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BUSINESS WITH PERSONALITYwww.cityam.comIssue 1,432 Tuesday 26 July 2011 FREE

FTSE 100 t5,925.26 -9.76 DOW t12,592.80 -88.36 NASDAQ t2,842.80 -16.03 /$ 1.63 unc / 1.13t-0.01 /$ 1.44 unc

Cable: enduniversalbanking

VINCE Cable, the business secretary, will today call on the IndependentCommission on Banking (ICB) tosound the death-knell for universal banking by backing a form of ring-fencing that is just as tough as a full-scale break up of Britains banks.

His intervention will put pressureon the ICB to explain why it has decid-ed to recommend a ring-fence, where a bank insulates its retail operationsfrom activities like investment bank-ing, instead of forcing banks such asBarclays to spin off and sell their retailbusinesses.

Cable will set out a series of keytests for the ring-fence, including:Will the division between what isinside and outside the ring-fenceensure that nothing resembling a uni-versal bank remains?

The comments are sure to provokealarm in the banking industry, whichfears any ring-fence could be designedin such a way that it is essentially asdebilitating as the now-defunct Glass-Steagall Act, which stipulated thatinvestment and retail banks could notbe owned by the same company.

Cable will also make it clear that hedisagrees with the chancellor, whoused his Mansion House speech lastmonth to back a form of ring-fencing.As you will know, my own instincts liewith full separation, Cable will say.

And the business secretary willaccuse banks of having an ingrainedrip-off culture that extracts excessprofits from personal and businesscustomers, which must be tackledthrough greater competition.

BY DAVID CROW

POLITICS

ANALYSIS l Barclays

p250

230

210

19 Jul 20 Jul 21 Jul 22 Jul 25 Jul

228.9525 Jul

8.2 per cent and Italian lenders IntesaSanpaolo and Unicredit dropped 8.3 percent and seven per cent respectively.

Observers put the loss of faith downto growing signs of an economic slow-down amid emerging details of thenew Greek bailout deal struck on Thursday. Many were stunned thatdespite a109bn bailout, Athens debt

burden is still forecast to rise next year.And in the US, there were few signs

of a consensus emerging as the IMFurged the nation to get past its debtimpasse. Republicans and Democratsannounced separate plans to raise thelegal debt ceiling before Washingtonruns out of cash next Tuesday.

Republicans in the House, led by

speaker John Boehner, will push legis-lation to cut $1.2 trillion in spendingover 10 years in exchange for a short-term $1 trillion increase in the bor-rowing limit, with no tax hikes.

Democrats hope to trim $2.7 trillionfrom the deficit over 10 years but allowthe US to keep up debt payments untilafter next years election. EUROPE: P5

BY JULIET SAMUEL AND JULIAN HARRISWORLD ECONOMY

Certified Distribution

30/05/11 till 03/07/11 is 102,636

ANALYSIS l Lloyds Banking Groupp


50

48

46

44

42

45.1025 Jul

ANALYSIS l Italy 10-year spread

bps300

280

290

270

260

2:00 4:00 6:00 8:00 10:00 12:00

289.74725 Jul

ANALYSIS l Spot Gold (one week)

$


$1,61625 Jul1,622

1,616

1,610

1,604

1,598

1,592

1,586

CONFIDENCE in politicians ability tosolve the debt crises of the developed

world collapsed yesterday, sendingbank shares into a tailspin and ramp-ing up the cost of sovereign borrowing.

As US politicians bickered over thedebt ceiling and investors fled EUfinancial stocks, Italy was forced tocancel a bond auction set for Auguston fears that investors are demandingan unaffordable premium for cash.

Yields on Italys 10-year debt rosenearly 20 basis points to 5.6 per cent,

with spreads against German gilts also widening, and equivalent Spanishyields jumping by a similar amount tosix per cent viewed as a dangerousthreshold for sovereign debt interest.

The Swiss franc notched up recordhighs against the dollar, and nervyinvestors also sent gold prices surging.

And banks saw billions wiped offtheir market cap: the value of the UKsmain four banks alone dropped by4.5bn, with Barclays falling 4.4 percent and Lloyds losing five per cent.

On the Continent, the losses wereworse still: Belgian bank Dexia plunged

Republican JohnBoehner is pushing forlaws to cut US publicspending in return forraising the debt ceiling

FEAR RETURNSTO MARKETS

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News2 CITYA.M. 26 JULY 2011

Cameron: Nonew stimulusPRIME Minister David Cameron

warned yesterday that Britains path back to growth will be a difficultone ahead of growth figures todaythat will reveal Britains economyflatlined for most of the year.

Gross domestic product (GDP) fig-ures from the Office for NationalStatistics are expected to show thismorning how the economy grew just0.2 per cent between April and June,less than half the level of the previousthree months.

Cameron and chancellor GeorgeOsborne refused to join calls by VinceCable, the business secretary, for theBank to print more money to lift theeconomy.

After being briefed on the growthfigures, the Prime Minister said the

country could not afford to boost theeconomy through more quantitativeeasing.

There is no country really that canafford another fiscal stimulus, DavidCameron told reporters. Theyve allrun out of money. There isnt somegreat monetary stimulus you can give

when interest rates are as low as theyare.

Osborne also spoke ahead oftodays figures claiming he hadturned Britain into a safe harbour ina storm by focusing so rigidly ondeficit reduction.

BYKASMIRA JEFFORD

POLITICS

Its as if the coalition wanted to fail

IMAGINE you were trying to crippleprivate sector growth and throttle therecovery. Yes, I know only a fool would

want to do that. But seriously whatwould you do? Here are a few ideas.

For a start, you would try and tie upbusinesses with as much red tape aspossible. You would promise a one in,one out regulatory regime andimmediately ignore your own pledge,adding far more rules than you takeaway. Then you would tax jobs withincreased national insurance. You

would target key decision makers andexecutives with some of the highest

taxes in the world, taking the top rateto 52 per cent (and an extra 13.8 percent employers national insurance).

You would drag millions into a 42 percent rate. You would increase capital

gains tax to 28 per cent and fail toindex for inflation, better to reducethe incentives to invest.

You would create an educationalsystem that fails to educate millionsand trap a large chunk of the popula-tion in poverty. You would promote anentitlement culture that denigrateshard work. You would make sure thegovernment spent as much of GDP aspossible, in the knowledge that publicsector productivity is negative andthat billions are wasted. You wouldcheer when you found out the publicsector is spending more than half ofGDP for the third year in a row,according to the OECD.

You would relentlessly criticise theCity firms that employ hundreds ofthousands. You would try and regu-late their salaries, slap new taxes ontheir balance sheets, make them

objects of public scorn and do you bestto make their lives less pleasant andless predictable. You would plot tomake large institutions uncompetitiveand hopefully relocate their activities

and headquarters abroad. You would turn a blind eye toalmost all European regulations, andgold plate everything that comes to

you. You would pass ever more strin-gent green regulations and taxes oncarbon to make sure that it ceases to

be viable to make things in the UK.You would prevent the expansion ofairport capacity. To guarantee thatpeoples purchasing power be cut, you

would give your blessing to out of con-trol inflation. You would force banksto hold more capital, reducing thesupply of credit.

Oh, wait. My anti-growth night-mare is actually a fairly accuratedescription of reality. Many of thesepolicies are the relic of governments

bygone, of course. Sure, the coalitionhas introduced a few good pro-growthmeasures yesterdays planning

reform was an improvement, corpora-tion tax is being trimmed, tax is beingreformed to retain HQs in Britain andto incentivise entrepreneurs, ander,thats about it. The education reforms

are fantastic but will take years tohave an effect on the economy. Thedeficit plans have helped confidenceand kept borrowing costs in check,

but they are a necessary and not suffi-cient condition for growth. The weakpound isnt enough.

Very few of the many business lead-ers I have spoken to in recent months

believe there has been a seriousimprovement in the UKs competitiveclimate over the past year. Almost allare disappointed by the coalitionssupply-side and tax measures; therehas been a significant worsening ofthe mood on that front. No wonder,therefore, that the recovery is disap-pointing. Judging from many of itsactions, it is almost as if the govern-ment didnt want to succeed.

[email protected] me on Twitter: @allisterheath

BETFAIR awarded its two senior exec-utives huge pay rises last year despiteoverseeing a disastrous entry to theLondon stock exchange last year.

David Yu, the groups chief execu-tive who announced last month he

would be stepping down, received apay package worth 824,676 in the

year to April, up 125 per cent on theprevious year, its annual reportrevealed yesterday.

Meanwhile Stephen Morana, itschief financial officer, saw his paypackage more than quadruple to1.6m last year compared with300,000 the year before.

Yu and Moranas package includeda senior executive incentive plan(SEIP) entitling them to 300,000 and1.2m respectively following thefirms listing on the stock exchange.

Shares in the betting firm haveslumped by 50 per cent since it floatedlast October at 13, closing yesterdayat 653.5p.

BYKASMIRA JEFFORD

LEISURE

Betfair boss doubles payDavid Yu, Betfairs chief executive, saw his pay package increase 125 per cent last year

NEWS | IN BRIEF

Auditors told to stand up to banksBritain's company auditors should ques-tion management more closely abouthow their revenue forecasts stand upagainst a backdrop of poor economicconditions and weak markets, the indus-try's watchdog said today. Auditors arefacing pressure to be more assertive

with banks in particular after many gavelenders a clean bill of health in the runup to the financial crisis just monthsbefore some of them had to be rescuedby taxpayers. In its annual survey ofaudits, the Professional Oversight Board(POB) found that the "Big Four" KPMG, PwC, Deloitte and Ernst &Young all failed to be sceptical enough.

UK forex turnover has jumpedGlobal foreign exchange turnover rose inApril 2011 from October 2010, drivenby increasing volume across spot, for-wards, swaps and options activities,according to a survey released by majorcentral banks. Average daily turnover inUK foreign exchange markets rose to arecord $2.191 trillion (1.34 trillion) inApril, keeping intact London's status asthe world's largest FX market, accordingto the Bank of England.

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

Chancellor GeorgeOsborne has defendedhis economic plansahead of GDP figuresdue out today

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 HeppleCommercialSales Director Jeremy Slattery

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

HACKING FEARS SPARK TRINITYREVIEW

Trinity Mirror, the publisher of theDaily Mirror, has launched a reviewof its editorial controls and proce-dures amid investor anxiety thatphone-hacking claims could spread

beyond the defunct News of theWorld. Trinity saw its shares fall 9.8per cent yesterday over concernamong investors that the phone-hack-ing scandal that has ripped throughRupert Murdochs NewsInternational was not isolated to onenewspaper group.

MEPC EXPLORES OPTIONS AFTER DEBTREVAMPProperty company MEPC has beenlined up for a partial sale or return tothe public market among options tohelp develop the business following a

long-term refinancing of 470m ofsecuritised debt this month.

The 65-year-old company owns 8.5msq ft of business parks across the UK

with a value of more than 900m.

WARNING SOUNDED OVER OFFSHOREAUDITINGRegulators are scrutinising the off-shoring of audit work from richereconomies to cheaper locations suchas India for fear it could make the vet-ting of accounts less rigorous. TheInternational Forum of Independent

Audit Regulators (IFIAR) is question-ing leading auditors including PwCand Deloitte about the extent to

which they plan to parcel out tasks tostaff in other countries.

APPLE APP STORE RULES HIT CONTENTDEVELOPERS

Amazon.com, Google, Rhapsody andSpotify are among a raft of mediacompanies whose iPhone and iPadapplications have become caught upin new rules being enforced by Apple

on how content is sold through itsApp Store.

BIG SIX SHOULD PAY FOR THEDOORSTEP DEL BOYS, SAY MPSPeople who have been pressured intoneedlessly signing up to new utilitysuppliers should be paid compensa-tion by their energy provider, accord-ing to MPs. The Energy and ClimateChange Select Committee has calledon suppliers to ditch doorstep selling,

which, according to Ofgem, results ina quarter of all people switching ener-gy supplier. The practice came underscrutiny after a court case in May.

BANKS STEP INTO THE BREACH FORAGEING NORTH SEA FIELDSBanks including Lloyds are preparingto underwrite the future cost ofdecommissioning a North Sea fieldfor the first time because the oilindustry does not trust the govern-ment to pay its share. Bankers say it

has become a test case over estimated20bn dismantling costs.

JOB HUNTERS TO SUBMIT LINKEDINPROFILES INSTEAD OF CVS FOR ROLES

Thousands of employers have begunallowing job hunters to apply for arole at their company by submittingtheir LinkedIn profile, rather than aCV or application form. From today,employers using the free service havean apply with LinkedIn button ontheir corporate website whichenables people to put themselves for-

ward for a role using their existingonline profile with the social net-

working site.

BOMBARDIER CHAIRMAN COLINWALTON: THAMESLINK DECISIONNEEDS TO BE REVIEWED

The chairman of Bombardier UK hasdemanded an official review of theGovernments decision to reject its

bid for a 1.4bn Thameslink contract

in favour of Siemens, the Germanmanufacturer.

BP AWARDED NEW TRINIDADDEEPWATER BLOCKSBPs plan to increase its global deep-

water portfolio has been boosted bythe award of two more explorationand production blocks offshore

Trinidad and Tobago, the UK oilmajor said yesterday. The new blocksmean BP will double its acreage inthe Caribbean island nation, whichalready accounts for 12 per cent ofthe companys global oil and gas pro-duction.

BRIDGEPOINT INVESTOR FILES FORSTAKE SALEShares of Bridgepoint Education Inc.fell sharply yesterday following newsthat Warburg Pincus LLC, whichholds about two-thirds of the for-prof-it college operators common stock,has registered to sell its entire stake.

Bridgepoint reported the registrationlate Friday.

WHAT THE OTHER PAPERS SAY THIS MORNING

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News 3CITYA.M. 26 JULY 2011

ANADARKO Petroleum Corporationswung to a second-quarter profit yes-terday, as the US exploration compa-ny produced and sold more oil thanexpected following higher crudeprices.

Anadarkos profit was $544m($334m), or $1.08 per share.

The company owns a 25 per centstake in Macondo well, which explod-ed in the Gulf of Mexico in April 2010,but has so far disputed BPs claim thatit should foot the bill for damages.

Anadarko was tight-lipped on the

spat, throwing focus onto BP, whichreports quarterly figures today.

SMARTPHONE maker Research InMotion (RIM) plunged more that 4.4per cent yesterday after it announcedit would axe a tenth of its globalworkforce.

The firm, best known for itsBlackBerry range, has struggled inthe face of soaring demand forApples iPhone and handsets runningGoogles Android, especially thosemade by Samsung.

Its market share in the US smart-phone market is on the decline, slip-ping from first place earlier this yearto fall behind Android, with 28.7 percent compared to Googles 34.7 percent. The high-margin iPhone has a25.5 per cent share.

RIMs first foray into the nascenttablet market earlier this year withthe PlayBook met with critical dis-dain and customer apathy.

The share slump means RIM hasnow shed 45 per cent of its value inthe last 12 months.

In a bid to stop the rot, theCanadian firm announced a shake-upamong its top executives. It said one

of its three chief operating officers,Don Morrison, would retire and theother two, Thorsten Heins and JimRowan, would take on additionalresponsibilities.

However, analysts were sceptical,and highlighted the shared chiefexecutive and chairman roles, cur-rently split between Mike Lazaridisand Jim Balsillie, as a more pertinentproblem.

Altogether 2,000 staff will be cut,leaving a workforce of 17,000.

The firm, which described the costreduction as a prudent and neces-sary step for its long-term success,said it would inform employees whowill lose their jobs this week.

RIM plunges

after it axes2,000 staff

A SIMPLIFICATION of the UKs plan-ning regulations was proposed by thecoalition government yesterday, earn-ing widespread applause from busi-ness groups.

Greg Clark MP, minister of state fordecentralisation, published a 52-pageconsultation document designed toclarify Britains thousands of pages of

planning red tape.The National Planning PolicyFramework is the first step towards aplanning system which enables devel-opment rather than holding it back,said Edwin Morgan of the Institute forDirectors.

Chancellor George Osborne hadidentified planning system reform inhis March budget for growth,describing existing regulations as anobstacle to economic growth.

Land Securities chief executiveFrancis Salway said: Its refreshing tohave a concise national planningframework which supports andencourages growth, and at same timeprotects our heritage.

Yet the British Chambers oCommerce warned the governmentthat words need to be translated intomore pro-growth decisions. Businessesneed to see more than just a new pol-icy document, it said.

Clark proposes streamliningof UKs planning regulations

US Dow Chemical has agreed a $20bn(12.3bn) joint venture with Aramcoto build one of the worlds largestchemical facilities in Saudi Arabia.

Aramco chief Khalid Al-Falih saidthe agreement will play a key role inthe Kingdoms industrial and eco-nomic diversification

The Sadara project is expected togenerate sales of around $10bn with-in a few years of operation and gener-ate thousands of jobs, Aramco added.

The joint venture will give Dowaccess to cheap Saudi gas feedstock

and a production facility close to cus-tomers in booming markets.

Dow inks $20bnSaudi ventureAnadarko posts$544m profits

BY STEVE DINNEEN

TELECOMS

OIL AND GAS

INDUSTRIAL

Greg Clark published the 52-page consultation document on planning laws Picture: PA

BY JULIAN HARRISREGULATION

ANALYSIS l Research In Motion Ltd

$


27.00

26.50

26.00

25.50

25.00

24.50

25.1925 Jul

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DEUTSCHE Bank yesterday appointedtwo of its top executives as successorsto Josef Ackerman, who will be step-ping aside next May after 10 years atthe helm.

Anshu Jain, the head of the UKinvestment bank, and Germany headJuergen Fitschen have been appointedco-chief executives, ending a lengthysearch for the position.

The German bank also revealedthat the board is working towards Dr Ackermann being elected as chair-man to the supervisory board to

replace Dr Clemens Boersig, who willbe stepping down next year.

DUTCH insurance and bank groupING sold virtually all its LatinAmerican insurance operations to aColumbian firm for a better-than-expected 2.68bn (2.4bn) yesterday.

The sale of the businesses to Grupode Inversiones Suramericana, knownas GrupoSura, values the insuranceassets at six times its forecast 2011earnings and 1.8 times its estimated1.5bn book value.

Alongside that, ING said it wouldsell its 36 per cent stake in Braziliannon-life insurer Sul America, estimat-ed to be worth another 800m.

RBS analyst Thomas Nagtegaal saidthe total 3.6bn price for both theLatAm business and Sul America wasabove the top end of his expectations.

But he said all proceeds from thesale would be used to repay debt inthe ING Insurance business, cuttingits leverage to 25 per cent, so INGsinvestors would see little benefit.

ING expects to make 1bn profitfrom the sale of the pensions, savings,investment management and lifeinsurance businesses in Chile,

Colombia, Mexico and Uruguay aswell as two stakes in Peruvian insur-ers. It has to divest its entire insur-ance division, becoming a purebanking business, to meet the condi-tions of its bailout by the Dutch statein the financial crisis.

Its commercial, mortgage and leas-ing businesses in the region are notaffected by the deal, while GrupoSuraalso takes on the 65m debt heldwithin the insurance operations.

INGs chief executive Jan Hommensaid the group would now prepare itsother investment management andinsurance businesses for initial publicofferings. It plans one for its US armand another for Europe and Asia.

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US reinsurer Validus Holdings took its$3.2bn (1.9bn) offer to buy Transatlantic Holdings directly toshareholders yesterday after rejectingits rivals conditions for merger talks.

Validus said it was unable to startdiscussions with Transatlantic because of a standstill provisionthat would have prevented it frompursuing its bid without the approvalof Transatlantics board.

It was the second time in two yearsthat Validus launched a hostile bidfor a reinsurer that had already

agreed a deal with someone else,after an unsuccessful bid to buy IPC.

Validus takes its$3bn bid hostileDeutsche Banknames its CEOs

BYALISON LOCK

INSURANCE

BANKING

M&A

BRITISH mortgage lender YorkshireBuilding Society is to buy the mort-gage and savings business of EggBanking from US bank Citigroup, asCiti continues to sell non-core assetsafter its bailout during the credit cri-sis.

Yorkshire, owned by its customers,said the Egg businesses it was acquir-ing comprised of a 2.5bn savings

book and a 430m mortgage book. Itadded it would also acquire the Eggbrand.

The sale of the Egg divisions toYorkshire Building Society comes justa few months after Citi sold off Eggscredit card assets to Barclays.

Yorkshire Building Society, whichhas more than 30bn worth of assets,said buying the Egg businesses wouldwiden its products and range of serv-ices, and improve the companys

funding position. Yorkshire did not disclose howmuch it paid for the Egg businesses.

Yorkshire Building Society is alsolooking at Northern Rock, the fullynationalised British bank that thegovernment aims to sell off in duecourse.

Citi acquired Egg from insurerPrudential in 2007 for 575m and thebank has been looking to sell it forsome time.

Yorkshire Building Societybuys Egg assets from CitiBANKING

Yorkshire Building Society, led by Iain Cornish, has bought Egg assets from Citigroup


ANALYSIS l ING Groep N.V.

19 J ul 20 J ul 2 1 Ju l 2 2 Ju l 2 5 Ju l

7.8825 Jul

8.40

8.20

8.00

7.80

7.60

7.40

7.20

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THE Bank of Ireland will becomeIrelands only lender to avoid major-ity state control after the govern-ment announced yesterday thatprivate investors have agreed to buya stake worth 1.1bn (971m) in thebeleagured bank.

The news saw investors make agrab for shares in the countrysbiggest lender, whose stock closedup three per cent, having reached ahigh of 11 cents, or 7.8 per centabove its previous days price, at onepoint.

The deal will eventually see thepublic stake in BoI brought downfrom its current 36 per cent level toaround 15 per cent, through an ini-tial sale of241m in shares, to befollowed by a further 882m divest-ment. The buyers are a group ofaround ten institutional investors.

The deal comes a day before arights issue was due to hand amajority stake to the government inorder to fulfil a 5.2bn capital-rais -ing requirement. Irelands centralbank had mandated the additionalcapital following its own stress testsin March.

Irish finance minister Michael

Noonan said that by the conclusionof a1.9bn rights issue this evening,private investors will own at least68 per cent of the bank.

BoI called the deal a majorendorsement of the banks strategyand the confidence which theseinvestors share with the bank in thefuture for the Irish economy.

Noonan claimed: This invest-ment is tangible proof of growinginternational confidence in thefuture prospects of both Bank ofIreland and the Irish economy.

The Irish government currentlyowns majority stakes in Anglo Irish,EBS and Irish Nationwide BuildingSociety, and Irish Life & Permanentwill have to accept state control if itcannot find another source of capi-tal soon.

BoI to avoid

state control

BY JULIET SAMUEL

BANKING

ROYAL Bank of Scotland has excludedthe former boss of its aircraft leasing business from the $8bn (5bn) auc-tion of the unit, raising concerns thepart-nationalised bank is barring acredible bidder and could short-change the UK taxpayer.

Source said Dublin-based aircraftleasing firm Avalon, which is run byDomhnal Slattery, the founder andformer chief of RBS Aviation, has

been barred from the process.

Slattery hired away key executivesfrom the RBS business last year, whena previous sale process was underway,though it was subsequently aban-doned after failing to find a buyer.

RBS Aviation, one of the worlds topfive commercial airline leasing firms,could fetch between $6bn and $8bn,analysts have said.

The state-owned bank, which isattempting to return to profit said thesale was underway following signifi-cant expressions of interest from

potential bidders in recent months.

RBS Aviation blocks its formerboss from 5bn auction processAVIATION

ALLIED Irish Banks jumped out of thered yesterday, reporting a pre-tax prof-it of260m (229.6m) for the half-yearended June versus a 2.44bn loss forthe same period last year.

The bank still posted an underlyingloss of2.6bn due to continuing ele- vated bad debts. Impairments rosefrom 12.1bn to15.2bn.

And the bank revealed that it has

seen a worrying flight of customerdeposits worth 5bn over the first halfof 2011, excluding the purchase of7bn in deposits from Anglo Irish.

It put the capital flight down toweak economic conditions, sovereignconcerns about Ireland and more gen-eral uncertainty about Europes solu-tion to the debt crisis.

Even so, its overall loan-to-depositratio fell from 165 per cent to 143 percent as the bank successfully ditched

chunks of its non-core book, shrinkingits loans from 96bn to87bn.The bank posted a core tier one cap-

ital ratio of 9.9 per cent at the end of June, versus just four per cent inDecember, in part due to its sale of a70 per cent stake in Polish lender BankZachodni WBK to Banco Santander.

Its shares closed up 4.8 per centafter the results yesterday, though thebank is currently 93 per cent owned bythe Irish government.

Allied Irish back in blackdespite 5bn fall in depositsBY JULIET SAMUEL

BANKING


Richie Boucher, Bank of Ireland chief, has mostly kept the firm out of state hands

ANALYSIS l Bank of Ireland

0.11

0.10


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Dixons wins deal with Harrods


DOMINOS Pizza yesterday forecaststronger sales growth in the secondhalf of the year after reporting a 15per cent rise in first-half profit.

The company, which runs theBritish and Irish franchises of theglobal delivery brand, is planning totreble marketing spend in the secondhalf compared with the same periodlast year, to back up the launch of agourmet pizza range.

It is also sponsoring a new SimonCowell-backed TV show, Red or Black,that will offer contestants a 1m jack-pot. This follows its expired sponsor-ship of Britains Got Talent.

The company said sales at its 607shops open more than a year rose by2.4 per cent in the 26 weeks to June26, against 4.2 per cent rise in thefirst quarter.

It made pre-tax profit of 20.1m,compared with 17.5m the yearbefore.

Finance director Lee Ginsberg said

he was confident sales growth wouldimprove in the second half.

While we dont give the marketnumbers for July, its quite pleasing tosee how well weve started this half,he said.

Weve got some great productlaunches coming. Were going tosponsor Red or Black in September.Weve got a lot in the bag and thatgives us confidence.

He said he was very comfortablewith analyst forecasts for comparablesales growth of three to four per centin the second half.

Netflix disappoints investors

NETFLIX, the top US video rental com-pany, reported second-quarter rev-

enue that fell short of expectationsand saw shares drop with a cautionthat subscriber growth would slow inthe third quarter.

The company said quarterly earn-ings rose to $68m (41.8m), or $1.26 ashare, from $38m, or 70 cents a share,in the same period a year ago.

Revenue rose 52 per cent to$788.6m, but fell short of the average

analyst estimate of $791.5m,according to analysts.

It warned that it would addfewer US subscribers in thethird quarter than it did

in the period in 2010, worrying investorsabout slowing growth.Shares droppedaround nine per centin late trade.

Netflix, whichrecently secured therights to stream hitUS show Mad Men

(pictured), defended its decision toraise prices on DVD and streamingmovie bundles.

It is expected and unfortunatethat our DVD subscribers who

also use streaming dont likeour price change, which canbe as much as a 60 per centincrease, Netflix said in itsearnings release.

The company acknowl-edged some subscribers would cancel or down-grade plans, but expectmost will keep its services.

BY JOHN DUNNE

CONSUMER

BY JENNY FORSYTH

MEDIA

STRUGGLING electricals retailerDixons which has been trying tofind a way to offset falling sales hassigned up to run the consumer elec-tronics section at Harrods.

The unlikely partnership comesafter a spat in which Dixons directlytried to steal customers from Harrodsby encouraging people to browse atthe upmarket store before buyingfrom Dixons.co.uk at lower prices.

Harrods yesterday laughed off theadvertising campaign saying: In factwe were pleased they recognised ourservice levels. Its all a bit amusing.

Dixons, which operates on theHigh Street as Currys and PC World,will replace a string of smaller elec-tronics concessions in a new 11,000square foot department on the thirdfloor of the Knightsbridge store.

Harrods said the departmentwould be high end and not the kindof range you see in the average highstreet store. Dixons said the depart-

ment would sell leading-edge com-puting and audio visual equipment.

Dixons has issued a string of profitwarnings this year but is pinning itshopes on iPad sales as well as design-er headphones and 3D televisions.

David Lloyd-Seed at Dixons Retailsaid: This gets the message across wehave changed as a business and havea different level of customers serviceand product than youd associatewith the old Currys.

Dixons shares lost 6.1 per cent yes-terday to close at 15.2p.

BY JOHN DUNNERETAIL

TEXAS Instruments has forecast onlymodest third quarter growth in theface of economic uncertainty.

The company, whose chips arefound in products ranging frommobile phones to cars, said it expectsthird-quarter revenue of $3.4bn(2.1bn) to $3.7bn, compared withthe average analyst forecast of $3.6bn.

For the second quarter Texas

Instruments earned $672m, or 56cents per share, compared with

$769m, or 62 cents per share, in theyear-ago quarter.Revenue fell to $3.46bn from

almost $3.5bn and was slightly aheadof analysts consensus forecast.

Production at some computingand consumer manufacturersappears lukewarm, chief executiveofficer Rich Templeton said in thestatement.

Texas Instruments expectseconomy to stunt growth

TECHNOLOGY

Dominos to

treble spendon marketingHamad bin Jassimbin Jabor Al Thani

John Browett

3.8bn

Chief executive

UK Sales (to 30 April 2011)

Founded

1937

1bn

Owner

Sales (to 31 January 2011)

Founded

1834

ANALYSIS l Domino's Pizza UK & IRL

p500

480

460

440


482.4025 Jul

8/6/2019 Cityam 2011-07-26

9/24

9EDITED BY

ELIZABETH FOURNIERGot A Story? [email protected] The Capitaliston Twitter: @citycapitalist

The CapitalistCITYA.M. 26 JULY 2011

MAGIC circle law firm FreshfieldsBruckhaus Deringers Fleet Streetoffices played host last night to a Citycrowd debating one of the most perti-nent questions currently facing theUKs politicians, regulators and

bankers whether the countrysbiggest banks should be forcibly bro-ken up, or whether other kinds ofreforms are the best way forward.

The discussion, organised by busi-ness group London First, broughttogether some of the Citys most influ-ential figures, with Sainsburys chair-man David Tyler, KPMG co-chair JohnGriffith-Jones, Tory grandee StevenNorris, Green Investment Bank boss Sir

Adrian Montague, Freshfields Londonmanaging partner Tim Jones, City ofLondon Police commissioner AdrianLeppard and many others finding timeto join the audience tackling the con-

tentious topic.In the corner fighting for a break-up

were Michael Mainelli, chairman ofCity commercial think tank Z/Yen andSimon English of the EveningStandard, with GE Capital chief exec

John Jenkins as their witness for theprosecution. Large banks howlingabout downsizing is exactly what we

want, argued Jenkins, adding his sup-port to the argument thatthe UKs biggest banksshould be broken intoeight pieces each.

Opposing a com-pulsory break-up

were British Landboss Chris Griggs andCity A.M. editor

Allister Heath, with witnessSir WinB i s c h o f f (right) ofL l o y d si n s i s t -ing: UK

b a n k shave some of the best capital inEurope. It is not the structure that is

broken. The steering may need direct-ing and the engine needs to lowerspeed, but the structure isnt broken.

And in the end Sir Wins team wasthe winner, with a show-of-hands voteamong the 75 attendees coming downfirmly on the side of those whoopposed Glass-Steagall-style break-ups.

To paraphrase the events title,when it comes to banking it looks likeLondon remains firmly in favour of bigand brave, as opposed to boring.

WAKE UP CALLWHEN Intercontinental Hotels Groupchief executive Andy Cosslettannounced his surprise departurefrom the company earlier this year, headmitted that non-stop globetrottingfor work had taken its toll over the

years.So its nice to hear that even the

most weary of business travellers canstill be left with their mouths gapingat some of the weird and wonderfulsights around the world even if it isat the expense of their employees

beauty sleep.One IHG staffer tells of the time that

Cosslett called him one morning fromHong Kong seven hours ahead ofBritish Summer Time to rave aboutthe view from the penthouse suite ofthe groups new hotel in the city.

Andy phoned me at an unearthlyhour and was saying: You just have tosee this place. We walked around the

suite and it took about 20 minutes!

he was in awe.Soon after the overwhelming visit,

Cosslett left the company, saying thathe had no immediate plans for workand would take a few months toassess his options. Though hes kepta low profile ever since, The Capitalistcan think of much less pleasant placesfrom which to plot your next movethan an infinity pool overlooking thePearl of the Orient.

GET GRIPES NOTICEDBOARDS, beware: ShareSoc, the privateshareholder society, has published akit to help aspiring activist investors toget their gripes noticed.

Top of the list is to be clear what youare complaining about and avoidlanding yourself in hot water whiledoing so.

You may feel that the directors aredishonest crooks who are only liningtheir own pockets at your expense, butputting that into writing on a bulletin

board or elsewhere is a recipe for largelegal costs, it sagely suggests.

ShareSoc may do well to heed itsown advice when it comes to the sec-tion on lawyers, though it tells read-ers: Past experience shows thatlawyers are notorious for not trackingcosts, not billing clients promptly,going over-budget without warning,and other poor practices.

THE PLACE TO BE SEENNOT content with building the UKs

tallest tower, developerSellar Property has started work on a smaller sister block in order to lure

more City firms to theSouth Bank.

Imaginatively namedThe Place, the 17-storeyglass building (pictured

below) will be ready in2013, less than a year after next doorneighbour The Shard opens its gigan-tic doors to tenants. Chairman IrvineSellar has hired no less than four setsof estate agents to market the two

buildings, fostering what he callshealthy competition as Knight Frankand Jones Lang LaSalle race to sellfloorplates in The Shard before rivalsColliers and CB Richard Ellis can find acompany to take space in The Place.

There will be trouble if the Shardguys cant beat us to sign the first ten-ant, joked once CBRE agent yesterday

at the launch.Perhaps a fresh sighting of The

Shards most famous tenant so far the fox that was found living on the72nd floor in February could sparkrenewed interest in the skyscraper?

Harriet Dennys is away.

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KPMGs co-chair-man John Griffith-

Jones (left) was a guest at thedebate, as wasSainsburys chair-man David Tyler.

Lloyds Banking Group chairman Sir WinBischoff made the case for universal banks

8/6/2019 Cityam 2011-07-26

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EMERGING market growth offsetweaker European sales to allow con-sumer goods giant Reckitt Benckiserto hike its interim dividend by ten percent yesterday.

Total like-for-like sales at the group, which makes Cillit Bang cleaners,Airwick air fresheners and Dettol dis-infectant, rose by five per cent in thefirst half.

However, European sales droppedone per cent, with Vanish fabric

cleaners among the products per-forming badly.

In the six months to 30 June theAnglo-Dutch group reported a 14 percent jump in net revenues to 4.6bn.

Pre-tax profit rose from 971m to1.04bn. The interim dividend was

increased by 10 per cent to 55p pershare.

Presenting his final set of interimresults before standing down as chiefexecutive in September, Bart Bechtsaid: Growth in the base business

was driven in particular by an excel-lent result in developing markets,and was boosted by innovations.

Reckitt liftedby emergingmarket boost

RYANAIR, Europes largest low-costairline, posted quarterly profits belowmarket expectations due to higherfuel and operating costs yesterday.

The Irish airline, which operatesmore than 1,500 flights a day, said itexpects average income yields to rise

by 12 to 15 per cent in its second quar-ter ending in September, but warnedthat traffic would fall four per cent inthe next winter season as high fuelcosts force the airline to groundflights.

Revenues in the three months to

June grew 29 per cent to 1.16bn(1.2bn), meeting market expecta-tions. But net profit was 139m, wellshort of the 151m forecast by a panelof analysts. Ryanair maintained itsprofit forecast for the year of400m.

Ryanair chief executive MichaelOLeary said: Fuel prices remainstubbornly high. Ryanair also hasconfirmed yesterday it will launchlegal action against BAA as it seeks torecover the substantial overchargesthe airline believes it suffered due tomonopolistic position of the air-port operator. The move comes after

regulators won a legal fight orderingBAA to sell Stansted.

Ryanair sees profit dentedby the soaring price of fuel

BY JOHN DUNNECONSUMER

AVIATION


ANALYSIS l Reckitt Benckiser

p3,540

3,500

3,460

3,420


3,526.0025 Jul

ANALYSIS l Ryanair

3.55

3.45

3.35

3.25


3.4025 Jul

Outgoing chief

Bart Becht saysthe Europeanmarket istough.

Picture: REX

Pharma arm too reliant on heroin addict drugRECKITT Benckisers pharmaceuti-cals (RBP) arm has always been anodd fit for the rest of the company,

which specialises in big bright clean-ing brands like Harpic and Finishdishwasher tablets. The drugs divi-sion is interested in something alto-gether darker: heroin addiction.

Things arent looking good forSuboxone, RBPs drug for opiate

addicts. It lost US patent protectionin October 2009 and a raft of cheap-er generics are around the corner.

Reckitt has had some success mov-ing users of Suboxone off tablets andon to a film version, which is stillunder patent, that is placed under

the tongue. If a patient has a pre-scription for the film variant, thepharmacy cant dispense cheapergeneric tablets. Forty-one per cent ofusers now take the drug this way,although analysts had hoped for afaster pace of conversion.

US insurance companies areunlikely to agitate for policyholdersto take cheaper tablets either. The

cost of failure rehab, trips to theemergency room etc is far greater.

Management is hopeful that arange of other dependency drugs ithas in development which treataddiction to alcohol, cannabis, andcocaine could replace the profits

lost from Suboxone, although noneof these will hit the market until2018 at the earliest.

Were still uneasy about RBPsreliance on one drug, however. Themedicine accounts for virtually allof the divisions revenues, whichstood at 320m in the first half andrepresents almost a quarter (22 percent) of group operating profits. It is

about as dependent on Suboxone asits customers were on heroin.

BOTTOMLINEAnalysis by David Crow

Ryanair in numbers, three

months to June 2011

1.16BN

+29%Revenue

248M +22%Ancillary sales (baggage, food &

drink, premium seats)

21.3M +18%Passenger numbers 139.3

+1%Profit

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BUILDERS merchant Wolseley said ithad agreed to sell two of its underper-forming businesses to French rivalSaint-Gobain for a total 310m yester-day.

The worlds biggest plumbers andbuilding merchant said Saint-Gobainwould buy its UK building materialsdistribution business Build Center for145m and was in exclusive talks to

buy its French plumbing and heatingfirm Brossette for 165m.

The disposals are the latest in anasset sale that has seen Wolseleyoffload underperforming parts of its

business to raise cash and repay debt.It flagged both firms several monthsago as units it wished to divest.

The two businesses each made verylittle profit despite generating close to1bn in combined revenues. Wolseleysaid Build Center generated just 4mtrading profit on revenues of 294min the 11 months to the end of June,

while Brossette made a 5m profit onrevenues of 590m in the same time.

Wolseleys chief executive IanMeakins said they were the last twomajor businesses it needed to sell torefocus on its core businesses, whichinclude building materials, plumbingand heating in the UK and France.

Analysts welcomed the sale, saying

it left Wolseley with just 100m netdebt and positioned it well to ramp upits investment for growth in future.Evolution Securities analyst AdrianKearsey said Wolseley negotiated agood price for the two disposals,though regulatory approvals neededmeant they could take months tocomplete.

Shore Capital analyst Gavin Jagoalso said the sales put an end to specu-lation that Travis Perkins had hopes of

buying the businesses. Travis Perkins has been linked to

bids for Wolseleys assets for the past

year, in a period of industry consolida-tion that included Travis Perkins558m purchase of BSS in December.

But Wolseley will still have to man-age a restructuring process to cutunrecovered overheads of 1m permonth. It also expects to pay 15mrestructuring costs.

Wolseley sellstwo more lowearning firmsBYALISON LOCK

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INDUSTRIAL turnaround firmMelrose hit back at the board of itstakeover target CharterInternational yesterday, claiming itcould raise its offer further if shownevidence the engineering group was

worth it.Charter has so far rejected two

offers from Melrose, the most

recent of which valued it at 1.4bn,as it believes Melrose undervaluesits two businesses, welding firmESAB and air and gas handling armHowden.

But Melrose, led by chairman

Christopher Miller (pic-tured) said it wouldneed Charter toopen its books fordue diligence

before it wouldincrease its offerprice further.

Melrose doesnot consider that it

would be appropri-ate to proceed with-

out access tosatisfactory diligenceand will not do so, itsaid in a statement.

Melrose is will-ing to consider

increasing its proposal to reflect anyinformation that demonstrates thatit has materially undervaluedCharter and justifies such anincrease.

It added that it would considerraising its offer without diligenceonly if rivals sparked a bidding war.

Charter has issued three profit warnings since November as its businesses have struggled with

fluctuating demand and a tough

economic climate. It is due toannounce its own turn-around strategy

shortly and is fight-ing to stay inde-pendent.

Melrose wants access to Chartersbooks before it raises its offer price

BYALISON LOCK

INDUSTRY

ENGINEERING consultancy WSPGroup has reported a lower first-halfadjusted pre-tax profit, hurt by asqueeze in the UK public sectorspending, and said it had cut its

workforce by four per cent.

Last month, the company had warned of posting lower 2011

results as the UKs government cutsspending. The company said itexpects to undertake furtherrestructuring action, in addition to2m incurred during the period, asthe outlook for UK public sector

works in roads and educationremains uncertain.

WSP, which is involved in build-

ing bridges and motorways apartfrom property and infrastructure,

said it also slashed its workforce byfour per cent to 8,500 from 8,900.

January-June adjusted pre-taxprofit was 14m, compared with17m last year. Revenue was margin-ally down to 362.2m.

WSP shares, which have shed 11per cent of their value after the com-panys 2011 outlook, closed at

281.1p yesterday, valuing the compa-ny at 178.75m.

BYHARRY BANKS

INDUSTRY

AssetCo toissue 10mnew equity

CASH-STRAPPED fire engine opera-tor AssetCo said it had turned to itsinvestors for money yesterday as itcould not reach agreement with itspotential buyer.

AssetCos board has been in exclu-sive talks with Bahraini bank

Arcapita for months to try andsecure a last-ditch sale that would seeit saved from bankruptcy.

But it admitted yesterday that itssorry finances and reliance on itscreditor banks had stalled the talksand it would source 10m of fresh

working capital from its institutionalinvestors to keep it afloat.

Discussions with a potential offer-or have reached a very advanced

stage but we have not been able toreach agreement, and as the poten-tial offeror also needs to reach agree-ment with the banks, there can be nocertainty that there will be an offerfor the company, it said.

The investors include Bermuda-based Utilico Investments; Gartmoreowner Henderson; and North

Atlantic Value, part of J O Hambro,though Assetco said other institu-tional investors may also be invitedto take part. It added that some cred-itors would also accept compromiseson their repayment.

However, the move would dramati-cally dilute all other shareholdings as

AssetCos share price is just 2.5p.AssetCo also said it had again post-

poned a court hearing over a credi-tors petition until 25 August.

BYALISON LOCK

SERVICES

ANALYSIS l Wolseley

p1,925

1,875

1,825


1,915.0025 Jul

WSP cuts workforce as profits drop

SHARES in Holidaybreak, the specialistholiday provider, rose 15 per cent yes-terday after the company revealed it

was in takeover talks.Holidaybreak, which provides out-

door education and adventure tripsfor school children, confirmed yester-day that it is in discussions with athird party, sending shares up to 367plast night to give a market cap of223m.

Cox & Kings, a tour operator listedin Mumbai has been named as apotential bidder, while analysts believe

a number of private equity firms maybe interested in buying the company.

In May, Holidaybreak reported anincreased first-half pre-tax loss afterharsh winter conditions and a diffi-cult economy hurt consumer spend-ing, but analysts believe the group has

been undervalued by the market.Last month the group sold its

London-based theatre tickets agencyWest End Theatre Bookings for 10.9mto reduce its debt and focus onexpanding its growing educationalholidays division.

Holidaybreak, which is beingadvised by Citi, was unavailable forcomment.

Shares in Holidaybreak

soar over takeover talks

Holidaybreak provides adventure trips for children Picture: Getty Images

BYKASMIRA JEFFORD

LEISURE

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EDINBURGH-BASED chipmaker Wolfson Microelectronics slashedits sales forecast again yesterday inthe face of a tough market for elec-tronics goods that lack an Applelogo.

The downgrade, its second in amonth, sent shares in the maker ofaudio processing chips down 10.7per cent to a 15-month closing low.

The company reported second-quarter revenue of 23.6m, upseven per cent on last year butmissing analyst forecasts of 25m.Operating losses widened to 1.8mfrom 800,000 a year ago.

It said its third-quarter revenuewould be in the range of 23m to27m, sharply below consensus of31m.

The group will cut spending by

about 3.7m a year, at a one-off costof 2.15m, by reducing research on

replacements for some older prod-ucts not related to its main audiorange, Hickey said.

Chief executive Mike Hickey said:The company is increasingly cau-tious about the challenging near-term consumer electronicsenvironment.

There has been a sharp reduc-tion across a wide base of cus-tomers in their near-termforecasts.

Wolfson said its full-year revenuewill grow by less than 10 per cent,missing analyst expectations

which had already been downgrad-ed to about 13 per cent.

The firm, which suppliesBlackberry-maker Research inMotion, Samsung and LG, said it

was being hit by slower-than-expected launches of productssuch as tablet computers, derailingits long-term recovery plan after

being ousted from Apple productsin recent years.

Its chips have been designed intomany of the smartphones andtablet PCs launched to challenge

Apple, but Hickey said productionnumbers were low due to muteddemand from consumers.

Analysts at Espirito SantInvestment Bank said that whilethe groups second-quarter results

were in line, the outlook was disap-pointing. They said that the resultsshow Wolfson is struggling totranslate design wins into revenue.

Apple loss bites intoWolfson forecastsBYHARRY BANKS

TECHNOLOGY

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NEWS | IN BRIEF

National Grid reaffirms outlookElectricity and gas provider NationalGrid has confirmed its positive financialand operational performance at thestart of the financial year, and said itplans to invest 3.6bn in its businessesbefore March 2012. Sixty-five per centof the firms investment will be domes-tically invested in its UK constructionprogramme. The company said itsfinancial position remains strong, andthat its US restructure plan is on trackto deliver savings of $200m by the endof the year. As part of the restructur-

ing, National Grid will cut 1,150 jobs.

Amplats sticks to 2011 targetsThe worlds largest platinum producer,Anglo American Platinum, has main-tained its 2011 output target and pre-dicted a stronger second half. Costsremain a concern for Amplats, as thethreat of industrial action over wageson output means that the company islikely to up wages to prevent a strike.Despite the impact of various externalevents, the company expects the mar-ket to remain in balance and believeits full-year target, of 2.6m ounces, isachievable. Headline earnings rose 20

per cent to 1,236 cents in the six

months to the end of June, comparedwith 1,028 cents a year earlier.

Premier completes Princes dealPremier Foods has completed thesale of its canned grocery opera-tions to Princes. Last month theOffice of Fair Trading raised compe-tition concerns about the deal, andmade the sale of the Fray Bentos piebrand and some manufacturingassets a condition of the deal. Thecash sale is worth 182m, and willboost Princes annual revenues to

1.5bn.

ANALYSIS l Wolfson Microelectronics

p185

175

165

155


155.0025 Jul

Advising Photobox on its mergerwith Moonpig is RBS. Heading up theteam is Nick Evans, director in thebanks financial sponsors division.

Evans has been at RBS for nearlyfive years, joining the mid-marketleveraged finance team in September2006, where he specialised in provid-ing debt for UK private equity backedtransactions. Before joining RBS hespent a year in Australia, where heworked as an intermediate analystfor PKF Chartered Accountants &Business Advisers. He was educatedat the University of Bath.

Also on the advisory team for RBSwas Ben Williams from the banksconsumer industries division, PhilBrown from business developmentand Dan Kirtley from structuredfinance transactions.

RBS yesterday described the dealas groundbreaking, saying it high-

lights the potential of the onlinemarket and the strength of bothPhotobox and Moonpig.

MEET THE ADVISERS

NICK EVANS

RBS

JUST over a decade ago, NickJenkins was working as a trader in

the Moscow office of commoditiesgiant Glencore.His departure, both from the

firm and the coun-try, was hastened

when he found adeath threat pinnedto his front door, the

work of a rogue sup-plier he had helpedsend to jail for stealing10m worth of sugar.

It was a helpfulreminder that it wasprobably time for achange of scenery.

He returned to the UKin 1998 and began working on aplan for a new business.

Yesterday, Jenkins was sitting ona paper fortune of up to 40m afterselling the personalised greetingscard business he launched in 2000.

Moonpig.com known for itscatchy jingle and logo featuring apig in a helmet was sold for

120m to private equity-ownedphoto business Photobox, with

Jenkins parting with some of his 35per cent stake.

The 44-year-old says he came up

with the idea while sending a greet-ing card of his own, whichhe resorted to Tipp-Ex in a bid to customise it. Hespotted a gap in the mar-ket for personalisedcards, which coincidedwith the ascendancy ofdigital publishing.

He ploughed in750,000 of his ownmoney, saved from histrading days. He alsosecured enough fund-

ing to lease office spaceand sign contracts with printers.His service eventually allowed usersto send in photos of their lovedones as well as customise themesand text.

Despite launching just in timefor the dot.com crash, Moonpig sur-

vived, breaking even after five years.

After 11 years with Jenkins atthe helm, Moonpig was turningover more than 40m a year and

was the most recognisable namein the sector.

Key to its success was market-ing; like it or not, the Moonpig

brand is memorable. But it wasnt

the result of a brainstorming ses-sion with highly-paid marketingexecutives Moonpig was therather derisory nickname Jenkinsearned while at school.

Regardless of its provenance,Moonpig was a hit. Last year 2.7mcustomers bought cards from thesite at least three times, amount-ing to unit sales in excess of12m.

It is understood Jenkinswill reinvest some of hisfortune into the newlyformed company andremain as an adviser.However, he is not set-ting out to recreatehis success in thesame industry.Instead the entre-preneur says he iskeen to take some

time out andconcentrate onhis charity work.

Moonpig founder hits the jackpotBY STEVE DINNEEN

TECHNOLOGY

NICK JENKINS

8/6/2019 Cityam 2011-07-26

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LENDING to companies, consumersand house-buyers remained mutedin June despite a pick-up in the number of mortgage approvals, theBritish Bankers Association (BBA)announced yesterday.

Net unsecured lending to con-sumers continued its steady decline,down by 100m in the month matching the six month average andthe fall recorded in May.

Lending to non-financial compa-nies was also down at the same rateas the previous month, slipping by2.5bn significantly higher thanthe six month average of the 1.4bndrop.

The BBAs statistics director DavidDooks said: Businesses, as has beenseen elsewhere, are concerned aboutthe economic outlook and, in weath-ering difficult trading conditions,they are putting off expansion orinvestment plans and limiting bor-rowing.

The number of mortgageapprovals for house purchasejumped three per cent to 31,747 inthe month an 11 month high. Yetnet mortgage lending actually

dipped to 500m, from 1.1bn inMay. Mortgage approvals were stillvery low by long-term norms, addedHoward Archer of IHS Global Insight.

Approvals were still down 6.2 percent year-on-year from 33,846 inJune 2010. Indeed, Junes number ofmortgage approvals was only 55 percent of the average monthly level of57,333 seen since 1997.

Capped mortgages have surged inthe last two years, according to sepa-rate research from the websiteMoneyfacts. Capped deals which work like variables rate mortgagesbut with a ceiling on how high inter-est levels can go reflect borrowersbecoming twitchy about when rates will start to rise, Moneyfacts com-mented.

While there was only one cappedmortgage on the market two yearsago, there are now 39 being offeredto house buyers and owners.

The Bank of England releases offi-cial lending figures for June onFriday. We expect the number ofmortgage approvals to haveincreased to 47,300 (from 45,900 inMay), net secured lending of 0.8bn(1.1bn in May) and net consumerlending of 0.1bn (0.2bn in May),said Barclays Capital in a note.

LEADING industry group the BritishChambers of Commerce (BCC) yester-day unveiled John Longworth (pic-tured) as its new director general,taking over from David Frost.

Longworth joins the BCC after anextensive series of high profile rolesin the British retail sector. Formerlya senior executive at both Asda and

Tesco, he is currently a non-exec ofthe Co-operative Group Food Ltd and

Nichols Plc.I am delighted to

be joining the BCCteam at this crucialtime in the econom-ic cycle, Longworthsaid yesterday.There is no doubtthat the BCC repre-sents the businessbackbone of the Britisheconomy and will

make a uniquecontribution to

recovery.Under Frosts leadership, the BCC

has campaigned for the governmentto reduce to the burden of regula-tion in the UK, while also throwingits weight behind the plans toreduce Britains large public deficit.

Davids hard work over the lasteight years has made the BCC a peer-less voice for businesses of every size

and in every part of the UK, saidBCC president Neville Reyner.

Longworths role willbegin in September.

British Chambers of Commerce namesJohn Longworth new director general

MULTIPLES paid by trade buyers forprivate companies rose sharply in thesecond quarter of the year, BDOs pri-vate companies price index revealedtoday.

Price to earnings (p/e) multiplesspiked to 10.8 in the three months toJune, from 9.0 in the first quarter ofthe year.

With stabilising deal volumes andlower volatility in pricing, the scene isset for the continued reduction in the

price expectation gap between buyersand sellers, said Christopher Clark,

M&A partner at BDO.Yet the number of trade deals fell11.5 per cent in the second quarter.The index recorded 371 deals, downfrom 419 in the opening threemonths of the year.

The number of private equityacquisitions came in at 68, downfrom 98 in the first quarter of 2011.

The first half of the year saw 166 PEdeals, slightly more than in the sec-ond half of last year (161 deals).

Multiples on private traderise in the second quarter

M&A

WEAK domestic demand is holdingback economic recovery in the capi-tal, figures from the LondonChambers of Commerce andIndustry (LCCI) reveal this morning.

While the proportion of compa-nies reporting a rise in domesticactivity increased in the second quar-ter of the year, they remain extreme-

ly low by historical standards.Londons businesses saw condi-

tions improve during quarter two butat a frankly disappointing and slug-gish rate, with growth still way belowpre-recession levels, said LCCIdeputy chief executive Peter Bishop.

Labour yesterday continued itsattack on chancellor GeorgeOsborne, ahead of this morningsGDP figures that many economists

expect to be downbeat.George Osborne is trying to get

his excuses in early, but they will not wash with the British public, saidLabour MP Angela Eagle.

Eagle was speaking after Osborneinsisted that the coalition hasbrought stability the UK in a worldof great uncertainty. Osbornepledged: we are sticking to the eco-nomic plan [of deficit reduction].

Sluggish growth in domestic demandtakes its toll on Londons businesses

ECONOMY

Banks report

small appetitefor borrowingBY JULIAN HARRIS

UK ECONOMY

BY JULIAN HARRISBUSINESS

NEWS | IN BRIEF

Aussie producer prices rise againAustralia's producer price index rose 0.8per cent at the f inal stage of productionin the second quarter of the year, makingfor an annual rise of 3.4 per cent. Thequarterly based index beat economistsexpectations of 0.6 per cent inflation. Inthe first three months of the year, pro-ducer prices were up 1.2 per cent, thedata revealed. In a separate boon for theAustralian economy, a top central bankersaid its banks have little exposure to sov-ereign debt in countries with the biggestdebt problems, while a strengthenedfunding base makes them more resilientto any global credit shocks. Speaking to aproperty conference, Reserve Bank ofAustralia assistant governor Malcolm

Edey said the more cautious attitude toborrowing shown by Australian house-

holds and businesses would ultimately begood for financial stability.

Business morale dips in BelgiumBusiness confidence in Belgium droppedfor the fourth month in a row in July. TheBelgian national bank index fell to minus2.5 in July from minus 1.1 in June.Economists had expected the index todecline to around minus 2.1. The centralbank pinned the blame for the drop onweaknesses in the building and industrialsectors, with manufacturing in particularsuffering a two-year low in productionaccording to some measurements. Theservices sector sub index actually rosefrom 10.4 to 13.9, while all other compo-nents fell, noted Barclays Capitals

Francois Cabau. Today's release paints aless negative picture than the PMIs.

No, I am not worried. I wouldnt saythings are improving strongly, but I

think we are safe from going back into

recession. There is always such nega-

tive press which

causes us to believe

we are going

backwards into a

double dip, which I

don't

think

we

are.

JOHN SATCHWELL |CITYNET

Yes, I am worried; we definitelyhaven't turned a corner out of the

recession as we are still in a soft

patch. The south of

England is recover-

ing from the

recession but this

doesn't reflect the

economic climate

faced by the gen-

eral popula-

tion of

the UK.

GEORGE MACLEAN |LINEDATA

I am not overly concerned. I thinkthat the government has everything

under control. We all know that it will

take a long time to get back on track,

but we should not be

alarmed at this stage.

If there is no impro-

vement in a year or

two, there will be

something to worry

about.

PETER GODFREY |JRP UNDERWRITING

CITY VIEWS: ARE YOU CONCERNED ABOUT THE STATE OF THE BRITISHECONOMY? Interviews by Helen Thompson and Phoebe Torrance

SMALL FIRMS AT RISK FROM SPIRALLING COSTS

RISING costs are cripplingUK businesses, a study bythe Centre for Economicand Business Research(CEBR) shows today. Costinflation is stifling thegrowth of three quarters (74per cent) of small firms,

with over half the countryssmall companies fearing fortheir survival if costs contin-ue to soar. There has been a23 per cent rise in smallbusiness overheads since2005, the CEBR has calcu-lated. Rapid cost increasesare dampening the entre-preneurial spirit so crucialto economic recovery, thereport said. Picture: Reuters

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Perella Weinberg PartnersThe investment banking boutique has

appointed private equity veteranChristopher O'Connor to cover the

healthcare sector and named him as apartner in its corporate advisorygroup. Previously, he was a managingdirector at JPMorgan Chase & Co.

Business Growth FundThe fund has appointed JohnEggleston as IT strategy director and

Jenny Chandler as human resourcesdirector. Both will sit on the BGFsmanagement committee and dividetheir time between London andBirmingham. Eggleston has held anumber of senior IT jobs and Chandlerhas over 20 years HR experience.

+44 (0)20 7092 0053morganmckinley.com

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

SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

Lloyds TSB Commercial FinanceThe asset-based finance providers hasappointed Ian Larkin as managing director, toreplace the departing Simon Featherstone.Larkin will head up the business that providesa range of asset based finance facilities andcomplementary products. He joins from the

commercial banking division of LloydsBanking Group, and was previously managingdirector of Lloyds TSBs consumer bankingand lending arms.

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BEST OF THE BROKERS

To appear in Best of the Brokers email your research to [email protected]

ANALYSIS lDiageo

1,300

1,260

1,220

2011 23 May 20 Jun 18 Jul

p

1,266.0025 July

DIAGEONomura rates the drinks giant as a buywith a target price of 1261p, and expects thecompanys full year results to confirm therevenue increases seen in its third quarter.The broker sees further M&A prospects forthe brand in global spirits, following acquisi-

tions earlier this year in Turkey and Vietnam.A more aggressive focus on growth andcosts could offer further upside to estimates.

ANALYSIS lHays

120

110

100

90

2011 23 May 20 Jun 18 Jul

p94.5525 July

HAYSCredit Suisse rates the recruitment groupas outperform and cuts its target priceto 135p from 140p after its fourth quartertrading update. The broker reduces its fullyear earnings per share estimates by fourper cent to reflect the increasingly chal-lenging UK market, which it thinks willremain difficult for the next couple ofyears.

ANALYSIS lArcelorMittal25.50

24.50

23.50

22.50

2011 23 May 20 Jun 18 Jul

22.7825 July

ARCELOR MITTALING rates the steel miner as a buy with a atarget price of 32, ahead of its second quar-ter results tomorrow. The broker expectsearnings before tax of $3.2bn (1.96bn), andsees comfort in the company meeting con-sensus expectations due to a rise in steel pro-duction and flat raw material prices, plusmanagement guidance that selling prices willmore than offset cost increases.

BRITAINS leading share indexslipped back yesterday,

weighed by weakness in finan-cial issues on fears of a possi-

ble debt default by the United States,with investors attention switchingto precious metal miners and defen-sively-perceived sectors.

At the close, the FTSE 100 indexwas down 9.76 points, or 0.2 per centat 5,925.26, snapping a four-sessionrally of over 3 per cent, but hanging

on to the 5,900 level.Even though there are concernsabout a US default on its debt repay-ments the markets seem convinced

that a resolution will be agreed before the August deadline, said Angus Campbell, Head of Sales atCapital Spreads.

Banks, which led last weeks rally, were the biggest blue chip casual-ties, with Barclays and LloydsBanking Group the worst off, down4.4 per cent and 4.2 per cent respec-tively.

FTSE knocked by

US default worryTHELONDONREPORT

CITY MOVES | WHOS SWITCHING JOBSEdited by Harriet Dennys

Fears dent Wall Street

US stocks dipped in trading yes-terday as lawmakers remainedin a standoff over raising thedebt ceiling to avoid default,

but investors were convinced a com-promise will be reached before next

weeks critical deadline.Trading volume, however, was light

even for a seasonally quiet period,suggesting investors were holding tothe sidelines.

The Dow Jones industrial average was down 88.36 points, or 0.70 percent, at 12,592.80. The Standard &Poors 500 Index was down 7.59points, or 0.56 per cent, at 1,337.43.

The Nasdaq Composite Index was

down 16.03 points, or 0.56 per cent, at2,842.80.

THENEW YORKREPORT

p

9 May 27 May 17 Jun 7 Jul

6,100

5,700

5,800

5,900

6,000

ANALYSIS l FTSE 5,925.2625 Jul

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17/24

CONTRACTS for difference (CFD)lend themselves to trading onindices. Where investors would usu-ally be restricted to taking a posi-

tion on one particular asset, indextrading through CFDs enables you toinvest in segments of the market, or even

the health of the broader national mar-ket.

And with the current volatility in themarkets, traders will be looking to take a

view on the outcome of the current eco-nomic instability. According to David

Jones, chief market strategist for IGMarkets: We are seeing some scrappytrading day to day because of the uncer-tainty surrounding European debt andthe US debt ceiling in recent weeks. Butthere are still opportunities with clientsfocusing on the major indices: FTSE, Dow,S&P 500 and the Dax.

EQUITY BULLSLast week, all was doom and gloom at theUS federal level as Democrats andRepublicans bickered over the raising ofthe US debt ceiling and over the USapproach to addressing its enormousdeficit. But as the bond market policethreatened to kick the door down and hitthe US with a downgrade, things on WallStreet were considerably more upbeat.Investors were more willing to dip theirtoes into equity markets though per-haps through fear of being bitten if theydipped them anywhere else.

COMMODITY POSITIONSTaking a position on a commodities indexalso enables you to take a view on com-modities without the inherent currencyrisk. As Yoni Assia, chief executive ofeToro, points out: The price ratio of goldto silver is currently 40 times greater than

An index lets youtake a view on asector as a whole,writes Craig Drake

The FTSE 100 has made some gains in the last week Picture: REX

Why CFD traders should

take positions on indicesE

QUITIES staged a strong rally for most of last week, asEuropean leaders and the European Central Bank(ECB) managed to reach agreement on a second Greekbailout package. At first glance, the proposed measures

appeared far bolder than many analysts expected. Previously,policymakers were accused of being too tentative in theirresponse to the European sovereign debt crisis, exacerbatingthe fear that contagion to the larger Eurozone countries wasbecoming unavoidable. Yet this time round, the feeling wasthat the Eurocrats had finally caught up with the markets.

This latest agreement provides an additional 109bn aidprogramme for Greece, and reduces the interest rate on res-cue loans to Greece, Ireland and Portugal to 3.5 per cent,while extending their respective maturities. The EuropeanFinancial Stability Facility has been made more flexible but

hasnt been beefed up. Private sector bondholders are beingasked to take a haircut on their Greek bond holdings (but noton Irish or Portuguese) of around 20 per cent. This isthought to be far smaller than the losses they should realisti-cally be accepting, given Greek 10-years are still around 14.7per cent. A selective/restricted/transitory Greek default isinevitable, and the ECB has backed down from its previous,strongly held position and will allow defaulted debt to beoffered up as collateral.

The main aim was to ring-fence Greece from the rest ofEurope. But yesterday, Moodys warned that this secondbailout has increased the risk of downgrades to creditorcountries, including Germany and France. This is becoming aworry. The growing burden on Germanys taxpayers is notonly politically problematic, but also economically damaging.Last week saw disappointing economic data from the core ofEurope. French and German manufacturing and servicesPMIs both fell sharply in July from the previous month, andwere much lower than expected. Then on Friday, GermanysIfo business climate survey showed that business confidencefell sharply.

On top of this, while the second quarter US earnings sea-son has proved to be broadly positive so far, a grimmer pic-ture is emerging from Europe. Bank of America reported lastweek that of the 49 companies who have reported to date,earnings for 53 per cent have come in below expectations.This doesnt bode well for the stronger growth necessary fora full European recovery.

THE EUROZONESUFFERS FROM

GREECES DEBTDAVID MORRISONCFD MARKET STRATEGIST, GFT

it was back in the 1980s. This means thatsilver is extremely overvalued againstgold, and so we need to be aware of thenarrowing gap between the buying ofgold and the shorting of silver. He adds:By monitoring this movement it allowsus to determine when gold outperformssilver and therefore begin to close thegap.

Traders taking this approach are leftwith no exposure to the turmoil in theforex markets and instead are able tofocus directly on the movements

between gold and silver.

PLAYING THE RANGESGiven the current volatility in the indices,

rather than looking for a definite medi-um term trend another strategy could beto play the ranges selling into strengthand buying weakness. According to

Jones: We are seeing some quite extrememoves. For example on Sunday night

when markets opened, indices were heav-ily down because of the lack of resolutionto the US debt crisis, but for the FTSE 100much of these losses were clawed back inthe Monday morning session, a rally ofaround 40 points or so. Due to the rela-tively tight ranges, you have to be on yourtoes as you jump in and out of yourtrades, but given the jitteriness of themarkets, this could be the most sensibleapproach at the moment.

17

Wealth Management | Contracts for Difference


6,000

5,900

5,800

ANALYSIS l FTSE 100

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I

N the event, lazy man yoga doesnthave an awful lot to do with yoga. Itturns out to be more like a post-work-

out stretch session. There are no floor-mats, no mantras and no dogs,downward-facing or otherwise.

Theres a lot of stretching, but its moreor less done for you by your therapist whobends and pulls your muscles while you lieprone, as well as massaging you with a hotpoultice (a steamed bag of aromatic herbs)and oil. As full-body muscular workoutsgo, its about as lazy as they come I fellasleep twice. But the well-worked, satisfy-ing aches I felt the next day were similar tothose after a vigorous exercise session,which reflects how much deeper and fur-ther than a normal massage treatmentthis one goes.

As the name suggests, this treatment isfor men. It can be adjusted for women, butas spa manager and my therapist Amy Taylor points out, women are generallylighter and more flexible than men, sothese stretches tend to have less impact.

Taylor says that things like prolongedoffice work, long-haul flights and profes-sional stresses have their own effects onthe muscles, and this is about de-stiffeningthem.

A spa treatment ofdeep stretches andpoultice-work madeTimothy Barber feellike a new man

You dont have to belazy to have the treat-ment, but it worksbest on men.

Picture: REX

19CITYA.M. 26 JULY 20

cityam 2011-07-26

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