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FTSE 100 5,340.38 +21.79 DOW 11,295.81 -119.05 NASDAQ 2,529.14 -19.80 /$ 1.60 unc / 1.15 +0.02 /$ 1.39 -0.01

Economicwoes hitLloyds sale

THE UKs growth slowdown could sig-nificantly reduce the price that Lloydscan get for the branches it is selling,City A.M. has learned.

At least two of the three bidders the Co-operative Financial Services,NBNK and Sun Capital are concernedthat the state of the economy willmake Lloyds forecasts about the assetsfunding gap untenable, potentiallydriving their sale price below 2bn.

The 632 branches on the block havesome 30bn more in loans than indeposits, a gap that Lloyds has predict-ed will narrow to around 10bn by thetime the deal closes in 2013.

Key to the banks argument is theidea that a steady recovery will let con-sumers pay back their mortgages,shrinking the loan book organically.

JP Morgan and Citi, Lloyds adviserson the deal, have offered a bridge loanto any buyer to cover the rest of thegap, but that loan is conditional onLloyds forecasts panning out.

Bidders are now stress-testing thenumbers in light of a worse macro sit-uation since the bank kicked off thesale. If the loan falls through, findingalternative funding could prove costly.

The bank has also offered to boostthe assets deposit base by 5bn, butfaces questions over how it will grabmarket share without eroding mar-gins on the business.

It will also be charged to provide evi-dence that the customer deposits are

sticky, and will not simply disappearonce the branches move out fromunder the Lloyds brand. Alternatively,it could cut down the mortgage book.

Sinking GDP growth across G7 countries is causing a headache for chancellor George Osborne Picture: REUTERS

THE GLOBAL economic slowdown isset to condemn the UK to near-stagna-tion in the second half of the year, theOrganisation for Economic Co-opera-tion and Development (OECD) warnedyesterday.

Forecasters at the OECD predictBritish growth of 0.1 per cent or belowin this quarter, and in the next.

The downward revisions are largelydue to weaker prospects for exports,the group said. It also slashed forecastsfor the G7 as a whole, excluding Japan,to sub-0.1 per cent growth.

The news dealt a severe blow tochancellor George Osbornes deficitreduction plan, which relies ongrowth continuing to boost the gov-ernments tax receipts.

Yet the OECDs chief economist, PierCarlo Padoan, urged the chancellor tostick to the schedule for austerity.

The government should notchange its course, Padoan said. Thisis a very precise recommendation.

Nonetheless, the severity of the UKsweak outlook was affirmed by DanskeBank analysts, who yesterday said thatthe government should be deprived ofits gold-plated credit rating and begiven the same rating that Italy cur-

rently holds.The UK should be given an A+ rat-ing, i.e. four notches below the current[triple-A] rating, it said.

COALITION HIT BYGDP DOWNGRADE

BY JULIAN HARRISWORLD ECONOMY

www.cityam.comIssue 1,464 Friday 9 September 2011 FREE

EVOLUTIONTAKEOVER

INVESTEC SET TO

ANNOUNCE DEAL

TODAY PAGE 3

LORD STANLEY FINK GETSTHE PARTY STARTED

ALL THE PICTURES AND GOSSIP P15

BUSINESS WITH PERSONALITY

The coalition managed to claw gov-ernment finances back into the blackin July, thanks to spiking corporationtax receipts and a new bank levy.

Yet public sector net borrowingexcluding financial interventions hasstill stretched above 40bn in the firstfour months of this fiscal year, while

the total government debt hasclimbed to 940.1bn, equivalent to61.4 per cent of the countrys GDP.

Central government spending hit

207.3bn from April to July, up from200.7bn at the same time last year.

The Office for Budget Responsibility(OBR) forecasts that public borrowingexcluding financial sector interven-tions will total 122bn during 2011-12,more than 20bn lower than in theprevious year.

However, the economy has barelygrown since last September and manyeconomists doubt the governmentwill meet its deficit target. When the

coalition launched its emergencybudget in June 2010, the OBR predict-ed growth of around 3.6 per cent inthe 18 months to the end of 2011.

But if the OECDs forecasts arerealised, the UK economy will haveexpanded by less than one per cent inthat period.

Elsewhere, German politicians wererocked by the OECD report, which pre-dicted contraction of 0.3 per cent forthe countrys fourth quarter.

Certified Distribution

04/07/2011 till 31/07/2011 is 93,093

ANALYSIS l Annualised quarterly GDP growth

%

G7 Excluding Japan

Source: OECD

2006 2007 2008 2009 2010 20112005

4

0

-4

-8

BY JULIET SAMUEL

EXCLUSIVE

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News4 CITYA.M. 9 SEPTEMBER 2011

Obama urgesnew stimulus AMERICA looks set for yet anotherdouble-pronged dose of governmentstimulus, after President BarackObama launched his American JobsAct late last night, and Fed chief BenBernanke hinted at more monetaryeasing.

Obama urged Congress to votethrough his $447bn (280bn) pro-gramme of tax cuts and governmentspending hikes, repeating the wordspass this plan no fewer than 15times during a 40-minute speech.

The President described the bill asuncontroversial and essential for theworlds largest economy.

It will provide a tax break for com-panies who hire new workers, and itwill cut payroll taxes in half for every working American and every small

business. It will provide a jolt to aneconomy that has stalled.

Companies that employ people who have spent more than sixmonths looking for work will begranted a $4,000 tax credit, he said.

The mammoth costs of the newplan will not be funded by greaterdebts, Obama also pledged. In July,Congress was tasked with finding afurther $1.5 trillion in savings by theend of the year.

Tonight, Im asking you to increasethat amount so that it covers the fullcost of the American Jobs Act, Obamasaid, promising a more ambitiousdeficit plan to be released next week.

During a patriotic, rallying speech,Obama invoked the legacy of Abraham Lincoln and urgedAmericans to win the battle to thetop.

If Americans can buy Kias and

Hyundais, I want to see folks in SouthKorea driving Fords and Chevys andChryslers. I want to see more prod-ucts sold around the world stamped with three proud words: Made in America, he said, to one of manystanding ovations and cheers fromthe assembled lawmakers.

Earlier in the evening FederalReserve chairman Ben Bernanke saidthat the central bank would do every-thing within its powers to boost theailing US economy, yet failed to speci-fy a precise plan for another phase ofmonetary accommodation.

The Federal Reserve will do all itcan to help restore high rates ofgrowth and employment in a contextof price stability, Bernanke told theEconomic Club of Minnesota.

US Treasury Secretary TimothyGeithner was also party to yesterdayschorus for stimulus. The imperativeremains to strengthen economicgrowth. Fiscal policy everywhere hasto be guided by the imperatives ofgrowth, Geithner wrote in theFinancial Times, while admitting thata repeat of 2009s huge stimulusmeasures is not feasible.

BY JULIAN HARRIS

US ECONOMY

Why buying property is no panacea

ANYBODY interested in the housingmarket and in trying to preserve their wealth in these uncertain timesshould take a look at a fascinatingnew book. Safe as Houses: a HistoricalAnalysis of Property Prices is full ofuseful facts and a stark reminderthat investing in residential propertyisnt as sure a bet as most people believe. Author Neil Monnery hasstudied house prices over the longterm around the world and confirmsthat globally they tend to grow atone per cent above the rate of infla-tion over very long periods of time.

In Britain, as the Barclays EquityGuilt Study points out, real houseprices grew by 2.4 per cent a year between 1952-2010, against 6.9 percent for equities. However, Monnerys

original and extremely importantresearch shows that real house pricesgrew by just 1.3 per cent a year between 1900 and 2010 (and by just0.8 per cent a year until 1995, beforethe bubble). In the US, real houseprices grew by 0.2 per cent a year between 1900 and 2010; in Norway,they grew by 0.9 per cent a year dur-ing that same 110-year period; in Australia by 1.4 per cent a year. InAmsterdam, he finds that they grewby 0.6 per cent a year on average overthe past 110 years; they only rose 0.4per cent per year since 1628.

The book also contains much otheruseful data. There is a nonsensicalmyth that the UK has uniquely highlevels of home ownership and thathardly anybody owns their own homeon the continent, where a rental cul-ture apparently prevails. Yet in 2009

the home ownership rate in Spain was85 per cent, 78 per cent in Belgium, 77per cent in Norway, 75 per cent inIreland, 70 per cent in Australia, 69per cent in the UK, 67 per cent in the

US and Canada, a still pretty high 57per cent in France and a lower but stillvery sizeable 43 per cent in Germany.Yes, the Germans are much less likelyto own their own homes but in gener-al the difference has been greatlyexaggerated. Another myth is that alleconomies saw house price rises dur-ing the boom. Yet since 1990, theyhave trended down in Germany,Switzerland and Japan and stagnatedin Italy and Finland, for example.

There are, of course, reasons whypeople may still prefer to invest inhousing rather than in equities, eventhough long run real growth in bricksof mortar is far less impressive thanusually understood. They can useleverage much more easily. Primaryresidences are exempt from capitalgains. Returns to equity can be severe-ly reduced if held using wealth man-

agers who charge high fees. AsMonnery points out, 100 earningfour per cent in real terms willbecome 710 in 50 years, giving a gainof 610. Reduce that by paying two per

cent fees and the gain falls to just169. The answer may lie in low-costtracker funds. Against this should beput the much higher than usuallyunderstood cost of buying and owningproperty. People spend thousands ofpounds on their homes, yet forget thatthis cost should be deducted from cap-ital gains, often wiping them out.

But for a full comparison, rents orthe benefits of living in a homeshould also be included. One mightassume a gross yield of 4 per cent anda net yield of 2.5 per cent after costsand expenses, which should be addedto price appreciation to create a realand fair measure of return. Long-run,property provides good but not mirac-ulous returns; short-term, more pricedeclines are certain. Food for thought.

[email protected] me on Twitter: @allisterheath

NEWS | IN BRIEF

SAP admits Oracle chargesSAP last night said it pleaded guilty tounspecified charges in a criminal caseinvolving unauthorised access to com-puters maintained by software rivalOracle. The US Department of Justiceprosecutors yesterday charged SAP'sdefunct TomorrowNow Inc unit with 11

counts of unauthorised access to anOracle computer, and one count of crim-inal copyright infringement, according toa court filing yesterday. With the agree-ment we now look forward to what wethink is a fair and final resolution of thematter, said a spokesperson for SAPyesterday.

Twitter sets out business stallSocial network Twitter tried to convinceinvestors of its business credentials yes-terday as it set out a business case andpassed the milestone of 100m users.Chief executive Dick Costelo talked upthe prospect of using promoted tweetsto generate revenues and boasted thatthe company has a truckload of cashfollowing a recent fundraising. He alsosaid that advertising is likely to remainTwitters primary source of funding forthe foreseeable future.

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 8900 Fax: 020 7283 5334Email: [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 SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

Ben Bernanke and Barack Obama both said they will try to boost growth

DEADLINE LOOMS TO OUT SECRETSUITORSCompanies covertly circling UKacquisition targets are being warnedby advisers that they risk the disclo-sure of their identities to the marketin coming days if they pursue bidtalks. On 19 September, the UK Takeover Panel, which regulationsM&A of public companies, bringsinto force new rules that requiregreater disclosure aorund bid situa-tions.

SMES WILL FACE THREAT FROMREFORM, SAYS SANDSSmall and medium-sized businesses,which are widely viewed as critical torestoring economic growth, will beamong the biggest victims of bankreforms, according to the chief exec-utive of Standard Chartered. Peter

Sands, who as head of the emergingmarkets-focused bank, has been one

of the strongest critics of regulatorychanges, said SMEs and other riskier

customers would bear the brunt ofrising bank costs.

BIDDERS FOR EMI ARE TOLD OF 150MLIABILITIESHMV, the embattled music retailer,has complicated the auction of EMIafter it emerged that the record labelcarries a potential liability of up to150m on the property leases ofsome of HMVs shops. Bidders in theEMI auction have been informed thatbefore the label spun off the retailrinto a separate entity in 1998, it hadguaranteed 40 property leases onHMV stores.

BOLTONS CHINA FUND BUYS BACKSTOCK TO TIGHTEN DISCOUNTFidelity China, the investment vehi-cle managed by Anthony Bolton, onThursday bought back stock for thefirst time after shareholders dumped

their holdings following a period ofpoor performance.

BLAIR IRAN IS THE REAL ENEMY Tony Blair backs regime change inIran and Syria and warns the West ofa long and hard struggle to defeat ter-rorism and the flawed ideology thatsupports it. The former PrimeMinister, in an interview with TheTimes to mark the tenth anniversaryof 9/11, blames Tehran for helping toprolong the conflicts in Iraq andAfghanistan long after the allies ini-tial victories.

FACTORY TURNS TO MARMITE POWER THEN MAGNUM FORCELove it or hate it, Unilever is to startusing the waste from the productionof Marmite to power the factory thatmakes the divisive yeast extract.Marmite, itself a byproduct of the brewing industry, is made at the Anglo-Dutch groups site in Burton

where inevitably some sticks to thesides of manufacturing equipment.

TNK-BP INTERNAL FRAUD PROBE LEADSTO 37 CRIMINAL CASESExplosive revelations over the extent ofalleged fraud and corruption at BP'sRussian joint-venture have emergedjust days before David Cameron makesa high-profile visit to Moscow. TNK-BP,the company jointly owned by the UKoil major and four oligarchs, disclosedthe extraordinary details of a newprobe, detailing hundreds of allega-tions of unscrupulous behaviour.

PLANNING REFORMS IN FEE THREAT TOVILLAGE GREENSCommunities would have to pay up to1,000 to apply to save their greenspaces from the developers bulldozersunder plans to speed up the planningprocess, The Daily Telegraph can dis-close. In official documents, ministersadmit the proposed charge is likely to

mean that fewer people will apply forthe special protection.

GOP CANDIDATES ASSAIL FED CHIEFSome Republican presidential candi-dates have turned the 2012 campaigninto open season on Federal Reservechairman Ben Bernanke. Mitt Romneyand Newt Gingrich both took swipesat the Fed chief at Wednesday nightsGOP debate, piling onto earlier criti-cism by Texas Governor Rick Perry,Minnesota representative MicheleBachmann.

SWISS CAP MOVE RILES OFFICIALS INNORWAY AND CANADANorwegian and Canadian officials on Thursday criticised Switzerlandmove this week to cap the rise of itscurrency, as the impact reverberatedin currency markets world-wide. TheNorwegian krone soared against theeuro after the Swiss National Banksaid Tuesday that it would use unlim-

ited spending to prevent the eurofrom falling below SFr1.20.

WHAT THE OTHER PAPERS SAY THIS MORNING

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EVOLUTION Group hopes toannounce as soon as today that Anglo-South African bank Investechas won the race to take over thefinancial group for around 220m.

Investec is thought to be payingmore than 100p a share to buy thebusiness. Talk of an imminent deal was enough to boost Evolutionsshares three per cent to 94p in trad-ing yesterday.

Investec and Canaccord had set outrival bids for Evolution in earlyAugust, sending Evos shares on anupward trajectory from 73.5p.

Canaccord conceded defeat lastnight, saying in a statement that it will no longer proceed with anoffer following its preliminary talks.

It is understood that Investec hasagreed to buy Evolution in its entire-ty, rather than cherry-picking the

more lucrative parts of the businesssuch as its Williams DeBroe asset

management arm.Evolutions broking arm does not

expect to make a profit this year, butthe asset management group, whichholds 6bn in assets under manage-ment, has given a rosier outlook.

Alex Snow, Evolutions chief execu-tive, is expected to remain in chargeof the companys operations follow-ing a takeover. But the deal hasalready claimed the head of financedirector Andrew Westenberger, whoquit with immediate effect in mid-August.

Evolution declined to commentlast night, while Investec did notreturn calls for comment.

Investecs managing directorBernard Kantor told City A.M. lastmonth that the deal makes commonsense for the bank.

In this day and age you need to beable to get the maximum out of allareas of opportunity and this is oneway of achieving those synergies and

get more ammunition, more arma-ments, to take on the market.

Investec setto unveil Evo

takeover dealBYMARION DAKERS

M&A

THE EUROPEAN Central Bank (ECB)

cut short its rate-hiking cycle yesterdaydue to intensified downside risks togrowth that it said will bring inflationbelow its two per cent target next year.

ECB president Jean-Claude Trichetsignalled that the Bank is now rela-tively more concerned about the eco-nomic recovery, seeing the risks ofprice instability and stagnation asbalanced.

He also launched a fierce defence of

the Banks reputation, blaming thedebt crisis on governments [who]have not behaved properly.

In response to criticism of the ECBs

decision to buy Eurozone government bonds to stem the rise of borrowingcosts, he demanded congratulationsfor delivering price stability inGermany that is better than what hasever been obtained in this countryover the past 50 years.

We do our job. Its not an easy job,he added. We try to be up to ourresponsibility and they are very heavyresponsibilities, very heavy.

Trichet loses his cool as ECB

holds rates in the Eurozone

News 5CITYA.M. 9 SEPTEMBER 2011

Investec managing director Bernard Kantor has all-but sealed a deal for Evolution

ON THE DEFENSIVE: TRICHETS PRESS CONFERENCE IN QUOTES

Can I remind us that in 2004 and 2005, some

important governments in Europe were asking forweakening the Stability and Growth Pact. Do youremember that? And do you remember which gov-ernments were asking for weakening the Stabilityand Growth Pact? The three big governments ofEurope, including of course France, Germany and Italy.

There is an enormous level of uncertainty, and I

think that the main message in this domain would beuncertainties. It is really uncertainty at a global level andwe see that clearly. It is also uncertainties certainly inthe major economies outside Europe in the world.

To ensure credibility, it is now crucial that the

announced measures be front-loaded and implement-ed in full. Governments need to stand ready toimplement further consolidation measures.

We stand ready to provide liquidity as wehave done in the past, taking into account the needs of

the banking sector.ON UNCERTAINTY:

ON THE STABILITY AND GROWTH PACT: ON DEBT REDUCTION MEASURES:

ON LIQUIDITY:

ON GERMAN CRITICISMS:

We have delivered price stability... impeccably,

impeccably. I would like very much to hear the con-gratulations for an institution, which has deliveredprice stability in Germany over 13 years...

BY JULIET SAMUEL

EUROZONE

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THE BANK of England kept interestrates on hold at 0.5 per cent yesterday,for the 30th straight month -- withanalysts not predicting an increase anytime soon.

Not since 1950 have interest ratesremained at the same level for so long.

And despite rumours that the Bank ismoving in a dovish direction, it optedagainst more asset purchases.

With the continued turbulence inglobal markets we are unlikely to see a

rate increased until 2013, said PaulShuttleworth at BlackRock.

The risks of a possible recession inthe UK have risen, and if we continueto see slow growth it may prompt theBanks monetary policy committee(MPC) to undertake a further round ofquantitative easing (QE).

That is a matter for some debate,however. Since the MPCs hawks,Martin Weale and Spencer Dale,stopped voting for a rate hike in

August, and Andrew Sentance left the

committee after Mays vote, expecta-tions changed rapidly.

In such a volatile environment, pre-dicting policy decisions months inadvance is an uncertain business.

Scott Corfe, of the Centre forEconomics and Business Research,

believes the lack of options will forcethe MPCs hand in coming months.

There is little scope for interest ratecuts or fiscal expansion to prop upgrowth, he said. QE is the onlystraightforward measure policymak-ers have left in the short term, despitearguments that it is unlikely to solve

the current economic malaise.That is despite inflation standing at

over twice its official target. It isexpected to break the five per centmark before the end of this year.

The asset purchase programme washeld at 200bn, and was last increasedin November 2009.

No statement was issued by themonetary policy committee on thechances of more QE in the near future,

but the minutes released at a laterdate could tell a different story.

No QE just yetas Bank holdsrates at 0.5pc HOUSEBUYERS across the countrywere buoyed by higher levels of pur-chase approvals in August, the sur-veyors group E.surv said yesterday.

Approvals were up 4.3 per cent on August 2010 and hit a 15-monthhigh.

However, Londoners missed out onthe boost, with approvals dropping

by 10 per cent compared with Julysfigure.

That is because of the difficultymany buyers have in raising thedeposit for Londons infamouslyexpensive property, said the consul-tancy.

Buyers at the lower end of theprice range did find mortgages

becoming easier to come by, as bankloosen lending criteria.

Approvals increased in all price

brackets below 750,000, analystsfound, and houses around the125,000 mark typically thosesought by first time buyers account-ed for a quarter of all approvalsnationally.

For those who can get mortgages,the good news is that fixed rate dealsseem certain to remain particularlycheap, said E.survs business devel-opment director Richard Sexton.Repayment rates will stay low forsome time.

Housebuyersstruggle to getloans in London

ANALYSIS l DOLE QUEUE AND INFLATION

Source: Timetric

Jul 2008 Jan 2009 Jul 2009 Jan 2010 Jul 2010 Jan 2011 Jul 2011Jan 2008

5.0

6.0

4.0

3.0

2.0

1.0

Annual % change in Job Seekers Allowance claimant count

CPI inflation (%)

Mervyn King is considering even more monetary easing Picture: Reuters

BY TIMWALLACE

UK ECONOMY

HOUSING


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THE Co-operative Banking Group hasappointed two women to its board,months after the recommendations ofthe Davies report.

One of them is Merlyn VivienneLowther, formerly chief cashier at theBank of England. The other is AnneGunther, chief executive of theNorwich & Peterborough BuildingSociety.

Lord Davies said in February thatcompanies needed to increase thenumber of women on their boards orface the possibility of regulation. There

are no other women on the Co-opBank board at the moment.

GLENCORE rose to its highest level infive weeks in London trading yesterdayafter First Reserve Internationalswapped its bonds in the commoditiesgiant and bought shares, in a movethat was seen by the market as a voteof confidence in the company.

US private equity giant First Reserveconfirmed yesterday that it had soldits $800m (600m) convertible bonds issued in December 2009 and insteadacquired 141m ordinary shares inGlencore.

The firm, which specialises in natu-ral resources, said will use the pro-ceeds of the bond, sold at 135 cents onthe dollar, which amounts to $1.08bn

before fees, to buy Glencore shares at aprice of 680 cents (425p).

This means First Reserve will end up with around 158m shares from thedeal, more than than the 140m it

would have had if it had waited for thebond to convert in 2014.

Credit Suisse and Morgan Stanleyhave been acting as joint bookrunnerson the offering.

Glencore shares surged 7.58 per centto close at 436.5p, their highest since 4

August, a welcome relief for the com-modities trader that has seen itsshares drop 24 per cent since its initial$10bn initial public offering in May.

Liberum Capital said it consideredthe move to be a bullish signal forGlencores shares.

First Reserve is a specialist naturalresources private equity firm and itschairman and CEO William Macaulayis a Glencore non-executive directorand we expect it will remain a longterm Glencore shareholder, Liberumsaid in a note.

Other investors in the original$2.3bn bond include Government ofSingapore Investment Corporation(GIC), BlackRock, and Chinas ZijinMining Group.

First Reserve

equity deallifts Glencore

Two women jointhe Co-op board Nasdaq slamsNYSE merger

BYKASMIRA JEFFORD

ENERGY

BANKING


Sale is a sign of some much-needed faithLIKE a proud parent whose faith inits wayward child never falters,First Reserve has believed inGlencore since day one. When thethen-privately held commoditiesgiant issued its debut $2.2bn con-

vertible bond in December 2009,First Reserve was one of the biggestinvestors, snapping up $800m ofnotes.

Now its swapped those notes forequity three years ahead of theirmaturity date and taken on a twoper cent stake in the company.

With Glencore shares trading 24per cent below their list price of

530p before the announcement,the market has been looking for a

vote of confidence. First Reservesbet essentially that the shares willgain enough to be worth more thantheir conversion price by 2014 is

also a vote for Glencores model. The opacity of how the compa-nys trading arm made money wasone of investors key concerns priorto the IPO.

But First Reserve knows the com-pany well its chairman and chiefexecutive William Macauley is aGlencore non-exec and by back-ing up its confidence its providing

a much-needed psychologicalboost.

True, First Reserve hardly strug-gled for investors willing to shifttheir stock, but its punt that thesell-off since listing has been over-

done is enough for the shares tohave regained almost a third oftheir lost ground during yesterdaystrades.

First Reserve is expecting itspaternal conviction to be rewarded.

We trust its instincts.

BOTTOMLINEAnalysis by Elizabeth Fournier

ANALYSIS l Glencore

p

5 Sep 6 Sep 7 Sep 8 Sep2 Sep

430

440

410

390

436.508 Sept

First ReservechairmanWilliamMacaulay isalso a non-exec-utive directorat Glencore

Picture: GETTY

BANKING

NASDAQ OMX Group has intensifiedits campaign against the merger of itsrivals NYSE Euronext and DeutscheBoerse in a fiery submission to the EU.

The merger is currently under con-sideration by European authorities,

who could scupper the deal.In a letter to the European

Commission, Nasdaq has claimed thatallowing it to proceed could kill com-petition because the resulting compa-ny could cut down on collateralrequirements for clients, driving rivalsout of the market.

However, Nasdaq itself attempted tobuy NYSE Euronext earlier this year.

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RUSSIAN lender Sberbank hassnapped up Austrian multinationalVolksbank International (VBI) in its sec-ond multi-million euro purchase ofthe year.

An adviser on the deal said that itprovides an example of how WesternEuropean banks are missing out ongrowth opportunities due to beingembroiled in the regions debt crisis.

At a stroke, the move givesSberbank, which is majority-owned bythe Russian government, a platformfor expansion across eight countries incentral and Eastern Europe. It has600,000 customers and 291 branchesin countries that include Croatia,Slovakia, Serbia, Hungary and theCzech Republic.

Sberbank will spend 585m-645mon the assets, with the exact price to

be determined by their book value when the sale goes through in

December.Stefan Goetz, who led the Socit

Gnrale team advising on the sale,said: This transaction is a sign of thetimes. Its the first major financial

institutions acquisition into the cen-tral and Eastern European region fromthe east rather than from the west.

There is currently a distinct dividein terms of valuation and acquisitioncurrency, between banks in... emerg-ing markets and those in the Western

world who are hampered by theEurozone crisis, he added.

Sberbank will fill a 2.5bn fundinggap out of its own pocket, while VBI

will plug the remaining 500,000 gapwith a loan to its buyer. The Russianbank is on the lookout for more pur-chases as part of an effort to become amajor international player.

The Russian government is alsokeen to privatise a 7.6 per cent stake inthe lender, but it is not clear if it willpush ahead with plans to do so thisSeptember due to turmoil in the equi-ty markets.

Sberbank was also advised by JP

Morgan and its own in-house invest-ment bank, Troika Dialog, on the deal.

Russian bankpounces forAustrias VBI CHANCELLOR George Osborne agreedto develop London into an offshoretrading centre for Chinas renminbi

currency after meeting Chinese vice-president Wang Qishan yesterday.

The move gave official Treasurysupport for the Citys push to tradethe renminbi, a market expected togrow rapidly for trade, foreign

exchange and bond issuance.The step reflects efforts by Chineseauthorities to push on with a series ofinitiatives to internationalise the ren-minbi, and should reinforce Londonsposition as a global currency hub.

We discussed the strong private-sector interest in developing the off-shore RMB market in London. We will

work together to support the mar-kets further development, Osbornesaid.

In particular, we agreed to collabo-rate on the development of RMB-denominated financial products andservices in London and our regulatorsstand ready to support this growingmarket.

Osborne said the UK and Chinastechnical cooperation on financialservices was unrivalled.

No other country has the samelevel of integration with China as the

UK. And these links are continuing togrow, he said.

Osborne agreesdeal for UK asrenminbi hub

Sberbank chief Herman Gref has snapped up a chain of banks Picture: Reuters

BY JULIET SAMUEL

BANKING

POLITICS


Stefan Goetz has been leadingSocit Gnrales (SocGen) push toexpand both its mergers & acquisi-tions (M&A) and financial institu-tions advisory business in Europe.

So far this year, he has advised onDeutsche Banks acquisition ofPostbank and the merger of NYSE

Euronext and Deutsche Boerse.

He was also involved in the cre-ation of Caixa Bank, as part ofSpains restructuring of its bankingsector. The deal, which involved aswap of industrial for financialassets, created Spains third-largestlisted lender after BBVA andSantander.

Goetz has spent all of his careerworking on financial institutionsdeals and, before moving to SocGen,was head of corporate strategy andM&A at Credit Suisse in Zurich andHong Kong.

He began his investment banking

career in London in 1994.

MEET THE ADVISERS: SOCIT GNRALE

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STEFAN GOETZ

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Spread beting losses can exceed

your initial deposit.

THE DEPARTURE of Carol Bartzappears to have done little to steadythe ship at Yahoo, with a majorinvestor yesterday calling for sweep-ing changes on the companys board, including getting rid of thechairman.

Activist hedge fund managerDaniel Loeb, who revealed he hasamassed a 5.15 per cent stake inYahoo, applauded the axing of Bartz,calling her hiring a serious mis-

judgement.But he demanded the immediate

resignation of chairman Roy Bostockfor championing her appointment,alongside fellow directors ArthurKern, Vyomesh Joshi and Susan James, who he says stood by andwatched as the firm floundered.

He said: From the failedMicrosoft sale negotiations, to a sub-sequent bungled and disappointingsearch deal with Microsoft, througha series of misguided chief executive

selections, and most recently theAlipay debacle, this Boards failureshave destroyed value for all Yahoostakeholders.

Against this background, it is evi-dent that merely replacing theCompanys chief executive yet again will not be enough to alter the direc-tion of the company. Instead, a recon-stituted board with new directors who will bring fresh eyes, relevantindustry expertise and increasedinvestor alignment to the table isimmediately necessary.

Loeb, whose Third Point fund

manages $8bn (5bn), has a reputa-tion as an activist investor and is alsoa major fundraiser for PresidentObama.

The board also felt the infamouslysharp tongue of Bartz yesterday when, in her first interview sinceleaving Yahoo, she accused Bostockof reading from a script when hefired her. She claimed she respondedby saying: Why dont you have the balls to tell me yourself? I thoughtyou were classier.

Yahoo facescalls for boardto step down INVESTORS and liquidators havereacted with shock after the SeriousFraud Office dropped a two-and-a-half-year probe into a hedge fund that

collapsed with $639m (399.86m)under management.

The SFO said there was not a rea-sonable prospect of conviction afterstudying evidence on London-basedWeavering Capital (UK), which wentinto administration in 2009.

The move comes days after aCayman Islands court ruled in a civilcase between the funds liquidatorsand two directors that Weaveringsfund manager Magnus Peterson hadcommitted fraud and that the fundhad made fictitious transactions toinflate assets and conceal losses.

It also comes ahead of legal actionbeing taken in the UK by the liquida-

tors against Peterson and otherWeavering directors and employees.

Geoffrey Bouchier, one of the liq-uidators, yesterday described theSFOs decision as deeply disappoint-ing. Peterson could not be contactedbut said in a statement that the alle-gations against him were ground-less and that he intends to appealthe Cayman ruling. Last month aCayman court awarded damages of$111m against fund directors StefanPeterson and Hans Ekstrom.

Anger as SFOdrops its probeinto hedge fund

BY STEVE DINNEEN

TECHNOLOGY

HEDGE FUNDS


Singapore comes underfire over Man United IPO

THE SINGAPORE stock exchange hascome under fire for its decision towave through the controversial sharestructure proposed in the ManchesterUnited IPO.

It is understood the Old Traffordclub will create a tiered structurewhereby stock held by its US ownersthe Glazer family will have twice thevoting rights of the new shares.

Singapore-based corporate gover-

nance expert Mak Yuen Teen brandedthe move a backward step for theexchange from the perspective ofgood corporate governance.

The club was tipped to list in HongKong but lawyers say Singapore,which has struggled to compete withits rival for big listings, may have beenmore willing to accommodate itsdemands.

The club could raise as much as$1bn (625m) in a bid to help reduce adebt pile of more than 300m.

Manchester United could raise as much as $1bn in an upcoming IPO Pic:Action Images

BY STEVE DINNEENBUSINESS OF SPORT

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SOARING car insurance costs are atthe centre of a new investigation bythe UKs competition watchdog, toassess whether insurance firms areraising premiums unnecessarily.

The Office of Fair Trading yesterdaysaid it was so concerned at signs thatpremiums rose up to 40 per cent inthe year to March that it launched acall for evidence to find out the rea-sons for the hikes.

But analysts said they doubtedwhether the probe was focused on theright areas and whether the motorinsurance industry could be accusedof being anti-competitive when it hadsuffered large losses for decades.

The Association of British Insurerssaid the industry had not turned a

profit for 16 years as claims, particu-larly personal injury claims from caraccidents, rose faster than premiums.

The OFT will look at the use of price

comparison websites, use of replace-ment vehicles and approved repairersafter accidents, and the sale of ancil-lary products such as protected noclaims bonuses.

But it will not investigate either thereferral fees paid to insurers for cus-tomer data, or inflation of personalinjury claim costs that insurers say isthe reason for the rise in premiums.

Motor is one of the most competi-tive markets in the world so it isunlikely consumers are sufferingbecause of limited competition, saidCollins Stewart analyst Ben Cohen.

Shares in insurer Admiral fell 2.4per cent on fears it could suffer due toits reliance on ancillary revenues andits comparison site confused.com.

But Shore Capital analyst EamonnFlanagan said the probe would cast alight on features that cause real con-

cern to those even within the indus-try and have been blamed for the very high levels of claims inflationover the past few years.

Car insurershit by probeinto rate risesBYALISON LOCK

INSURANCE


Henry Engelhardt, chief executive of Admiral, which made 173m in ancillary revenuesin the first half of this year alone Picture: Micha Theiner

CITY VIEWS: IS THERE ENOUGH COMPETITION IN THE UKS CAR INSURANCEMARKET? Interviews by William Turvill and Max Faulkner

Car insurance is very expensive at the momentbut I do feel as though there is enough competi-tion between companies. I'm just very gratefulfor the fact that I'm not a new driver buying aninsurance premium now.

KATY TANN | RBS

I understand that some might not feel there isenough competition personally, though, I am sat-isfied. I would recommend price comparison web-sites to anyone looking to improve theirjudgement on what they should be pay-ing.

CHRIS DAVIS | RK HARRISON

Although, through no fault of my own, my car insurance premium has risen by a huge amount over the past year,I do think there is enough competition. I blame the no-win-no-fee insurers for the price inflation; otherinsurers simply have to go along with the market.

MARK PAYNE | WILLIS

WHY PROBE CAR INSURANCE?

Q.WHY HAS THE OFT LAUNCHEDTHIS INVESTIGATION?A.The competition regulator isconcerned that steep rises in carinsurance rates in recent years couldbe due to insurers levying unneces-sary charges or selling productswrongly.

Q.WHAT IS THE OFT CALLING FOREVIDENCE ON?A.The investigation covers areaswhere insurers charge motoristsadditional amounts, such as forreplacement cars after accidents, or

the use of only approved repairers. It

is also investigatingwhether price com-parison websites reallydo lead to lower costs for motorists,and whether the sale of extra prod-ucts alongside insurance is beingdone correctly.

Q.WHY ARE PERSONAL INJURYCLAIMS NOT INCLUDED?A.The OFT is not covering personalinjury claims, such as forwhiplash after a car crash, as the gov-ernments transport select commit-tee is already investigating how such

claims are affecting motor insurers.

Q A&

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THE NATURAL History Museumlast night took on a globaltheme for the World WideLaunch Party for The Global

Party the 24-hour internationalparty next Thursday and Friday that

will link together 80 parties in 73cities in 42 countries.

More than 2,000 guests helped TheGlobal Party get off to a flying start,including hotelier Sol Kerzner; hedgefund boss Ian Wace of Marshall Wace,accompanied by his model girlfriendSaffron Aldridge (pic-tured); Dunhillchief executiveChris Colfer; and,of course, thepartys co-organ-

isers LordStanley Finkand his busi-ness partnerD a v i d

Johnstone.May I wel-

come you allto a wonder-ful night atthe muse-um, saidFink among

the dinosaurs, before handing over toJohnstone, who explained where the1m the party is expected to raise will

be donated a total of 15 charitiesincluding the Duke of Edinburghs

Award, the Blue Marine Foundation,the Nelson Mandela Childrens Fund,and Absolute Return for Kids, thecharity co-founded by Wace and phi-lanthropist Arki Busson.

Entertainment was provided byEddie and the Robbers and

Finks favourite BryanFerry, who kept the crowddancing until the earlyhours to Roxy Music hits.We are very pleased with

the turnout, Fink toldThe Capitalist. So

much so that heand Johnstoneplan to bring theinaugural GlobalParty back in two years time well, it does take18 months toorganise expanded for2013 to 380parties aroundthe world.

NIGHT AT THE MUSEUMLAUNCHES LORD FINKS

GLOBAL FUNDRAISER

Far left: Global Partyco-host David

Johnstone, founder of FrHoldings

Left: Global Party co-

host Lord Stanley Fink, Conservativ party treasurer andchief executive of

I n t e r n a t i o n a lStandard Asset

Management

Pictures: MiTheiner, City A.M.

15EDITED BY

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

The CapitalistCITYA.M. 9 SEPTEMBER 2011

Andrew Michael of Investec and NickYeatman of Constituo

Nick Mason of RNIB and fiancePip Whatley of State Street

Marie Hlne and Pierre-Andr Mourgue dAlgue ofMorgue dAlgue & Cie with Vincent Barnogin of Ecofinand his wife Luna

John Asgian and his wife Katushka, philan-thropists to Ark and Clic Sargent

Max Aitken of Cherif Capital and his wife Ines withOliver Mackwood of Splash and Gaia Arzilli

Philanthropist Vanessa Hankaand entrepreneur Marcus Newton

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BRITISH Land, the second-largest UKreal estate investment trust (REIT),has closed a $480m (300.6m) US private placement bond issue, takingthe total funds it has raised sinceMay to $860m, it said yesterday.

It is the largest US private place-ment by a UK REIT, involving 12investors and a range of maturitiesbetween seven and 15 years.

For any of the UK REITs diversify-ing, their source of funding is a posi-tive, said Mike Bessell, a propertyanalyst at Evolution Securities.

Traditional large lenders to thesector in the UK such as RBS and

Lloyds are reducing their exposure.Other property companies to

announce bond issues this yearinclude Great Portland Estates andDerwent London.

The oversubscribed placementoriginally launched at $200m, takesthe companys weighted averagedebt maturity and interest rate,including share of joint venturesand fund debt, to 9.7 years and 4.8per cent respectively, British Landsaid.

Royal Bank of Scotland and HSBCacted as joint agents and hedge co-ordinators, and Lloyds Banking

Group provided hedge underwritingand syndication.

HOUSEBUILDER Redrow has postedbetter than expected pre-tax profits,thanks to a 14 per cent rise in rev-enues, but warned of a tough outlookfor the property market.

The Wales-based company posted apre-tax profit of 25.3m in the 12months to the end of June, comparedwith 700,000 the year before, beat-ing a consensus of around 20m.

Chairman and founder SteveMorgan, who returned to the grouparound two years ago at the bottomof the property crash, said theimprovements were boosted bystrong sales of its New HeritageCollection, a range of two- to four-bed-room houses launched in February2010.

The average selling price of thesehomes, which made up 41 per cent oftotal sales in the second half of the year, increased 11 per cent to201,000.

The company sealed more legalcompletions in 2011, with the num-ber improving to 2,626 from 2,587.

But Morgan, who also ownsPremier League football club

Wolverhampton Wanderers, warnedthat the outlook for the industryremained tough due to the lack ofmortgages, particularly for first timebuyers.

With five new jobs being createdfor every new home built, it is strong-ly in our countrys interest to resolvethe mortgage issue, which wouldonce again enable the housing indus-try to provide urgently needed newhomes and a major stimulus to theeconomy, he said in a statement.

The group also sold its Scottishoperation during the year in order tofocus on the south east England mar-ket. Redrow established a Londonregion where 342 plots have beensecured.

Redrow beats

forecasts inprofits surge

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British Land taps US investors inrecord $480m private placement

BYKASMIRA JEFFORD

CONSTRUCTION

PROPERTY


NEWS | IN BRIEF

VW delays merger with PorscheVolkswagen said yesterday it woulddelay a merger with Porsche until after2011 because of unresolved legal issuesand examine other ways of creating anintegrated auto group. Porsche andVolkswagen in 2009 agreed to seal amerger deal by the end of 2011 but in

February signalled the merger faceddelays because of investor lawsuits and acriminal investigation of its former chiefexecutive and its finance head.

First Quantum eyes $1bn financingFirst Quantum Minerals is close to secur-ing about $1 billion (625m) in financingto expand its Zambian copper opera-tions, a source familiar with the detailssaid yesterday. The group has an 80 percent stake in the Kansanshi mine in

Zambia, the world's eighth-largest cop-per mine, and also produces copper andgold in Mauritania. The firm is looking toalmost double production at Kansanshiby 2014. The expansion will be carriedout in two parts with the first stageexpected to lift production capacity toabout 285,000 tonnes a year.

WS Atkins says it is on courseWS Atkins said yesterday its tradingwas in line with forecasts ahead of itsannual shareholder meeting. The engi-neer said that while the UK marketremains difficult and Europe business ison the wane, strong growth in theMiddle East and Asia Pacific is enough toput the firm on course to hit its targets.The firm also warned that revenues andmargins in its North American business

will be hit by poor performance at itsconstruction management arm.

Allied Gold wins FTSE placePacific-focused mining group Allied Goldis set to enter the FTSE SmallCap indexlater this month after the FTSE changedits mind about the firms eligibility under

share liquidity rules. Allied Gold, whichhas a market cap of almost 400m, willalso join the FTSE 250 reserve list from19 September. A spokesperson for FTSEsaid the original failed liquidity test onAllied Gold shares in June was affectedby trading issues, which were not pres-ent during a later examination of thestock. Allied Gold started trading onLondons main market on 30 June, afterbeing promoted from the juniorAlternative Investment Market.

ANALYSIS l Redrow

p


120

116

116.308 Sept

Redrow founder and chair Steve Morgan has helped deliver better than expected results

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SHARES in Premier Farnell, the Britishdistributor of electronics and mainte-nance products, plunged almost eightper cent yesterday after the companysaw sales weaken over the summer andoffered a cautious outlook on itsprospects.

Premier Farnell, which is seen as a bellwether of global trade because itdepends on short term demand, said atwo per cent fall in August sales indicat-ed that the economic environment wasstill challenging.

The group, which issued a profit warning in July after its sales felt theeffects of a global economic slowdownand the earthquake in Japan, said

adjusted pre-tax profit for the threemonths to the end of July rose 0.9 percent to 23m.

Total sales for the quarter edged up1.4 per cent to 245m in the threemonths to July, down from the 8.3 percent lift in the previous quarter.

Sales from its developing markets

such as Taiwan, South Korea andThailand accounted for 23.9 per cent oftotal sales in the second quarter as itcontinues to move towards its target of30 per cent. In these regions, second-quarter sales grew 46.8 per cent sequen-tially.

The firm said it would make a further15m of cuts the second half of the year.

In taking these [cost saving] actionsquickly and effectively we believe wewill ensure maximisation of our sales,operating profit and cash positions todrive towards achieving our expecta-tions this year, said chief executiveHarriet Green.

Premier Farnellsales in a slump

Chief executive Harriet Green played up the firms cost savings

BYKASMIRA JEFFORD

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ANALYSIS l Premier Farnell

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HTC has stepped up its war with arch-rival Apple by adding nine recentlyacquired patents to its ongoing law-suit.

The ammunition was provided byGoogle, which sold the patent portfo-lio to the Taiwanese firm, threaten-ing to further sour its relationship

with Apple. Google, which appears

unwilling to sue Apple directly,acquired the patents over the last 12months from firms including Palmand Motorola. It is unclear how muchHTC paid for the portfolio.

Cupertino-based Apple also has sev-eral patent suits pending againstHTC, with a spokesman saying yester-day: We think competition ishealthy, but competitors should cre-ate their own original technology, notsteal ours.

Analysts say Googles biggest everdeal, acquiring Motorola Mobility for$12.5bn (7.8bn), was an attempt to

buy insurance against increasinglyaggressive legal attacks from rivals.

Meanwhile, Google snapped updining recommendations and ratings

website Zagat in a push into localmarkets. Google will link the serviceup with its places software to providea vertically integrated location-basedrecommendation application.

HTC uses Google patentsto extend Apple lawsuitBY STEVE DINNEENTECHNOLOGY

COLT PENS BT TOWER DEAL

Colt has penned a deal with BT that will allow businesses across Europe access to highdefinition content via the BT Tower, City A.M. can reveal. The information supplier tobusinesses says the agreement will allow its European customers to broadcast contentsuch as the Olympic games and will open up syndication revenue opportunities for UKcompanies by delivering more coverage to viewers.

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US EXPORTS soared while importsdeclined slightly in July, resulting inthe largest fall in the trade gap for

over two years. At $44.8bn (27.9bn), the gap is13.1 per cent lower than in the previ-ous month. Exports increased by 3.6per cent to $178bn and imports fellby 0.2 per cent to $222.8bn in parthelped by the declining price of oil.

The value of exports in July wasthe highest on record. In particular,$14.7bn of exports went to Southand Central America, also represent-ing an unprecedented value.

Over the course of the first sevenmonths of the year, total exportsreached $1,209bn, up 16 per cent onthe same period of 2010, which sawexports of $1,042.

Not all factors worked in favour ofa reduced trade deficit, however.

Exports to China increased, butwere outstripped by rises in importsfrom the country, now standing at$8.17bn and $35.13bn respectively,

creating the largest ever trade deficitwith China.

The global marketplace presentsvast opportunities for US companiesand todays trade report shows theyare taking advantage of those, saidacting commerce secretary RebeccaBlank. The figures keep us on track

to meet the Presidents goal of dou-bling exports by 2015.She stressed that high export lev-

els support US jobs, but initial job-less claims this week counteredthose hopes, with unexpectedly highfigures reported.

Canada also saw an unexpectedlylarge fall in its trade deficit in July.

An expansion of 2.2 per cent sawexports rise to C$37.3bn (23.6bn). That cut the deficit to C$753m,down from C$1.4bn, becauseimports increased by only 0.5 percent, to C$38bn. Export volumesincreased by 4.1 per cent, but a 1.9per cent fall in prices reduced theimpact on the trade balance, accord-ing to Statistics Canada.

The countrys economy was hit bythe Japanese tsunami in March, butimport levels surpassed the C$800mmark in July, showing trade had

reached levels similar to those beforethe disaster struck.

US exports ata record high

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US ECONOMY

US INITIAL jobless claims came inhigher than expected yesterday.

A fall to 405,000 had been forecast.However, the number rose by 2,000 to414,000 last week, stirring fears oflabour market stagnation.

The figures from the LaborDepartment said the number of newbenefit claimants had suffered no dis-cernible impact from the severestorms battering the country.

Excluding one week in early August,new claims have held above 400,000since early April.

Total insured unemployment forthe week ending 27 August, however,fell to 3,717,000, according to initialestimates down 30,000 on the previ-ous weeks revised figures of3,1747,000.

The overall number of claimantsacross all programmes was also downto 7,169,176, meaning the figures fellby 167,009 from the previous week.

New American jobless claimsrise but overall figures decline

US ECONOMY

TACKLING Britains crumbling infra-structure would create jobs and boostcompetitiveness at a critical moment,businesses said in a survey out today.

But 98 per cent of 447 companiessurveyed see the complexities of thecurrent planning system as a barrierto infrastructure investment.

Fifty-eight per cent of businessesthink the UKs infrastructure com-

pares unfavourably against competingnations in the EU, according to areport from the Confederation ofBritish Industry (CBI) and KPMG.

If we are serious about boostingexports especially in emerging mar-kets and achieving sustainablegrowth the government must putinfrastructure investment firmly atthe top of its agenda, said the CBIsJohn Cridland.

We need ministerial decisions thatget spades in the ground and people

working now. There are large amountsof business capital waiting to beunlocked if the government achieves astep-change on transport, for examplewith the introduction of road tolls.

The governments new planningframework is expected to introduce abias in favour of development.

Just over 40 per cent of the firmssurveyed think the coalitions policieson infrastructure development willhave a positive impact, while 33 percent said it will affect them negatively.

UK infrastructure bottleneckstifles investment and jobsBY TIMWALLACE

INFRASTRUCTURE


The number of new jobless claims in the US rose at the end of August Picture: GETTY

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EXPORTS and imports declined in Julyin Germany, according to figuresreleased yesterday by the FederalStatistical Office (FSC).

German exports fell by 1.5 per cent,following Junes 1.3 per cent decline.Imports fell by 0.3 per cent, reducingthe countrys trade surplus to 10.1bn(8.8bn), its lowest since January 2010.

Analysts point to sluggish demandaround the world as a cause. Thedecline in exports in recent monthshas been broad based but particularlyapparent in exports to the rest of theeuro area, said Barclays CapitalsMarian Laboure. Export demand both

within Europe and particularly out-side has been weakening. It is also

worth observing Italian exports out-side of Europe these have fallensharply, by 4.2 per cent in June and 5.8per cent in July.

Exports from France increasedslightly, rising by 0.3 cent, according tothe Directorate General of Customsand Excise. Imports increased by 2.9

per cent, countering Junes 2.8 percent fall and taking the trade deficitup 1bn to 6.46bn.

However, export levels were the onlystrong point, with other figures weakacross the board. Bank of France statis-tics, also out yesterday, show manufac-turing confidence fell to a 22-monthlow while service output slipped in

August. The Bank cut Frances economic

growth forecasts to 0.1 per cent for thethird quarter, and revised figures fromthe national statistics body INSEEshow 39,000 jobs were created in thesecond quarter. That compares with84,600 in the first three months of the

year.With the sharp worsening in

unemployment in recent months, itappears that businesses had alreadyexpected weaker conditions ahead,Laboure said. The deterioration in theglobal environment, including thenegative signals coming fromEuropean financial markets, are likelyto continue to make businesses reluc-tant to take on new staff, creating arisk of a negative spiral.

Demand fallsfor EU output

Demand for exports from France and Germany is slowing Picture: REUTERS

BY TIMWALLACE

EUROZONE ECONOMY

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MORRISONS marked its forecast-beat-ing first half results with a renewedeffort to finally enter the online deliv-ery market more than a decadeafter its rivals launched their services.

The supermarket saw an 8.9 percent rise in first-half profits to 449m,as a focus on fresh foods, low pricesand promotions helped it chip awayat the market share of its biggerrivals.

It also grew its sales by 2.2 per cent,despite a dip in the second quarterthat was blamed on the tough com-parative of the royal wedding in April.

Total sales beat forecasts to hit 8.7bn.There was a 3.5 per cent increase in

footfall, with a record average of11.5m customers visiting Morrisons

stores every week.Chief executive Dalton Philips saidthe way customers shop has shifted as

rising prices, muted wage growth andgovernment cutbacks eat into theirpurchasing power.

The supermarket will pay an inter-im dividend of 3.17p a share, up 10per cent.

Morrisons, the UKs fourth-biggestgrocer behind J Sainsbury, Asda andmarket leader Tesco, produces moreof its own fresh foods than any of itsrivals, and employs more specialist

butchers, bakers and fishmongers.

Sales surgeat MorrisonsBY STEVE DINNEEN

RETAIL

CARPETRIGHT said yesterday that itremained a profitable businessdespite a substantial reduction inprofits over the past year.

The carpet and flooring companylast month reported a 5.8 per centdecrease in trade for the year ending30 April and, in spite of improve-

ment, sales fell at a rate of 1.5 per centfor the 12 weeks to 23 July.

Carpetright chairman Lord Harrissaid at the companys AGM yesterdaythat the continued decline was fullyanticipated and admitted that he didnot expect an immediate respite.

Looking forward, he said, I seeno respite from the challenging envi-ronment over the next year butremain confident the group willemerge in a strong position to deliver

future growth once consumerdemand improves.

Carpetright reckons it will remainstrong despite challenging marketRETAIL


A QUICK glance at his CV showsthat Morrisons appointment ofSimon Thompson to managing

director of its website is somethingof a coup.He left Apple in May after rising

to become one of the most seniormarketing-men in its Europeanoffice. While working under Steve

Jobs headed up the team responsi- ble for its online store during therelease of hit products includingthe iPad and iPad 2.

However, he is most widelyknown for his work on a series of

innovative Honda adverts, includ-ing the superlative, HeathRobinson-esque chain-reaction adCog, as well as the famous slotfeaturing a choir mimicking thenoises of a car and the Hate

Something, Change Somethinganimation. The industry stalwart has also

held senior marketing positions atLastminute.com and Motorola,making him one of the most highlysought-after executives in the coun-try.

He will head up the team tasked with belatedly setting upMorrisons as a power in theonline grocery delivery busi-

ness. He willtravel toNew York totakes notesf r o mMorrisons

part-ownedFreshDirectv e n t u r e before rollingthe service outin the UK next

year.

Apple man to freshen up supermarket

BY STEVE DINNEEN

RETAIL

ANALYSIS l The online grocery race

1998

1998

1997

2012

2002SIMON THOMPSON

ANALYSIS l Wm Morrison

p


300.00

295.00

290.00

285.00

301.608 Sept

The years in which the mainsupermarkets launched theironline stores

LAST OFF THE BLOCKS

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THE chief executive of Home RetailGroup warned that hopes of anOlympics bounce on the high streetnext year could prove misguided.

Terry Duddy told City A.M. that con-sumer confidence was as low as inearly 2009. The Argos and Homebaseowner reported a second quarterslump which stopped short of ana-lysts worst fears.

Duddy said: There are some peo-ple who will say there is a feelgoodfactor in 2012 with the Olympics andthe Queens [Diamond] Jubilee butfrom an economic point of view I seelittle to change the outlook.

Duddy expects a fall of four to sixper cent in Argos like-for-like sales forthe year to February 2012.

The group is expecting a betterChristmas this year, however, helpedin part by the refurbishment of its750 Argos stores, nearly half of which

has been completed.Shares in Home Retail closed up

1.99 per cent at 117.8p last night afterit said sales at Argos stores open morethan a year fell 8.6 per cent in the 13weeks to 27 August.

Two-thirds of the decline wasblamed on the consumer electronicssector, down by about 20 per centover the quarter. Sales were buoyantlast year in the run-up to the footballWorld Cup.

Homebase recorded a like-for-likesales fall of 3.1 per cent in Q2.

Home Retail

boss expectssales to drop

LAURA Ashley said it was on track tomeet its expectations for the yearafter doubling the interim dividendand reporting a 28 per cent rise infirst-half adjusted pre-tax profit.

The furniture and clothing compa-ny said yesterday that all its productcategories except home accessoriesshowed positive like-for-like sales

growth in the period.While the consumer environmentcontinues to be uncertain, we remainconfident for the remainder of theyear, the firm said.

Retail sales in August fell 0.6 percent on a like-for-like basis as cash-strapped consumers bought fewernon-essential items such as home- ware or furniture. Pre-tax profit before exceptional charges rose to7.3m for the 26 weeks to the end of

July, up from 5.7m last year. Revenuewas nearly flat at 135.3m. The com-pany declared an interim dividend of1p.

Laura Ashley shares, which havelost a fifth of their value over the pastthree months, closed at 20.75p, valu-ing the firm at about 135m.

Analysts at Seymour Pierce said thefigures showed consumer spending was robust despite concerns overthe outlook.

20-27 November

The O2

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Profits climb at Laura Ashleydespite consumer slowdown

BY PETER EDWARDS

RETAIL

Sitting pretty: First half profits rose strongly at Laura Ashley

BY PETER EDWARDSRETAIL


ANALYSIS l Home Retail

p


130

120

117.808 Sept

ANALYST VIEWS: ARE THINGS LOOKING UPFOR HOME RETAIL GROUP? Interviews by Peter Edwards

DAVID JEARY | INVESTEC

Our initial estimates suggest that Argos is likely to make a small oper-ating loss in the first-half. This is certainly not conducive to more positive senti-ment and the debate on its weak performance... will not therefore abate.

PHILIP DORGAN | PANMURE GORDON

It looks likely that group profits will fall for the next two years and it isbecoming increasingly stretching to see any short term upside for the shares... Wefind it increasingly difficult to see a quick path to recovery for Argos.

KEITH BOWMAN | HARGREAVES LANSDOWN

The update is no worse than expected. The decline in sales at Argoshas slowed compared to the previous quarter, whilst changes in the sales mix havehelped to limit the damage on the profit margin.

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Sign up at cityam.com

GLOBAL brewer SABMiller is set tolaunch its formal takeover forFosters Group this month after an

Australian regulator rejected itsclaim that Fosters had made mis-leading financial statements as partof a hostile A$9.5bn (6.3bn) bid bat-tle.

SABMiller had hoped to rattle theFosters takeover defence by castingdoubt on its financial statement.

The ruling allowed both sides toclaim victory as it dismissed doubtsover Fosters financial forecasts butdid force Fosters to clarify its netdebt position.

The Takeovers Panel yesterday dis-missed SABMillers claims thatFosters had made misleading anddeceptive forward looking state-ments over future sales and earn-ings growth.

Both parties accepted the panelsdecision and SABMiller is now likelyto launch its bid document, whichcould come as early as next week, at

the same cash price of A$4.90 aFosters share as originally pro-posed, sources close to the situationsaid.

SABMiller is ready to go, so thisruling gives it the green light to for-malise its bid as soon as possible atthe same price, said one source

with knowledge of the situation.SABMiller said it accepted the

panels determination and ispleased that Fosters has now clari-fied its debt position.

Fosters had dismissed the claimsby its suitor, which related to state-ments Fosters had made in its full-

year results late last month.

SAB to launch

a formal bidfor FostersBY HARRY BANKS

M&A

TROUBLED carmaker Saab insisted itwas not dead yet yesterday after aSwedish court pushed the ailing car-maker closer to collapse by rejectingits application for protection fromcreditors.

The court decision could open theway for Saab itself, unions or creditorsto seek bankruptcy for a company

where a chronic shortage of cash hashalted production and left suppliersand workers unpaid.

Saab, which brought the applica-tion to win time for vital Chinese

investment, said it would appeal theruling and provide more information

at some point today.We are not dead yet. We were not

dead yesterday, we are definitely notdead today, news agency TT quoted

Victor Muller, chief executive of Saabsowner Swedish Automobile , as saying.

The court set a deadline of 29September for an appeal. A courtspokeswoman said that while Saabhad no court protection, petitions for

bankruptcy could be made. The Vanersborg district court in

western Sweden said it was unclearhow the company would be able tosolve its liquidity crisis and continueoperations.

Saab was rescued from closure by

General Motors in 2010 by Amsterdam-listed Spyker Cars.

Saab is pushed to the brink ofbankruptcy by Swedish court

INDUSTRY


Jones Lang LaSalleThe property services firm has hired

Frank Prschke as chief executive forGermany, effective from 1 January.Prschke was previously chairman of

the management board at Eurohypo.He replaces Andreas Quint, who movesto the firms corporate finance division,based in London and Frankfurt.

Betfair GroupThe gaming group has appointed Peter

Marcus as UK director. Marcus will joinBetfair in October from Betclic EverestGroup, where he is group chief strategyofficer, to oversee the companys UK-facing business divisions.

VenquisThe recruiter has expanded its invest-

ment management desk in London byhiring Michelle Sally and DanielStockman. Sally joins from CornwallisElt and Stockman moves from soft-ware firm Pentana.

Old Mutual Asset Managers

The investment firm has hired KevinLilley as a fund manager to run theOld Mutual European Equity Fund,effective from October. Lilley movesfrom Royal London AssetManagement, where he has managedthe 641m Royal London EuropeanGrowth Fund since 2001.

Business Growth FundThe governments 2.5bn BusinessGrowth Fund, established to helpBritains SMEs, has hired Jon Rhodesas director of communications andmarketing. Rhodes joins from PR firmBrunswick, where he was a partner.

AmundiThe fund manager has hired JasonJosefs as senior portfolio manager forglobal equities in London. Josefs, who

joins from Aviva Investors, will co-manage Amundis flagship active glob-al thematic equity fund.

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

Houlihan LokeyThe international investment bank has hiredOliver dOelsnitz as a managing director and headof financial advisorys European financial institu-tions coverage. DOelsnitz was most recently amanaging director at Pan American Financial

Resources, where he established a portfolio realestate, infrastructure and debt funds. Prior tothis, he was a managing director and global headof corporate finance at WestLB AG in London.

ANALYSIS l SABMiller

p


2,260

2,220

2,180

2,234.008 Sept

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BRITAINS leading shares endedhigher after a volatile sessionyesterday, as investors emergedfor beaten-down growth stocks

to put a f loor under the market.By the close the FTSE 100 was up

0.4 per cent at 5,340.38 points, takinga rally into a third straight day afteran intraday trading range of 100

points, or 1.8 per cent.Oil and gas stocks including BGGroup, up 1.8 per cent, BP up 0.5 percent, and Royal Dutch Shell up 0.6per cent, were among the stocksadding most points to the index.

Today feels like real buying acrossthe board, among growth and cycli-cal plays such as oils and tech. Whichis why people trying to whack themarket down are struggling to do so,a portfolio trader at a leading USinvestment bank said.Glencore led risers across Europe,up 7.6 per cent, after First ReserveInternational sold out of $800m in

convertible bonds and bought intothe firms equity. Supermarket WmMorrison was also a top riser.

Oil and gas companies lead avolatile FTSE to further gainsTHELONDONREPORT

US stocks closed sharply lower

yesterday after Federal Reservechairman Ben Bernanke gaveno indications of new stimulus

measures to boost the flagging econo-

my in a keenly awaited speech.Investors have been looking to

Bernanke, who gave his outlook onthe US economy yesterday, and otherpolicymakers to address a host of con-cerns from slowing global growth toEuropes debt crisis.

Banks were the biggest declinersafter sharp gains on Wednesday. Theyhave been one of the most turbulentsectors in the volatility that hasengulfed equity markets this sum-

mer. The KBW Bank Index fell nearlythree per cent.

The Dow Jones industrial averagedropped 119.05 points, or 1.04 percent, to 11,295.81. The Standard &Poors 500 Index fell 12.72 points, or1.06 per cent, to 1,185.90. The NasdaqComposite Index lost 19.80 points, or0.78 per cent, to 2,529.14.

The VIX volatility index, a measureof expected market turbulence, rosethree per cent to 34.37.

THENEW YORKREPORT

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ANALYSIS lEMPRESARIA

55

45

35

13 Jun 4 Jul 25 Jul 15 Aug 5 Sep

p

25.008 Sept

EMPRESARIAMerchant Securities Research, whichdowngraded Empresaria to a sell lastmonth, said the f irms interim results yes-terday confirm its fears. It points out thatoperating profit is down 52 per cent, theUK is flat, the boss is stepping down and

market expectations will now not be met.Its price target of 25p has already beenmet so it reverts to a hold but it wouldnot recommend buying at this stage.

ANALYSIS lImagination Technologies

450

350


p345.00

8 Sept

IMAGINATION TECHNOLOGIESNumis reiterated its buy on ImaginationTechnologies, setting a target price of400p. It said licensing activity continues tobe strong and broad across graphics andother products. It added that despite aweak macro environment, the firms expo-sure to Apple and new customer rampsshould drive substantial royalty growth.The broker said that it remains confident inits 2012 estimates.

DIXONSArden says it is a weak holder of Dixons

shares. It says it has a target of no morethan 12p a 20 per cent discount to its sum-of-the-parts price. It closed at 11p last night.The broker trimmed its full-year pre-taxprofit forecast from 85m to 70m-75m,despite more cost-cutting. It says losses inthe other European operations are annoy-ingly persistent and Pixmania remainsunder pressure.

Wall St slumps on Fed speech13 Jun 01 Jul 21 Jul 31 Aug10 Aug

6,200

5,400

5,000

5,800

ANALYSIS l FTSE5,340.38

8 Sept

ANALYSIS lDixons Retail

18

14


p

10.968 Sept

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Living | Abroad FRIENDS WITH BENEFITSMILA KUNIS AND JUSTINTIMBERLAKE, REVIEWEDON PAGE 39

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ctual,refertosalesstaffforfurtherinformation.

Rugby host is also

property heavenAs New Zealand hosts the Rugby World Cup,Zoe Strimpel looks at some of its prize homes

WITH the seventh rugby world cupkicking off today (our time) in Auckland, millions of eyes areturned to Kiwi-land. Thousands of

fans have physically landed in New Zealand,too, to soak up the experience first-hand,one that promises to be a jamboree of sun,sea and beer as the southern hemispheres

spring rolls into town. Many of the visitors expected to include 24,000 Brits out of85,000 total will no doubt find the timedaydream about buying a home out there,passing the odd down moment by browsingestate agents windows. Some may actuallydecide to do it.

Indeed, Brits have an increasingly tangi-ble connection with New Zealand property, with summer (or winter) homes being apopular and discerning acquisition amongour more flexible and monied profession-als. Its also a popular retirement destina-tion because of its temperate climate,stunning natural beauty and less-than-hec-tic rhythm of life. According to Savills, dur-ing last year, about 14,500 long-term Britishmigrants entered New Zealand. Of these, 35

per cent settled in Auckland, 13 per cent inCanterbury, 12 per cent in Wellington andthe remainder spread throughout the coun-try.

But if you thought you might be in for abargain, think again. As you can see at rightand below, some of the properties availablein NZ are utterly breathtaking. But while

prices are clearly lower than they would befor the equivalent properties in, say,Switzerland, theyre nearly back to thecountrys 2008 highs, according to Savills.

Auckland has seen the biggest price risesdue to increased demand. Savills says:Urban drift to the warmer north has beenin progress for the past 50 years, and itslargest city, Auckland, is forecast to increaseby half its present population in the next 30years.

In July 2011, Barfoot & Thompson report-ed that its average sale price across theentire city was NZ$530,000, with 26 percent of its sales ranging betweenNZ$750,000 (390,518) and NZ$1m(520,704) and 15 per cent selling for morethan NZ$1m.

AUCKLAND ENVIRONSPrice: NZ$3.5m (1.83m)This French country-style home, located near the beach and 45 minutesfrom Auckland, was designed by local architect Peter Sargisso and featurestwo spacious bedrooms overlooking the gardens.Contact: Jim Mays atPrecision Real Estate, www.mays.co.nz/sale315b.html

MILFORD, AUCKLANDPrice: On applicationClaiming to offer an executive beach lifestyle, this super-sleek, four-bed-room, 354 sq m architectural home sits in the heart of Milford, only astone's throw from the beach and a short stroll to Milford village. Contact:Harcourts International, on +64 09 451 9300, www.harcourts.co.nz

ORAKEI, AUCKLANDPrice: By negotiationSet in a prestigious location close to the centre of Auckland, this four-bed-room hilltop property has wonderful harbour views, spacious, elegant inte-riors and lovely gardens. Contact: Sothebys Realty atauckland.nzsothebysrealty.com

AUCKLANDPrice: NZ$9.5m (4.5m)A beautifully designed, six-bedroom manor, with tenniscourts, spa and ocean views that reach from the GreatBarrier Islands to Takatu Point.Contact: HarcourtsInternational, on +64 09 451 9300

SCOTTS LANDING, NORTH ISLANDPrice: 1.3mSet on 5,000 sq m of waterfront land, this idyllic five bed-room property with beautiful views is a family retreat, butcould also make a boutique hotel. Contact: Savills on 0207016 3754.

OHAWINI BAY,WHANGAURUHARBOUR,Price: 478,000A four-bedroom KiwiIcon property, this his-toric 250 sq m villa hasbeen in the same familyfor 85 years. Its a realget-away-from-it-allproperty with fishingrights and space for aboat. Far from flashy, itsgot the kind of charmpeople pay dearly for.Contact: Savills on 0207016 3754.

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- 90% of our Landlords return to us

- 7 Million worth of rent collected in 2010

- Over 75 years of experience within

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