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News2 CITYA.M. 15 JUNE 2011

Teachers votefor walk outs TEACHERS have become the latestgroup of public sector workers to votefor strike action, threatening to bringBritain to a halt over the summer.

Members of the National Union ofTeachers (NUT) and the Association ofTeachers and Lecturers (ATL) are threat-ening to stage walkouts on 30 June.

NUT general secretary ChristineBlower said: The governments unnec-essary attack on public sector pensionshas convinced NUT members thatthere is no alternative but to supportstrike action.

Tube drivers in London are due totake industrial action next week, in a wave of strikes that could bring thecapital to a halt during the popularWimbledon tennis season.

The CBI hit out at union leaders over

the industrial action, attacking the vot-ing process that secured the walkoutdecision and calling for a change in thelaw.

This strike is an attempt to causemaximum disruption for Londonerson a minimal turnout, said Katja Hall,CBI chief policy director.

It cant be right that just 29 percent of the balloted workforce voted infavour of this strike.

We are calling for the law to bechanged so strikes can only go aheadwith the backing of a significant pro-portion of the workforce, she added.

BYRICHARD PARTINGTON

POLITICS

RBS TAKES CONTROL OF 42 MARRIOTTHOTELSRoyal Bank of Scotland has taken con-trol of a 1bn property portfolio ofMarriott hotels after failing to securea debt-for-equity restructuring of oneof its largest individual real estateloans made during the propertyboom. RBS on Tuesday night appoint-ed Ernst & Young as receivers to theportfolio of 42 hotels across the UK.

BANK CHIEFS PAY RISES BY 36PCBank chiefs average pay in the USand Europe leapt 36 per cent last yearto $9.7m, according to data compiledfor the Financial Times. Two of theindustrys biggest names JamieDimon, the JPMorgan Chase chiefexecutive, and Goldman Sachs LloydBlankfein were paid more than 15times their 2009 earnings. Mr Dimon

received nearly $21m in 2010, toppingthe FTs survey of the salary and

bonus packages awarded to 15 topbankers. Mr Blankfein earned $14.1m,

including a $5.4m cash bonus upfrom $863,000 in 2009.

IMF WARNS RUSSIA OF REFORM ORRECESSIONRussia has dashed hopes that the2008-2009 economic crisis would spurneeded economic reforms aimed atmodernising the economy, a missionfrom the International MonetaryFund has concluded.

US DERIVATIVES REFORMS TO BEDELAYED UNTIL END OF 2011Derivatives rules are set to be delayedby six months in an effort to quelllegal uncertainty around financialreform that some worry could roilmarkets. Gary Gensler, chairman ofthe Commodity Futures TradingCommission, said officials wouldmiss a July 16 deadline to finaliserules stemming from the sweeping

Dodd-Frank financial reforms passedlast year.

NETWORK RAIL FAILED TO ADDRESSSAFETY RISKS SAYS REGULATORNetwork Rail must take urgent actionto improve its safety procedures, therail regulator said yesterday after theprivate maintenance company missedeight out of ten of its performance tar-gets. It failed a string of targets forpunctuality and serious delays inEngland, Scotland and Wales, withlong-distance services on the East andWest Coast Main Lines suffering theworst of the disruption.

TO GO OR NOT TO GO . . . UNION SAYSTHAT IS THE QUESTIONThe owner of a call centre and a lead-ing union are locked in a legal battleover how long staff take to go to thelavatory. The CWU has called for a dayof action to protest at the BirchwoodIndustrial Park in Warrington today

and has pledged to dress up inVictorian clothes to make its point.

UK ECONOMY REMAINS STEADY ASGLOBAL GROWTH WOBBLESThe UKs economic recovery is expect-ed to remain on track over the comingmonths in the face of a deterioratingoutlook for France, Italy and the euroarea as a whole. Britains relativeresilience emerged in the closely- watched leading indicators indexcompiled by the Organisation forEconomic Co-operation andDevelopment (OECD).

SURGEON INTERRUPTS CAMERONSHOSPITAL VISITA senior surgeon interrupted a hospi-tal visit by David Cameron and NickClegg to complain that the TV crewsfilming them were not observingstrict hygiene rules. David Nunn leftthe Prime Minister and Deputy PrimeMinister stunned with his angry out-

burst during the walkabout at Guyshospital in London Bridge.

UNIBAIL MAY BE SHOPPING FORSPANISH MALLSUnibail-Rodamco SA, a leadingEuropean property company, could beon the prowl for property in Spain,according to analysts. An acquisitionof shopping centers in Spain that fitUnibail's business would appear well-timed and strategically sound, says John Lutzius, managing director ofthe European offices of Green StreetAdvisors, a boutique research firm.

CHINA TIGHTENS, COMMODITIES SHRUGFresh monetary tightening by China'scentral bank was largely shrugged offby commodities, a sign investors aregetting more comfortable with infla-tion-tackling measures from theworld's top commodities consumer.The Peoples Bank of China said it willlift the amount of capital banks must

keep on reserve by half a percentagepoint.

WHAT THE OTHER PAPERS SAY THIS MORNING

Broadgate victory is great first step

IT is merely a small, symbolic victoryin a much bigger battle against redtape but it is great news that JeremyHunt will today announce that he wont be listing Broadgate Estate, aswe reveal on our front page. EnglishHeritages indefensible bid to protectthis unexceptional complex aroundLiverpool Street station, built in themid-1980s, has rightly been slappeddown by the culture secretary. Amuch-needed plan to redevelop theestate and to build a new home forUBS, the bank, will now go ahead.

City A.M. is delighted to have played

a major role in demonstrating theabsurdly anti-growth and anti-compet-itive implications of listing such adevelopment and to marshal thegrowing opposition to the decision.

Among those who signed up to ourcampaign to dismiss EnglishHeritages over-reach were Boris Johnson, Lord Wolfson (the CEO ofNext) and a raft of others.

What was so infuriating about theattempt to halt the redevelopment was that it took no account of theneed for growth, jobs and regenera-tion. Londons finance hub hasthrived by reinventing itself, as exem-plified by the transformation of theSquare Mile and the emergence ofCanary Wharf; if a 26-year old office block cant be knocked down any-more, then what next? Would every-thing be deemed worthy ofpreservation, regardless of cost? Downthat road lies stasis, stagnation andthe transformation of a dynamic econ-omy into a fossilised, irrelevant snap-shot of a bygone age. It must become

easier to change and adapt to modernneeds in a world where talent and cap-ital are so footloose not harder.

Big firms feel that London is a farless attractive place to do business as a

result of the 52p tax rate (includingnational insurance), a raft of other taxhikes and numerous new labour mar-ket rules. So it is refreshing that theywill at last be sent a strong signal thatthe coalition is trying to reopen theUK for business.

Given the good news on Broadgate,let us hope that George Osborne useshis Mansion House speech tonight tointroduce other reforms. He willannounce that he backs the ring-fenc-ing of the retail part of large universal banks, a move which will reduceuncertainty for City firms. But he willface a crowd that is growing increas-ingly worried that the government islosing its reformist credentials inmany areas. Tax is a real issue, withserious anger about the raid on NorthSea oil and gas firms. It is also increas-ingly obvious that the UK has one of

the highest direct tax burdens of anymajor economy, as confirmed again by accountants UHY. The researchworks out the take home pay for work-ers, taking into account personal taxes

and social security contributions, andreveals the UK charges the 7th highesttaxes. The calculations are based on asingle, unmarried taxpayer with nokids; the UK would score even worsefor families, as these enjoy tax breaksin other countries. Only Mexico,Estonia, Italy, France, India andGermany take more than the UK froman employee earning $25,000 a year.For a person earning $200,000, onlyFrance, Israel, Germany, Ireland, theNetherlands and Italy take more intax. None of this is going to change ina hurry, unfortunately, but Osborneneeds to try and compensate for it byunveiling more pro-growth, supply-side policies. Broadgate is an excellentmove now we need more fromwhere that came from.

[email protected] me on Twitter: @allisterheath

US banking giant JP Morgans mort-gage chief David Lowman has left thebank after it overcharged active USmilitary personnel on their homeloans.

His departure comes just fourmonths after another executive wasdrafted in to manage the lendersmortgage unit over him.

Lowman, who joined JP Morganfrom Citigroup in 2006, had been

placed under chief administrativeofficer Frank Bisignano.

Dave Lowman and I have decidedhe will leave the firm, Bisignano saidin an internal memo.

He added that Lowman would takesome much needed time off.

JP Morgan said in February it hadreturned 10 homes to families pro-tected by a law that entitles thehouseholds of military personnel tocheaper mortgages, after they had been found to have been takenimproperly in foreclosure actions.


BANKING

JP Morgan loses LowmanJP Morgan mortgage chief David Lowman has left the bank

NEWS | IN BRIEF

Price of gold to soar to $5,000Standard Chartered bank has tipped theprice of gold to soar as high as $5,000(3,051) per ounce by 2020. The bullishview of the gold market indicates theperceived security of the commodityamong investors, who have rushed to theprecious metal since the financial crisis.

The bank says limited gold production,the gold purchasing programmes of cen-tral banks and the increasing demand forthe commodity in India and China willcombine to push up its price. Spot goldprices closed at $1,520 an ounce yester-day.

BIS advising on Southern CrossMandarins from the department ofhealth have been advised by the govern-ments corporate finance unit - the busi-ness departments Shareholder Executivebranch - ahead of a crunch meetingtoday with embattled care home opera-tor Southern Cross. The struggling firmwill meet with the government, as wellas landlords and HM Revenue & Customs,to discuss its future today. TheShareholder Executive is best known forhaving advised on plans to save carmaker MG Rover.

EDITORS LETTER

ALLISTER HEATH

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

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

Head of Distribution Nick Owen

Editorial StatementThis newspaper adheres to the system of

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

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CBI policy directorKatja Hall has calledfor a change in the lawto prevent low ballotturnout strikes

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*Ex

clusions

apply,

see

instore

for

details.

News 3CITYA.M. 15 JUNE 2011

BRITAINS financial watchdog has warned wealth management firmsover the way they invest clientmoney, prompting an angryresponse from the industry.

The Financial Services Authority(FSA) said it had found significant,

widespread failings in the industrythat put the interests of customers atrisk.

The regulator warned 260 wealth

managers in a letter yesterday toimprove the way they advise retailinvestors.

But the trade body that represents wealth managers hit out at the watchdogs intervention, saying it

was not aware ofany detrimentalimpact on cus-tomers.

There has not, asfar as we are aware,

been any consumerdetriment directly asso-ciated with the issue andour firms, aspokesperson forthe Associationof PrivateC l i e n t

InvestmentM a n a g e r ssaid.

We dotake thematter very

seriously and arekeen to continue working

with the FSA, thespokesperson for the 184-

member-strong body added.The FSA had conducted

a survey of 16 wealthmanagers and

found thata l m o s t

80 percent ofclientsh a db e e nsold at

least one potential-ly unsuitable prod-uct.

Of those firms, itsaid 14 had acted ina way that posed ahigh or medium-

high risk of detri-ment to theircustomers. It added

that it was involved inongoing regulatoryaction with the com-panies.

The review rangedfrom small independ-ent firms to the UK

wealth managementunits of global banks.

The warning focusedon the ability of wealthmanagers to keep up-to-date records on clients

wishes, needed to makeinvestment judgments.

The regulator said 67 per cent ofthe files it reviewed were not consis-tent with the firms risk models, theclients documented attitude to riskand the clients investment objec-tives. You should be aware that weconsider suitability - and the ability todemonstrate it - a key area of risk in

this sector and wealth managementbusinesses can expect to see continu-ing and increasing supervisory focuson these issues, said FSA businessconduct head Margaret Cole (left).FSA IMPOSES FINES: PAGE 14

Greece yields set anotherrecord as ECB stands firm

YIELDS on Greek debt again set newrecords yesterday as the major playersin the Eurozone reiterated their oppos-ing stances on the terms of a new res-cue for the struggling sovereign.

ECB board member Mario Draghi, who is also its incoming president,voiced his support for the Banks posi-tion that non-governmental investorsin Greeces debt should not be asked totake losses as part of a new bailout, astance that both Germany andHolland firmly oppose.

The ECB is not in favour of restruc-turing or haircuts, we should excludeall concepts that are not purely volun-

tary or that have any element of com-pulsion, he told the EuropeanParliament during a hearing on hisproposed appointment as the ECBsnew president.

The ECB is estimated to have 444bn(392bn) in direct exposure to periph-eral sovereign debt.

Draghi added that on the sovereigncrisis: There are no shortcuts avail-able. The response to the debt crisislies first and foremost in nationalpolicies.

Yields on Athens ten-year bondsreached new highs of 17.4 per cent

while two-year rates shot to 26.4 percent.


REGULATION

MAPLE, the rival bidder for theLondon Stock Exchanges agreedmerger target TMX Group, has said ithas been given regulator approval forthe structure of the company underits control.

The Maple consortium of 13Canadian financial firms said it had

been given exemptive relief fromsecurities regulators in the country.

Maple said the development doesnot constitute approval for itsC$3.7bn (2.4bn) deal for any regula-tory purpose.

LSE rival givenapproval for itsTMX structure

CAPITAL MARKETS

THE US could lose its prized AAAcredit rating if Washington fails toswiftly resolve the row over the gov-ernments debt ceiling, FederalReserve chairman Ben Bernanke saidlast night.

Even a short suspension of pay-ments on principal or interest on the

Treasurys debt obligations couldcause severe disruptions in financialmarkets and the payments system,Bernanke said.

Inaction could also create funda-mental doubts about the creditwor-thiness of the US, and damage thespecial role of the dollar and

Treasury securities in global marketsin the long term, Bernanke added.

The government will begidefaulting on its debts, rising over$14.3 trillion (8.7 trillion), if

Congress does not increase its limit by 2 August, the TreasurDepartment has warned.

We could actually have a repriseof a financial crisis, if we play thistoo close to the line, PresidentBarack Obama concurred yesterday.

Bernanke: USfaces credit riskfrom debt row

US ECONOMY

EUROZONE

Directline:Localfax:Email:

14June2011OurRef:

YourRef:

DearCEO

Thisletterrequiresyourimmediateattention.Itasksyoutorespondtothe

FSAby9August2011.

WealthmanagementreviewWehaverece

ntlyreviewedthesuitabilityofclientportfoliosinasampleoffirmsinthe

wealthmanagementindustry.Wehaveidentifiedsignificant,widespreadfailings,whichwe

areconcernedmayalsobeprevalentinfirmsoutsideoursample.Inthisletterweexplainthe

issueswehaveidentifiedandaskyoutoconsiderwhetheryourfirmmeetsandcan

demonstratethatitmeetsoursuitabilityrequirements.Resultsfromourreview

14outof16firmswerejudgedtoposeahighormedium-highriskofdetrimenttotheircustomers,basedonthenumberofclientfileswhichhadahighriskof

unsuitabilityorwherethesuitabilitycouldnotbedetermined. Overall,79%offilesreviewedhadahighriskofunsuitabilityorthesuitabilitycould

notbedetermined. 67%ofthefilesreviewedwerenotconsistentwithoneormoreofthefollowing:the

;

;

.

14 June2011OurRef:

YourRef: Wealth firms

attacked bywatchdog

In association withPoliticsHome.com

Apply to join today atwww.cityam.com/panel

THIS week were asking members ofour readers panel, recruited in associa-tion with PoliticsHome, to have theirsay on whether David Cameron is r ightto protect the international aid budgetfrom spending cuts.Well also be asking whether the gov-

ernment is right to contribute 814mto pay for vaccines for children indeveloping countries during a period ofausterity at home.To answer these questions, and otherslike them, apply to join the panel atwww.cityam.com/panel

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GLENCOREs maiden results as a listedfirm disappointed markets, just three

weeks after its $60bn (36.6bn) float,with its trading arm delivering profitssome 20 per cent below forecasts.

The traders shares tumbled 4.47 percent, sent down further by chief execu-tive Ivan Glasenbergs statement thatthere has been no firm discussion ofa merger with Xstrata, rumours of

which had sent the share price up by3.3 per cent the previous day.

But analysts were overall adopting await and see attitude, with severalsaying that they would need to see sev-

eral quarters of post-IPO results beforethey could become sufficiently famil-iar with Glencores business model.

The company, known for its secrecyin the past, revealed that during thefirst quarter of 2011 it made $1.01bn, or61 per cent of its earnings before inter-est and taxes (EBIT), in its industrial

division, which consists of Glencoresglobal network of mining assets.

But it was the marketing divisionthat missed expectations, bringing inan EBIT of $675m in the quarter.

That was still 37 per cent up on last years earnings but the metals andmining division saw profits fall by afifth, with the company saying that theparticularly strong first quarter of2010 was unflattering to the numbers.Earnings from trading in its energydivision soared by 240 per cent, howev-er, due to fluctuating oil prices.

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 toCopenhagenfrom

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ENRC shares fell sharply yesterdaymorning after Glencores chief exec-utive dismissed reports that it waspreparing a bid for troubled metalsproducer.

Ivan Glasenberg took the opportu-nity to quash the rumours afterreleasing the Swiss commoditiesfirms first set of quarterly profitssince its flotation last month.

We can confirm that althoughwe talk to a lot of people in the sec-tor, we are not actively considering a

bid for ENRC, he said.ENRCs share price was also hit

after its general council RandalBarker resigned, which comes aftertwo of its non-executive directors,Ken Olisa and chairman Sir RichardSykes, were ousted from the boardlast week.

ENRCs London-listed shares fell1.9 per cent to 761.50p.

Glasenberg plays down talk ofplan to make a move on ENRCBYKASMIRA JEFFORDMINING


ANALYSIS l Main products from Glencoresbiggest mining assets during first quarter of

TIME LINE | HISTORY OF GLENCORE

1974: Glencore is established after a man-agement buyout of Marc Rich & Co, its pred-ecessor, to trade metals, minerals and oil.1987:Glencores first acquisition of a com-modities asset, with the purchase of anAmerican smelter and a mine in Peru.1990;Acquisition of a stake in Xstrata.1993/1994: Management buyout andrenaming as Glencore International1997: Purchase of Prodeco coal develop-ment project in Colombia.

2000: Acquisition of a majority stake inKazzinc.2002: Sale of the Australian and SouthAfrican coal assets to Xstrata as well as itslisting in London.2007:Merger of some Glencore assets withRusal, in which Glencore has majority stake.2011:Glencore floats simultaneously inLondon and Hong Kong, raising $11bn at avaluation of some $60bn.

June 2011: Glencores maiden results.

London IPOANALYSIS l Eurasian Natural Resources Corp.

p

14 Mar 1 Apr 21 Apr 17 May 7 Jun

1000

900

950

800

850

700

750

761.5014 Jun

ANALYSIS l Glencore International

p

17 May 7 Jun

535

525

530

515

520

500

510

505

500.00

14 Jun

Glencore seesshares tumble

on first resultsBY JULIET SAMUEL

COMMODITIES

CST$475m spent on cooper mine

KATANGA49,800 tonnes coppe

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XSTRATA is reviewing the status ofits relationship with Glencore, CityA.M. understands, after Glencoresmaiden results prompted a three percent drop in the miners share pricedue to a negative read-across byanalysts.

Glencore, which owns 34 per centof Xstrata, published its first quarter-ly results since listing yesterday,including a net income figure of$554m from associates.

Nomura analyst Paul Cliff put outa note later in the day that said: Weestimate that Xstrata normallyaccounts for around 97 per cent ofGlencores net income from associ-ates, which suggests an Xstrata first-quarter net income of around$1.6bn. That is substantially belowconsensus forecasts of $4.1bn, headded.

It is understood that Xstrata has up

to now given Glencore a moredetailed breakdown of its ongoingfinancials than it releases to the mar-kets, which only receive a quarterlyproduction update. The numbers onwhich Glencore based its results fig-ures were disclosed to the traderbefore its float,City A.M. understands.

Now that Glencore is listed andmust publish financial results eachquarter, in part due to its bondinvestors, Xstrata is reviewing its levelof disclosure to the company.

The two companies have had aclose relationship ever sinceGlencore, then called Marc Rich & Co,acquired a major holding in Xstratain 1990. In 2002, Glencore spun off acollection of coal assets that nowbelong to Xstrata. And they share sev-eral board members.

Markets have repeatedly speculat-ed about a merger between the two, with some suggesting Glencoresfloat, raising $10bn, has provided itwith ample capital for a takeover.

HONG Kong-based CST MiningGroup said yesterday that it hasmade an initial agreement to sellits Peruvian copper project toGlencore for $475 (289m).

The Swiss mining giant hassigned a memorandum of under-standing agreeing to buy CSTResources, a subsidiary of CSTMining registered in the CaymanIslands, which indirectly owns theMina Justa project in southern

Peru.The project would give Glencore

access to a resource base of more

than 3 million tonnes of containedcopper. The memorandum follows the

recent acquisition of Zambian cop-per producer Sable for $28m.

Glencores quarterly resultsreleased yesterday showed strongimprovement in the groups metalsand mining assets.

Total zinc production was up 55per cent to 127,000 metric tonnes,including a 10 per cent increase in

production at Kazzinc, the Kazakhzinc producer, where the group hasused $3.2bn of the IPO proceeds to

increase its stake from 50.7 per centto 93 per cent.According to a statement on the

Hong Kong stock exchange, CSTMining and Glencore are expectedto formalize a sale by July and com-plete the disposal by October.

Shares in CST Mining rose toHK$0.25 yesterday afternoon fol-lowing the announcement beforeclosing at HK$0.22, up 12.8 per centon the day before.

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The Swiss commodities giant splashes out289m on CST Minings Peruvian project

BY JULIET SAMUEL

COMMODITIES

BYKASMIRA JEFFORD

MINING


RESULTS: REACTION

RESULTSRevenues rose 39 per cent compared tothe first quarter of 2010, to $44.2bn.Adjusted earnings before interest andtaxes rose to $1.8bn, up 45 per cent onthe equivalent quarter last year. Mostprofits came from Glencores miningassets, though its float prospectusshowed that the vast majority of revenuesstem from its trading division.

MANAGEMENTChief executive Ivan Glasenberg com-mented: Our first-quarter results showthat Glencore continues to deliver share-holder value whilst emphasisingthe unique benefits of having large scalemarketing and industrial asset activities.

ANALYSTS RESPONSEAnalysts were overall disappointed by theresults. Nomuras Paul Cliff said: We hadexpected more of a blow-out first quarter

for the marketing business... While this isclearly not the case, it does, however, sug-gest that the quality and stability ofearnings in the marketing business is per-haps better than we expected. But oth-ers said the stock is still teething. Theywere below expectations but the rangewas quite wide, Killiks JonathanJackson said. Given the float was sorecent, we wouldnt have wanted to seeany big surprises. Numis Andy Davidsonsaid many analysts were waiting for sev-eral quarters of results before forming adefinitive judgment: The business modelis not well-understood. Its thought of as amining stock but they have a fantasticamount of intellectual property and deepknowledge of the commodities market.The tentative approach from analystscould explain why one senior bank toldCity A.M. that Glencores aftermarket per-formance lacked the oomph many hadanticipated.

Hong Kong IPO

ore chief executive Ivannberg (right) has over-the firms first resultsisted company

KAZZINC74,300 oz zinc26,800 oz lead94,000 oz gold1,953,000 oz silver

00 tonnes copper

Xstrata to review relationshipwith trader after results mishap

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A CONTRACT IS SIGNEDIN LONDON. BY 10:30 AM THENEXT DAY IT TOUCHES DOWN

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BANK of Israel governor StanleyFischers hopes of taking the vacanttop job at the IMF have been dashedafter it refused to change rules pre-venting anyone over 65 from running.

The move reinforces Frenchfinance minister Christine Lagardesclaim to the International MonetaryFund position, with only Mexicancentral bank chief AgustinCarstens in her way.

Fischer (pictured), 67,

yesterday expressed hisdisappointment, saying: Ithink the age restriction,which was set in the past,is not relevant today.

I was hoping the IMF board of directorswould change itsregulations, notonly for thesake of my can-didacy, butalso for the

sake of future candidates for the posi-tion of managing director.

Sources say the IMF could easilyhave changed the rules if there wasenough support for Fischer.

Lagarde is backed by Europe, whichholds one-third of the votes, and ahandful of other countries includingIndonesia, whose finance ministerAgus Martowardojo said he personal-ly supports her candidacy. If she wins,Lagarde would become the firstwoman to head the IMF.

Carstens has the support of adozen Latin American countries in

a race which, despite being one ofthe most hotly contested in IMFhistory, is widely expected to

result in Europe maintaining its65-year grip on the job.

The Eurozone debt crisis makesa European far more likely

to be handed the role,despite an earlieragreement the nextcandidate would beappointed solely onmerit.

IMF in ageismrow as Israelsman loses outBY STEVE DINNEEN

WORLD ECONOMY


Rupert Murdoch, 80, takes a very activerole at the top of the media empire he has

built. The octogenarian is still regarded asone of the most influential men in politics.

At 74-years old, Winterflood Securitiesfounder now its life president Brian

Winterflood is still an ever-present figurein the City.

Simon Murray, the 71-year-old chairman ofGlencore, has been busy since joining the

firm before its float. He has also visited theSouth Pole and been chased by a leopard.

CITY VIEWS: SHOULD THERE BE AN AGE LIMIT ON COMPANY EXECS?Interviews by Phoebe Torrance

I think it should be down to capability ratherthan age. They have to review the candidate

within all aspects including capability and experi-ence, every individual is different. It is notright to have an age limit because it mightnot be applicable to some people.

MATT CLAY | LLOYDS OF LONDON

Each should be a case-by-case basis,there shouldn't be a set rule beyond a

certain age. Age isn't a contributingfactor unless they are senile or notable to do the job due to age relateddiseases.

RICHARD HUGHES | LLOYDS OF LONDON

There shouldn't be an age limit, especially not 65, they should choose the best person that suits the job.Perhaps if that means a forty year old has the same qualifications and as a seventy year old, maybe they shouldgo for the forty year old because he can continue in the job for longer.

VIKTOR KALIN | DEUTSCHE

THREE WISE MEN: THE ELDER STATESMEN OF BUSINESS

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rent owner Rupert Murdoch.Could a renewed approach for the

tabloid be on the cards now Desmondhas an up-to-date assessment of exact-ly how much his publishing business-es are worth?

At least it would put a whole newspin on The Animals hit House of theRising Sun if and when Desmonddoes take to the stage with Burdon

FINAL HAWK-SONGBUT IF Burdon is busy, perhapsDesmond could give AndrewSentance a call, now the rock musicfan has more time to devote to his

band Revelation after marking his

exit from the Monetary PolicyCommittee with a leaving party onMonday night.

It would be a meeting of minds, asSentance chose The Animals tuneDont Let Me Be Misunderstood, firstrecorded by Nina Simone, as one ofhis eight Desert Island Discs toremember his MPC career in hisspeech at the Bank of England drinks.

Also on the playlist were Good Times,Bad Times by Led Zeppelin and the

Joe Cocker version of The Beatles

With A Little Help From My Friends.Bank of England governor MervynKing continued the musical theme atthe send-off, revealing how Sentancepresented the rewritten lyrics to Help

by The Beatles in his final MPC ratesmeeting in May. Wont you please,please help the MPC, wrote the inter-est rates uber-hawk, in a twist on theBeatles lyrics that raised a smilefrom his colleagues past and presentincluding Paul Tucker, Sir John Gieveand David Miles.

WIDE AWAKE CLUB A TOP-LEVEL diary clash has causedconsternation in the City, with Bankof America Merrill Lynch forced tomove its roundtable discussion next

Wednesday forward by half anhour to 8.30am. This is because

we are aware of another event

taking place this morning at10am, conflicting many of you,

the bank wrote to its guests. Thisother event is only round the corner

so you will be able to spend a fullhour at BofAML.

So what is this mysterious otherevent? None other than JP Morgansmid-year discussion on trends in

banking and capital markets led by JPM executives Hernan CristernaLarry Slaughter, Viswas Raghavan andLaurence Hollingworth which sentout its save the date invitation well inadvance on 23 May.

RUNNERS AND RIDERSIF YOU cant make it to Ascot this

week, the next best place to be seenis the Runner Bar at GreensRestaurant and Oyster Bar onCornhill, whose shareholdersinclude Lord Vestey (below), the for-mer chairman of Cheltenham, and

Aintree chairman Lord Daresbury.Amateur jockey Thomas Greenall

is running the show this week, where he will be on hand to dis-pense Royal Ascot cocktails and rac-ing tips in that order.

BLOOD BROTHERSCHARLIE Metcalfe, president of Nikko

Asset Management, has secured thesupport of both ends of the politicalspectrum for the fundraising cycleride he organised after he lost his wifeLily to leukaemia six years ago.

On the right: Boris Johnson, who will cycle alongside Metcalfes sonLouis and his three friends on aBoris Bike at the start of the Londonto Lisbon ride on 5 July, enlisted

because he is the godfather of riderArchie Gilmour.

On the left: former Blair spin-doctorAlastair Campbell, who will find him-

self pedalling in the midst of the fourteenage Etonians thanks to his role aschairman of fundraising for the ridesdesignated charity Leukaemia &

Lymphoma Research.See www.

b e a t b l o o d -c a n c e r s .

o r g / g e t -involved/lon-don-lisbon toget involved.

HOUSE OF THE RISING MEDIA BARON:DESMOND PLOTS THE ANIMALS GIG

THE CAPITALIST had an entertainingconversation with Richard Desmondthis week, in which the media baronrevealed the next rock frontman he

would like to enlist to perform withhis charity band The Crusaders isEric Burdon of The Animals.

Desmond was speaking at a pre- view of his CNBC interview withChannel Five presenter Tania Bryer,

which airs tonight at 10pm, where he

gave his most emphatic affirmation yet that he has no plans to sell hisnewspaper and magazine interests.

No, no and no, came the replystraight from the horses mouth,

when asked if there was any sub-stance behind the speculation that heis looking to sell Express Newspapersand Northern & Shell, indicating thatthe appointment of Goldman Sachsand BarCap is simply a fishing expedi-

tion to put a price on his press assets.I am a buyer, not a seller, added

the tycoon mysteriously, hinting thatthe City should look out for what heacquires next, not what he disposes of.

Desmonds comments made TheCapitalist think back to last June,

when the media maverick madeheadlines by announcing he woulddo a better job of running Britains

biggest red-top than The Suns cur-

Animal farm: The Crusaders drummer Richard Desmond with Eric Burdon (inset)

Exit music: the MPCs Andrew Sentance

The Capitalist8 CITYA.M. 15 JUNE 2011

EDITED BY

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

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TESCO stoked fears over the financialpressures on British consumers yes-terday by posting sales growth in allinternational regions except the UK.

The UKs biggest supermarketblamed high petrol prices for eatinginto household incomes and causingan 0.1 per cent fall in UK sales exclud-ing petrol and VAT in the past threemonths.

It added that a cautious consumerenvironment and weak demand,

particularly in general merchandisehad also hit sales of home goods.

Analysts had expected an 0.5 percent increase. However, the decline

was smaller than the previous quar-ter, when sales fell 0.7 per cent.

High fuel costs continue to meanthat customers have to direct some oftheir spending to petrol at theexpense of their normal shoppingand this remains a drag on bothindustry and our own like-for-likegrowth, it said in a statement.

Total group sales rose 1.6 per centon a like-for-basis excluding petrolsales but including VAT. Its US divi-sion, where it is rolling out Fresh &Easy stores, grew 11.1 per cent while

Asian sales rose 3.2 per cent andEuropes grew two per cent.

Tescos trading update does littleto reassure that underperformance inthe UK is set to improve in the nearfuture, said Evolution Securities ana-lyst Dave McCarthy. Seymour Pierceanalyst Kate Calvert cut three percent from Tescos 2012 pre-tax profitforecast to 3.94bn on the news.

Tesco blamesfuel price forUK sales dip

WATCH CHAT

SHARE SURF

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BYALISON LOCK

RETAIL


Investors ignore growth abroad to focus on UK woes

MAYBE Tesco should move its pri-mary listing to Hong Kong. Theninvestors might pay more attention to

Asia, where sales grew by 11.4 per centat constant exchange rates in the firstquarter. The region accounted foraround 17 per cent of sales and trad-

ing profit last year, a figure that willonly grow. Or shareholders couldfocus on Europe, which contributed16 per cent of sales and 15 per cent oftrading profits in 2010-11. In the firstquarter, the supermarket giant grewsales in the region by 9.5 per cent.

Sure, the UK still accounts for twothirds of revenues and three quartersof trading profit, but Tesco is still seenas more British than it actually is (a

redesign of the red, white and bluelogo might be a good idea too).

Virtually all its growth will comefrom abroad in the future it truly isan international beast.

Alas, the most closely watchednumber is UK like-for-like sales exclud-

ing VAT and petrol, which fell 0.1 percent in the first quarter against expec-tations for modest growth of about0.5 per cent. That performance waspartly explained by a five per centdecline in sales of non-food items,

with electricals performing particu-larly badly. Luckily for Tesco, it can re-profile its non-food space to sell morecheap clothes (which are performing

well) and fewer flatscreen TVs. The

likes of Comet, Best Buy and Curryshave no such option.

We have long argued that Tescodeserves a richer valuation, on a par

with the truly global retailers like Wal-Mart and Metro. Currently ittrades on a price-to-earnings multiple

of 10 times 2012 earnings forecasts, afour per cent discount to WmMorrison and a 10 per cent discountto the higher-yielding J Sainsbury. Forthat reason, investors should lookpast the UK weakness and buy intothe growth story abroad.

BOTTOMLINEAnalysis by David Crow

ANALYSIS lTesco

p

Apr May Jun

420

400

380

360

407.3014 Jun

Tesco chief executive Philip Clarke said demand was subdued

BREWER Shepherd Neame said yester-day that its sales have been boosted bythe recent good weather, as it issuedan upbeat trading statement and saidits pub estate had risen in value.

For the 48 weeks to 28 May,Shepherd Neames own beer volumegrew by 3.6 per cent, while like-for-likesales in managed houses grew by 7.7per cent. Average income per tenantedpub grew by 0.6 per cent.

The group, which sells Spitfire ales,said its pubs are worth 68m morethan when they were last valued.

Sales of Spitfire were up 4.5 per

cent.

ECO-FRIENDLY cars manufactured byNissan could be leaking detailedinformation about a drivers loca-tion, speed and destination on theinternet.

The Nissan Leaf could be transmit-ting the private data through itsinbuilt RSS reader, a US security

blogger has found.The leak is said to come from the

vehicles on-board Carwings datasharing service was found to trans-mit data without permission.

Nissan said last night that it wasaware of the story but had no fur-

ther information available.

Nissan eco carprivacy fearsBrewer sales upon good weatherCONSUMER

AUTOMOTIVE

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CARPHONE Warehouse (CPW) yester-day dodged making a decision on itsBest Buy Europe joint venture despitethe unit acting as a millstone on itsbooks.

Losses at its big box stores, inwhich CPW is involved in a 50/50 part-nership with US firm Best Buy, over-shot forecasts to hit 62.2m.

Investors had hoped a strategywould be laid out at a meeting yester-day but chief executive Roger Taylorsaid: We did hope to have it finishedbut its now looking like anything upto another two or three months beforeweve finished all the evaluation.

He said the firm is still searching forthe correct formula for selling electri-cals in the UK.

The firms other divisions fared bet-ter, with Carphone Warehouse Europeseeing its profits rise 18 per cent to134.6m, buoyed by soaring demandfor smartphones.

Its Best Buy Mobile US venture also

saw booming demand, raking in prof-its of 97.9m. Its Virgin Mobile Francebusiness, in which it owns a 47.5 percent stake, also made profits of20.6m, up from a loss of 22.2m theyear before. CPW will pay an inauguraldividend of 5p and said it is well posi-tioned to maintain its momentumdespite the tough economic environ-ment.

In the US, Best Buy beat quarterlyprofit and sales estimates as strongdemand for mobile phones, callingplans and tablets offset weakness in itsTV business.

Delays for JV

at CarphoneWarehouseBY STEVE DINNEEN

RETAIL

Royal Mail has reported an 80 percent slide in profits to 39m driven bythe decline of its mail business.

Total revenues for the group fell to9.2bn mainly due to a four per centdive in its letters and parcels opera-tion, falling 120m last year or 2m aweek -- its largest loss in seven years.

The groups chief executive MoyaGreene said that the next two years

would be challenging as the group

makes further job cuts and mail cen-tre closures to try and reduce costs.With the decline in our volumes,

we are going to be a smaller companyin the future than we are today,Greene said.

Cash payments of 771m weremade towards its pension funddeficit, which has halved from 8bnto 4.5bn.

Operating profit was 39m in 2010,down from 180m in 2009.

Profits collapse at RoyalMail as post volume falls

BYKASMIRA JEFFORD

PUBLIC SECTOR


ANALYSIS l Carphone Warehouse

p

Apr May Jun

410

400

390

380

370

370

388.2514 Jun

ANALYST VIEWS: WHAT DID YOU MAKE OFCARPHONES RESULTS? Interviews by Steve Dinneen

NICK BUBB | ARDEN PARTNERS

This was meant to be D-Day for the heavily loss-making Best Buy UKbut, slightly pathetically, CPW has said that it has not made up its mind what to dowith it yet. Maybe that just means they are waiting for Kesa to reveal their hand onComet first. Fortunately the US joint venture is still going gang-busters.

KEITH BOWMAN | HARGREAVES LANSDOWN

High end earnings and the introduction of a dividend have been coun-terbalanced by a lack of strategy update for the UK electricals business. Thisappears to have dragged on the share price today. Nonetheless, hopes for the USmobile operations remain high.

MANOJ LADWA | ETX CAPITAL

Carphone Warehouse seems to have hit a hump in the road as it

struggles to meet targets on its joint venture with Best Buy. Given the toughtrading environment in the UK, the mobile phone retailer seems to have lostits momentum.

TED BAKER PROVIDES RETAIL THERAPY AS SALES SURGE

DESIGNER gear makerTed Baker defied theretail sector gloom yes-terday to post a 15.2per cent revenue risein the past fivemonths. Sales were up9.4 per cent compared

with the same periodin 2010 while whole-sale sales jumped 42.1per cent as demand inthe US rose. New storesin the Middle East andAsia were popular andthe company plansnew shops in NewZealand, China, the USand more in the UKlater this year.

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SHARES in car hire firm Avis Europeleaped 58 per cent yesterday asinvestors rushed to benefit from itstakeover by US counterpart AvisBudget.

Avis Budget said it would pay636m in cash for Avis Europe toreunite the two firms after 25 yearsand create a group with revenues of$7bn (4.3bn).

The 315p per share offer was at a60 per cent premium to Avis

Europes share price at Mondaysclose but its shares gained 114.2p intrading yesterday to end at 310.8p.

The deal will give Avis a presencein 150 countries and operations inhigh growth markets includingIndia and China. It should also bringcost synergies worth $30m or moreper year.

The car rental market is moreand more consolidated worldwide, itis quite a capital intensive market,said Avis Europe chief executive

Pascal Bazin.It is natural at one point in time

to reunite two companies which arerunning the same brand in differentterritories.

The two companies have been sep-arate since 1986, but Avis Budget hasowned a stake in Avis Europe since1989 and floated it in London in1997. Avis Europes largest sharehold-er, Belgian group DIeteren with a 60per cent stake, has backed the deal.

Avis Budget will fund the deal byraising equity of up to $250m, itsown resources and a debt facility.

Shares in Avisspike on newsof takeover TURNOVER at City law firm NortonRose increased by nine per cent lastyear, with the groups new Australianaddition providing a boost to its latest

results.Combined group turnover for the

year to 30 April was $814m (496m), anincrease of $144m from the previousyears figure of $670m.

Norton Rose merged with Australian firm Deacons in January2010, so the latest results are the firstto include Australia as part of thegroup for the full year.

Chief executive Peter Martyr empha-sised the groups global focus, and thecontributions that its latest tie-upswere making to revenues.

This is the first full year withAustralia as part of the group and weare already seeing the benefits, said

Martyr.We further expanded into Canada

and South Africa on 1 June making usone of the top 10 largest internationallegal practices by number of lawyers ...both are critical destinations along thetrade routes of global business and areof significant interest to China.

Norton Rose has not yet released itsprofits per equity partner, or a geo-graphical breakdown of how each jurisdiction contributed to the com-bined numbers.

New Oz office

lifts turnover

at Norton Rose

Avis Europe boss Pascal Bazin said it was natural to reunite the companies

BYALISON LOCK

SERVICES

LAW


ANALYSIS l Avis Europe

p

A r Ma Jun

300

280

260

240

220

200

310.814 Jun

AVIS Budget has hired Citi andMorgan Stanley as joint advisers onthe deal, while Barclays Capital isadvising Avis Europe.

Citis team is headed by PhilipRobert-Tissot, a service sector expertwith experience working on complexand difficult deals including Kraftstakeover of Cadbury last year, andSimon Property Groups spat with its

bid target Capital Shopping Centres.Other notable deals he has advised

on include Spanish infrastructure giantFerrovials takeover of airports opera-tor BAA in 2006.

A Citi managing director, he has

previously headed the banks UK M&Adivision and is now its head of UKbanking and broking. He has workedwith Grant Kernaghan to seal the Avistakeover.

At Morgan Stanley, Adrian Doyleleads the advisory team. With 12years experience in the banks M&Aadvisory team, Doyle advised budgetairline Ryanair throughout its bid forIrish airline Aer Lingus, among otherclients.

ADVISERS: CITI AND MORGAN STANLEY

PHILIP ROBERT-

TISSOT

CITI

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FERTILISER producer PhosAgro is plan-ning a Moscow and London initialpublic offering (IPO) worth more than$500m (305m) next month, the latestin a string of Russian firms to test alacklustre market for new listings.

Launching the offering yesterday,PhosAgro chief executive MaximVolkov said the company planned tofloat 10-15 per cent of existing shares,with Russian politician Andrei Guryevthe selling shareholder.

Russian companies seeking tobroaden their investor base and raisenew capital have been a key source of

activity in a tough European marketthis year, but with mixed results. Just four firms, including bank

Nomos and real estate developer

Etalon, have succeeded in listing,while at least seven have had to pulltheir plans to float after investorsbaulked at the valuations on offer.

PhosAgro has been given regulatoryapproval to list 2.6m shares, or 21.35per cent of its total share capital, in theform of global depositary receipts out-side of Russia.

The main goal of the placement isto get currency for potential mergersand acquisitions Volkov said.

PhosAgro, which joins RussiasGlobal Ports in seeking to float beforethe height of summer, did not say howbig the offering would be, but threesources close to the deal said the goalwas at least $500m.

The company is due to begin road-shows for the share sale on 29 June,the sources said, setting a final priceon 15 July.

BYHARRY BANKS

CAPITAL MARKETS

EUROPE will need a much larger secu-ritisation market if it is to fostergrowth, Simon Lewis will say today inhis role as chief executive of the Association for Financial Markets inEurope (AFME), a regional industrybody.

Europes funding needs in the com-ing years will be considerable the

ECB estimates that 1,000bn (883bn)of debt is due for refinancing over thenext two years so it is crucial that astronger and reinforced securitisationmarket plays its part, he will say.

Lewis will also highlight thatdespite their risky reputation fol-lowing the financial crisis, manyasset-backed securities (ABS) in

mortgages and credit card loanshave performed well.

AFME: Securitisation marketwill be critical to EU recovery

SECURITIES

BANKIA, Spains third-largest bank byassets, yesterday denied suggestionsthat it might delay its initial publicoffering in the wake of telecoms giantTelefonica cancelling the planned flota-tion of its call centre unit Atento at theend of last week.

Telefonica blamed the unfavourablestate of the markets for its decision.

Bankia which groups seven region-al savings banks hopes to raisebetween 3bn and 4bn (2.7bn -3.5bn) by selling shares to retail andinstitutional investors, and has indicat-ed that it wants to list in July.

Obviously if the market goes intomeltdown there might be reasonto think again, said one personclose to the deal. But you cannot stop doing things every timethings get a bit tough.

BYDAVID HELLIERCAPITAL MARKETS


SUCCESSFUL:

Nomos Bank - priced at middle of range to raise $718m on 19 AprilEtalon - price at the bottom of its range to raise $575m on15 AprilRusagro - priced towards lower end of range to raise$330m on 8 AprilHMS Group - president Artem Molchanov (right) cut priceand size of its planned IPO to raise $360m on 8 February

ANALYSIS lNo warm welcome for Russian listings in London Spanish troubles threaten toupset Bankias share listing

PhosAgro totry Londons

IPO market

Bankia chairRodrigo Ratowas in Londonlast week todrum up sup-port for thefloat

CANCELLED OR POSTPONED:SUEK chairman Alexander Landia (right) postponed IPO on 9 JuneDomodedovo International Airport cancelled 31 MayRussian Helicopters postponed 10 May due to low demandEuroset postponed 15 April due to marketconditionsNord Gold postponed 11 FebChelPipe postponed 10 Feb due to market condi-tions, cancelled 16 May

Koks postponed 4 Feb due to market conditions

PLANNED:PhosAgro chief executive Maxim Volkov (left) p lans to raiseat least 305m from a dual London and Moscow listingGlobal Ports Investments plans to raise $750m for a valua-tion of $3bn

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THE Financial Services Authority(FSA) has banned a trader for marketabuse and ordered him to pay morethan 1.3m in damages.

Self-employed trader BarnettMichael Alexander was fined700,000 and ordered to pay 322,818in restitution to firms that experi-enced a loss as a result of his actions.

An additional 306,312 was alsotransferred to the firms.

Alexander, 47, toldCity A.M. he was baf-

fled by thecharges, claiminghe was unawarehe was breakingany rules. Hesaid: In no waydid I realise

what I was doing was marketabuse.

He says he believed he had

developed astrategy that

exploited an inefficiency in the mar-ket and called for greater clarity inthe rules. This is a massive chargefrom a high-powered division to bringon a sole trader, he said.

The FSA says Alexander known asBarney manipulated the prices ofshares on the London Stock Exchangein a complex scheme that involvedentering multiple small buy and sellorders, often in the name of thirdparties.

He generated 629,130 by tradingCFDs and spread bets at the prices hecreated through his share pricemanipulation over a period of around16 months. His fine was reduced from1m after he cooperated with theFSA.

Tracey McDermott (pictured), theFSAs acting director of enforcementand financial crime, said: The FSA

views market manipulation extreme-ly seriously. Alexanders behaviour

was deliberate and repeated over asignificant period of time.

He sought to conceal his tradingand made substantial profits at theexpense of the firms which allowedhim to trade with them. The courtaction shows the FSAs determinationto use all our powers to prevent mar-ket abuse and to pursue those whocommit it.

Trader fined

1.3m by FSABY STEVE DINNEEN

ENFORCEMENT

The FSA has won its first criminalconviction for boiler room fraud.

David Roger Griffiths Mason hasbeen sentenced to two years in prisonand disqualified from being a direc-tor for six years after pleading guiltyto a string of charges.

In a far-reaching scam lasting sixmonths, Mason coordinated the saleof shares in a company he promisedinvestors was soon to list on the PLUSmarket.

Victims were cold called andoffered shares in a firm called

EduVest by unauthorised overseasfirms such as Hunter Rowe Financial,

Bernam and Shore and Attlee WurthConsulting Group.

Mason raked in 270,000 throughthe boiler room operation, which hethen laundered. Some funds weredirected to the boiler rooms viaaccounts in Switzerland and theSeychelles. He pleaded guilty to 13counts related to the scam.

A second man, David Sinclair ofAxiom Capital, was fined 68,000 forunwittingly allowing Mason to use a

bank account under his control to dis-sipate investor money.

Tracey McDermott, acting directorof enforcement and financial crimeat the FSA, said: This sentence sends

a clear message that the court takesboiler room offences seriously.

FSA wins first criminal convictionagainst a boiler room fraudster

HSBC has agreed to sell part of itsRussian retail banking business toCitigroup in a deal valued at around$10.7m (6.5m).

The British bank said in April that it would quit its Russian retail opera-tions, becoming the latest in a stringof international lenders to pull theplug on consumer banking in thecountry.

HSBC said it hoped to close the salein the third quarter of this year. Itadded that it would refer its cus-tomers, upon their consent, toCitibank, which intends to offer themnew account facilities.

The London-based bank left thecountry in order to concentrate on itscommercial and wholesale banking

business.Several large international banks

have struggled to crack the domi-nance of Russias state-backed giants.

HSBCs exit follows that of Barclays, which also quit Russian consumerbanking earlier this year.

Barclays boss Bob Diamond said atthe time his bank was unable to com-pete in Russia.

State-owned banks control around65 per cent of Russias top-100 banksassets, according to estimates.

Citi gained a foothold in theRussian market due to its early entry,having first established a Moscowpresence in 1993.

HSBC sells Russian consumerbanking division to CitigroupBYRICHARD PARTINGTONBANKING


BY STEVE DINNEEN

ENFORCEMENT

NEWS | IN BRIEF

Capgemini in Prosodie talksEuropes largest computer consultancyCapgemini is in talks to buy closely-heldoutsourcing and payment servicesprovider Prosodie for an enterprisevalue of 382m (337m) to expand itsofferings to large telecoms, financialand retail clients. The cash deal would

boost earnings per share from the firstyear and chief executive Paul Hermelinsaid that Capgemini may make othersmall acquisitions this summer.

Ericsson to acquire TelcordiaEricsson, the telecoms technology andservice company, today announced thatit has reached an agreement withProvidence Equity Partners andWarburg Pincus to buy Telcordia, aglobal leader in the development ofmobile, broadband and enterprise com-

munications software and services, for$1.15bn (700m). Ericssons deal isexpected to close before the end of theyear.

ITV climbs on Liberum noteITV shares, which are down more thanfour per cent this year on advertising

spend and regulatory worries, climbed2.5 per cent yesterday as LiberumCapital said the broadcaster's shareprice fall is overdone. Even on a double-dip scenario analysis lasting into theOlympic year of 2012, the shares wouldstill offer over 10 per cent upside fromcurrent levels without further self-help,noted Liberum analyst Ian Whittaker.He added that ITV's balance sheet givesit the option to return significant levelsof cash to shareholders, giving double-digit earnings accretion.

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INFLATION is widely expected to balloon past five per cent in thecoming months, after rising foodcosts held the consumer price index(CPI) to a two-and-a-half year high of4.5 per cent in May.

Mays steady rate on the CPI rep-resents just a temporary pause in anupward trend which could takeinflation to 5.5 per cent or above,said Jonathan Loynes of CapitalEconomics yesterday in a note.

Food inflation could climb toaround 14 per cent by the end ofthis year, adding roughly anotherone per cent to the overall inflationrate, Capital Economics expects.

A post-holidays reduction in air-

fares came in weaker than expected, while food prices jumped 1.3 percent between April and May, theOffice for National Statisticsannounced yesterday.

With major energy suppliersannouncing price rises in recent

weeks, we expect this to make anupward contribution to inflation incoming months although ScottishPowers price rises do not take effectuntil August, added Charles Davisof the Centre for Economics andBusiness Research (CEBR).

The retail price index (RPI) alsoheld at 5.2 per cent in May,unchanged from April.

The tax price index (TPI) edgeddown very slightly, from 4.9 per centin April to 4.8 per cent last month.

A basic rate taxpayer needs a sav-

ings account of 5.63 per cent perannum just to beat inflation, the

website Moneyfacts revealed.Just one ISA negates the current

effects of inflation, while higherrate taxpayers have no inflation-

beating accounts available to them.As the governments two per

cent CPI target slips further beyondthe Bank of Englands grasp, it is thenations savers who are left suffer-ing the consequences of erodingspending power with little hope ofrescue, said Sylvia Waycot ofMoneyfacts.

Meanwhile, Spanish CPI came inat 3.5 per cent in May, official datarevealed yesterday.

Inflation figures for the wholeEurozone region are expected on

Thursday.

Inflation held up bysteeper food pricesBY JULIAN HARRIS

UK ECONOMY

HOUSE prices plummeted by 1.1per cent from March to April, gov-ernment figures revealed yester-day.

Yet a separate survey showed anincrease in approved mortgages forthe month, providing some sign ofrising activity in the market.

The monthly drop in Aprilsprices largely offset the 1.2 per cent

jump recorded in March, accordingto the Department for

Communities and LocalGovernment (DCLG).

The average house price acrossthe country came in at 204,439 in

April, down 0.3 per cent from thesame time in 2010, the datashowed.

The annual drop was largelydriven by falling prices in Wales(down 1.4 per cent), Scotland (down1.2 per cent) and Northern Ireland(down 15.2 per cent).

In England, prices remained flatacross the previous 12 months.

Not only do economic funda-mentals remain difficult overall

for the housing market but theMay survey from the Royal

Institution of Chartered Surveyorsindicates that more houses arecoming on to the market, saidHoward Archer of IHS GlobalInsight, thereby diluting the possi-

bility that a shortage of propertiescould provide significant supportto house prices.

However, the number of housepurchase loans was up eight percent in April, compared to March,totalling 40,900, or 5.9bn in value.

One swallow does not make asummer, warned David Whittaker

of Mortgages For Business. Activitywill remain subdued this year.

House prices drop sharply in Aprildespite rise in mortgage approvalsHOUSING


NEWS | IN BRIEF

China hikes again to cool inflationChinas May industrial output jumped13.3 per cent from a year earlier, top-ping forecasts for a 13.2 percent gain,government data showed yesterday. Ontop of a 34-month high of 5.5 per cent inthe consumer price index, the figureswere sufficient to convince the central

bank to tighten monetary policy. Thereserve ratio requirement was pushedup for the sixth time this year, in a bid todrain excess liquidity and cool downinflation.

Morale slips in London businessesBusiness confidence in London faded inthe second quarter of the year, accord-ing to a survey by accountant groupICAEW released yesterday. Moraledipped to an index score of 15.2, from20.6 in the first quarter, but remainsslightly above the UK-wide average of13.7. Despite the downbeat sentiment,turnover in London grew by 4.3 per centover the 12 months to the second quar-ter, up from 1.5 per cent in the year tothe first quarter.

US retail sales hit by Japan quakeUS retail sales fell in May for the firsttime in 11 months as auto sales took a

hit from the damage wrought byJapan's earthquake. Sales were down0.2 per cent. Meanwhile, producerprices rose 0.2 per cent in the month,less than expected.

SUMMERS feel-good factor saw con-sumer confidence bounce back lastmonth, a Nationwide surveyrevealed today.

The leading barometer of moraleon the British high street jumped 11points, from 44 in April to 55 in May.

Despite recording one of the biggest monthly jumps ever, theindex still sits nine points lowerthan the same period last year and

well below the historical average, warned Nationwide economistRobert Gardner.

The index was measured between

25 April and 22 May, including theroyal wedding and several other

bank holidays, alongside a period ofclement weather.

These factors are likely to have

boosted sentiment among Brits, thesurvey said.

The expectations index, whichmeasures optimism for the economyover the next six months, soared 17points to 76 in the latest survey, from59 previously.

People were more upbeat aboutspending; the sub-index measuring

willingness to splash cash rose 16points to 79, while the percentage ofconsumers who believe now is agood time to make a major purchaserose by seven per cent to 27 per cent.

However, the index measuringcurrent economic conditions wasless positive, increasing by just threepoints in May.

There are still strong downwardpressures, not least higher thanhoped for inflation and recentannouncements of large domesticenergy price hikes, Gardner added.

Summer feel-goodfactor sees morale

soar on high streetBY JULIAN HARRIS

UK ECONOMY

FRENCH president Nicolas Sarkozylashed out at commodity speculators

yesterday, arguing that tighter con-trols would prevent spiralling globalprices.

Sarkozy, head of the G20 group of

the worlds leading economies, said hewants to see new rules requiring min-imum cash deposits with a centralauthority for all commodities deriva-tives deals, not just those on formal

exchanges as is the current practice.Following the US and Europe, all

G20 countries should commit to thisway forward, said Sarkozy.

However, placing blame with specu-lators merely masks the errors of

Western central banks, according toCarl Neill, analyst at Risk ManagementIncorporated in Chicago.

Its all the Feds fault, Neill hitback. Central banks around the worldaround the world are continuing toprint money, so of course people are

buying inflation-protected assets.

BY JULIAN HARRIS

WORLD ECONOMY

Sarkozy blames speculationFrench president Nicolas Sarkozy called for more regulation Picture: GETTY

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APPLE has settled an ongoing patentrow with troubled phone makerNokia, with analysts speculating thatSteve Jobs firm could part with up totwo per cent of the price of eachiPhone it sells.

The terms of the settlement willsee Apple pay a one-off sum as well ascontributing ongoing royalty fees.Details were not disclosed but thesum is likely to run into hundreds ofmillions of dollars, with iPhone salesforecast for $43bn (26.2bn) this year.

Nokia first sued Apple in 2009, with the Cupertino-based firmresponding with its own lawsuit.

Apples ongoing payments could beoffset in a deal taking into accountNokias alleged encroachment onApple patents in areas such as touch-

screen scrolling.Nokia boss Stephen Elop said: This

settlement demonstrates Nokiasindustry-leading patent portfolio andenables us to focus on further licens-ing opportunities in the mobile com-munications market.

Apple confirmed it has enteredinto a mutual licencing agreement. Itis also involved in ongoing patent law-suits with Asian phone-makers HTCand Samsung, accusing the latter ofslavishly copying its designs.

Nokia to takea thin slice outof Apples pie


ADVERTISING giant WPP is to stepup its acquisition drive this year, set-ting aside a 200m war chest toexpand into new media in emergingmarkets.

Chief executive Martin Sorrell hastended to focus his expansion onsmall and medium sized agencies inrapidly expanding markets includingBrazil, India and China.

The amount earmarked for acquisi-tions is around double that spent inrecent years. WPP has seen its shareprice fall by around 7.5 per cent thisyear.

Sorrell also said in an interview with Bloomberg Television at theWorld Economic Forum in Jakarta heis optimistic about growth in theadvertising sector this year.

Sources close to the firm recentlyruled out a 500m bid for Aegis mar-ket research business Synovate.

WPP sets aside 200mfor new acquisition drive

WPP boss Martin Sorrell is confident about the ad market Pic: Micha Theiner/CITY A.M.

BY STEVE DINNEENADVERTISING

JONATHAN Agnew, the formerchairman of Nationwide BuildingSociety, is set to become the newchairman of Virgin Money, as soonas his appointment is approved bythe FSA.

Agnew (pictured) will take overthe leadership of a company thathas been without a figurehead forthe last year since the death of itschief executive Brian Pitman.

Top of Agnews inbox will be a 150-page informa-tion memorandum hotoff the presses fromLloyds, detailing the632 branches the bank is being forcedto sell.

Richard Bransonhas declared Virgin

Money to be a serious bidder for the assets,which would cat-apult Virginf r o m being aminnowin thein d us -

try to being the UKs sixth largest

bank with 4.6 per cent of the mort-gage market on its books.Agnews first task will be to over-

see the decision on whether theasking price looks reasonable,where Virgin can find some 30bnto find to cover the branches fund-ing gap or whether it might in factmake more sense to bid forNorthern Rock, which the govern-ment is likely to offload this year.

Agnew, who is 70, is alreadychairman of Beazley, the Lloyds ofLondon insurer, fund manager

Ashmore GlobalOpportunities, the CayenneTrust and Rightmove.

He is an experiencedhand in the financialservices industry, havingalso held roles as a direc-tor of Commerzbank,

LMS Capital, Bankside

Insurance and DresdnerKleinwort.

Virgin Money recruitsan old hand as chair

BY JULIET SAMUEL

BANKING

BY STEVE DINNEENTELECOMS

JONATHAN AGNEW

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RIGHTMOVE founder Harry Hill willtoday list his new conveyancingproject on the AlternativeInvestment Market.

In-Deed, which Hill launchedwith private funding last month, israising 1.58m by placing 3.77mordinary shares with institutionaland other investors, the firm willannounce to the stock market todayas its shares commence trading.

After the IPO, Hill and his co-founder, one-time 3i Group partnerPeter Gordon, will each retain a 10per cent stake in the busi-ness. The firm said in itsannouncement todaythat the float is signifi-cantly oversubscribed.

Non-executive directorBoris Zhilin has taken a5.4 per cent stake, whileAnthony Ekins, a proper-ty veteran who is anon-executive at Hills JKM PropertySolutions, has alsotaken 3.9 per cent ofthe post-float equity.

HSBC, Octopus

Investments, Hargreave Hale andnominated adviser Numis have alltaken stakes ahead of the float,helping to give In-Deed an expectedmarket capitalisation of 8.57mwhen in joins AIM.

We are delighted with thestrong interest our listing has gen-erated, said Hill, who steppeddown as chairman of estate agentCountrywide in 2009.

This is an important step in driv-ing our business growth and willhelp us to fulfill our ambition to become market leader in the con-veyancing sector within 3 years.

Im not very good at being sec-ond or thirdI believe In-Deed candominate the conveyancing marketand set service standards for othersto aspire to, he added.

The firm has been set up to cashin on the complexities of the UKproperty market. In-Deed claims

that one in four homebuyers findconveyancing confusing, and

hopes to provide onlineservices to make theprocess simpler. In-Deedaims to become a marketleader in the 1bn con-veyancing sector throughits website.

UK-BASED healthcare giantGlaxoSmithKline yesterdayannounced a deal to acquire theremaining 51 per cent of Chinesedrug maker and joint venture part-ner Shenzhen Neptunus InterlongBio-Technique, for 24m.

Once the agreement is approved by Chinese authorities, Glaxo will

become the sole owner of the joint venture Shenzhen GSK-Neptunus

Biologicals or GSKNB.Established in June 2009, GSKNB

focuses on the development andmanufacture of seasonal and pan-demic influenza vaccines for China,Hong Kong and Macau.

Glaxo had previously raised itsequity share in GSKNB to 49 per centin August last year, from an initial 40per cent.

Glaxo said its decision to acquirethe outstanding interest in GSKNB

reflects its intention to furtherexpand its vaccines presence in

China through establishing local vac-cine manufacturing capability.

GSK has licensed more vaccinesin China than any other global man-ufacturer and has packaged morethan 100 million vaccines at ourShanghai facility. Todays announce-ment represents an expansion ofGSKs long-term commitment to vac-cine supply, manufacturing anddevelopment in China, said JohnLepore, vice president and general

manager of biologicals and corporatefor GSK China.

Glaxo vaccine drive accelerates as itbuys out its Chinese flu joint venture

CHINA Everbright Bank is planningto raise about $6bn (3.7bn) in aHong Kong initial public offering,according to a term sheet of thedeal.

The lender plans to issue 10.5bnshares as part of the deal.

China Everbright Bank is set tokick off pre-marketing by as soon asnext week, with listing scheduled

for 11 July, according to sources.Its Hong Kong plans comes just

six months after its Shanghai IPO.Everbright Securities, China

International Capital, MorganStanley, JP Morgan, UBS, BNPParibas, BOC International, HSBCand Shenyin Wanguo have beenhired to manage the offering.

Separately, China Everbright saidthat a fund it runs with MacquarieGroup had secured nearly half a bil-lion dollars from global investorsfor a Greater China infrastructure

fund, bringing the total amountavailable for investment to $729m.

China Everbright plans$6bn Hong Kong listing

CAPITAL MARKETS

In-Deed is set

for AIM floatto build cashBYMARION DAKERS

PROPERTY

BYHARRY BANKS

PHARMA


NEWS | IN BRIEF

Polar Capital triples its profitsFund manager Polar Capital beat fore-casts for full-year profit yesterday andsaid assets surged over the past twomonths as client inflows helped it

through May's choppy markets. Assetsjumped 11 per cent to $4.3bn betweenthe end of March and the end of May, asclients invested in its technology, Japan,insurance and healthcare funds on theback of strong performance last year,the firm said. Pre-tax profit for the yearto March almost tripled to 9.2m asPolar's assets continued to reboundafter the financial crisis, beating ana-lysts' forecasts of up to 8.7m. Thefirms shares gained almost 11 per centyesterday.

Oxford buys nano-tech companyTechnology group Oxford Instrumentsyesterday unveiled its 28.1m purchaseof nano-technology group Omicron as itploughs on with expansion plans. Theacquisition will be part-funded by ashare placing run by JP MorganCazenove, which raised 39m yesterday,the firm added. Oxfords revenues rose24 per cent to 262.3m in the year tothe end of March, giving a pre-tax profitof 26.7m. Oxford said its figures werethe strongest in its 51-year history, help-ing lift its shares 2.5 per cent.

Pursuit Dynamics widens lossesFood and drink tech firm PursuitDynamics suffered a 13 per cent shareprice fall yesterday after it admittedthat its operating losses had doubled to7.16m for the six months to the end ofMarch. The firm announced several newcontracts alongside the figures, howev-er, and chief executive Roel Pieper saidhe was confident about the year ahead.The firm said it has a cash balance of11m after raising 8m in a share plac-ing in April, and that it expects to signextra deals with biofuels plants in its USbusiness during the rest of the year.

AIR Partner, the British air charterfirm, said yesterday that demand foremergency evacuations and charterflights has put its business firmly oncourse for growth.

The company, which suppliesplanes to governments and industry,organised 70 flights over a four-weekperiod for humanitarian aid relief toNew Zealand and Japan following the

earthquakes.We are now investing to take fur-

ther market share and broaden ourproduct offering across our 24 inter-national offices, said Mark Briffa,chief executive.

The firm said its private jet divisioncontinues to suffer from weak pricingin the current market, but it has hirednew jet brokers to help find extrabusiness.

Shares rose five per cent yesterdayand closed at 470p.

Air Partner says charterbusiness is firmly on track

Mark Briffa, chief executive of Air Partner, says he is investing in new business

BYKASMIRA JEFFORD

AVIATION

The writing was on the wall for Focus DIY

A T the start of last month theFocus DIY chain enteredadministration. BrandIndexdata gives us a read on the

problems that they have had for along period.

When we compare them to theircompetitors (B&Q, Homebase andWickes) we can see that they were theleast talked about, and when peopledid talk about them it was less

favourably. They were seen as poorquality and relatively poor value andthey had lower satisfaction levels allin all, not a great recipe for success.

First looking at attention over thecourse of 2010 and 2011 between fiveand seven per cent of the populationhad recently heard anything aboutFocus (either good or bad). This com-pares to Wickes (10-17 per cent),Homebase (13-22 per cent) and B&Q(19-33 per cent). The leap for Focus (up

to 19 per cent) came after theyannounced their intention to go intoadministration a time when theadage that all publicity is good pub-licity really doesnt hold true.

With such low attention wedexpect Focus to perform less well onthe standard score for perceptionmeasures if people arent thinkingof you, they cant think good thingsof you. On BrandIndex though we cantake this further and look at thosescores proportionally (i.e. only takinginto account those people who saysomething about the brand). Evenhere Focus performs badly; as men-tioned earlier this poor performance

is across all measures so best summedup using the index score (a combinedscore from the six differentmeasures). Focus had been hoveringaround the +20 to +30 level before

plummeting on the news of adminis-

tration, whereas its rivals have consis-tently had scores of +60 to +70. Thewriting had long been on the wall forFocus DIY.

Stephan Shakespeare is chief executive of

YouGov

BRANDINDEX

STEPHAN SHAKESPEARE

ANALYSIS l BrandIndex scores

01 01 2010 01 09 2011 01 06 2011

40.0

30.0

20.0

10.0

0.0

B&Q

Focus

HomebaseHomebase

Wickes

ANALYSIS l Attention scores

01 01 2010 01 09 2011 01 06 2011

35.0

25.0

15.0

5.0

B&Q

Focus

HomebaseHomebase

Wickes

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Arden PartnersThe stockbroker has appointed JohnGoold, one of the firms original

founders, who returns to Arden fromOriel Securities as head of equity sales.Arden has also confirmed the appoint-

ment of Lord Flight as chairman. LordFlight has been acting as interim chair-man since the retirement of Sir DavidRowe-Ham on 31 December 2010.

KPMG

Giles Triffitt has been appointed as arisk director in KPMGs financial riskmanagement division. Triffitt joinsfrom Royal Bank of Scotland, wherehe was head of risk services. Prior toRBS, Giles was director of PwCs UKOperational Risk team.

Renaissance Asset ManagersThe investment management firm has

made two senior distribution hires.Peter Zurhorst, previously at JanusCapital Group, will lead RAMs clientbusiness in Germany and Austria andRon Gillies, who joins from CoFunds,will build on existing client relation-

ships and develop new opportunities asa director in the London office.

Standard LifeThe savings and investments providerhas appointed Paul Matthews as chiefexecutive of its UK business.Matthews joined Standard Life in1989, and most recently held the posi-tion of UK take to market director.

Osborne ClarkeThe law firm has appointed regenera-tion specialist Rajindh Mangat, for-merly head of urban regeneration atNorton Rose, as a senior regenerationestate partner.

EnQuestThe petroleum company has hiredDavid Heslop as United Kingdom con-tinental shelf general manager, effec-tive from 20 June. Heslop has morethan 30 years of international oil andgas industry experience, includingsenior roles at Talisman Energy, MobilOil and Schlumberger.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

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

in association with

Retail figures driveUS markets rally

US stocks posted their biggestgains in nearly two months yesterday as retail sales fig-ures allayed fears over the

economy that had driven a six-weekslump in the market.

Many analysts said the rally was

likely a one-day wonder. Though stillweak, the retail sales data was not as bad as most had expected, whichprovided an excuse to buy after themarket had neared its most oversoldconditions in a year.

Its the long-term trend which isstill disturbing, said Alan Valdes,director of floor operations at DMESecurities in New York. If you lookat the S&P 500, theyve lost over $1trillion (610bn) in value since thebeginning of May - that is telling.

We were so oversold you had tosee a plus day.

Many headwinds remain, includ-ing concerns over debt problems inEurope and the United States, along with the expiration at the end ofthis month of the US FederalReserves bond-buying program,which has been a key source of liq-uidity for markets.

US retail sales declined for thefirst time in 11 months in May, but

the fall was less than forecast. Fordetails, see China data also helped toease worries about global growth.

Gains were spread across the board, with the Morgan Stanleyretail index, up 2.8 per cent, amongthe best performers. Energy also out-performed, with the S&P energy sec-tor up 2 per cent as oil prices rose.JC Penneyjumped 17.5 per cent to$35.37 after the department storechain named Ron Johnson, Applessenior vice president of retail, as itsnew chief executive.

The Dow Jones industrial averagegained 123.14 points, or 1.03 percent, to 12,076.11. The Standard &Poors 500 Index rose 16.04 points,or 1.26 per cent, to 1,287.87. TheNasdaq Composite Index advanced39.03 points, or 1.48 per cent, to2,678.72.

Expectations for further sellingthis summer hovered in the back-ground even as the market rallied.

Many investors are eyeing a possi- ble retreat in the S&P 500 to itsMarch low near the 1,250 level. Theindex closed flat on Monday afterfalling to near a three-month lowlast Friday.

That level could be seen as a near-term bottom and attract additionalbuyers, analysts have said.

The S&P 500 is down about 5.4 percent from its high in early May asrecent weak data sparked worries

about the sustainability of an eco-nomic recovery.

Britains top share index rose

yesterday, with oil majors and banks gaining as above-fore-cast data from the United

States and signs that the Chineseeconomy could avoid a hard landingboosted appetite for riskier assets.

Britains FTSE 100 ended 29.67points higher, or 0.5 per cent at5,803.13 points, after inching up 0.1per cent on Monday.

Concerns about a slowdown in theUS economy eased after data showedretail sales fell less-than-expected inMay, though they still showed a firstdrop in 11 months.

Chinese data showing the worldssecond-biggest economy may avoid ahard landing amid efforts to preventit from overheating renewed themarket's appetite for risk.

Integrated oils were among thegainers, up 0.9 per cent, as Brentcrude prices hit their highest inmore than five weeks on the back ofimproved risk appetite.

Appetite for buying does seem tobe creeping back in right now, aided by better-than-expected retail salesdata out of the US, said Ben

Critchley, sales trader at IG Index.However, sentiment is crucial

right now, and theres no shortage ofpotentially negative factors floatingaround, he said, referring to a Greekdebt crisis and a US borrowingpredicament.

Traders said concerns alsoremained about the state of theBritish economy, as figures showedinflation held at a two-and-a-half-year high in May.

Banking stocks held up well -despite Standard & Poors ratingagency downgrading Greece to tripleC on Monday, the lowest level of any

country - with traders saying theGreek debt crisis was factored intobanking stocks as long as no furtherbad news emerged.

Broker comments added to theaction on the FTSE 100, with ITVadding 4.4 per cent to top the leader-board after Liberum Capital arguedthe broadcasters price couldadvance more than 10 per cent fromthis point.Schroders

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