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FTSE 100 5,899.89 +46.07 DOW 12,724.41 +152.50 NASDAQ 2,834.43 +20.20 /$ 1.63+0.02 / 1.13 unc /$ 1.44 +0.02

Directors at

BSkyB turnon Murdoch

A NUMBER of independent directorsat the News Corp-controlled BSkyBare expected to push for the oustingof James Murdoch as chairman atthe firms board meeting nextThursday.

Their unease over his position will be intensified by new allegationsthat suggest he knew in 2008 thatphone hacking at the News of the World was the work of more thanone reporter.

Sources close to the group say thatsome directors, some of whom workfor News Corp, remain loyal toMurdoch but that others on the 14-strong board are adamant he stepsdown until the inquiries over thephone-hacking scandal at the Newsof the World have concluded.

BSkyBs board includes formerRoyal Mail chairman Allan Leighton,the Random House chief executiveDame Gail Rebuck and Daniel Rimerof Index Ventures. One scenario isthat senior independent directorNicholas Ferguson will become act-ing chairman. BSkyB said: The com-pany has a strong governanceframework which has worked wellover several years. There are no plansto change existing arrangements.

Yesterday former NoTW editorColin Myler contradicted Murdochsevidence that he didnt know the

phone hacking problems were notconfined to a single reporter.Murdoch last night said he stood byhis testimony.

BY DAVID HELLIER

MEDIA

French president Nicolas Sarkozy is fronting the deal, on which he says there is unanimous agreement Picture: Getty Images

MARKETS rallied after Eurozone lead-ers agreed to a new Greek rescue thatwill cut the countrys debt by 12 percent of GDP from its current 140 percent level and see the EUs bailout fundgiven sweeping new powers.

The deal, fronted by French presi-dent Nicolas Sarkozy, will also seemost private holders of Athens debttake a 20 per cent cut in the value oftheir bonds.

As details emerged, the euro gainedone per cent against the greenback between yesterday morning andevening, rising to $1.44 in the after-noon and rising 0.8 per cent againstthe Swiss franc over the same period.

Relieved investors surged into equi-ties as they concluded that theEurozones collapse is not imminent,with the Eurostoxx 50 closing up 2.1per cent and the FTSE 100 gaining 0.9per cent.

Yields on 10-year Greek debtdropped from 17.5 to 16.5 per cent,interest on equivalent Spanish andItalian debt dropped 25 basis points to5.75 per cent and 5.34 per cent respec-tively.

However, most observers expect themarket cheer to be short-lived as

details of the new bailout emerge anddoubts persist over both the sustain-ability of Greeces debt burden and themore fundamental problem of the

MARKETS CHEEREUROZONE DEALBY JULIET SAMUELEUROZONE

www.cityam.comIssue 1,430 Friday 22 July 2011 FREE

BORROWINGHITS 14BN

UKS PUBLIC

SPENDING KEEPS

BALLOONING P5

ANISTON AND CO ARETRULY HORRIBLE BOSSES

READ OUR FILM REVIEW P20

BUSINESS WITH PERSONALITY

Eurozones widely diverging competi-tiveness.

The deal aims to reduce Greeces pri-vate-sector debt burden by134bn by2020, confirming that the EuropeanCentral Bank (ECB) has failed in its bidto avoid imposing any losses on privateholders of Greek debt.

Under pressure from a Franco-

German alliance, the ECB surrenderedon Jean-Claude Trichets central tenet that non-official creditors must notshare in the bailout costs.

Greece will be allowed to default,but only temporarily, as its debts aretransferred over to the EuropeanFinancial Stability Facility (EFSF), theEUs750bn bailout fund. Private cred-itors will then be paid by the EFSF, whose debt will be underwritten byGreek assets.

However, the net present value of

the debts will shrink by around 20 percent as their maturity is doubled from7.5 years to 15 and the interest rate onthem cut to just 3.5 per cent.

The bailout fund itself will also begiven new powers to intervene in sov-ereign debt markets, taking the task of buying countrys bonds out of theECBs hands.

However, the EFSF will only beallowed to buy bonds subject to analy-sis by the ECB, the details of whichare unclear.

In addition, the bailout fund will beallowed to make loans to nations inorder to recapitalise their banking sys-tems. MORE: P2-3

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News2 CITYA.M. 22 JULY 2011

Dont compare this to Marshall Plan

PERHAPS the worst element of yester-days proposals to rescue the Eurozonewas the attempt to rebrand the exer-cise as a new Marshall Plan for Greece.It is the kind of propagandistic non-sense that would have made GeorgeOrwells Ministry of Truth proud. TheMarshall Plan was intended to help Western Europe survive the post-Second World War era and rebuild itsdestroyed, ravaged infrastructure.While it was also offered to Soviet-con-trolled countries (and rejected bythem), its real aim was to preventimpoverished Europeans from turn-

ing to communism. There are absolutely no parallels

between that and what is happeningto Greece, a country that has alreadylong been hooked to subsidies but

that has made no proper effort to putits own house in order. The two situa-tions are incomparable; what we areseeing here is window-dressing, alarge bailout, a move towards furtherfiscal unification through the backdoor and a partial, much-needed butsmall selective default.

In truth, it is debatable whether theMarshall Plan really achieved much;while most academics hold it up asone of the few truly successful foreignaid programmes in history, other com-mentators (including myself) are moresceptical. What really transformedGermany from disaster zone to eco-nomic miracle were the heroic actionsof Ludwig Erhard, at the time a little-known West German official. He tookover a special economic departmentin 1947; the following year, he becamethe director of economics of the

Bizonal Economic Council, a positionhe used to push through a radical free-market and sound money agenda.Over one weekend, he abolished allprice and wage controls, freeing the

economy at a stroke; and he intro-duced the Deutsche Mark in June1948. This halted Germanys post-warstagnation and kick-started a dramaticeconomic recovery that lasted threedecades. His policies not those of theMarshall Plan deserve to be copiedtoday.

It is a tragedy that Europes (andespecially Italy and Spains) problemwont be addressed by yesterdays plan but it is an even greater disaster thatits growth problem wont be tackledeither. There is no latter day Europeanor Greek Erhard, as the latest figuresdemonstrate yet again. As theEngineering Employers Federationpoints out, the latest manufacturingpurchasing managers survey num- bers are grim for the Eurozone. Although Germany and France sawgrowth, output fell for the second suc-

cessive month for the rest of theregion. Even growth in France andGermany was the slowest rate sincethe recession ended so on top of atwo-speed Europe, which is making

the region even less of an optimal cur-rency area than it previously was, theoverall rate of expansion is slowing.

Ultimately, the weaker EU countriesneed to sort out their economies andbring their costs back into line. Theycannot do this artificially by devalu-ing as they are part of the single cur-rency. So they need to undergo yearsof pay restraint, cost-cutting and pain.There is still no sign that they are pre-pared to do this, unlike Germany, which has spent the last couple ofdecades since reunification tighten-ing its belt and is only now reapingthe rewards.

The markets were pacified yester-day, but it wont last. Europes sover-eign debt crisis has merely beenpostponed.

[email protected] me on Twitter: @allisterheath

CANADAS stock exchange group TMXhas relented and agreed to start talkswith the Canadian consortium thatended its ambitions to merge withthe London Stock Exchange.

TMX Group, whose shareholders vetoed the LSE merger last month, will meet the Maple consortium todiscuss the C$3.8bn (2.5bn) hostiletakeover bid it tabled in June.

Canadas biggest banks and pen-sion funds formed Maple to fend offthe LSE and keep TMX in local hands. The consortium directly controlsabout seven per cent of TMX equity.

The LSE was forced to walk awayfrom its planned C$2.4bn merger on30 June after just over 50 per cent of TMX investors voted for the deal,short of the 66 per cent needed underCanadian law.

TMX Group tostart talks withMaple over bid

CAPITAL MARKETS

EDITORS LETTER

ALLISTER HEATH

Editorial StatementThis newspaper adheres to the system of

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

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

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

4th Floor, 33 Queen Street,London, EC4R 1BRTel: 020 3201 8900Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Alice Hepple

CommercialSales Director Jeremy Slattery

Commercial Director Harry OwenHead of Distribution Nick Owen

Greeces latest rescue: what you need to know

IN A scheme that euro leaders dubi-ously dubbed their very ownMarshall Plan, after the USs post-Second World War aid programmefor Europe, the parameters of a newGreek bailout were announced inBrussels yesterday:

In a controversial move, theinterest rate on Greeces loans will becut to 3.5 per cent when they aretransferred to the 750bn EuropeanFinancial Stability Facility (EFSF).Critics argue that this constitutesreward for failure after Greecemissed its deficit target by nearly oneper cent last year.

The maturity of Greeces debtswill also be doubled from 7.5 years to15 years. This is considerably higherthan the maturity of its originalthree-year rescue funds.

Eurozone leaders claim that thepackage will cut Greeces debt by 12per cent of GDP, from its current levelof 140 per cent.

The Institute of InternationalFinance (IIF) announced that the private sector will voluntarily takepart in the deal as Greece will tem-porarily default as its obligations aretransferred to the EFSF.

The aim is for 90 per cent of pri-vate creditors to take part in the deal,which, it is said, will reduce Greecesdebt burden by54bn between nowand mid-2014 and by135bn by 2020.

The average maturity of Greeces

private debt will be extended fromsix to 11 years and the current stockof debt reduced by13.5bn.

The stock of private sector debtcould also be cut potentially muchmore through a debt buyback pro-gram that is to be defined by the offi-cial sector. The EFSF is likely to bethe buyer.

For private creditors, the likeli-hood is that the net present value ofthe Greek bonds that they hold willeffectively be cut by 20 per centthrough a bond swap.

However, the aim is to offset thiscut in net present value by collateral-ising the new bonds with triple-Arated bonds.

The EFSF will also receive a rangeof new powers from the EuropeanCentral Bank (ECB). It will be allowedto intervene in secondary bond mar-kets in an attempt to bring down yields, although many argue thatthis power never proved very effec-tive when exercised by the ECB andsaddled the Bank with some 77bn injunk bonds.

The EFSF will also have a menuof instruments to cut down sover-

eigns debt, for example by buyingdebt from private creditors and cut-ting its interest rate.

Crucially, the EFSF will also beallowed to give sovereigns loans inorder to recapitalise defunct bankingsystems. This could prove necessarybecause if Greece is deemed to havedefaulted and the voluntary natureof private sector involvement notaccepted, its banks will no longer beable to use its debt as collateral formuch-needed ECB liquidity funding.

Eurozone leaders are keen toemphasise the exceptional natureof Greece. However, it is not clear ifmarkets will be convinced that othersovereigns will not require a similarlyrescue. Ireland and Portugal are bothkeen for cuts in the interest rate oft h e i rbailouts.But theE F S Fremainsinsuffi-cient tobail outS p a i nor Italy.

BY JULIET SAMUEL

EUROZONE

FSA FINES WILLIS ARM A RECORD6.9M The UK arm of Willis, the numberthree global insurance broker, hasbeen fined a record 6.9m by the Citywatchdog for anti-bribery and corrup-tion failings related to commissionspaid overseas. The fine is the largestmeted out by the Financial ServicesAuthority for failings in systems andcontrols aimed at preventing anddetecting financial crimes.

JOHN LEWIS TO OPEN 10 CITY CENTRESTORESJohn Lewis is delivering a rare piece ofgood news for Britains beleagueredhigh street, with moves to open 10smaller stores in city centre locationsover the next five years. The staff-owned department store chain,beloved of better-off shoppers, plans

to open stores of between 65,000 sq ftand 100,000 sq ft, creating 3,000 jobs.

ICAHN SPARKS MOTOROLA SURGEWITH PATENT PROPOSAL

Motorola Mobilitys shares gainedmore than 12 per cent after CarlIcahn, Motorolas largest shareholder,urged the US smartphone makersmanagement to explore options forits extensive patent portfolio. MrIcahns move comes shortly after the$4.5bn sale of a portfolio of morethan 6,000 wireless patents held byNortel Networks, the bankruptCanadian telecom equipment group.

SCIENTISTS WARN OVER APEINGHUMANSExperiments to make animals look,sound or even think like people couldsoon be on the research agenda,according to a UK scientific body thathas warned politicians and thepublic to start considering the impli-cations. The Academy of MedicalSciences has spent the past 18months investigating present and

future research into animals con-taining human material.

NETWORK RAIL SAYS ITS REPUTATIONMEANS THAT IT JUST CANT GET THESTAFFNetwork Rail has claimed that it isstruggling to hire talented managers because some people believe thattheir careers could be damaged bythe companys reputation. DavidHiggins, chief executive, said thatensuring the company had high-qual-ity people to manage the UKs rail sys-tem was the single biggest issue hefaced.

CASTLESTONE RAIDED BY REGULATORAFTER COMPLAINTThe Financial Services Authority raid-ed the offices of the London fundmanager Castlestone Managementafter receiving a complaint about thecompany. The regulator confirmedthat it visited offices near Sloane

Square and in Chichester yesterday aspart of an ongoing investigation.

IEA TO STOP SELLING EMERGENCY OILDESPITE HIGH PRICESThe International Energy Agency (IEA)will stop selling oil from its emergencyreserves, following its historic releaseof stocks in the past month. The globalenergy watchdog put 60m barrels onto the market in an attempt to damp-en prices, which had soared above$120 per barrel in the wake of lost sup-ply from war-torn Libya.

UK CAR PRODUCTION RECOVERS AFTERJAPAN EARTHQUAKECar production in the UK bounced back last month as manufacturersrecovered from disruption caused bythe Japanese earthquake. The numberof cars made in the UK rose 1.8pc inJune compared with last year, new fig-ures reveal. This provides new hopethat GDP f igures next week will show

growth in the economy during the sec-ond quarter of 2011.

FOUR MORE CREDIT SUISSE BANKERSCHARGED IN TAX CASEUS prosecutors yesterday chargedCredit Suisse Groups former top off-shore banking executive in North America and three other seniorbankers with defrauding the US gov-ernment, increasing pressure on theSwiss bank over US customers secretaccounts that the officials say wereused to evade taxes.

AMD STRUGGLES TO FIND NEW CEOMillions of Americans are unem-ployed and looking for work, yet atleast one well-paying job has goneunfilled this year. Advanced MicroDevices Incs search for a new chiefexecutive has entered its seventhmonth, a delay seen as an indicator ofthe challenges facing the chip maker'snext leader. A number of prominent

executives have turned downapproaches by AMD.

WHAT THE OTHER PAPERS SAY THIS MORNING

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GREECES opposition Left Coalitionparty expects public anger over gov-ernment austerity measures to rise tonew heights after the summer andforce a snap parliamentary election,its leader said yesterday.

Often blamed by the socialist gov-ernment for inciting violent protestsin May and June, the smallest of fiveparties in parliament opposes theEuropean Union/InternationalMonetary Fund loan that was securedby announcing austerity moves.

Those who think the squares willnot fill up again in September aredeluding themselves, Left CoalitionPresident Alexis Tsipras said as EUleaders worked on a second bailoutfor Greece.

People cannot accept they have nofuture, no job. They feel despair andrage.

In almost daily rallies in May and June, thousands of people gatheredin Syntagma Square in central Athensto chant slogans against the austeritymoves and political corruption. Theprotests were sometimes violent, andriot police used teargas against black-clad youths.

Protests have eased this month,and many Greeks are now on vaca-

tion, but people will return to work

in September to even deeper austerityand smaller pay cheques after taxincreases.

When you go from 400,000 unem-ployed to one million, what do youexpect? Tsipras said. We warnedthem the medicine they are prescrib-ing will be worse than the disease.

He said he expected a snap election within months because heightenedpublic rage would force the rulingsocialists to seek a new mandate.Opinion polls show no single partywould win outright and a coalitiongovernment would be the likelyresult.

The prime minister has an obliga-tion to seek national elections,"Tsipras said.

We do not support violence orincite violence. Its the system thatturns violent when it feels the earthshaking beneath its feet.

Summer of

riots to takeover Greece

THE WHITE House last night vehe -mently denied that President BarackObama had come to a deficit reduc-tion agreement with Republicansthat did not include tax hikes.

Anyone reporting a $3 trillion(1.8 trillion) deal without [highertax] revenues is incorrect, WhiteHouse spin doctor Dan Pfeiffer said.

The White House had earlier refut-ed reports that President Obama wasclose to sealing a deal withRepublican House of RepresentativesSpeaker John Boehner.

Some Democrat Senators arebecoming increasingly tetchy aboutthe Presidents behind-closed-doorstalks with senior Republicans.

The ruling party is holding out forhigher taxes to fund entitlement pro-grammes such as Medicare.

No debt deal yet,says White House

BYHARRY BANKS

EUROZONE

Opposing the latestbailout plan, theGreek Left Coalitionparty has warnedof more riots tocome from publicunrest at spendingcuts

Picture: Reuters

BY JULIAN HARRISUS ECONOMY

News 3CITYA.M. 22 JULY 2011

IS THE EURO NOW SAFE?

Q.DOES THIS PLAN BRINGGREECES DEBT BURDEN DOWNBY ENOUGH?

A.Not really. Even if it manages todeliver the promised 12 per centcut to Greeces debt pile, which is 140per cent of GDP, many commenta-tors do not regard this as sustain-able, and the programme is subjectto Greece getting its spending undercontrol from now on.

Q.WHAT DOES GREECE HAVE TODO?A. It has to meet its deficit targetsin order to continue to qualifyfor its latest rescue funds. Given its

failure to meet pre-vious targets, thatlooks unlikely. Moreover,the country is hamstrung by beinglocked in a deep recession thatmeans even if it can cut its spending,it will be hard to boost revenues.

Q.WHAT ABOUT THE OTHERINDEBTED COUNTRIES?A.Capital Economics JonathanLoynes says the plan is aimedvery specifically at Greece, with lit-tle to convince markets that Europecould handle similar problems inSpain or Italy. That means panic and

contagion could well continue.

Q A&

ANALYSIS l Euro vs Dollar

$

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RISING government spending sawpublic borrowing hit 14bn lastmonth, official figures unveiled yes-terday showed.

Public sector net borrowing (PSNB) was up 300m from the same timelast year, and about 1.5bn abovemarket expectations, according tothe Office for Budget Responsibility(OBR).

Central government spending was51.96bn in June up from 49.54bnin June 2010. Total debt now totals944.3bn, up by over 140bn from a

year ago.This is certainly not a step in the

right direction, said Nida Ali of theErnst & Young Item Club.

The government still has a verylong way to go in order to meet its tar-get of reducing borrowing by 20bnthis year. With nine months to go itneeds to reduce borrowing by morethan 2bn a month compared withlast years figures.

Yet there was some relief for chan-cellor George Osborne in positive revi-sions to the data. PSNB(ex-interventions) was revised down

by 0.2bn for May, 1.2bn for Apriland by a cumulative 1.1bn for 2010-11, explained Nomuras Philip Rush.

And retail sales came in aboveexpectations, with the value of salesrising four per cent annualised in

June and the volume of sales up 0.4per cent.

The last three months saw a 0.6 percent rise in the sales by value, and a0.2 per cent increase by volume.

Meanwhile, mortgage lendersexpect home loan approvals to holdsteady in the coming months andsome see a risk of more people losingtheir homes this year, a Bank ofEngland survey showed yesterday.

The major UK lenders expectedapprovals for house purchase toremain at current levels over the com-ing months, the Trends in Lendingreport said. Some major UK lendersnoted upside risks to arrears.

Public sectorborrowing at14bn in JuneBY JULIAN HARRIS

UK ECONOMY


Chancellor George Osborne faces an uphill battle to cut the deficit Picture: Reuters

CITY VIEWS: ARE YOU WORRIED ABOUT THE DEFICIT? Interviews: Alex Sainty, Phoebe Torrance

Yes, I am worried. But given the pre-carious economic climate, I feel Osborneis doing an admirable job, and I think weshould appreciate how unfair it is that

he is left cleaning up the mess causedby our previous government.

RICHARD SMART | ARGO INSURANCE

I am not worried. The government wantsto reduce the deficit at any cost, and thismakes me confident that they will succeed.The only problem I have with

Osbornes efforts so far is that heis going about things too quickly.

REMCO VAN EEUWIJK | MN SERVICES

I am seriously concerned about the deficit. But I believe the steps that George Osborne is takingare on the right track. From what I understand, when Osborne first proposed his deficit plans, theywere lauded. So, I have full confidence that he will be able to walk us through the storm.

CHARLIE HENDERSON RUSSELL | AMLIN INSURANCE

JAPANS exports rose in June and thepace of annual declines slowed,

bringing the trade balance back intosurplus as factory output and salessteadily recover from the 11 Marchearthquake, tsunami and nuclearmeltdown.

Exports jumped 5.4 per cent fromMay and were down 1.6 per cent from

June 2010, less than a median fore-cast for a 4.1 per cent annual decline,

Ministry of Finance data showed yes-terday.

Japans exportsbounce back up

ASIAN ECONOMY

CHINAS factory sector shrank for thefirst time in a year in July, a surveyshowed yesterday, feeding worriesamong the countrys main tradingpartners that its growth is unsustain-able and could lead to a slump.

The HSBC flash purchasing man-agers index (PMI) fell to 48.9 in July,suggesting the manufacturing sectorcontracted at its fastest pace sinceMarch 2009, as monetary policy

tightening and slack global demandweighed on the sector.

Manufacturingin China shrinks

ASIAN ECONOMY

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MORGAN Stanleys stock jumped 8.9per cent after it unveiled better-than-expected quarterly results yesterday.

But the bank still made a pre-taxloss of $655m (401m) on the back ofpoor performance from its jointJapanese venture with Mitsubishi UFJ.

The results saw the banks pay-to-revenues ratio shoot up to 57 per cent versus 49 per cent in the same quar-ter last year which it blamed on theJapanese loss. Overall, the bank hasput aside $4.3bn for compensationcosts in the quarter, versus $4.4bn forthe same period last year.

Like its rivals, the bank saw rev-enues from its trading business plum-met due to declining client activity.

Revenues from sales and trading inthe banks fixed income and com-modities division nearly halved, from$2.7bn last year to $1.8bn in the sec-ond quarter of 2011.

However, revenues from commodi-ties products actually increased.

And Morgan Stanley managed toshake off the general malaise in equi-ties, posting a 21 per cent rise in rev-enues to $1.7bn.

The investment bank also

improved upon last year, clocking an18 per cent increase in advisory feesto $385m and an 11 per cent rise inunderwriting revenues to $623m.

Its wealth management businessalso saw a strong 11 per cent rise inrevenues to $3.4bn.

However, the bank has some workto do on its capital reserves, which itsaid were 11.8 per cent in core tierone capital but only under Basel Irules. The loss in its Japanese venturemeans that Mitsubishi UFJ will haveto deliver a $370m capital injectionunder the terms of the partnership.

US private equity firm Blackstonealso beat forecasts yesterday with$703m second quarter net income,adding that its funds now have $31bnof dry powder available to invest.

US MEDICINE administrator ExpressScripts said it had bought its rivalMedco Health Solutions for $29.1bn(18bn) yesterday.

The deal creates a US powerhousein managing drug prescriptions butinvestors remained unsure that itwould get past regulators on antitrustgrounds.

It would give the combined groupcontrol of at least 30 per cent of the

US drug benefits market and greaterleverage to negotiate lower drugprices for its clients such as USemployers.

In a statement, Express Scriptschief executive George Paz said thetakeover was the right deal at theright time for the right reasons.

He defended the deal as helping todrive out waste in the healthcare sys-tem and protect people from risingcosts. The merger with Medco will

accelerate our efforts to creategreater efficiencies in the healthcare

system, he said.Express Scripts will pay $71.36 per

Medco share, a 28 per cent premiumto Medcos closing price onWednesday. Medco shareholders willreceive $28.80 cash and 0.81 ExpressScripts share for each Medco share.

Medco shares rose yesterday butremained below the offer price asinvestors doubted the deal would winthe approval of regulators.

Its like a coin flip right now about

whether it gets approved or not,Gabelli & Co analyst Jeff Jonas said.

US prescription firm Express Scriptspens 18bn takeover of rival Medco

THE second-quarter earnings of RoyalBank of Scotlands global bankingand markets business will reflect the weakness in fixed-income marketsdue to debt woes in the Eurozone, anexecutive has said, warning that bondmarkets will remain tough in thethird quarter.

The comments come a few daysbefore RBS, 83 per cent owned by the

UK government, announces second-quarter earnings. Global banking and

markets account for more than halfof the banks core profit.

It wouldnt surprise you to notethat the entire fixed-income marketsare more challenged in the secondquarter than they were in the firstand we will be representing thattrend, John Hourican, chief execu-tive of RBSs global banking and mar-kets business, said.

We have a biased business towardmacro, fixed-income. I would have to

say for the third quarter the marketscontinue to be challenging.

RBS warns that Eurozonecrisis will hit its earnings

BANKING

THE Financial Services Authorityintends to launch an inquiry intothe collapse of HBOS once itsenforcement investigation of thefirm is complete, FSA chief HectorSants revealed yesterday.

In a letter to Andrew Tyrie MPpublished yesterday, Sants revealsthat as soon as the current investiga-tion is closed, the FSA intends tostart work on a report providing anaccount of the developments over

the years preceding the crisis whichput HBOS in an unsustainable posi-

tion in autumn 2008.The FSA is currently tackling a legalquagmire surrounding its inquiryinto RBS, which provoked a publicoutcry last year when it concludedthat no major management failingshad taken place but failed to publisha report to back up the findings.

That means that the FSA will bekeen to establish at the outset thatany report on HBOS can be pub-lished without legal restrictions.

FSA will launch inquiryinto the failure of HBOS

BANKING

JAMES Vernon, one of the founders ofEuropes biggest hedge fund BrevanHoward, is to leave the firm inSeptember, City A.M. has learned.

Vernon, who has served as thefirms operating officer since found-ing it with four Credit Suisse FirstBoston colleagues nine years ago, toldCity A.M. when called that he couldnot comment on his departure.

The company has simply said he isleaving to pursue other interests.

Vernons colleagues were told of hisdeparture in the monthly newsletterof its primary fund, BH Global.

We wish to inform you that JamesVernon has decided to leave BrevanHoward in September to pursue otherinterests, it said in the newsletter.James will continue to act as a non-executive board member of BrevanHowards non-UCITS funds. We thankhim for his contribution and wishhim well in his future endeavours.

Vernon is only the second of thefunds founders to leave, after Jean-Philippe Blochet left in 2009. Thefounders are notoriously secretiveand only its co-chief executive NagiKawkabani regularly speaks publicly.

But the firm has been a remarkablesuccess story, growing to a giant$32.5bn (20bn), and is shortlisted inCity A.M.s awards, in the alternativemanager of the year category.

This story was first reported in theFinancial Times.

BrevansVernon to

leave firmFUND MANAGEMENT

CITY experts warned yesterday thatnew rules governing UK takeovers

ignored the concerns of market par-ticipants and could further damagean already sluggish market for deals.

New changes to the Takeover Codesay bid approaches must be madepublic from the outset and all inter-ested parties named, while the putup or shut up deadline has been cutto just 28 days.

Deal protection incentives such asbreak fees will been banned from 19September and bidders must disclose

their financing plans and intentionstowards the targets employees, theTakeover Panel said.

But deal advisers said the ruleswould make bidders wary of explor-

ing ideas for fear of being exposed.While the ban on break fees prob-ably wont be a show-stopper in allcases, theres little doubt that thechanges to rules on virtual bids will be, said Allen and Overy partnerRichard Cranfield. Publicity shypotential bidders will be worried andmay be less willing to start negotia-tions or more inclined to withdrawfrom negotiations rather than riskbeing outed under the new rules.

Others said the Panel had ignoredvalid concerns voiced by many whoresponded to its consultation.

Market concerns were voicedagain on identifying bidders and the

prohibition on break fees but thepanel is going to implement thechanges it published in March with-out material amendment, saidNorton Rose partner Paul Whitelock.

The catalyst for the changes wasthe controversial takeover of iconicchocolate maker Cadbury by US foodmaker Kraft in 2009. The rules werecriticised for failing to protect targetsfrom hostile bids and allowing shortterm investors to vote sales through.

New rules may bar takeoversBYALISON LOCK

REGULATION

Wall St cheers

after MorganStanley jumpsBY JULIET SAMUEL

BANKING

BYALISON LOCK

PHARMA


ANALYSIS l Morgan Stanley

$

15 Jul 19 Jul18 Jul 20 Jul 21 Jul

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22.50

21.50

21.00

20.50

22.00

24.2021 Jul

MICROSOFT posted a 30 per cent risein its fourth-quarter profit yesterday,smashing market forecasts, as sales ofits Office software and Xbox gamesconsoles continued to soar.

Revenues hit a record high of$17.4bn (10.8bn), up eight per centfrom the same quarter in 2010, whilenet profit was $5.9bn, up from$4.52bn in 2010.

But revenues from its Windowsoperating system fell one per cent in

the quarter as sales of new PCsremained soft, and its share price fellmarginally in after hours trading onthe news.

Its full-year revenues were 12 percent up on the year to June 2010 at$69.9bn, while full-year net incomejumped 23 per cent to $23.2bn.

But Windows full year revenueswere two per cent down and analystsfretted that growing demand forApple products and tablet computerscould hit Microsoft hard. Its sharesfell 0.3 per cent after hours.

Microsoft profits up 30pcbut market frets over PCsTECHNOLOGY

Microsoft chief executive Steve Ballmer delivered record revenues

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A SQUABBLE broke out yesterday between the Treasury SelectCommittee and the FSA, after thefinancial regulator brushed off rec-ommendations from MPs.

Parliamentarians have said thereought to be a years delay before theimplementation of the RetailDistribution Review (RDR), scheduledfor January 2013, to give financialadvisers more time to comply.

The review will bring about a struc-tural change for the industry, most

notably affecting the provision offinancial advice.

But the FSA swatted down the com-mittees recommendations withinhours of them being released to thepress, angering the committee chair-man, Andrew Tyrie MP.

The Treasury Select Committeereleased its report on the RDR to jour-nalists last Thursday, embargoeduntil midnight on Friday.

Tyrie said in a letter to HectorSants, chief executive of the FSA: Wedepreciate the Authoritys action. It was precipitate, giving the impres-sion that no adequate considerationhad been given to the arguments for

the delay we recommended. This isunacceptable.

MPs fume at the FSA fordismissing reform adviceREGULATION

BANKNOTE maker De La Rue yester-day said business over the past threemonths had been satisfactory and itsturnaround strategy was working,but warned that some of its divisionswere still facing headwinds.

Its currency printing division sawhigh volumes while its identity sys-tems division, which produces pass-ports, also performed strongly, De LaRue chairman Nicholas Brookes said

in a statement.But its paper volumes, which have

been dogged by production problemsover the past year, were lower thanprint, as the company expected.

It also said market conditions forits security products division, whichmakes high security features for doc-uments, remained challenging.

De La Rue said the improvementplan, designed to restore the group tomore than 100m operating profit by2014 at the latest, was making goodprogress.

And in a show of its confidence in

the outlook, it also maintained itsdividend payout at 28.2p per share.

De La Rue is fighting to return toprofitability levels seen in 2009 afterpaper production problems last Julycaused its largest client to suspend itsorder, and it is yet to reconfirm that.

The company also fought off theattentions of French rival Oberthur Technologies in January and Junethis year. De La Rues chief executive Tim Cobbold, who joined lastDecember, has pledged to lead arecovery to strengthen the firm.

De La Rue produces more than 150

national currencies, including newlyindependent South Sudan.

De La Rue says turnaround ison track but business mixedMANUFACTURING

US FOOD and drink maker PepsiCoscaled back its full-year earnings fore-casts on ongoing economic uncertain-ty yesterday.

Pepsi said performance in its NorthAmerican drinks business was worsethan expected, due to weakened con-sumer demand and intensifying com-petition, which has made it difficultto raise prices to offset soaring com-modity costs.

Of the three factors impactingNorth America beverages inflation,consumer demand and pricing theconsumer demand picture is themost concerning to us at this point,chief executive Indra Nooyi told ana-lysts on a call.

PepsiCo now expects 2011 earningsto grow at a high single-digit rate,from the $4.13 per share it earned in2010, reflecting greater uncertainty

regarding macroeconomic and con-sumer trends for 2011, cost inflationand investment in emerging markets.

Its net income in its second quarterrose to $1.89bn (1.2bn) or $1.17 pershare from $1.6bn or 98 cents pershare a year earlier.

Pepsi warns onUS demand andcost inflationCONSUMER

IS YOUR BOSS A

SLAVE-DRIVING PSYCHO?

NEARLY 40 per cent of Cable & Wireless Worldwide (CWW) share-holders refused to back new chiefexecutive John Plutheros controver-sial incentive scheme yesterday.

A further 27 per cent withheld sup-port for the embattled firms remu-neration plans during a humblingannual meeting for the telecomsgiant. While CWW was braced for aprotest vote given its precarious finan-cial position, the final number waseven worse than sources close to thefirm were expecting.

Shareholders are furious Plutheroand finance director Ian Gibson couldreceive shares worth three times theirsalaries next year. That could leave

Pluthero with more than 2m worthof shares, despite CWW revising downits forecasts.

Shares in the firm have slumpedsince the profit warning last month the third since its demerger fromCable & Wireless Group. The news

was accompanied by the resignationof former chief executive Jim Marsh,described by one analyst as theleader of the most loathed manage-ment team in the FTSE.

The vote marks one of the mostsevere shareholder revolts so far thisyear. Afren and EasyJet both faced dis-sent of more than 50 per cent overtheir remuneration plans.

FirstGroup, Thomas Cook andTullow Oil all had votes in the high40s and Dominos Pizza, TravisPerkins, WPP and Ladbrokes havealso endured dissenting investors.

Revolt overPluthero payBY STEVE DINNEEN

TELECOMS

Cable & WirelessWorldwide chiefexecutive John

Pluthero facedthe ire of share-holders yester-day.

ANALYSIS l Cable and Wireless Worldwide

p

15 Jul 18 Jul 19 Jul 20 Jul 21 Jul

47

45

43

42.9921 Jul

SHAREHOLDER REVOLTS ON REMUNERATION-RELATED ISSUES (Source: Manifest VoteWatch)

Company Event Date Dissent

Afren plc 06 June 2011 59.82%

easyJet plc 17 February 2011 54.96%

FirstGroup plc 15 July 2011 48.95%

Thomas Cook Group plc 11 February 2011 46.79%

Tullow Oil plc 12 May 2011 46.20%

Domino's Pizza UK & Ireland plc 30 March 2011 43.15%

Travis Perkins plc 26 May 2011 42.40%

WPP plc 02 June 2011 41.76%

Ladbrokes plc 13 May 2011 40.62%

Cable & Wireless Worldwide 21 July 2011 38.8%

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DUTCH chemicals group AkzoNobelpromised new, unspecified measuresto improve its earnings as it reporteda 10 per cent drop in second-quartercore profit, hurt by rising costs and

weak demand.The worlds biggest paints compa-

ny was hit by faster-than-expectedincreases in prices of raw materialssuch as pigments and oil-relatedresins and solvents.

It has struggled to offset thisthrough product price rises due to

weak demand in European and USconstruction markets. The group

said raw material costs have risen 20per cent year on year, higher than itsforecast for a 15 per cent rise.

It reported quarterly earningsbefore interest, tax, depreciation andamortisation (EBITDA) before one-offsof551m (486m), down from 614ma year ago having warned last monththat profits would fall.

I am not satisfied with our per-formance in the quarter, despite posi-tive volume and pricingdevelopments. Recent months have

been challenging and it does taketime for price increases to work

through, outgoing chief executiveHans Wijers said in a statement.

AkzoNobel vows actionto boost flagging profitINDUSTRIALS

SCOTTISH & Southern Energy (SSE) yesterday became the third largeBritish energy supplier to hike its fuelprices this summer.

Electricity bills will increase by 11per cent and gas will go up by 18 percent from 14 September, affecting8.8m households in Britain, the utili-ty firm warned in a statement.

Customers on duel fuel optionswill see their annual bill rise by 171

to 1,265.I am sorry that we have had to

announce an increase in householdenergy prices at a time when manypeoples budgets are under strain, butthe upward pressures on prices have

become too great, said SSE chiefexecutive Ian Marchant.

He blamed the move on rising wholesale prices and said this wascaused in part by the earthquake andtsunami in Japan and politicalupheaval in the Middle East.

SSE follows Scottish Power andCentrica in raising energy bills from

this summer as all energy providersstruggle to deal with surging whole-

sale prices. Analysts, however, esti-mate that SSEs bills will be slightlycheaper by one to two per cent.

Energy secretary Chris Huhne saidthe price hike was unwelcomednews for households and that hisplans for power market reform wereaimed at reducing the UKs relianceon expensive fossil fuels.

The energy supplier said in its inter-im management statement, alsoreleased yesterday, that it expected todeliver a larger part of its pre-tax prof-

its for 2011/12 in the second half of theyear, when tariff rises will take effect.

Scottish and Southern thelatest utility to hike fuel billsUTLITIES

LONDON & Stamford Property (L&S)has stepped up plans to expand itsresidential portfolio, agreeing to buymore than 100 residential propertiesin north London for 49.1m.

The real estate developannounced yesterday it had bought107 private residential units and 31car parking spaces in Islington fromSeward Street Developments, bring-ing its total portfolio to around140m.

In its interim management state-ment, the company said it hadpledged to grow its residential portfo-lio to 300m given the large demandfrom potential first-time buyers andpositive rental metrics.

L&S, led by industry veteranRaymond Mould, is continuing itsspending spree following the acquisi-tion of One Carter Lane for 75m on

30 June.L&S also announced it had secured

16 new leases since April 2011 for theMeadowhall, shopping centre inSheffield, its joint venture withBritish Land to develop the UKslargest out-of-turn retail destination.

Spending spreeplans at London& StamfordPROPERTY

IS YOUR BOSS A

SEX CRAZED NYMPHO?

GREAT Portland Estates (GPE) saidthe value of its property assetsincreased by 3.8 per cent in the firstquarter this year, driven by demandfor West End offices and near-termdevelopment schemes.

The London property developersaid its portfolio valuation increased

by 58.4m to 1.6bn in the threemonths through June. Net asset

value (NAV) increased by 4.2 per centto 376p a share from 362p at the endof March.

The depreciation of the poundtogether with a lack of new officespace in the West End fuelleddemand from internationalinvestors, with London assets viewed

as a safe haven. Rental value grew 2.1per cent.

Investor demand for centralLondon commercial property contin-ued unabated during the quarterand with limited supply, we expectmuch of it to remain unsatiated for

some time to come, said chief execu-tive Toby Courtauld.

In May, the company was alsogiven the green light to buildHanover Square in Mayfair into205,400 square feet of office space,retail units and residential apart-ments, further boosting the value ofits overall portfolio by 25 per cent.

GPE also sold four non-core assetsfor 111m -- 7.2 per cent ahead of

book value.Shares in the company, up 48.6 per

cent over 12 months, dipped 0.8 percent yesterday to close at 436.1p.

Great Portland

boosts its NAVBYKASMIRA JEFFORD

PROPERTY

ANALYSIS l Great Portland Estates

p


450

440

430

436.1021 Jul

Great Portland Estates was given the go-ahead to develop Hanover Square in May

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The current Russian presidentDmitry Medvedev backs the propos-als, as does Nikolai Kosov, the deputychairman of state-owned VEB bankand a wonderfully friendly

Anglophile who is, apparently, aman to do business with. There is atarget, there is a budget and with afair wind behind it, the building proj-ect should succeed, said a sourceclose to the developments.

POOLING RESOURCESGOOD to see JP Morgans traders pool-ing resources.

The Capitalisthears one JP MorganChase boss regularly lends his num-

ber two his Porsche for the weekendso the junior can impress at socialoccasions weddings, visits from hisFrench girlfriend etc.

Disaster struck, however, when thetrader got so drunk one weekend thathe lost all his personal possessions:phone, wallet and the keys to his

bosss car. Only the fact that thereprobate is something of afinancial star at the bank stopped theloss becoming a matter for HR

CAPTAIN AMERICANEWS of the merger between CityPR firm Finsbury and the US consul-tancy Robinson, Lerer &Montgomery was not released inthe usual, professional Finsburymanner, so it didnt receive as many

column inches as it deserved.Nevertheless, the merger of thetwo Sir Martin Sorrell-owned com-panies is still generating a fairamount of chat in the City. Doesthis mean Finsbury founder RolandRudd, promoted to chairman of thenew RLM Finsbury, will spend lesstime on his London clients now hehas a bigger platform to operatefrom, wondered one rival? Not so,say friends of Rudd, who reckon he

would be unlikely to do anythingthat would jeopardise Finsburysposition at the forefront of UK M&Aand IPO work.

And where now for Rudd, nowEurope has become too small andhe has added America to his remit?

Outer space, according to onesource, who predicted Rudd willtravel along Richard Bransons linesand take a look at expanding

onto Mars...

GRADUATION DAYCELEBRATIONS at Kentz Corporation,the engineering and constructionfirm that listed on AIM in February2008, which today graduates to themain market of the London StockExchange following three years ofsignificant growth.

While the investor team irumoured to be splashing out on aliquid City lunch, chief executiveHugh ODonnell is said to be takinga well-deserved break doing what heloves most when he is not working:extreme sports. It will be a survivalof the fittest

POETS CORNERIT WAS only a matter of time beforethe muse called on Felix Dennis(below), chairman of DennisPublishing and poet, to write a few

verses on the phone hacking scandal. And here they are although

sadly, for reasons of space, TheCapitalistcan only bring you the firstand last verses of the epic Oh DoNot Call Them Vultures.

Oh, do not call them vultures,for vultures love dead meat. Andrarely don disguises or lurk acrossthe street. Not so the tabloid jour-nalist, who craves his victims fresh,to feed a willing multitude thatlusts for living flesh.

Oh, do not point the finger; whomade them what they are? Who

built the Sun and Mirror, the Screw You and the Star? No patient in acancer ward excoriates their nurse the blame lies in our appetite: forscandal, or for worse!

FOREIGN EXCHANGE ASMOSCOW MOVES TO

BECOME WORLD-CLASSCAN MOSCOW ever become a world-class financial centre?

BP may have had its fingers burnedover the ill-fated Rosneft deal, but

Anglo-Russian relations are beingimproved behind the scenes follow-ing a Moscow-London foreignexchange to set up the MoscowInternational Finance Centre (MIFC).

First, Lord Mayor Michael Bear the co-chairman of the MIFC LiaisonGroup with Russian businessman

Alexander Voloshin flew to Moscowto meet Moscow Mayor SergeiSobyanin with City representativesincluding Danny Corrigan, managingdirector of rouble products at ICAP;Howard Snell, chairman of OtkritieSecurities; Axel van Nederveen, treas-

urer of EBRD; and Bob Foresman,head of BarCap Russia.

Returning the favour, Bear thenhosted lunch at Mansion House forthe Russian finance minister and

deputy prime minister AlexeiKudrin, who landed in London witha group of Russian bankers andindustrialists to continue the talksabout how to make Moscow moreattractive to foreign investors.

Like a grown-up foreign exchangethen although no-one tried theirfirst cigarette on the trips; they justtalked regulation, equities, deriva-tives and marketing in a bid tomake Moscow a respected centreof commerce. Much of the marketis well-developed, insistedCorrigan, who spent two years

working in Moscow at ING.The Capitalistalso hears plans are

underway to build a Canary Wharf-style physical base for the finance

centre, to be located on the out-skirts of Moscow, as part of a proj-ect that is shaping up to become a

vote-winner in the Russian presi-dential elections on 4 March.

Clockwise from topleft: Dmitry Medvedev, SergeiSobyanin, MichaelBear, Alexei Kudrin

The proposedCanaryWharf-style

developmentfor Moscowwill be a vote-winner in thepresidentialelections

The Capitalist12 CITYA.M. 22 JULY 2011

EDITED BY

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

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POSITIVE first-half results and out-look from British outsourcing groupCapita yesterday were overshadowedby uncertainty over when the compa-ny will return to organic growth.

Capita, which runs the TeachersPension Scheme, TV licensing for theBBC and the Criminal RecordsBureau, said underlying pre-tax prof-it rose seven per cent to 174m for thesix months to 30 June, in line with

market expectations and comparedwith 163m during the same period

last year.Capita said that after two reason-

ably subdued years, strong contractwins and a healthy bid pipeline paint-ed a more promising picture for 2012,where the company expects revenueto swing back towards organicgrowth.

The fact that we have had such astrong period of sales wins in the f irsthalf of this year will tend to be a goodleading indicator for revenue growthin 2012, chief executive Paul Pindar

said.Revenue growth rose by three per

cent to 1.4bn, as cost savings andacquisitions helped offset a UK mar-ket recovering from a recession andcontracts delayed by government aus-terity measures.

The company talk a good game forsecond half prospects and beyond.However, we believe Capita will ulti-mately be judged on when organicgrowth will turn, which we do notthink will materialise until the sec-ond half of 2012,

Shares in the firm closed down 1.6

per cent at 686p, valuing Capita at4.27bn.

Upbeat outlook from Capitafails to address growth fearsSUPPORT SERVICES

SWISS drugmaker Roche raised its full-year earnings target for 2011 yesterdayas cost-cutting protected its first-halfprofitability from the impact of thestrong Swiss franc.

The Basel-based group is now aim-ing to grow core earnings per sharearound 10 per cent in local currenciesthis year, after previously guiding forhigh single-digit growth.

But it stuck to its target of low sin-gle-digit sales growth in local curren-cies as austerity measures on bothsides of the Atlantic continue to weigh,while the rallying Swiss franc also ateinto its top-line in the first six monthsof the year.

Roches first-half core earnings pershare slipped four per cent to SwFr6.68(5.00), though this was still ahead ofthe average estimate of SwFr6.48.

All in all, we expect investors will

be modestly relieved by these results,which confirm management is mean-ingfully tackling Roches cost base,Deutsche Bank analysts said in a note,adding that this could be at least partyoffset by slowing underlying sales ofpharmaceuticals.

Roche predictshigher earningsdue to cost cuts

PHARMA

IN CINEMAS NOW

ASTRAZENECA shares jumped twoper cent on yesterday, buoyed by USapproval for its new heart drugBrilinta as a rival to Plavix, theworlds second-biggest selling medi-cine.

But industry analysts warned theLondon-based drugmaker still had abattle on its hands to sell the productin the worlds top market, given itsinteraction with aspirin and expectedlaunch of cheap generic copies ofPlavix next year.

Investors had been on tenterhooksahead of the Food and Drug Administration (FDA) decision, andthe positive verdict more than offseta setback just 24 hours earlier for a

diabetes pill being developed withBristol-Myers Squibb.

Brilinta is a new competitor toSanofis and Bristol-Myers $9bn-a-year seller Plavix, which is now facingcut-price generic competition inmany markets.

Analysts, on average, expect globalsales of Brilinta of about $1.4bn in2015. That may rise in light of theFDA decision.

The fate of the new medicine iscritical for AstraZeneca which, unlikemore diversified rivals, is bettingeverything on its ability to bring suchnew prescription drugs to market. It badly needs new products as olderdrugs lose patent protection.

However analysts said that the factthat Brilinta interacts badly withaspirin a common drug amongheart patients could dent sales.

Astra rises ondrug approvalBYHARRY BANKS

PHARMA

ANALYSIS l AstraZeneca

p


3,160

3,120

3,080

3,040

3,000

3,092.00

21 Jul

Trimming the fat is not enoughCAPITA yesterday said the condi-tions for outsourcing were provingincreasingly buoyant. Such confi-dence should have had investors pil-ing into the stock, especially asearnings per share were up 12 percent and contract wins were doublethe same period last year at 1.1bn. The companies it signed majordeals with in the first six months MetLife, Zurich and the DVLA readlike a whos who of private sectorblue chips and big-spending govern-ment agencies. Investors werentimpressed however; the stock closeddown 1.6 per cent at 686p, havingtouched lows of 657.5p earlier in thesession.

Because the truth is things are far

from buoyant. Earnings were boost-

ed mainly because of efficiencies which pushed the operating mar-gin up 70 basis points to 13.8 percent and acquisitions. Still, it ishardly unsurprising that an out-sourcer has managed to trim thefat that is, after all, Capitas stockand trade.

What investors were desperate forwas a sign of when the firm expect-ed to return to organic growth, of which there was none. CollinsStewart thinks shareholders willhave to wait until 2012. Until suchtimes, the stock deserves to trade atfive per cent discount to the sector.

BOTTOMLINEAnalysis by David Crow

PRINCE ANDREW QUITS TRADE ROLE

PRINCE Andrew is to step down from his role as Britains trade ambassador, just fourmonths after his links to a sex offender prompted calls for him to quit the unpaidposition. The prince, 51, will be leaving his job as the government's special representa-tive for international trade and investment, which he has held since 2001 but willcontinue to travel the world in a less formal role to promote UK trade.

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NOKIA yesterday crashed to anexpected second quarter loss, com-pounding a miserable year for theformer smartphone market-leader.

Even factoring in a one-off pay-ment of430m from Apple over along-running patent dispute, Nokia

slumped to a loss of

368m(324m).It was dragged down by a 20 per

cent slide in revenues in its once-unbeatable mobile business, withoverall revenues tumbling sevenper cent to 9.3bn

It has now been superceded by

both Samsung and Apple in smart-phone sales, with little sign of turn-ing the Titanic. The Finnishmanufacturer said it sold 16.7msmartphones in the quarter, falling behind Apples sales of 20.3miPhones.

Fellow industry stalwart Ericssonalso announced torrid trading yes-terday. Investors ditched shares in

the mobile phone network suppli-er, after it missed earnings forecastsdue to a hefty job cut charge andforecast less profitable business inthe pipeline in Europe.

Its second quarter earnings fellwell below analyst expectations.

Meanwhile, Alcatel-Lucent con-

firmed it may sell a collection ofbusinesses that serve non-telecomoperator customers as part of bossBen Verwaayens ongoing turn-around plan.

Torrid trading dragsNokia to 324m lossBY STEVE DINNEEN

TELECOMS

ONLINE gaming firm 888 yesterdayreported an 18 per cent rise in first-half revenue, driven by a strong per-formance in its casino and pokerbusinesses.

It now forecasts full-year resultswill be marginally ahead of the cur-

rent market view. Analysts on aver-age expect the company to post afull-year pre-tax profit of $21m on arevenue of $257m. Yesterdays fig-ures did not include a profits figure.

The company, whose rivalsinclude the worlds biggest listed

online gaming company Bwin.partydigital, said strong trading has con-

tinued into July, led by poker. January-June revenue rose to

$154m from $130m last year.In April, British bookmaker

Ladbrokes terminated talks with888 after four months of wranglingover price with the companys

founding shareholders, causing 888shares to shed 20 per cent.

888 revenues storm past forecastsGAMING

NEWS | IN BRIEF

AT&T profit beats forecastsAT&Ts second-quarter profit and revenuebeat Wall Street estimates as it added moresubscribers than expected, despite the lossof exclusive rights to sell Apples iPhone. The

number two US mobile provider, which isseeking approval to buy T-Mobile USA for$39bn, added 331,000 net subscribers in thequarter, compared with the average analystexpectation for 91,000.

Colt earnings fall on voice revenueEUROPEAN telecoms provider Colt Groupsaw core earnings dip slightly in the first halfas a drop in voice revenue offset higher dataand managed services sales. The group,

which mainly serves businesses, reportedcore earnings of157.2m (139m), down 0.6per cent, on 3.5 per cent lower revenue of766.2 for the six months to the end of June,but said its order pipeline was improving.

PRIVATE equity firm BC Partners is setto buy Swedish cable company ComHem, in a deal that will value thefirm at about 17bn crowns (1.6bn),one of the largest buyouts in Europethis year, people familiar with the sit-uation said.

BC Partners beat rival Cinven toacquire the business, owned byCarlyle Group and Providence, that isSwedens market leader and provides

digital TV, broadband and telephony

to more than 800,000 customersacross the country. The deal follows on the heels of

Bain and Hellman & Friedmansagreement to buy Swedish alarmsfirm Securitas Direct, Europe's largestbuyout this year.

It also marks the first investmentby BC Partners from its ninth buyoutfund, which earlier this week securedabout 5.5bn from investors for newdeals.

BC Partners wins fight tobuy Con Hem for 1.6bn

TELECOMS

SHRINKING margins and a warning

of a final quarter slowdown took theshine off forecast-beating first-halfresults at Publicis.

A surprise pick-up in European adspending pushed the French firm tobetter than expected revenues.

The worlds third-biggest ad groupalso reiterated its previous annual tar-gets as revenue grew across allregions in the first six months of theyear.

The end of a two-year hiring freeze

saw costs tick up because of highersalaries, eroding margins by one per-centage point to 13.5 per cent. Analysts had estimated margins

would improve slightly or remainflat.Chief executive Maurice Levy said

yesterday he expects costs to be lowerin the second half of the year and saidhe is concentrating on improvingmargins and growing market share.

US rival Omnicom saw 7.2 per centorganic growth in the quarter. Thestrong sales performance by the twofirms bodes well for other large adagencies like WPP, Aegis and Havas,

which are set to publish results inAugust.

Investors had been watching forclues on how much Europes sover-

eign debt crisis has dented companymarketing budgets, as well as for thelingering effects of the Japan earth-quake and political unrest in theMiddle East.

With ad agency performance large-ly linked to the macroeconomic cycle,investors have been wary of the sector.

Publicis shares are down some fourper cent this year, WPP is down about10 per cent and smaller rival Havas isdown 12 per cent.

Shrinking margins hit PublicisBY STEVE DINNEEN

ADVERTISING

ANALYSIS l Nokia Oyj


4.30

4.10

3.90

4.1821 Jul

OFCOM CROWNS T-MOBILE TOP OF THE POLLS

T-MOBILE yesterdaytopped a poll of cus-tomer satisfactionwith their networkoperators, with a 72

per cent approval rat-ing, according towatchdog Ofcom (ledby Ed Richards, pic-tured). O2 finished aclose second, withOrange, VirginMedia and Vodafoneall within three percentage points. BSkyBwas the top majorbroadband providerwith 60 per cent, fol-lowed by BT with 58per cent. Orangetopped the poll forsmaller broadbandproviders.Picture: PA

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PLANS by Thomas Cook and the Co-Operative Group to merge their highstreet travel agent businesses have

been given preliminary approval bythe Competition Commission.

The commission said it did notexpect the deal to have a majorimpact on customers buying packageholidays.

If the merger gets the final goahead it will create the UKs largesttravel agent group.

The Competition Commission willrelease its final report on 16 August.

Thomas Cook has 780 stores whilethe Co-op has 360, though the twofirms plan to maintain their separate

branding.Thomas Cook will continue to run

its tour operator business separatelyfrom the joint venture.

The deal also includes theMidlands Co-operative Society, whichhas a further 100 stores.

Thomas Cooks shares plungednearly 30 per cent last week after itsthird profit warning this year.

The group announced it wouldreview its UK operations after its busi-ness was hit by political unrest in the

Middle East and north Africa, and thedifficulty of passing on cost increasesto budget-conscious UK travellers.

Its French business was particular-ly badly hit by the fallout from theunrest in the region.

It said it would hold off makingany decisions on shop closures untilthe Competition Commissionannounced a decision on its Co-opmerger, which some had expectedlast week.

Chief executive Manny Fontenla-Novoa welcomed the commissionsdecision as great news, adding thatthis merger is just one part of theplan to strengthen our UK business.

The commission said UK customers would not be adversely affected bythe Co-op merger.

PUBS and restaurants group Mitchells& Butlers said yesterday sales growthhad slowed in the last two monthsand that the outlook was rocky

because of the economic climate.M&B, whose chains include Toby

Carvery and All Bar One, said underly-ing like-for-like sales were up 2.8 per-cent in the nine weeks to 16 July.

Underlying sales were up only one

per cent over the period, it said.Economic pressures continue and

consumer expenditure in our markethas weakened in the last couple ofmonths with the short term outlookremaining uncertain.

The company, which also runsHarvester and the Sizzling Pub Co, isnow a food-led business. It saidunderlying sales in the first 42 weeksof the year were up 3.1 per cent butthat margins would likely be slightly

below last year as a result of contin-

ued cost pressures.In March the firm said previous

chief executive Adam Fowle wouldleave the company by mutual con-sent. Chairman Simon Burke steppeddown earlier in July, having onlytaken up the role in February. M&Bhas now gone through six chairmanin the last two years.

Joe Lewis, who is M&Bs biggestshareholder, led a boardroom couplast year in which then-chairman

Drummond Hall was removed.

Mitchells & Butlers suffers as its salesgrowth slows in economic uncertainty

CAR parts and bicycles retailerHalfords said the soaring cost of fuelhas forced cash-strapped motorists toreduce mileage and scrimp on expen-diture on their beloved cars.

Motorists average mileage wasdown one to two per cent, the compa-ny said, while petrol has risen 15 percent year-on-year.

When you are seeing the scale offuel price increases that we are, it isinevitable that customers will look

for ways to save money, chief execu-tive David Wild said.

Customers are pushing backspend on car servicing. If they do notdefer a service then they will go foran interim service rather than a fullservice.

They wait until the light comes on before they check their oil, addedWild.

Sales at its Autocentres car servic-ing chain in the UK fell 5.1 per centand it is planning to increase promo-tional activity to stimulate trade.

Halfords sales decline asfuel costs hit motoristsRETAIL

BREWER SABMiller reported a rise infirst-quarter beer volumes, led by con-

tinued growth in emerging markets, but kept the market guessing whether it will sweeten its bid forAustralias Foster.

The worlds second-largest brewerand maker of Miller Lite, Peroni andPilsner Urquell said yesterday thatunderlying beer and soft drink vol-umes grew five per cent year-on-year.

Price rises also helped the group topush up revenues in its April-Junequarter by seven per cent, it said in a

trading statement.The company said that the jump in

volumes reflected growth in con-sumer spending in many developingmarkets, and a relatively weak com-

parative quarter in the prior year.The firm added that its financialperformance was in line with itsexpectations as it made selectiveprice rises to offset a moderate rise inraw material costs.

But the firm suffered a bloody nosein its annual shareholder meeting

yesterday afternoon, when 16 percent of its investors voted against thepay packages of directors, on an 86.5per cent turnout. All resolutions at

the meeting were passed.Shares in SABMiller, which have

soared over the last month, closed0.24 per cent down at 23.10.

SABMiller beer volumes upBYHARRY BANKS

CONSUMER

KITCHEN supplier Howden Joinery isbenefiting from a growing trend forconsumers to shy away from do-it-

yourself projects, it said on reportinga rise in first-half revenues and prof-its yesterday.

The firm, which supplies kitchenunits and joinery to over 200,000small builders posted a near nine percent rise in its first-half pre-tax profitand reported relatively healthy

recent trading.

Howden up asDIY dwindles

CONSUMER

BRITVIC volumes in the UK in thelast four weeks fell 8.2 per cent,

while Irish volumes were down 13.2per cent.

Total revenue in its business acrossthe globe rose 12 per cent to 324.9m.

However, excluding BritvicsFrench business, acquired last May,revenue declined two per cent due to

weakness in Ireland. The companyclaimed that a relatively cold June

had hit sales in the UK.

Britvic blamescold for slump

CONSUMER

Thomas Cook

given nod forCo-op mergerBY JOHN DUNNE

LEISURE

BY JOHN DUNNE

LEISURE

Ian Cheshire admitted the UK economic climate was challenging


ANALYSIS l SABMiller

p


2,330

2,310

2,290

2,309.5021 Jul

ANALYSIS l Thomas Cook

p


74

72

70

68

68.0021 Jul

ANALYST VIEWS: CAN KINGFISHER TURNAROUND ITS FLAGGING UK SALES? Interviews by John Dunne

RAMONA TIPNIS | SHORE CAPITAL

Whilst the UK performance is much worse than we had expected, it is

understandable given the pull through of summer ranges into quarter one and t heclosure of Focus with its promotional activity. The encouraging point is that grossmargins are up for the quarter despite tough comparatives. We say Buy.

MATTHEW MCEACHRAN | SINGER

Trading over the last 10 weeks has been a smidge weaker than expect-ed, with the UK worse but France better. This statement is t herefore likely toerode some of the padding generated after a strong quarter one, but full yearforecasts will still remain intact.

RICHARD HUNTER | HARGREAVES LANSDOWN

Kingfisher is positioning itself prudently and should benefit from anyuptick in consumer behaviour. On the downside, the outlook remains inevitablyuneven. On balance, prospects for the company remain strong, as does the marketconsensus, which currently comes in as a buy.

SALES at Kingfishers B&Q haveslumped, with the company warningof challenging trading conditions.

Like-for-like sales at B&Q, which has330 stores, fell 6.7 per cent in the 11

weeks to 16 July.Kingfishers UK sales overall

dropped by 5.5 per cent, with a goodperformance by trade supplierScrewfix offsetting some of the poorperformance at B&Q.

The company claimed B&Q washurt by rival Focus DIY going intoadministration and cutting prices toclear stocks.

Kingfisher chief executive IanCheshire said: These are testingtimes for retailers. The UK marketremains challenging compounded bydisruption in the second quarterfrom heavy stock clearance activity bya major competitor closing down.

Sales at Kingfishers two Frenchchains Castorama and Brico Depot

were much stronger, adding 3.7 percent on a same-store basis during the11 weeks.

Across the Kingfisher Groupincluding its outlets in easternEurope, sales were 0.5 per cent down.

Cheshire added: We expect toemerge from this year in excellentshape and well prepared to start deliv-ering the next phase of our growthplans.

Shares in Kingfisher jumped 5.6per cent yesterday.

B&Q declinetakes toll on

KingfisherCONSUMER

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Merrill LynchMerrill Lynch Wealth Management hasappointed David Harrison as a portfolio

manager. Harrison joins from HermesFund Managers, where he was also aportfolio manager, focusing on theEuropean and UK markets.

Berenberg BankMatthew Stemp has joinedBerenberg Bank in London to workwith both the private banking teamin London and Berenberg AssetManagement in Hamburg. Stemp

joins from UBS Global AssetManagement, where he spent 17years, most recently as head of UK.

Threadneedle InvestmentsThe asset management firm hasappointed Toby Nangle as head ofmulti-asset. Prior to joining the com-pany, Nangle was a director of boththe multi asset and fixed incometeams at Baring Asset Management.

Ashcourt RowanThe wealth manager has appointedDavid Archer as a director of interme-diary sales to focus on promoting thefirms portfolio of in-house asset man-agement services. Archer was previ-

ously intermediary sales manager atKleinwort Benson.

DeloitteDeloitte has appointed two independ-ent non-executive directors to the mainboard: Gerry Grimstone, chairman ofStandard Life and economist DeAnneJulius, a founder member of theMonetary Policy Committee and chair-man of Chatham House.

RathbonesPeter Anwyl-Harris and JamesBrennan have joined RathboneInvestment Management as invest-ment directors in its London office.Anwyl-Harris joins from Newton

Investment Management and Brennanjoins from Baring Asset Management.

PitmansAlan Davies has been promoted fromdirector to partner in the law firmsdefendant insurance department.Davies, who joined Pitmans in 2004as a senior solicitor, specialises inpublic and employer liability andhealth and safety prosecutions.

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

US debt discussionboosts Wall Street

US stocks climbed yesterday assigns of progress on the US debttalks and concrete action fromEurope on its own debt crisis

heartened investors.Unexpectedly robust earnings

results from Morgan Stanley, whoseshares rose 11 per cent to $24.20,extended a relief rally in bank stocksafter Goldman Sachs dismal tradingprofits stunned the market earlier inthe week.

But the biggest news was on a pos-sible US debt deal to save the UnitedStates from an unprecedenteddefault.

The KBW Capital Markets indexrose 2.9 per cent.

In Europe, following a summit,Eurozone leaders agreed the privatesector would provide a net 37bn to asecond bailout package for Greece, with the total official financingaround109bn.

The Dow Jones industrial averagegained 152.50 points, or 1.21 per cent,to 12,724.41. The Standard & Poors500 Index rose 17.96 points, or 1.35per cent, to 1,343.80. The Nasdaq

Composite Index advanced 20.20points, or 0.72 per cent, to 2,834.43.

Stocks rallied to session highs afterthe White House said it saw momen-tum for a balanced deficit deal, butdenied reports that US PresidentBarack Obama and Republican USHouse of Representatives speakerJohn Boehner were close to a pact.

Transportation shares also contributed to gains after Union PacificCorp posted higher quarterly profits.Shares of the railroad company rose4.6 per cent to $104.40, and the DowJones transportation index was up 1.7per cent.

Biotechnology issues also rose.Alexion Pharmaceuticalsjumped 9.1per cent to $56.77 after the drugmak-er posted better-than-expected quar-terly earnings and raised its 2011outlook. The NYSEArca biotech indexclimbed 1.8 percent.

On the downside, Dow componentIntel shed 0.8 per cent to $22.81, a dayafter the chipmaker trimmed its fore-cast for 2011 personal computer unitsales.

After the closing bell, MicrosoftCorp shed 0.8 per cent to $26.87 afterthe worlds largest software companygreater-than-expected 30 per centincrease in fiscal fourth-quarter prof-it, but profit from its core Windowsproduct fell on soft personal comput-er sales.

Volume saw an upswing withabout 8.22bn shares traded on theNew York Stock Exchange, NYSE

Amex and Nasdaq, above the dailyaverage of 7.49bn.

FINANCIALS drove gains onBritains top share index yester-day, as hopes a solution couldbe found to Europes sovereign

debt crisis boosted investor senti-ment.

The UKs benchmark index closed

up 46.07 points or 0.8 per cent at5,899.89, having endured a choppysession, trading in a 137 point rangeas nervous investors jostled positionsawaiting an announcement fromkey debt talks in Brussels.

The bulls won the day as EuropeanUnion officials seemed close to adeal to bail out debt-stricken Greece with the help of the private sectorand with no new tax on banks.

Sources said the European CentralBank was willing to let Greece slipinto temporary default as part of acrisis response.

Potentially it's good news, but Ithink there are too many economicheadwinds to make a definitive callthat the worst is now behind us,Peter Dixon, an economist atCommerzbank, said. Weve got tolook at todays rally as simply a cor-rection to some of the perhaps overly

pessimistic sentiment thats crept inover the past week.

Banks and insurers, most exposedto European sovereign debt, ralliedhard with Barclays the top riser, up7.8 per cent.

UK-listed banks enjoyed their biggest one-day percentage gainsince the start of 2011, but remaindown over eight per cent in 2011.

Although the rally looked like anexaggerated knee-jerk reaction, valu-ations show shares in the FTSE areripe for the picking, should uncer-tainty be removed over the Europeanand US debt situations.

Beaten-down retailers such asKingfisher, up 5.6 per cent, enjoyed astrong rally after the groups update.

Drugmakers also added strengthto blue chips, led byAstraZeneca, uptwo per cent after falling in the previous session after its heart drugBrilinta gained approval from USregulators, opening up the massiveUS market to the companys biggestdrug hope.

Relief that Europe was makingprogress on dealing with its debtproblems, and hopes that it wouldavoid widespread contagion andplunge the region into a deep reces-sion, was not enough to reverse loss-es in the mining sector.

The sector underperformed, suf-fering in tandem with easier copperprices after poor manufacturingdata from top metals consumerChina heightened worries over the

growth outlook for the country.Factory output in the worlds

largest consumer of commoditiesshrank in July for the first time in 12months.

We still forecast strong globalGDP growth, at three per cent tofour per cent in both 2011 and 2012.But we are again making more GDPforecast downgrades than upgrades,Willem Buiter, analyst at Citigroup,said.

On the downside, outsourcinggroup Capita shed 1.6 per cent as abigger than expected seven per centfall in organic revenue weighed on

first-half results. Analysts atEvolution Securities downgradedtheir rating to neutral.

Peer Serco Group dropped 1.1 percent.

Chip designer ARM Holdings fell1.6 per cent as Nomura downgradedits rating on US peer Intel toreduce, a day after the top chip-maker cut its outlook for 2011 per-sonal computer unit sales andelevated its capital expenditure.

Nervous FTSE ends higher asEU solution for Greece loomsTHELONDONREPORT

THEWORLDREPORT

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

ANALYSIS lAberdeen Asset Management240

230

220

210

11 May 31 May 20 Jun 8 Jul

p228.30

21 July

ABERDEEN ASSET MANAGEMENTSinger Capital rates the fund manager a buy with a 275p target priceahead of its third-quarter results, which are expected to show a one per centrise in assets under management and a strong upward trend in revenue mar-gins as its asset mix shifts towards higher margin equity pooled funds. Singerbelieves current forecasts may not reflect this positive impact, whileAberdeens earnings momentum remains positive despite tough markets.

ANALYSIS lTui Travel

260

220

180

May Jun Jul

p189.30

21 July

TUI TRAVELDeutsche Bank rates TUI a buy with a 280p target price as it is sticking toits full-year earnings forecasts despite the tough trading conditions it hasexperienced. Deutsche believes investors are nervous of consensus earningsdowngrades, which is causing share price falls and creating a buying opportu-nity. Deutsche thinks management will use third-quarter results to state thatthey remain comfortable with full year forecasts, so it recommends buying.

ANALYSIS lHome Retail

240

200

160

120May Jun Jul

p 138.90

21 July

HOME RETAIL GROUPArden Partners rates the Argos owner a sell with a 120p target price onthe emerging consensus view that it would cut its dividend and its share pricewould fall to 130p. Its historic dividend yield is 10.7 per cent at this level butprobably only 5.4 per cent with earnings cover gone, which, considering it isthe UKs biggest general merchandise retailer, looks low. Before its second-quarter results in September, Arden believes the shares have further to fall.

p

9 May 27 May 17 Jun 7 Jul

6,100

5,700

5,800

5,900

6,000

ANALYSIS l FTSE 5,899.8920 Jul

BNY MellonMichael Cole-Fontayn has been appointed asthe new chairman of EMEA at BNY Mellon,retaining his existing responsibilities as chiefexecutive of the depositary receipts division.Cole-Fontayn succeeds Tim Keaney, chief execu-

tive of BNY Mellon Asset Servicing, who is relo-cating to New York. Cole-Fontayn joined BNYMellon in 1984 and has worked in the deposi-tary receipts business since 1992. He also ranBNY Mellons issuer services group in HongKong between 1993 and 2000.


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WE have style-savvy chaps fromNaples to thank for the exis-tence of the man bag. Back inthe day, the Neapolitan sharp-

dressers took to using handbags to avoidspoiling the line of their suits by carry-ing anything in their pockets, and thus anew accessory genre came into being.

The foppish okay, effeminate leather bag was always something of an

object of mockery over here, where blokes preferred the hard-edged, built-for-business briefcase. The laptop age

brought the big, casual messenger bag,surely the least suave thing a man canswing from his shoulder. Now, withfewer papers to carry, tablets replacinglaptops and fashion pursuing a preppy,less blokey and more elegant trajectory,the smaller, much more stylish bag is

back. Fine leather, interesting details,economic proportions and old-fashionedcraftsmanship mean youll be cutting atasteful dash when youre on the movein the city this summer.

Lifestyle | Fashion MARBELLASCLASSY SIDEIN TRAVEL ONMONDAY

19

HOW TO GET

DRESSED

Q.One minute it's sunshine, thenext it's pouring down. I'm soconfused about what to wear I

don't know whether to salvage mysummer wardrobe or opt for an earlywinter?

A.Summer in England is unpre-dictable at the best of times. Itwould be a real shame to com-

pletely give up on summer this early we've hopefully got six weeks left andit's definitely not time for a winter coat.Instead utilise your summer wardrobewith some key pieces and look to the pre-fall collections for some inspiration.

The longer skirt length for the comingseason is super practical. Not only are thelonger midi lengths and maxis nicelydemure for those of us not so keen toexpose our upper thigh, they are also somuch warmer than a short skirt. RebeccaTaylor has some gorgeous midi-lengthdresses this summer which would workequally as well in autumn with boots anda leather jacket. Try a strapless but longerlength dress which can be layered up withcardigans and jackets or stripped down tobare minimums if you find yourself sud-denly in a suntrap. The pre-fall collectionhas some gorgeous ankle-skimming maxisin soft jerseys which are gorgeously com-fortable and equally easy to layer up orwear on their own when the sun rears itshead again.

The key item for fending off the weath-er is a trench. To keep it in line with thenew longer lengths, go for a midi or maxilength with a full skirt. This will work withall your knee length and longer dresses, aswell as with trousers. Look for light-heart-ed details to keep the trench less seriousand more summer friendly. RebeccaTaylors Runway trench has ruffle detailsgiving it a feminine and frivolous edge.

Another trick for battling the elementsis a good cropped straight-cut trouser.Not capri length or calf-skimming whichcan be unflattering on some, but croppedright down at the ankle. The trouser willkeep you warm but the shorter lengthmeans you can wear it with flats, sandalsor a pair of heels. Try a dark olive trouserby Tiger of Sweden which will work inboth winter and summer. Wear it with asilk tank and layer up with a colourful silkcape or scarf to protect against a suddengust of wind whilst keeping it July-appro-priate: playful and pretty!

Q AMan bags that

cut a stylish dash

&Clare Rous &Kara IlandFOUNDERS OF ROUS

ILAND MEMBERS

BOUTIQUE

Replace that clumpy messenger bag withsomething more elegant, says TimothyBarber

OLYMPIC FASHION, ARMANI STYLEOne thing you can rely on with the Italians isthat theyll always look stylish. Georgio Armanihimself is to kit out the Italian Olympic team in2012 with a range of sporting and formal wear.Giorgio will create the official outfit for the open-ing ceremony at the Olympic Stadium as well as

their post-event gear. Stella McCartney is design-ing the British teams get-up.

PRADA SHARES RALLYPrada shares have risen 17 per cent since thecompanys IPO a month ago, outperforming theHang Seng index. Prada chose to float in HongKong as it plans to create a bigger presence inChina, doubling its stores in the country to near50 by early 2014. Some analysts are cautious,

though, noting that Europe the brands home is in economic turmoil.

NEW CHALAYAN SCENTHussein Chalayan yesterday launched his newscent, Airborne, at the Dover Street Market inMayfair. Top notes of neroli, Syracusan lemon,

bergamot and juniper berry are countered bymusky cedarwood and incense. Its nothing ifnot sexy and could work on men and women

both, we reckon.Available from end of July. 60 for50ml. www.husseinchalayan.com

AUTUMN/WINTER AT CH MOUNT STREETMother-daughter duo, Carolina Herrera Sr andCarolina Jr, have a gem of a shop in Mayfair, amore affordable spin-off of their New York-

based haute couture business. Hurry for firstdibs on autumn-winter: think swathes of greenand camel leather and cloth; coats, capes, over-

sized jackets and pencil skirts. All lovely stuff.20Mount Street, W1K 3NN. 020 3441 0965

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