S SWITCHING JOBSEdited by Harriet Dennys

8/6/2019 Cityam 2011-06-08


21

Wealth Management | Foreign Exchange

Profitable carry trading

from a land down underAs central bank chiefssit on their hands, youcan make gains fromlow interest rates,writes Craig Drake

with it a drop in the gains available to acarry trade. But according to ChristopherBeauchamp, research analyst for IGGroup: “It looks like traders will be ableto continue benefiting from the carry trade for a while longer yet. Previously,markets had begun to expect a smalldegree of tightening in the US in thethird quarter, but last week’s run of baddata (especially the non-farm payrolls)has resulted in a shifting of opinion, withtightening in the fourth quarter now more likely.” Beauchamp added, “if datacontinues to disappoint then a delay inrate hikes until the first quarter of next year is not completely out of the ques-tion.”

NOT SO LOONIE HEDGING At the same time as benefiting from the

relative interest rates of the paired cur-rencies, it is prudent for traders to hedgetheir positions. Trading Australian dollar-dollar outright means that a trader isconstantly exposed to carry tradeunwinding.

According to George Tchetvertakov,Head of Research at Alpari UK, hedging atrade on the Aussie dollar with a dollar-Canadian dollar trade is prudent (seegraph, above). “Going long Aussie dollar-dollar could be complemented with anadditional trade designed to protect thetrader in case the dollar receives a strong bid at short notice, for example long dol-lar-Canadian dollar,” explains Tchetvertakov. “This leg would usually make a loss, but because Aussie dollar-dollar gain outweighs dollar-Canadiandollar loss, the strategy works.”

T

HE currency market’s attention has been focused on the announce-ments made by the US FederalReserve, the Bank of England and

the European Central Bank. But at thesame time, there are a large number of traders taking advantage of the policiesof other central banks, such as theReserve Bank of Australia (RBA), and theirrelatively high interest rates.

The RBA announced yesterday that it would be maintaining its current rates. The interest rate has been held at 4.75 percent since November last year, when theRBA raised rates by 25 points. With theannouncement, RBA governor GlennStevens said: “The current mildly restric-tive stance of monetary policy remainedappropriate.”

While this announcement knockedthe Australian dollar, it was neverthelessa boost to those taking advantage of carry trades, which involve borrowing incountries with low interest rates andinvesting in nations with high interestrates.

According to Angus Campbell, head of sales for London Capital Group: “The Australian dollar is a popular currency for carry trades. An investor who buys Australian dollar-dollar, for example,should attract a small interest paymenteach night as Australian base rates are at4.75 per cent, whereas the Fed has heldtheir base rate between 0 and 0.25 percent for a substantial length of time,hence the weakness in the US dollar inthe past couple of years.”

With the end of the Fed’s program of quantitative easing in sight, most hadexpected an increase in US rates, and

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ONCE AGAIN,THE ECB MAY

SURPRISE USBORIS SCHLOSSBERGDIRECTOR OF CURRENCY RESEARCH, GFT

IN THE movie Groundhog Day, Bill Murray wakesup each day only to find himself repeating theactivities of the day before. There is a bit of aGroundhog Day feel to the currency market this

week, as traders once again prepare for the monthlyEuropean Central Bank (ECB) press conference.Recall that last month I noted that the euro wouldlive or die by the pronouncements of ECB PresidentJean Claude Trichet – and indeed the unit tumblednearly 900 points off its highs at the start of May, inthe wake of Trichet’s dovish words.

This month, the market anticipates that the ECBwill turn decidedly more hawkish and Trichet willfinally signal a 25 basis point rate hike for July byusing the code word vigilance. Although the

Eurozone continues to be plagued by problems inthe periphery, the ECB’s monetary policy is gearedprimarily towards the core economies of Germanyand France. To that end, economic growth inGermany remains robust as unemployment declinedto the lowest level since the re-unification, whileretail sales led by strength in the core Europeaneconomies saw their sharpest rise in thirteenmonths. Meanwhile, inflation shows no signs of eas-ing, with PPI readings rising at a 6.7 per cent annu-al rate.

In short, there are many good reasons to believethat the ECB will pre-announce the tightening of monetary policy at this Thursday’s press conference(scheduled for 1.30pm London time). However,given the fragility of the situation in the peripheryand the slowdown in the most recent PMI reports,the ECB may decide to err on the side of cautionand hold off hiking rates until the autumn.Furthermore, a rate hike now would only exacer-bate the overvaluation of euro-dollar, pushing ittowards the $1.5000 level and making it more diffi-cult for the export-driven German economy tomaintain growth. If the ECB does surprise the mar-ket by remaining stationary, expect another sell off in euro-dollar. But, given the general weakness of the US economy, the correction this time aroundmay not be nearly as steep.

Shrimps and barbecues under-pin the Australian economy Picture: GETTY

ANALYSIS l AUDUSD with USDCAD hedge

31 May 1 Jun 2 Jun 5 Jun

1.5

1

0.5

0

-0.5

AUDUSD

USDCAD

8/6/2019 Cityam 2011-06-08


SINCE the financial crisis,excepting gold, the Swissie has

been the global reserve curren-cy of choice. After failed efforts

last year, the authorities are now sig-nalling that businesses will have toget used to exporting with a strongcurrency. So far, so successful.

Both the euro and dollar have been hitting historic lows against theSwissie, with the former dropping toSFr1.2052 last week and the latterdown to SFr0.8327 on Monday. Thedollar, which has also traditionally

been a safe haven, is no longerthought of as secure enough.Switzerland’s loose monetary policy and weak data, such as Friday’s USnon-farm payrolls figures, are under-mining its reputation.

Rishi Patel of Fair FX says:“Switzerland is a victim of its ownsuccess. From a global perspective it

has always outperformed. With con-trolled national debt, a balanced

budget and sustainable growth, theeconomy remains robust.” He adds:“With negative factors surroundingmany other major currencies andglobal economies, it is unlikely theposition of the Swiss franc willchange soon. The Eurozone periph-ery is not helping the situation.” Aslong as the Eurozone’s only solutionto the debt crisis is to prop up its rot-ten edges, the euro will continue totrade weakly against the Swissie.

Last month, Switzerland’s head of the federal department of economicaffairs, Johann Schneider-Ammann,told business leaders they will haveto “learn to live” with – and even“want to live” with – a strong franc.He has clearly learnt from last year’sSFr19.2bn loss, as Switzerland’s cen-tral bank failed to keep currency

appreciation in check by buyingfalling euros. Despite legitimate wor-ries about exporting with a strongcurrency, recent data shows thatthings are working. The Swiss econo-my grew annually 2.4 per cent in thefirst quarter, with exports up 5.7 percent. Also, the Swiss purchasingmanagers’ index rose in May to 59.2points from 58.4 points in April,

while retail sales in the same monthrose 7.5 per cent year-on-year.

Let’s hope Switzerland remainssuccessful with a strong currency.

The alternative model of competitivedevaluation, practised in the GreatDepression, benefits no country.

There is a cloud on the horizonthough: Swiss banks, and so its econ-omy, could be drowned by the conta-gion of a collapsing Eurozone. One

way or the other, in the 21st century,no Swiss family is an island.

Swissie will remain a

peerless safe haven

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Wealth Management | Foreign Exchange22 CITYA.M. 8 JUNE 2011

€1.4670-€1.4671.Ongoing concerns over the risks to

the global economy as a whole and per-haps more specifically the state of thedeficit in the US are continuing to pushdollar-Swiss franc to fresh record lows.The pair has been trading below parityfor just over six months now, but withthe world’s largest economy still strug-gling to gain traction, there’s no reasonto believe we’ll see a reversion any timesoon. Current IG Index price for dollar-

Swiss franc is SFr0.8333-SFr0.8335.The flurry of interest rate policy deci-sions from no less than nine centralbanks has raised event risk significantlyfor this week. The ECB is in prime focusas expectations for hikes gather momen-tum. All board members have beentelegraphing hawkish views but tighten-ing into a stressed periphery seems anobvious policy mistake. The Aussie dollar

has its own fair share of news flowand it seems to be a little morepositive than that of the euro.Reports from Australia over thenext couple of days are expected toshow gains in home loans and

employment. Add this to the ECBdecision and press conference

and the result should bea busy couple of daysfor the pair. On euro-Australian dollar,Alpari UK offers a

spread of Au$1.3702-Au$1.3703.

Philip Salter

A

FTER Jean-Claude Trichet sug-gested the euro was overvalued,

euro-dollar stalled yesterday. Theeuro remains sensitive to Greekdebt issues, and the periphery of Europeremains in the spotlight. It is unlikely inthe near team euro-dollar will make anattempt on the $1.49 May high. Tradersshould begin selling into euro strength fora medium term correction. FairFX quoteseuro-dollar at $1.4668-$1.4670.

Sterling is falling and is facing eightconsecutive poor trading daysagainst the euro. With concernsthat the austerity drive isn’tpushing growth as much as wewould like, this could mean ratesstick where they are for sometime. Poor UK retail sales figuresearlier this week haven’thelped the pound’scause, and withtraders buying intogilts, this could signalworse to come for

sterling. CapitalSpreads quotessterling-euro at

THE TIPSTERTRICHET’S TIP

FOR TRADERS

TRIPS EURO

As currencies compete to devalue, Switzerland has acceptedthat it cannot drive its franc down, writes Philip Salter

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CAXTON FXRICHARDDRIVEREven at these very lowsterling-euro levels, Iwould not like to be longof sterling. Sentimenttowards the UK econo-my has gone from bad

to worse after last week’s data showed growthis stalling. We can expect another poor quarterlyGDP figure, so a Bank of England rate rise thisyear looks very optimistic. The 0.5 per cent UKinterest rate will definitely be kept on holdtomorrow, particularly in the absence of therecently departed MPC hawk Andrew Sentance.I’d be long on euro. The ECB won’t raise rates

tomorrow, but as long as Trichet adopts his“strong vigilance” rhetoric, then the euro hasdecent upside potential. Investors were prettyunperturbed by last week’s downtick in monthlyEurozone inflation; a reflection of their confi-dence that the ECB will raise rates to 1.5 percent in July. To a large extent, a July rate rise ispriced in, but the euro will no doubt enjoy aboost from hawkish remarks from Trichet.With the worst of the Greek debt crisis seeming-ly behind us and a resolution in sight, euro-dollaris remarkably targeting the $1.50 level again. Isee sterling-euro heading down towards €1.11 bythe end of this week, and dipping below €1.10 bythe end of the month. The appetite of Asian sov-ereign buyers for the single currency seems insa-tiable and as the market shifts focus from thedebt crisis back to interest differentials, this isonly going to favour the euro.

IG INDEXDAVIDJONESInterest ratedecisions arepretty boringevents for mar-kets at themoment. Muchmore weight,particularly in

the UK, is being given to the minutesreleased a week or so after the meeting astraders pore over them to try and figure outif the balance towards monetary policy isshifting.The ECB decision is potentially the one thatcould add some volatility. Again, no change

is expected here but the central bank isexpected to give a clear signal that rateswill be going up once again next timearound in July. The challenge here is justhow much of this is already being factoredinto the price of euro-dollar as it is hardly asecret. Considering that the euro has ralliedby around 600 points against the dollar inthe last couple of weeks, maybe the strate-gy is to go for a contrarian play – the mar-ket is expecting a signal that rates will goup and is factoring it in; there is the poten-tial for a big disappointment and maybe theeuro has come far enough – the $1.4900area was a big barrier in early May.Once the decision is out of the way, it couldbe the catalyst for some euro selling tocome in, so placing a short sell with a sensi-ble stop loss may be an interesting trade.

FOREX.COMKATHLEENBROOKSThe markets have beenembracing the euro withgusto this week. Partlythis is a response to theweak US labour market

data for May, but it is also due to expectationsthat the ECB will signal a rate rise in July whenit meets on Thursday. The hawkish rhetoricfrom ECB members recently, including fromPresident Trichet himself, makes the use of thephrase “strong vigilance” likely in our opinion.The FX market is positioned for this, and euro-dollar has jumped six big figures in two weeks.If Trichet does utter these words then we maysee euro-dollar test $1.4900/50 – the highs

from early May – and a similar euro-sterling jump to £0.9000. However, when the marketseems as sure of itself as it does this week therisk is that it is wrong. If Trichet fails to deliverthe goods then this would be a dovish signaland we could see a sharp sell-off possibly backto the $1.4350 prior resistance zone. The ball isdefinitely in Trichet’s court so traders need to benimble.We expect the BoE to be another non-event andnot to have much impact on the pound. Interms of positioning, sterling is being movedaround by two external factors: firstly, wherethe dollar is going and secondly, what the eurois doing. We don’t expect this to change any-time soon, but we may see some broad-basedsterling weakness if the ECB signals a furthernormalisation of monetary policy next month,which would serve to highlight the Bank of England’s reluctance to adjust monetary policy.

ALPARI UKJAMES HUGHESThursday’s rate decisionscould be some of the mostimportant in recent months,as both economies havebeen stuck with their ownset of problems. Yesterday’snews that the IMF are

backing the UK government in their austeritymeasures will have been met with a sigh of relief from Mr Osborne and his staff. This willleave the BoE with little to do. However, theIMF support is based on the perception that theinflation rate will move closer to the bank’s 2 percent target in the near future. Something thathas been causing some interesting votes amongthe committee.

The ECB is in a much more aggressive moodwhen it comes to monetary policy and it seemsthat momentum is growing for yet another ratehike. The fear is that higher rates would mean agreater risk of the likes of Ireland and Portugalfalling the same way as Greece. Like any eco-nomic announcement that creates volatility,many will likely wait on the sidelines. The eurowill likely be the most volatile place after thenumbers. However, a lot will depend on Trichet’spress conference and whether the recent poorreadings have had a bearing on the ECB deci-sion. Equity markets will also be a little waryahead of any big numbers. We have alreadyseen a degree of calm this week ahead of thekey numbers today and tomorrow. However,should we get any surprises those who waitedwill be far better placed. Caution is definitely theway to play it when there is so much indecision.

Trichet’s words could lead to volatilityWith both the Bank of England and the European Central Bank annoucing their decision on ratestomorrow, we ask four foreign exchange experts for their views on how traders should be positioned

Wealth Management | Foreign Exchange 23CITYA.M. 8 JUNE 2011

FOREX ANALYST PICKS

FOREX STRATEGISTILYA SPIVAK

My pick: Long dollar-Canadian dollarExpertise: Global macroAverage time frame of trades: 1 week to 6 months

FOREX STRATEGISTJOEL KRUGER

My pick: Long dollar-Swiss francExpertise: Technical analysisAverage time frame of trades: 4 weeks

The latest sharp drop to fresh record lows into the SFr0.8300s hasbeen quite extreme, with the market now violently oversold and in des-

perate need of a major corrective rebound at a minimum. It is not toooften that daily, weekly and monthly charts are oversold at the sametime, and in our opinion, the very bearish price action warns that amaterial reversal is imminent. Position: long at SFr0.8350 for an openobjective; stop only on a daily close (10pm UK time) below SFr0.8240.

Dollar-Canadian dollar positioning has argued for gains since prices complet-ed a head and shoulders bottom chart pattern with a break above Ca$0.9667.Prices are pulling back from support-turned-resistance at Ca$0.9818 towardthe bottom of a rising channel set from the 2 May low at Ca$0.97, which Iexpect to offer a long entry opportunity to capitalise on risk aversion follow-ing the end of QE2. Dollar-loonie has a strong inverse correlation with theS&P 500 and a move lower in US shares ought to push the pair higher.

FOREX STRATEGISTJOHN KICKLIGHTER

My pick: Short Kiwi dollar-dollar, sterling-dollar and Swiss franc-yenExpertise: Fundamental analysis with risk managementAverage time frame of trades: 1 day to 1 week

Underlying fundamental themes are starting to kick in – notably riskaversion is very early in a swell. I’ll keep an eye on risk-sensitive pairsthrough the near-term (as well as expectations for US stimulus with-drawal and Greece issues); but they are individual considerations fornow. I’m short Kiwi dollar-dollar from $0.8070 with a 100 pip stop andfirst target. Sterling-dollar looks primed for a pivot break below $1.63and Swiss franc-yen on a congestion break to reversal below ¥95.25.

8/6/2019 Cityam 2011-06-08


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● ERICSSONTelecommunications giant Ericsson is listed on the Stockholmexchange. Its business segments include networks, profes-sional services and multimedia, as well as the joint venture

Sony Ericsson, which produces mobile phones, accessoriesand PC-cards. The company’s turnover is 806.5m Swedishkronor, according to figures from Nasdaq OMX.

● NOKIALast year, the mobile phone manufacturer Nokia, which isheadquartered in Finland, had a turnover of €604.5m, butlast week’s profit warning indicates the pressure it is current-ly under from competitors. With production and researchfacilities, as well as sales and marketing centres, around theworld, the company makes a wide range of mobile devicesoffering services including music, navigation and video.

● NOVO NORDISKNovo Nordisk is a global healthcare company with more than31,300 employees in 74 countries, 44 per cent of whom arebased in Denmark. Its main area of research is diabetestreatments. The company, which is listed in both Copenhagenand New York, has a turnover of 559.4m Danish kroner

according to the Nasdaq OMX statistics.

● HENNES & MAURITZ (H&M)The high street retailer H&M has an annual turnover of 560.7m Swedish kronor, according to Nasdaq OMX. Thecompany’s business concept is to provide customers withhigh value by offering fashion and quality at a low price. Itdoes not manufacture the clothes it sells. It buys them fromindependent suppliers located primarily in Asia and Europebefore selling them from stores that are rented rather thanowned by the company.

MAJOR NASDAQ OMX NORDIC LISTINGS

OMX Nordicshows warmgrowth in thesnow and ice

Wealth Management24 CITYA.M. 8 JUNE 2011

THE Nasdaq OMX Group is the

world’s largest exchange com-pany, listing 3,600 companieson exchanges in six different

continents.It incorporates four Scandinavian

stock exchanges, two of which are based in Stockholm, Sweden. Theother two are in Copenhagen inDenmark and Helsinki in Finland, while there are also Nasdaq OMXexchanges in Iceland, Tallinn, Rigaand Vilnius.

Well-known names listed on theScandinavian exchanges – known col-lectively as Nasdaq OMX Nordic –include telecoms giants Nokia andEricsson and Volvo, the car manufac-turer.

Perhaps unsurprisingly given allthe developments in the telecomsindustry, Nokia and Ericsson were themost heavily-traded companies acrossthe exchanges in the three countriesduring 2010.

Credit Suisse shares also changedhands a lot, probably due to the ongo-ing repercussions of the global finan-cial crisis.

These companies are far from theonly household names that can beaccessed via the Nasdaq OMX Nordic

exchanges, though.

Other notable players include theSwedish high street fashion storechain H&M, brewer Carlsberg andhealthcare specialist Novo Nordisk.

The latter two companies are listedin their home country of Denmark, where the first of the Scandinavianexchanges to start trading – theCopenhagen Securities Exchange – was established in 1808.

The Stockholm Securities Exchangecame next in 1863, while the HelsinkiSecurities Exchange – the modern day version of which is now home toNokia – was not opened until morethan a century later in 1912.

Trading in options and futuresstarted in Copenhagen in 1988, whileelectronic trading reached Stockholmand Helsinki in 1990.

However, despite various alliances between the Scandinavian markets inthe 1990s, it was not until 2003 thatthey began to really come together viathe merger of OM and Hex Group toform OMHEX, later OMX.

The Copenhagen Stock Exchange joined the group in 2005 and theOMX Nordic Exchange brand – incor-porating Stockholm, Helsinki andCopenhagen – was first used in 2006.

Nasdaq then acquired OMX thenext year, forming the Nasdaq OMXGroup that exists today and hasachieved significant growth in recenttimes.

In 2010, for example, the averagedaily share trading amounted to €2.5bn, up from €2.2bn in 2009, whilethe number of share trades hit285,000 per day, up from 214,000 theprevious year.

Total derivatives trading also rose by a massive 37 per cent, from400,000 contracts per day in 2009 to

In the fourth part of our series on globalexchanges, Jessica Bown looks at a groupof Scandinavian exchanges on the rise

Fall and rise of the Oslo BørsEasing regulation helped revivethe exchange, says Jessica Bown

THE Oslo Stock Exchange, alsoknown as the Oslo Børs, offersinvestors access to a range of products including equities,

derivatives and fixed income instru-ments.

Owned by Oslo Børs VPS Holding,it lists a number of global playersand is of particular interest toinvestors keen on the energy, ship-ping and seafood sectors.

A lot has changed since 1819, when the first exchange in Norway opened two mornings a week in thecentre of Christiania, as the capitalcity was then known.

Things did not happen fast. Trading in stocks and shares didn’treally start until March 1881, whiletrading in commodities such assugar and herring oil only achievedsignificant volume at the start of the

1900s.During and immediately after the

First World War, however, the stock market in Norway boomed.

New companies sprang up, every-one wanted to buy shares and pricesclimbed ever higher – the estab-

lished broking firms could scarcely cope. Unfortunately, this boomended in a crisis just a few short years later.

Then came the Wall Street crash of 29 October 1929, which caused the worst global depression in modernhistory and helped to pull the OsloStock Exchange turnover down from207m Norwegian kroner in 1919 to just 4m kroner in 1932.

Following the occupation of Norway in 1940, the stock exchangein Oslo was also affected by restric-tions, while further regulation wasalso necessary in the years following

the war due to Norway’s economic weakness.Regulation of the economy gradu-

ally eased, though, and theNorwegian securities market hasshown very healthy growth since themiddle of the 1980s.

Other developments since theninclude the start of derivatives trad-ing in 1990 and a move to electronictrading in 1999. More recently, in2009, the Oslo Stock Exchange alsoentered into a strategic partnership with the London Stock Exchange.

Oslo Stock Exchange chief execu-tive Bente Landsnes said: “Our busi-ness is characterised by increasedcompetition and we must continueto change ourselves to maintain ourcompetitiveness.”

Next week: the fifth part of our series on global exchanges will continue with a lookat the Nasdaq – measured by market cap-

italisation, the second-largest exchange inthe world.

TOP FIVE OSLO BØRS-LISTED COMPANIES BY MARKET CAPITALISATION

Ticker Company Market Market CapSymbol NOK million

STL Statoil Oslo 430.64

TEL Telenor Oslo 144.45

DNBNOR DnB Nor Oslo 130.63

SDRL Seadrill Oslo 86.65

NHY Norsk Hydro Oslo 84.59

8/6/2019 Cityam 2011-06-08


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NASDAQ OMX NORDIC: FACTS AND FIGURES

25CITYA.M. 8 JUNE 2011 Global Exchanges: Scandinavia

546,000 contracts in 2010. This is much stronger growth than

most other world markets managedduring the same timeframe.

Executive vice president of NasdaqOMX Nordic Hans-Ole Jochumsensaid: “The year 2010 was very strongfor the Nordic markets.

“Our indexes increased by 26 percent in Stockholm, 33 per cent inCopenhagen and 23 per cent inHelsinki, compared with an averageincrease of 4 per cent in Europeanmarkets and an average global

increase of 12 per cent.” The most recent figures released by

Nasdaq OMX Nordic also tell thesame tale, with the total market capi-talisation of companies listed on theScandinavian exchanges jumpingfrom €668bn in May 2010 to €809bnlast month.

One reason for this is that NasdaqOMX Nordic reduced costs for thosetrading on its exchanges by 20 percent last year, thanks to the introduc-tion of faster systems and caps onfees.

1,000

800

600

ANALYSIS l OMX Nordic 40 index over the last three years

Jan 09 Jul 09 Jan 10 Jul 10 Jan 11

Source:ADVFN.com

Baseline: 1,000 (28/12/2001)

AN INNOVATIVE REGION THAT BRIMSWITH INVESTMENT OPPORTUNITIES

PAUL INKSTERHEAD OF PRODUCT,BARCLAYS STOCKBROKERS

SCANDINAVIA is a region known forits innovation and is home to plentyof well-known technology and ener-gy companies. Although the Nordics

are often overlooked, its laws and regula-tions are encouraging to investors andthe region proposes some interestinginvestment opportunities.

REGIONAL GROWTHSweden, Norway, Denmark and Finland –all four markets belong to the OMXexchange, which over the last 10 yearshas seen its list of companies grow by 1

per cent. However, during that period,the capitalisation of those listed compa-

nies has increased by 14 per cent eachyear, telling you something about theeconomic growth of the region.

The national domestic product of Sweden, Finland, Denmark and Norwayrecently reached a combined total of €17bn – not an amount to sniff at.

SWEDISH RETURNSIn 2010, Sweden was the best perform-ing European market. Some well-knowncompanies, including Volvo, also achievedimpressive returns for investors. Thebest performing Swedish stock of 2010was Lundin Petroleum, an oil companytraded on the Stockholm StockExchange.

NORWAY’S ENERGYOne of the best-knownNorwegian companies isStatoil, the world’s13th-largest oil andgas company. Statoilis majority govern-ment-owned and is

managed by theNorwegian Ministry

of Petroleum and Energy. Last year, itwas ranked the largest company in

the Nordic region by market cap-

italisation, profit and revenue.It has operations in bothScandinavia and abroad, aswell as a fleet of 2,000petrol stations across theregion.

GLOBAL REACHA little research can go a

long way and there are plen-ty of opportunities for

investors interested in NorthernEurope. The rest of the area ishome to some world-famousnames. For Finland – Nokia –

for Sweden – Ikea andEricsson – and for

Denmark –Carlsberg.

● LOCATIONS6 Nikolaj Plads, Copenhagen, Denmark14 Fabianinkatu, Helsinki, Finland15 Tullvaktsvagen, Stockholm, Sweden

● OPENING AND CLOSING TIMES [LOCAL TIME]Copenhagen:9am open; 5pm close[8am-4pm London time]Helsinki:10am open; 6.30pm close[8am-4.30 pm London time]Stockholm:9am open; 5.30pm close[8am-4.30pm London time]

● MARKET CLOSURESCopenhagen:April 21, 22, 25, May 20, June 2, 3, 13, December 26Helsinki:January 6, April 22, 25, June 2, 24, December 6, 26Stockholm:January 6, April 22, 24, June 2, 6, 24, December 12

● CURRENCY

Copenhagen: Danish kroneHelsinki: EuroStockholm: Swedish krona

● NUMBER OF LISTINGSAbout 650 main market listings

● VOLUME€2,187,276 (Nasdaq OMX Nordic)

●MARKET CAPITALISATION€809bn(All Nasdaq OMX Nordic markets, at end of May 2011.)

Not feeling theeconomic chill

Picture: GETTY

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T E R

R E S T R I A L

SPRINGWATCH 2011

BBC2,7.30PMKate Humble and Chris Packham are joined by Martin Hughes-Games andCharlie Hamilton-James to follow thefortunes of wildlife.

YOU’VE BEENFRAMEDAND

FAMOUS! ITV1,8PM

Harry Hill showcases some of the bestcelebrity lookalike clips. Highlightsinclude Tom Cruise, Kylie Minogue andJohn Barrowman doppelgangers.

GIANTANIMAL MOVES

CHANNEL5, 8PMTwo silvertip sharks must be flownfrom Australia to Dubai for a breedingprogramme, but the animals are hardto keep alive in confined spaces.

BBC1

SKY SPORTS 15.30pm Live Twenty20 Cup

Cricket 9pmFIFA Futbol Mundial9.30pm Football’s Greatest 10pmThe Sky Sports Years 11pmTwenty20 Cup Cricket 1amBoots

‘n’ All 2am The Sky Sports Years3am Twenty20 Cup Cricket 5amFIFA Futbol Mundial5.30am-6am Football’s Greatest

SKY SPORTS 21.55pm Live International One-

Day Cricket 10pm Boots ‘n’ All11pm Kings of the Surf 11.30pm

NFL: Total Access 12.30amInternational Rugby Union2.30am-3am Total Rugby

SKY SPORTS 35pm Live International RugbyUnion 7.30pm Live International

Rugby Union 10pm Total Rugby10.30pm Trans World Sport11.30pm Cage Fighter 12amChampions Tour Golf 1am Poker

3am Inside the PGA Tour

3.30am European Tour Weekly

4am-5amChampions Tour Golf

BRITISH EUROSPORT12.15pm Live ATP Tennis 8.15pm

Olympic Magazine 8.45pm

Wednesday Selection 8.55pm

Show Jumping9.55pm Riders

Club 10pm Ladies European Tour

Golf 10.10pm Golf Club 10.15pm

Yacht Club 10.20pm Wednesday

Selection 10.30pm ATP Tennis

11.35pm-12.40am Cycling

ESPN6.45pm ESPN Press Pass:

Football-related debate. 7.15pm

Premier League World 7.45pm

ESPN Kicks: Extra 8pmDTM

Review Show 9pmFormula 3

Euroseries Review 10pm VW

Scirocco Cup 11pm VW Scirocco

Cup 12am Live Major League

Baseball 3am Baseball Tonight

4am ESPN Kicks: Extra 4.15am

ESPN Press Pass 4.45am UFC

5.45am-6am ESPN Kicks: Extra

SKY LIVING7pm CSI: Crime Scene

Investigation 8pm Psychic Sally:On the Road 9pmBones 10pmSupernatural 11pm Nikita 12amCriminal Minds 1amCSI: Crime

Scene Investigation 2.40amGhost Whisperer 4.20amCharmed 5.10am-6am Maury

BBC THREE7pm Top Gear 8pmGreat MovieMistakes 2: The Sequel 9pm

Cannabis: What’s the Harm?10pmFILMKill Bill: Vol 2 2004.

12.10am Family Guy 12.55amCannabis: What’s the Harm?1.55am American Dad!

4.25am-5.25am Great MovieMistakes 2: The Sequel

E47pm Hollyoaks 7.30pm Friends9pmFILMTenacious D in ThePick of Destiny 2006. 11pm RudeTube: Rude Tunes 12am My Name

Is Earl 1amDavid Blaine: Magic

Man 1.50am Ugly Betty 2.30am

David Blaine: Magic Man 3.15am

Privileged 3.55am Reaper4.35am-6am Switched

HISTORY7pmHeir Hunters 8pmAx Men

11pm Oil Riggers 12am Ax Men

2amDeep Wreck Mysteries 3am

Heir Hunters 4am The Universe

5am-6am Ax Men

DISCOVERY

8pmHow It’s Made9pmBritain’sToughest Cops: Specially trained

officers deal with dangerous

situations. 10pm I Almost Got

Away with It 11pm Disaster

Eyewitness 12am Bear Grylls:

Born Survivor: Surviving in the

Australian Outback. 1amBritain’s

Toughest Cops 2am I Almost Got

Away with It 3am Deadliest

Catch 3.50am Future Weapons

4.40am Nasa’s Greatest Missions

5.30am-6am Destroyed in

Seconds

DISCOVERY HOME &

HEALTH7pmBringing Home Baby 8pm

Little People, Big World 9pm

Untold Stories of the ER 10pm

Hospital Sydney 11pm A&E:

Outback 11.30pm Chopper

Rescue 12am Untold Stories of

the ER 1amHospital Sydney 2am

A&E: Outback 2.30amChopper

Rescue 3am Little People, Big

World4amA Baby Story

5am-6am Bringing Home Baby

SKY18pm Emergency with Angela

Griffin: The actress highlights the

work of paramedics. 9pmBrit

Cops: Zero Tolerance 10pm Fringe

11pm Cop Squad 12am The

Chicago Code 1amNight Cops

1.50am Stargate Atlantis

3.20am Top Ten Show 3.30am

Myths, Magic and Monsters

4.20am Airline 5.10am-6am

Don’t Forget the Lyrics

BBC2 ITV1 CHANNEL4 CHANNEL5

S A T E L L I T E &

C A B L E

TVPICK6pm BBC News

6.30pm BBC London News

7pm The One Show

7.30pmWaterloo Road: BBC

News

8.30pm In with the Flynns

9pm The Apprentice

10pm BBC News

10.25pmRegional News10.35pmThe National Lottery

Wednesday Night Draws10.45pm Not Going Out 11.15pm

FILMThe Mexican. 2001; NationalLottery Update 1.15am Sign Zone:

See Hear 1.45am Sign Zone:Country Tracks 2.40am Sign Zone:

The British at Work 3.40am-6amBBC News

6pm Eggheads: Quiz show.

6.30pm Britain’s Empty Homes

7pm Escape to the Country

7.30pmCHOICE Springwatch

2011

8.30pm Springwatch

Unsprung 2011

9pm Wonderland – Travels

with My Family10pm The Apprentice: You’re

Fired!

10.30pmNewsnight: Weather

11.20pmStewart Lee’s

Comedy Vehicle

11.50pmQueen: Days of Our

Lives 12.50am BBC News

3.40am-6am Close

6pm London Tonight

6.30pm ITV News

7pm Emmerdale

7.30pm Poms in Paradise

8pmCHOICE You’ve Been

Framed and Famous!

9pm Injustice

10pm ITV News at Ten

10.30pm London News10.35pmMugged

11.35pmCops with Cameras

12.30am The Zone; ITV News

Headlines2.30am FILMVillage of the

Damned: Sci-fi thriller remake,

starring Christopher Reeve. 1995.

4.10am-5.30am ITV Nightscreen

6pm The Simpsons

6.30pm Hollyoaks

7pm Channel 4 News

7.55pm 4thought.tv

8pm Embarrassing Bodies:

Live from the Clinic

9pm 24 Hours in A&E

10pm Desperate Housewives

11.05pm The Big Bang Theory12am Music on 4: The Album Chart

Show: Spotlight 12.15am Benjamin

Francis Leftwich 12.35amMirrors

12.50amDad’s Having a Baby: A

Bodyshock Special 1.45amFILM

The Shape of Things.2003. 3.25am

The Dead Zone 4.05am Hill Street

Blues5am Wogan’s Perfect Recall

5.25am-6.10am Countdown

6pm Home and Away

6.25pm OK! TV

7pm 5 News at 7

7.30pm Pawn Stars

8pmCHOICEGiant Animal

Moves: 5 News at 9

9pm NCIS

10pm Law & Order: Criminal

Intent10.55pmLaw & Order: Special

Victims Unit11.55pm Poker: Aussie Millions

12.50amSuperCasino4am TheFamily Recipe 4.10am Michaela’s

Wild Challenge 4.35am Michaela’sWild Challenge 4.55am County

Secrets 5.10am Wildlife SOS5.35am-6amHouse Doctor

10 11 3

45

7 13

22 3 14

45

5 16

45

6 13 10

8 6

45

11 23 15

5

17

7

9

34

35

22

4

18

13

15

5

9

12

11

4

26

9

15

23

15

33

7

10

6

12

Fill the grid so that each block

adds up to the total in the box

above or to the left of it.

You can only use the digits 1-9

and you must not use the

same digit twice in a block.

The same digit may occur

more than once in a row or

column, but it must be in a

separate block.

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

KAKURO

QUICK CROSSWORD

LAST ISSUE’SSOLUTIONS

KAKURO

WORDWHEELUsing only the letters in the Wordwheel, you have

ten minutes to find as many words as possible,

none of which may be plurals, foreign words or

proper nouns. Each word must be of three letters

or more, all must contain the central letter and

letters can only be used once in every word. There

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

SUDOKU

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

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

from 1 to 9 to solve this tricky Sudoku puzzle.

SUDOKU

QUICK CROSSWORD

ACROSS

1 Pigment prepared

from the ink of cuttlefishes (5)

4 Clench, clutch tightly (5)

7 Restrain (7)

8 Beast of burden (3)

9 Types, varieties (5)

11 Root vegetable (5)

12 Tip at an angle (5)

14 Bushy plant (5)

16 Toward the sternof a ship (3)

17 Acquired knowledge (7)

19 Suggestive of thesupernatural (5)

20 Compel (5)

DOWN

1 Draws in by a

vacuum (5)

2 Metal cooking vessel (3)

3 Assumed name (5)

4 Conjecture (5)

5 Non-professional (7 )

6 Ski run densely packedwith snow (5)

10 Nuclear plant (7)

12 Judder (5)

13 Mark (~) placed over theletter ‘n’ in Spanish (5)

14 Woollen item wornabout the neck (5)

15 Emblem (5)

18 Not either (3)

M

A

T

U

EE

S

N

M

N O B L E W O R K S

O E R C W

T I P T O E T U B A

I A D E N

C A S T I G A T E D

E H N I B G C

M A G N A C A R T A

F L N E V

L E G O T A T T L E

A V S O A

T O W E L S P U R T

3 2 6 5 7 9

7 6 9 8 4 1 6 2

6 1 7 9 3 4 2 8 5

9 4 4 1 2 7 1

5 3 2 2 8 7

8 5 7 9 1 3 5 2

3 5 7 1 7 5

8 4 8 9 4 6 1

7 2 9 6 5 3 1 8 4

9 6 8 6 1 2 4 3

1 3 8 2 9 7

WORDWHEELThe nine-letter word was

BOOMERANG

Lifestyle | TV& Games 27CITYA.M. 8 JUNE 2011

8/6/2019 Cityam 2011-06-08


AS a car hack I have spent an awfullot of time at international motorshows over the years. Sure they can

be hard work, they’re often very busy and can get too big to afford you areally good overview on what’s going on.Ideally, it’s good to see rival cars closetogether to better understand them but atthe really big motor shows it’s just not pos-sible. If you’re looking to choose which carto buy you can come away more bewil-dered than when you arrived. And as forthe dream exotic supercars it can be diffi-cult to get anywhere near them.

But the real problem with motor showshas always been their static format. Sure

you can sit in the cars but it’s rare to get achance to test drive the cars you’re consid-ering owning. How good would it be tohave a chance to drive some of the cars

you’re interested in?London’s sole remaining motor

show, Motorexpo is the clos-est we have to a Britishmotor show since thedemise of the event in2010. The Motorexposhow – which is under-

way at Canary Wharf –

Motorexpo is the best way to see some of theindustry’s exciting new motor designs in situ

WIN A F1 DRIVE IN HUNGARYThere’s a chance to win a drive in a F1 single-seater aroundHungary’s famous Hungaroring circuit at Motorexpo. The all expens-es paid full-day driving experience will include a drive in a FormulaRenault 2.0, Lotus GT4 and a Formula One single-seater. To win allyou have to do is post the fastest race time on one of the of F1 simu-

lators in the show’s RaceRoom in Jubilee Place.

LEXUS DISPLAYS 202MPH LFA SUPERCARLexus has brought its LFA supercar amongst its other models toMotorexpo. The 4.8-litre V10 powered supercar is capable of 202mph and 0-62mph in 3.7sec and costs a mean £340,000. If that’s a little rich for your blood, why not test drive the new CT200h full hybrid luxury hatchback – a car we enthused about a few

weeks back.

JAGUAR CONVOYIf you’d spotted the convoy of 50 Jaguar E-types travelling throughLondon on Monday you’d already have guessed Jaguar is exhibiting atMotorexpo. The company is showing the fastest production car it hasever produced – the 186 mph XKR-S – at the Canary Wharf show,plus its most efficient Jaguar yet – the XF 2.2.

has taken the tired, familiar motor show format and given it a clever twist. And itsunusual format goes some way towardssolving some of these issues. More impor-tantly, it’s also free and close enough that

you can pop down there over a lunch break or even over the weekend.

Its best feature is that it has been creat-ed for Londoners. Motorexpo’s “show floor” is the streets and buildings aroundCanary Wharf. This means punters can getup close to the cars and see them in amore natural urban setting. You can evendrive some of them. Considering theamount of time I’ve spent looking at a carunder artificial lights only to discover itlooks very different on the road, thisseems a very good thing indeed.

Companies including Bentley, BMW, Jaguar, Land Rover, Lexus,

Lotus, Mercedes-Benz,Mini, Mitsubishi,

Morgan, Nissan,Saab, Skoda, Tesla, V a u x h a l l , Volkswagen and

Volvo are exhibit-ing more than250 vehicles

between them, at the show which endsSunday.

Members of the public can also drivesome of the emerging wave of more ecofriendly vehicles. The “Drive the Future”display in Montgomery Square has beenset up to de-mystify electric, hybrid andultra-economical vehicles and show whatthese emerging alternative powered vehi-cles have to offer. You could get to drivethe electric Mitsubishi i-MiEV and NissanLeaf or super economical versions of the

Volkswagen Polo and Skoda Fabia and if you’re lucky enough – the breathtakingelectric Tesla Roadster sportscar. There iseven an extended-range electric Vauxhall

Ampera saloon, a car that’s not even beenlaunched yet.

The display is supported by the RAC,

Transport for London and the Low Carbon Vehicle Partnership so there are plenty of boffins to answer technical questions ontopics such as government grants for low emission cars. You can also see electriccharging-point exhibits and a mobilehydrogen refuelling station to help betterimagine what your real-world commutingexperience could be driving suchadvanced cars.

With car journalists reviews rangingfrom hostile cynicism to gushing plaudits,it’s a great chance to see cars for yourself and make up your own mind. Or at very least get some real world experience andsee what all the fuss is about.

Motorexpo is open: Monday June 6th –Sunday June 12. (10 am–6pm, Mon-Sat. From 11am – 5pm, Sunday.) www.motorexpo.com

Above, scenes fromMotorexpo. Aboveright, an orangeBentley ContinentalGT. Below left, aRange Rover Evoque.

A motoring show for LondonersPunters canget up closeto the carsand see themin a morenatural urbansetting. Youcan even

drive them

CAR TALK: MORE FROM MOTOREXPO BY RYAN BORROFF

Lifestyle | Motors

28 CITYA.M. 8 JUNE 2011

WORDS BYRYAN BORROFF

8/6/2019 Cityam 2011-06-08


8/6/2019 Cityam 2011-06-08


PREMIERSHIP champions Saracenshave avoided the big-hitters in thedraw for the group stages of next sea-son’s Heineken Cup, but capital rivalsLondon Irish and Harlequins have not been so fortunate.

Sarries have swerved any previous winners of Europe’s premier competi-tion and line-up in Pool 5 alongsidetwo-time finalists Biarritz, Welshregion Ospreys and Treviso.

The Exiles have been plunged into agroup with 2009 semi-finalists Cardiff Blues, Scottish outfit Edinburgh andRacing Metro.

Amlin Challenge Cup winnersHarlequins, meanwhile, will face

Toulouse, fellow Premiership sideGloucester and Connacht.

London trio handed toughHeineken Cup assignments

TOTTENHAM’S Peter Crouch insistshe is fully committed to England butadmits the thought of quitting inter-national football has crossed hismind following his latest snub.

The 30-year-old boasts an impres-sive strike rate for his country havingnetted 22 goals in 42 games but has been constantly overlooked for selec-tion in the last year by manager FabioCapello.

Crouch didn’t even make thematch-day squad, despite a strikershortage with Wayne Rooney sus-pended and Andy Carroll injured, forSaturday’s lacklustre Euro 2012 qual-ifying draw against Switzerland.

The striker admits he was disap-pointed to be have been omitted but

said at no point will he follow thelikes of Paul Robinson and WesBrown and retire from England duty.

“I feel that whenever I’ve played forEngland, I’ve done well, so I feltmaybe I’ve been slightly unfairly treated,” he said.

“Playing for England is the pinna-cle of any [English] player’s careerand I absolutely love doing it. If I geta minute on the pitch [for England],that’s great, if I get 90 that’s a lot better.

“I was disappointed, but I’ve got along summer now to think aboutthings and hopefully come back with a new attitude.”

He added: “Do I want to carry onplaying for England? Yeah, of course. I would never give up play-

ing for my country at any stage. It’san honour.”

Crouch denies he’d everturn his back on England

BY JAMES GOLDMAN

RUGBY UNION▲

BY JAMES GOLDMAN

FOOTBALL▲

Sport30

Results

email [email protected]

England left

feeling flat byLord’s pitch

ENGLAND captain Andrew Strauss

blamed the lifeless Lord’s pitch forhis side’s failure to force a victory onthe final day of the second Test.

Alastair Cook continued his rich vein of form by reaching his sixthcentury in his last nine Test inningsand his 18th overall, while KevinPietersen returned to something likehis best with a classy 72.

However, disciplined Sri Lankan bowling and a strangely conservativeCook meant Strauss was unable todeclare at lunch. The Essex left-han-der and Ian Bell upped the tempoafter the interval but England’sattack were given just 58 overs to bowl out the tourists, who were set343 to win.

Unlike in Cardiff last week, SriLanka’s batsmen offered stiff resist-ance and the players eventually shook hands on a draw with 15 oversremaining and the visitors on 127-3.

“We didn’t expect them to foldquite as they did [in the first Test] atCardiff, and they didn’t on a flat wicket,” said Strauss. “The guys hadtoiled hard, and you get the feelingas a side whether you’re likely to get wickets or not – and it just seemedthat we’d run our race.”

England’s pace attack neveroffered a consistent threat over thecourse of a match that alwaysseemed destined to end in a draw with Steven Finn, Chris Tremlett and

Stuart Broad failing to grasp the net-tle in the absence James Anderson.

The Lancashire paceman will gostraight back into the team, fitness

permitting, for the final Test of theseries at the Rose Bowl leavingStrauss with a potentially difficultselection issue, not that the captain was giving away anything yesterday.

“Hopefully he [Anderson] will befit but we don’t know at this stage,”he added.

Despite criticism of his scoringrate on the final morning the matchrepresented another personal tri-umph for Cook, who added 106 tohis first innings 96.

The 26-year-old is just four away from Wally Hammond’s all-timerecord of 22 centuries for Englandand the Essex left-hander believesthose who suggested he should have batted more selflessly yesterday were wide of the mark.

“When we went out there today we were only 140 runs ahead, so if you lose a couple of wickets it’s not agreat position. It was about gettingthrough that first hour,” he said. “Weactually scored at four an over inthat session but you have to givecredit to how Sri Lanka bowled.”

Sri Lanka are likely to be without Tillakaratne Dilshan for the final Test. The skipper, who won the manof the match award for his firstinnings 193, is not expected to haverecovered from a fracture of hisright thumb which prevented himfrom batting yesterday.

SPORT | IN BRIEF

Woods pulls out of US OpenGOLF: Former world No1 Tiger Woodswill miss the US Open next week

because of injury. The 35-year-old suf-fered a sprain to his left knee and a mildstrain to his left Achilles tendon duringthe third round of the Masters in April.“I am extremely disappointed I won’t beplaying in the US Open [16-19 June],” hesaid. “But it’s time for me to listen to mydoctors.”

Serena set for her comebackTENNIS: Serena Williams has confirmedshe will return to action at next week’sAegon International in Eastbourne. TheAmerican, 29, has not played since beat-ing Vera Zvonareva in last year’sWimbledon final. Shortly after winningthat event, she cut her foot on brokenglass then needed treatment for a bloodclot in her lung.

Ward knocks out WawrinkaTENNIS: British No2 James Wardenjoyed the best win of his career beat-

ing Swiss fourth seed StanislasWawrinka in round two of the AegonChampionships at Queen’s Club. The 24-year-old held his nerve to win 7-6 (7-3),6-3 and he will now face defendingchampion Sam Querrey in round three.Ward revealed he has recently startedworking with ex-cage fighter DiegoVisotzky as his fitness trainer. “He’staught me a lot and given me a lot of discipline,” said Ward. “And obviouslyI'm not going to answer him back toomany times.”

Swansea seal Graham swoopFOOTBALL: Swansea have broken theirtransfer record by signing DannyGraham, 25, last season’s Championshiptop goalscorer, for £3.5m from Watford.

POOL ONE: Munster, Northampton, Scarlets,

Castres Olympique

POOL TWO: Cardiff Blues, London Irish,

Edinburgh, Racing Metro 92

POOL THREE: Leinster, Bath Rugby, Glasgow

Warriors, Montpellier

POOL FOUR: Leicester, Clermont Auvergne,

Ulster, Aironi Rugby

POOL FIVE: Biarritz Olympique, Ospreys,

Saracens, Benetton Treviso

POOL SIX: Toulouse,Harlequins, Gloucester

Rugby, Connacht Rugby

HEINEKEN CUP DRAW

Strauss blames dead surface for tepid draw andhopes Anderson will return for the series decider

BY JAMES GOLDMAN

CRICKET▲

WINDOW PAIN: PRIOR SAYS SORRY FOR INJURING

ENGLAND wicketkeeper Matt Prior was forced into making a public apology to confused Mmembers at Lord’s after breaking a dressing room window with his bat. Prior was run outing a mix-up with Ian Bell and once he had returned upstairs, according to an England anWales Cricket Board statement, his bat handle “bounced off the wall into the glass” which and cut the ankle of a female member standing below. Pictures: ACTION IMAGES

8/6/2019 Cityam 2011-06-08


IN the hit TV show, as AlanPartridge becomes increasingly desperate, his pleas for a secondseries laughed off by smug TV

executives, his suggestions for new programmes become more and more

ludicrous.“Arm-wrestling with Chas and

Dave?” Partridge offers apologetically,inviting derision. “Youth hostelling

with Chris Eubank?” he whimpers, before the piece de resistance:“Monkey Tennis?”

So pin-sharp an example of a man vainly groping for credibility was thescene from Steve Coogan’s comedy masterpiece that the suggestionshave become by-words in media cir-cles for absurd ideas.

Yet they are in danger of beingeclipsed by the latest developments atfootball’s world governing body Fifa,

whose embattled president SeppBlatter has vowed to root out any

wrongdoing amid allegations of cor-ruption.

In order to restore faith in Fifa,Blatter says he intends to establish a

quasi-independent so-called “councilof wisdom”, to include former FBIchief Louis Freeh. So far, so reason-able – if some way short of the com-plete transparency Fifa’s criticsdemand.

Things took a turn for the stranger when Blatter announced Henry Kissinger would join the panel, only for the former US Secretary of State tosay he hadn’t actually agreed to any-thing yet.

Raised eyebrows turned to outrightsmirks this week, however, whenBlatter named his latest signing:Spanish-Mexican opera singer PlacidoDomingo.

Domingo, who as one of the Three

Tenors recorded the soundtrack tothe 1990 World Cup in Italy, is univer-

sally recognised as a distinguishedand celebrated man in his field.

But his pedigree for investigatingFifa is unclear to say the least. His

best-known association with footballremains singing at a few tourna-ments, while he is hardly renownedfor his crime-fighting abilities.

What made Partridge’s pro-gramme suggestions so comic werethe farcical juxtapositions involved,and Blatter appears to be going thesame way. For Youth Hostelling WithChris Eubank, read Cleaning UpFootball with Placido Domingo.

Of course, none of Partridge’s ideasever saw the light of day. The world

waits to see whether Blatter’s own

Monkey Tennis moment will ever befully realised.

Fifa chief Blatter’s Domingo tactic is a

wander into Alan Partridge territory

31

WE may not have had theexplosive finish we weretreated to in Cardiff, butLord’s certainly provided

more positives than negatives forEngland.

This is as powerful a battingline-up as England have ever pro-duced and they compliment eachother splendidly. With KevinPietersen back in the runs the topseven are bang in form and itaugers well for the India series.

If there is a concern, it’s thatEngland’s method of winningmatches seems to be rathermechanical. Their main ploy is to

build a large first innings totaland then turn to Graeme Swannon a deteriorating fifth day pitch.

That’s all well and good whenconditions are helpful, but that

wasn’t the case at Lord’s and they are unlikely to be down atHampshire for the final Test

Chris Tremlett, Steven Finn andStuart Broad are almost carboncopies of each other and that’samplified when James Andersonis absent.

The Lancashire paceman willgo straight back into the side, fit-ness permitting, and as harsh as itmight be I’d leave Finn out at theRose Bowl.

The statistics show he’s more of a wicket-taking threat than Broad,

but England’s new Twenty20 skip-per offers that natural aggressionthat any attack requires.

Feisty Broadstill well worthhis Test place

COMMENT

FRANK DALLERES

SPORTANNUAL

REVIEW OFFOOTBALLFINANCEDetailed analysis of Deloitte’s latestreport on the gameand its millions

SEE TOMORROW’SCITY A.M.

Fulham have made good appointment

in Jol, says World Cup winner CohenCraven Cottage herobelieves Dutchman hasattributes to pick upwhere Hughes left off

BY FRANK DALLERES

EXCLUSIVE▲

FULHAM great George Cohen has backed Martin Jol’s appointment asmanager after the Cottagers moved

quickly to hire the Dutchman as areplacement for Mark Hughes.

Former Tottenham boss Jol hassigned a two-year contract thought to

be worth £1.5m a year and will joinup with the squad for pre-seasontraining later this month.

Confirmation of his arrival came just five days after Hughes activated a break clause in his deal and walkedaway following a successful first sea-son in charge.

And 1966 England World Cup-win-ner Cohen (below) believes Jol has thepedigree and skills to prove just aspopular as Hughes and his predeces-sor Roy Hodgson.

“I think he is a good appoint-ment. He did reasonably well

with Tottenham and got theminto the top five. He’s beenaround, he knows what’s goingon, including in England,and he’s an experi-enced man, which

we do really need,”Cohen told City A.M.

“I understandhe’s a very per-sonable man,enthusiastic,gets on withpeople – andthat’s what

you’ve got to be able to do

as a manag-er. If you geta team that

wants to play for you, you’re

halfway there.“The board

have acted very quickly; they’ve been

very decisive. They’ve got itright on the last two occa-sions and there’s no reasonto suspect they haven’t gotit right here.”

Jol came close to join-ing Fulham last summer before they appointed

Hughes and empha-

sised his desire to return to thePremier League. “I’m very happy to

be back and especially at a club likeFulham,” he said. “I could have goneto other countries, but I was waitingfor the opportunity to come back toEngland.”

Fulham return to pre-season on 23 June as the Europa League qualifyinground begins in early July, and Cohen

warns Jol will have to familiarisehimself with the squad urgently.

“He’s going to have to find out what kind of team he wants and whoour best players are very, very quick-ly,” he added. “He may need thesegames in Europe to sort out hisleague team.”

1996-98 Roda JC

Won the Dutch Cup, delivering club’s first

silverware for 30 years

1998-2004 RKC Waalwijk

Won coach of year awards in 2001 and 2002

for steering club away from relegation zone

2004-2007 Tottenham

Finished fifth in successive years but sacked

after poor start to 07-08 season

2008-2009 Hamburg

Came fifth and reached semi-finals of German

Cup and Uefa Cup

2009-2010 Ajax

Dutch Cup winners and second in the Eredivisie

but quit in December while in fourth place

MARTIN JOL: MANAGERIAL RECORD

FAN’S VIEWThis is good news for all Fulham fanseverywhere. You never know what’saround the corner – we weren’t exact-ly going ballistic when we got RoyHodgson but that proved a perfectappointment, and on the face of it thisseems to be another one.

The quality of the last three man-agers indicates the way Fulham aregoing. We’ve come so far in a shortspace of time from the absolute dregsof football, and now you can’t argue

that we aren’t an established PremierLeague side. We’ve got to a Europeanfinal, we’ve had a seventh place andnow an eighth place.

A lot is to do with the state of thePremier League – there’s a lot of mid-dling sides there – but given that,there’s no reason to think that if we doimprove on last year then we couldn’tbe knocking on the door of the top six.

David Lloyd is editor of the fanzineOne F In Fulham

CRICKET COMMENT

ANDY LLOYD

8/6/2019 Cityam 2011-06-08


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