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Greek aid

talks fail toagree plan

LAST-DITCH talks to prevent Greecefrom running out of money will dragon into next week after internationalleaders again failed to strike a firmdeal with politicians in Athens.

The markets are today expected totake a dim view of the delay, created

when a two-hour conference calbetween officials from the EuropeanCommission, the European CentralBank, the International MonetaryFund and Greek finance ministerEvangelos Venizelos ended last night

without a formal resolution.The troika said merely that good

progress had been made and that itwill return to Greece early next week.

Athens said there would also be achance for discussions at the annualmeeting of the IMF in Washingtonthis weekend and stated its confi-dence Greece would clinch therelease of the 8bn (6.96bn) aidtranche that it needs by next month.

The last-ditch talks are the secondtime in three months that Greece has

brought the Eurozone to the brink ofdisaster. In July the troika threatenedto withhold its fifth tranche of aidunless ministers showed more deter-mination to meet deficit-reductiontargets, but eventually gave in as mar-kets veered towards a panic.

Meanwhile, Germanys governingcoalition has drawn up a draft bill to

authorise Greeces second bailoutpackage, which will cost around109bn. EUROZONE TURMOIL: P8-9

FORUM: P24-25

BY PETER EDWARDS & JULIET SAMUEL

EUROZONE

THE GLOBAL economy has hit a dan-gerous new phase, the InternationalMonetary Fund (IMF) warned yester-day, as it slashed growth forecasts fornearly every corner of the world.

The UKs economy will grow by just1.1 per cent this year, the IMF expects,knocking 0.4 per cent off its projec-tions from June.

And stock market falls this quarterpoint to roughly a one in six chance ofa British double dip, the IMF said.

France faces a similar likelihood ofanother downturn, the groups WorldEconomic Outlook said, while the USis looking at a more worrying 38 percent chance of a double-dip.

Despite the global nature of the eco-nomic slowdown, the news piles morepressure on chancellor GeorgeOsbornes deficit reduction plans,

which largely depend on economicgrowth. The latest data on the UK gov-ernment finances is released today.

The Office for Budget Responsibilityexpected growth of 1.7 per cent for2011, in its most recent forecast inMarch. And as recently as lastNovember, the governments fiscal

watchdog optimistically predictedgrowth of 2.1 per cent this year

around double the current outlook.Central government current spend-ing has slowed in recent months, yetremained 6.6bn higher in April to

GLOBAL ECONOMYPUT ON RED ALERTBY JULIAN HARRIS

WORLD ECONOMY

www.cityam.comIssue 1,472 Wednesday 21 September 2011 FREE

A FREE PINTOF BEER FOR

EVERY

READER P17

IN THE FORUM TODAY: GREECE MUSTQUIT THE EURO ANDREW LILICO

ALSO: JAMIE WHYTE; JOHN LONGWORTH P24-25

BUSINESS WITH PERSONALITY

July compared to the same time lastyear. Shadow chancellor Ed Balls yes-terday repeated his call for the govern-ment to delay its def icit reduction.

The IMFs chief economist OlivierBlanchard stayed on the fence: Fiscalconsolidation cannot be so fast that itkills growth, nor so slow that it killsrecovery.

The government could bring for-ward 5bn worth of spending on infra-

structure, BBC television said lastnight. The Treasury denied the claim, yet senior Liberal Democrats arebelieved to be keen. Business secretary

Vince Cable has spoken of flexibilitybuilt into the existing fiscal plans.

The IMFs Blanchard also singledout the ongoing Eurozone crisis.

There is a wide perception that pol-icymakers are one step behind mar-kets, Blanchard said. Europe mustget its act together. Eurozone growthfor this year was also slashed to 1.6 percent in yesterdays report.

Next year, the single currency area

will progress at an even more sluggishrate of 1.1 per cent, the IMF expects,knocking 0.6 percentage points off its

June forecast.

Even harsher estimates weredropped on the US, with a whole per-centage point taken off its growth out-look for this year.

The worlds largest economy isexpected to expand by just 1.5 per centthis year and 1.8 per cent next year.

Across the pond, new constructionof US homes fell more than expectedin August. Housing starts dropped fiveper cent, the most since April, to a sea-

sonally adjusted annual rate of571,000 units, data revealed yesterday.ALLISTER HEATH: P2

STEPHAN SHAKESPEARE: P16

Certified Distribution

01/08/11 till 28/08/11 is 92,745

THE IMF SLASHED GROWTH FORECASTS THROUGHOUT THE WORLD

The International Monetary Fund, led by Christine Lagarde (above), has warned of a possible double-dip Picture: PA

New New Change from

forecast forecast last forecast

2011 2012 2011 2012

WORLD 4.0 4.0 -0. 3 -0. 5

US 1.5 1.8 -1.0 -0.9

UK 1.1 1.6 -0.4 -0.7

GERMANY 2.7 1.3 -0.5 -0.7

ITALY 0.6 0.3 -0.4 -1.0

EUROZONE 1.6 1.1 -0.4 -0.6

EMERGING MARKETS 6.4 6.1 -0.2 -0.3

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News2 CITYA.M. 21 SEPTEMBER 2011

TESCO BANK FACES MORTGAGE DELAYTesco faces a fresh delay to the roll-out of Tesco Bank, with mortgagesunlikely to be launched until earlynext year.Britains biggest retailer by sales had been expected to introduce mort-gages this autumn but, havingbought out Royal Bank of Scotlands50 per cent share in their financialservices joint venture three years ago,it has experienced teething problemssince moving from RBSs systems toits own.

CHARTER DEFENDS COLFAX BREAK FEECharter International, the engineerthat has recommended a 1.5bntakeover by Colfax, has defended anarrangement to pay its favoured suit-or 15m if shareholders back another bidder. The two parties struck the

arrangement just days before theTakeover Panel prohibited such deals.

COGNETAS PORTFOLIO TARGETED A European financial investor has

made a proposal to buy out the port-folio of companies in a fund of privateequity group Cognetas. The moveemerged only days before an investormeeting on Thursday where Cognetasmanagement aims to present its ownplan to restructure the fund, thegroups second, which was set up in2005 with 1.25bn euros (900m) ininvestor commitments.

CROMBIE TO SELL TOMMY NUTTERCrombie has put up for sale theTommy Nutter brand, a legacy of theclothing companys association withthe legendary tailor, who dressed aroster of celebrities in the 1960s and1970s. Crombie, owned by Alan Lewis,the millionaire retail and propertyentrepreneur, has not put a price onthe potential deal which, along withthe Tommy Nutter trademark,includes a small collection of original

garments and designs sketched bythe tailor.

LLOYDS POACHES TWO MORE EXECS Antnio Horta-Osrio has poachedtwo senior executives fromSantander, adding to the bevy of exec-utives that the Lloyds chief executivehas recruited from his previousemployer. Toby Rougier, who oversawSantanders deals strategy, andMiguel ngel Rodrguez Sola, its headof corporate finance, have joinedLloyds from the Spanish bank.

NUCLEAR CHIEF QUITS PUBLIC SECTORThe former BP executive brought intothe Nuclear DecommissioningAuthority has quit after less than two years into the post. Tony Fountain,the chief executive, found it hard toadjust to working in the public sectorfor the state-controlled body, whichowns 19 nuclear sites around Britain,including Sellafield. Fountain, the

highest paid civil servant, earnt680,000 including benefits last year.

SHELL WINS ARCTIC OIL PERMITS BUTWITH ENVIRONMENTAL CONDITIONSRoyal Dutch Shell has moved a stepcloser to drilling for oil in the Arctic,after US authorities granted it twocrucial permits with strict environ-mental conditions. TheEnvironmental Protection Agency(EPA) awarded two air-quality permitsfor drilling ships, clearing anotherhurdle in Shells battle to be allowedto drill in the Arctic.

GOLDMAN DISCOUNTS OCADO'S SHAREPRICEGoldman Sachs has taken the axe toOcados share price for the secondtime in as many months after theonline grocer warned that sales wereslowing. The investment bank, whichhelped lead Ocados flotation in Julylast year, has lowered its six-month

share price target down from 225p to190p.

GOOGLE+ SOCIAL NETWORK OPENEDTO PUBLICGoogle yesterday broadened itsassault on rival Facebook by openingits Google+ online social network tothe public. The company also intro-duced new features to Google+,including the ability to search forinformation about topics such ascooking and photography, and along with the ability to see relevanGoogle+ users and their posts.

COURT DELIVERS MIXED YUKOSRULINGEuropes top human-rights courtfound Russian authorities violatedthe rights of OAO Yukos when they broke up the oil giant but rejectedthe companys allegation that theactions were politically motivatedasplit decision that both sides hailed

as victory in their long-running battlein Europes courts.

WHAT THE OTHER PAPERS SAY THIS MORNING

Chancellor must ignore siren voices

HOW fast the world can change. Ayear ago, the data and corporate sur-veys suggested we would be undergo-ing a square root shaped recovery. Thecollapse of 2008-09 looked like itwould be followed by a mini reboundin 2010-11 (with annual growth of upto 2 per cent), before a return to quasi-stagnation. This best case scenarioalways looked much gloomier thanthe implausibly optimistic forecast bythe Office for Budget Responsibility ofa very strong rebound in subsequentyears, a v-shaped recovery. But we nowknow that the mini-rebound turned

out to be truly tiny and has alreadyrun out of steam.

In its latest set of forecasts, the IMFpredicts UK growth of 1.1 per cent this year and 1.6 per cent in 2012 and

guesses there is a one in six chancethe economy could fall back intorecession. In part, this is because of aglobal slowdown: the IMF is slashingits growth forecasts across theWestern world. Another reason is theactual and psychological fallout fromthe Eurozone crisis but there arealso two big UK-specific problems.Inflation has been even higher thanfeared, slashing real take home payand slashing the value of bankaccounts and homes. UK Plc had con- vinced itself that the coalition wasserious when it said Britain wouldnow once again be open for business.But instead of the supply-side reformsit hoped for, there has been an ava-lanche of new rules. The good newsfrom reduced corporation tax has been swamped by the bad. None ofthis has been conducive to corporate

confidence and investment.The IMF thinks UK final domestic

demand will be the real drag, falling0.5 per cent in 2011, which asCitigroup reminds us, would make it

the weakest performance in the G7.This would rise by just one per centyear on year in 2012. The big danger inthe forecasts is that the IMF expectsnet trade to add 1.4 per cent to GDPthis year, making it the biggest contri-bution since 1977. If this doesnt mate-rialise because of the Eurozone crisis,even these gloomy figures would haveto be cut further. To my mind, it isclear that the bulk of the drag ondemand doesnt come from the gov-ernments austerity plans but frominflation and subdued businesses. Butthe IMF said that if activity continuesto slow, ministers should also consid-er delaying some of their plannedadjustment.

The Treasury must not listen tosuch siren voices: it is already likely toborrow at least 126bn this year, sever-al billion more than it hoped for.

Increasing that by another 5bn oreven 10bn will merely rattle investorsand companies while doing virtuallynothing to boost demand. The 0.7 percent cut to total public spending pen-

cilled in by George Osborne for thisyear is the minimum he can get away with while convincing those globalfunds that are lending him so muchmoney that he is serious about deficitreduction. If this figure slips, it would-nt take long for investors to realisethat Britain is actually in a very precar-ious position. The chancellor plans to borrow more over this parliamentthan Labour did in 13 years. Certainly,Labours published plan would havebeen even worse, increasing debt by59 per cent, against the Tories 51 percent. But with a deficit which remainsamong the worst in Europe (and withthe added issue that we have the mostindebted households in the G7) the UKremains worryingly vulnerable. Nowis not the time to borrow even more.

[email protected] me on Twitter: @allisterheath

NEWS | IN BRIEF

Hedgies in US downgrade probeSecurities regulator the SEC is believedto have sent subpoenas to hedge fundsand other trading firms as it probes pos-sible insider trading before the US gov-ernment's long-term credit rating wascut last month. Securities and ExchangeCommission officials demanded more

information about specific trades madeshortly before Standard & Poors down-graded the country's rating to AA+ fromAAA in August. SEC officials are said tobe zeroing in on firms that bet the stockmarket would tumble.

Full Tilt accused of Ponzi schemeProsecutors yesterday accused the FullTilt Poker website of running a Ponzischeme that defrauded gamers out of$440m (289m). Full Tilt Poker did notmaintain funds sufficient to repay allplayers, and in addition, the companyused player funds to pay board mem-bers and other owners more than$440m since April 2007, the office ofManhattan US Attorney Preet Bhararasaid in a statement. Howard Ledererand professional poker championChristopher Ferguson, as well as otherdirectors, are caught up in the case.

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 Jo SimpsonPictures Alice HeppleCommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

Huhne: energyprices will fall

A CRACKDOWN on energy companies will boost competition, secretary ofstate Chris Huhne claimed yesterday,promising that consumers will bebetter off in 2020 thanks to our lowcarbon policies.

Huhne has recently dismissed risingenergy prices by calling on Britons toshop around for better deals.

We are determined to get toughwith the big six energy companies toensure that the consumer gets thebest possible deal, Huhne said yester-day.

Utilities will no longer be able todelay Ofgem rulings by up to a year byforcing the independent regulator toseek a second opinion from the

Competition Commission.Yet Huhnes claim that households

will be better off by 2020 was attackedby critics of the governments energypolicy.

The Departments [of Energy andClimate Change] previous estimatethat prices would only see smallincreases were based in fantasy land,said Matthew Sinclair of theTaxpayers Alliance. But this is severalsteps further it is a bit of a joke.

To meet their targets, around200bn needs to be spent on the ener-gy sector, and someone has to foot thatbill, Sinclair added.

The government said that new sta-tistics showing a rosier outlook forconsumers were not yet published.

On the penultimate day of theLiberal Democrats conference inBirmingham, another member of thegovernment pensions minister Steve

Webb laid out the coalitions plan onpensions, claiming that the new auto-enrolment scheme would help peo-ple save for their retirements.

The scheme will see millions of private sector employees automaticallyenrolled in their employers pensionschemes, unless they actively decide toopt out. Webb also signalled the gov-ernments intention to consolidatesavers multiple pensions into individ-ual big fat pots.

Elsewhere at the conference, Lib

Dem president Tim Farron brushed offclaims that he was after party leaderNick Cleggs job. Insisting that DeputyPrime Minister Clegg is doing a bril-liant job, Farron said: I want him tobe leader of this party for so long that,by the time the vacancy comes up, I'llbe too decrepit to take it.

Farron has won applause from LibDem activists this week by stressingthe partys independence from itsConservative coalition partners.

CITY VIEWS ON ENERGY BILLS: P16

Chris Huhne has promised consumers they wi ll be better of f Picture: PA

BY JULIAN HARRIS

LIB DEMCONFERENCE

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News 3CITYA.M. 21 SEPTEMBER 2011

ORACLE last night posted quarterlyrevenue above expectations, defying aweak outlook for global technologyspending, while Microsoft and Adobealso gave reasons for optimism in thesector.

Bellwether firm Oracle, which sellssoftware to corporations and publicagencies, reported revenue of $8.37bn(5.32bn) in the three months to 31August, up 12 per cent from $7.5bn inthe same period last year. Net incomecame to $1.84bn, up 36 per cent.

New software sales, a gauge of

future profit because they generatehigh-margin long-term service con-

tracts, rose 17 per cent comparedwith expectations for 15 per cent.

Microsoft last night pledged toraise its quarterly dividend by 25 percent, in a move that it hopes will satis-fy investors clamouring for some ofits $53bn cash pile. The raise wasahead of Wall Street expectations.

Meanwhile Adobe Systems allayedinvestor concerns over slowing salesin Europe as it forecast market-top-ping fourth-quarter revenue.

The company, which reportedthird-quarter revenue below expecta-tions, projected sales of $1.08bn(686m) to $1.13bn for the fourth

quarter, ahead of the average forecastof $1.07bn.

MANCHESTER United may be flyingon the pitch but its IPO in Singaporeappears to have stalled.

Sources close to the transactiontold City A.M. the club is struggling toconvince cornerstone investors toinvest at its target price against abackdrop of volatile markets.

The club is hoping to raise in theregion of 640m when it floatsaround a third of its equity, giving ita market cap of almost 2bn ahuge mark-up on the Glazer familysheavily leveraged 790m takeover in2005.

The source added the terms of theIPO, which would see new sharesreceive half the voting rights of thoseheld by the Glazers, could also be asticking point.

It is understood retail investordemand is high, buoyed by the sky-high popularity of the team in Asia, but state investors including Temasek are taking longer to con-vince.

The club is still thought to be aim-ing to float in the fourth quarter butis open to the prospect of waiting

until next year depending on the per-formance of equity markets. It iskeen to cut its debt pile, which totalsmore than 300m.

However, its prospects have beenhindered by a choppy IPO marketthat has seen high profile firmsincluding Groupon and, in HongKong, Fitness First pull their floats.

Credit Suisse is lead adviser toManchester United, supported by JPMorgan and Morgan Stanley.

The Singapore exchange last weekgave permission for the float to goahead.

The clubs hopes of forging ahead with the IPO were boosted earlierthis month when it revealed a swinginto the black in its full year results.

It reported a pre-tax gain of29.7m, compared with a loss of79.2m last year. Its total revenuealso soared 16 per cent to 331.4m surpassing the 300m mark for thefirst time.

Commercial revenue was up 27per cent, driven by an 80m shirtsponsorship deal with Aon. Mediaincome grew 10 per cent to 119m,witha new Premier League TV rightsdeal coming into effect. Match dayincome was 108.6m.

United could

be forced todelay its IPO

MARK Byrne, the former reinsuranceexecutive who has launched a bid for25 per cent of the Lloyds of Londoninsurer Omega, will be entitled to a2m payment if the company termi-nates his employment within 12months of any change of control.

The entrepreneur will be on arolling contract as executive chairmanof Omega, which will have a 24

months notice period with a bonus

equal to 200 per cent of his 400,000annual salary.When Byrne, who would be invest-

ing 50m in Omega, left the reinsur-

ance group Flagstone in December he

went with a $2.2m pay-off and thefirm paid $91.9m to buy out his shares.Byrnes offer to buy 25 per cent of

Omega at a maximum price of 83p ashare faces competition from a possible full all-cash offer, again at 83p,from the insurance group Canopius.

Much hangs on the decisions of Neil Woodford of Invesco, whose fundshold 29.9 per cent of Omega. Canopiusis expected to discuss the matter withWoodford over the next few days.

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Insurance chief secures heftyfees if Omega bid turns sour

Tech titans beating forecastsdespite dire consumer outlook

BY STEVE DINNEEN

BUSINESS OF SPORT

TECHNOLOGY

The Glazer family hope to raise $1bn in the Man Utd float Picture: REUTERS

BYDAVID HELLIER

INSURANCE

Mark Byrne stands togain 2m if Omega severties within 12 months ofa change of control atthe Lloyds insurer

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EMBATTLED bank UBS faces newpressure after its largest shareholder

broke its silence to criticise the fail-ures that led to the $2.3bn (1.5bn)rogue trading scandal.

The Government of SingaporeInvestment Corp, which has a 6.4 percent stake in UBS, has met seniormanagers and urged them to takefirm action to restore confidence,although it also offered a generalstatement of support.

GIC expressed disappointmentand concern at the lapses and urgedUBS to take firm action to restoreconfidence in the bank, it said.

GICs view of UBSs fundamentalstrength as a well-capitalised bank

with a strong private wealth manage-ment franchise remains unchanged.

The eastern sovereign wealth fundruns more than $100bn of assetsaround the world but makes few pub-lic comments. It has lost about 77 percent of its 11bn Swiss franc (7.86bn)

investment in UBS.GIC is not thought to be consider-

ing selling its shares, however,despite a torrid few days for UBS,

which has seen the bank face a waveof international criticism and severalratings reviews ahead of a possiblecredit downgrade.

It has emerged, however, thatUBSs plans for a new 340m Londonhome are continuing. Sources saidthat British Land, co-owner of the site

with private equity giant Blackstone,held its usual weekly project meeting

with stakeholders yesterday.

UBS, which declined to comment,is currently the largest tenant in theCitys Broadgate development.

It had just started to rebound fromnear collapse during the financialcrisis -- as well as a damaging USinvestigation into the bank allegedlyaiding wealthy Americans to dodgetaxes -- when the rogue tradingscandal struck.

London trader Kweku Adoboli has been charged with fraud and falseaccounting.

Investor pilespressure ontroubled UBSBY PETER EDWARDS

BANKING

Focus on UBS4 CITYA.M. 21 SEPTEMBER 2011

BANKS are eyeing the possibility ofpoaching UBSs most talented staff,taking advantage of the uncertaintyplaguing its investment bank.

Recruiters have told City A.M. thatthere is strong interest in snapping uprising stars from the bank, where this

years bonus pool for its UK equity cap-ital markets (ECM) team is likely totake a hit from its $2.3bn loss due to arogue trader.

One front-office recruiter said: Itsinevitable really. If the banks in trou-

ble, those who might have wanted tostay for career opportunities or

because they thought it was doing well might be having seconthoughts. But the recruiter addedthat given that theres not a lot of hir-

ing going on, the headhunting isfocused on top talent rather than massrecruitment.

The bank is conducting a strategicreview of its investment bank that isexpected to downsize the division dras-tically. The overhaul could see many ofits 6,800 London employees jobs cut.

UBS was already planning to reduceits headcount by 3,500, but the savingsit hoped to make by doing so have now

been wiped out, meaning it could cutmore.

UBS chief executive Oswald Gruebel will this week ask directors to backplans for a deep overhaul of its invest-ment banking division.

The board begins a two-day meet-ing in Singapore tomorrow althoughit is understood the sessions werearranged before the rogue tradingcrisis broke.

UBS is under pressure to scale

down, ringfence or even split off itsrisky investment banking businessfrom its core wealth managementunit in order to shield private clients.One source said Gruebel will scale

back proprietary trading and fixedincome but will not do away withthem completely.

Gruebel has vowed to bear theconsequences of the loss but yester-day faced unconfirmed reports he

will be subject to a vote of confidenceat the board meeting.

Headhunterscircling talentat Swiss bank

Gruebel bids to overhaulinvestment banking arm

Helping hand: Oswald Gruebel needs the support of UBS directors

BY PETER EDWARDSBANKING

BY JULIET SAMUEL

BANKING

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NATIONAL Australia Bank (NAB) hasslapped down suggestions that itcould rush headlong into a deal withNBNK Investments, the buy-out vehi-cle led by Gary Hoffman and LordLevene.

NAB is in talks with NBNK overselling its UK business theClydesdale and Yorkshire banks but yesterday insisted that it is in no

hurry to do so.

A director of the bank told anAustralian newspaper that althoughit has been in talks, nothing haschanged since before NBNK sus-pended its shares due to the discus-sions, and suggested that there isunlikely to be an imminent deal.

The timing is sensitive becauseNBNK is also a bidder for the 632branches that Lloyds is selling, withthe second bid deadline just over aweek away.

The Independent Commission on

Banking (ICB) has stated that itwould prefer to see the branches soldto a buyer who will be able to have atleast six per cent of the personal cur-rent account (PCA) market.

NBNK would either need to ensurethat Lloyds beefs up its PCA offeringor would need to combine thebranches with NABs UK business inorder to cross that threshold.

However, the ICBs recommenda-tion has yet to directly affect the sale.

NAB playing hard to getwith Lloyds bidder NBNK

Gary Hoffman is leading buyout vehicle NBNK along with Lord Levene

BY JULIET SAMUEL

BANKING


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BREVAN Howard, the hedge fund runby Alan Howard, is planning to return$2bn (1.27bn) to investors to fulfil adeal with its clients, who want to capthe size of the firms flagship fund at$25bn.

The size of the fund currentlystands at $26.9bn, after it made gainsof 6.2 per cent last month.

A source close to the firm saidinvestors in the Brevan HowardMaster Fund have insisted for some

time that the size of the vehicle becapped at $25bn, due to fears thatlarger funds struggle to make as largereturns.

The source insisted that the deci-sion had nothing to do with theopportunities in the market or thefunds ability to make money.

Brevan Howard would be happy togrow the fund further, the sourceadded, and is only returning the cash

because it had promised clients itwould do so.

A Brevan Howard spokesman saidthe firm was considering how best toreturn the cash to clients. Theprocess could prove difficult, espe-cially as some clients are likely to

want to keep their cash invested inthe fund.

It could either return the cash on apro-rata basis or pick clients based ontheir commitment to the fund andthe length of time they have beeninvested in it.

The Brevan Howard Master Fund,which is run by Howard and a groupof traders, has outperformed the mar-

ket in recent years, gaining 18.7 percent in 2009; 20.4 per cent in 2008;and 25.2 per cent in 2007. However, itonly added one per cent last year.

Brevan fundreturns $2bn

to its clientsMOST hedge fund strategies were

wrong-footed by plunging stock mar-kets in August, according to datareleased yesterday.

The EDHEC Risk Institute, whichtracks the performance of hedgefunds, said managers following ashort-selling strategy were the onlyones to post significant gains lastmonth, with an average return of 6.97per cent.

Short sellers benefited from fallingshare prices, with the S&P 500 indexsuffering a 5.43 per cent loss, its mostsevere since May 2010.

Convertible arbitrage funds postedan average loss of 2.09 per cent in

August, as falling convertible bondprices and a shrinking credit spreadtook their toll.

Event driven funds lost 3.78 per cent

on average; long short equity funds were down 4.07 per cent; and dis-tressed securities funds were off 4.08per cent. However, all managed to out-perform the wider stock market.

Commodity trading adviser funds,which try to play the technical factorsin different niche markets, also ekedout a tiny gain of 0.27 per cent.

The funds of funds strategy also out-performed the stock market with anaverage return of -2.57 per cent, theEDHEC Risk Institute said.

AMERICAN conglomerate United Technologies is negotiating finalterms of an all-cash acquisition of air-craft components maker Goodrich

with the goal of reaching a deal inthe next few days, people familiar

with the matter said last night.An acquisition of Goodrich, which

has a market capitalisation of about$14bn (8.9bn), would be the biggest

deal in a decade for United Technologies, which makes Pratt &Whitney aircraft engines, Otis eleva-tors and Carrier heating and air con-ditioning systems.

Sources familiar with the discus-sions declined to elaborate on thelikely price, and cautioned that thetalks could still fall apart.

Last week it emerged that United Tech was lining up financing of$10bn to $20bn for a takeover of a UScompany.

Hedgies failto beat fallingshare prices

United Tech nears all-cashbid to take over Goodrich

United Technologies chief Louis Chenevert is eyeing up a takeover Picture: REUTERS

BYDAVID CROW

HEDGE FUNDS

HEDGE FUNDS

Brevan Howard is Europes second largesthedge fund, measured by assets under manage-ment It was founded by Alan Howard, now 48, anda group of Credit Suisse traders in 2002.

FAST FACTS | BREVAN HOWARD


BYHARRY BANKSM&A

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ENGINEERING group Siemens fluc-tuated between denial and uncer-tainty yesterday, as it addressedreports that it had withdrawn morethan 500m (435m) in cashdeposits from Socit Gnrale andmoved it to the European CentralBank (ECB).

Shares in the French bank fell 6.6per cent by lunchtime yesterdayafter it was named as the institu-

tion that Siemens had deserted infavour of the ECB, despite earlyreports suggesting the Germangroup had denied the story.

But a Siemens spokesman inMunich then told City A.M. that nostatement of denial had beenissued, and that it would be makingno further comment on the trans-ferring of funds.

Siemens currently has up to 6bnin one-week deposits at the ECB,which was last week paying a 1.01

per cent interest rate on funds thatcould be withdrawn with sevendays notice.

At the same time, Eurozone banks were paying an average of0.95 per cent on overnight deposits.

French banking sources later saidthat the transfer was due to theunderperformance of a specificSocit Gnrale investment vehi-cle, rather than any concernsaround the overall financial healthof the bank.

Two of Frances biggest banks

SocGen and Crdit Agricole hadtheir long-term credit ratings down-graded by rating agency Moodyslast week, which cited concernsover their risk exposure to Greece.

Siemens is one of a limited num-ber of corporates that is allowed todeposit funds with the ECB, after itapplied for a banking licence lastyear so it could expand into finan-cial services.

Shares in Socit Gnrale closed3.08 per cent down at 17.15.

Siemens doesflip-flop overSocGen funds

MONEY market strains worsened yes-terday after Standard & Poors cutItalys credit rating and the Bank ofChina halted foreign exchange swapswith several European banks.

Eurozone bank borrowing at theEuropean Central Banks weekly ten-der surged to 201bn, the highest inseven months in a sign of growingstress in the sector. Three-month dollarLibor edged up to its highest in morethan a year at 0.35500 per cent and thepremium for European banks to swapeuros into dollars also rose.

The Bank of China, a big market-maker in Chinas onshore foreignexchange market, has stopped forexforwards and swaps trading with sev-eral European banks due to theEurozone debt crisis, sources said.

The sources identified Frenchlenders Socit Gnrale, Crdit

Agricole and BNP Paribas as amongthe affected banks.

On the dollar Libor panel, CrditAgricoles indicated cost of borrowing was among the highest at 0.425 percent with those for BNP Paribas andSociete Generale also above average.

Another Chinese bank also haltedinterest rate swaps trading with someEuropean banks, a source at the banksaid, indicating Chinese lenders hadjoined the ranks of institutions cuttingexposure to the Eurozone.

Funding pressureas China pulls outof Eurozone forex

Country S&P Moodys Fitch 5yrCDS*

Greece CC Ca CCC 5,235

Ireland BBB+ Ba1 BBB+ 842Portugal BBB- Ba2 BBB- 1,137

Spain AA Aa2 AA+ 372

Italy A Aa2 AA- 448

Belgium AA+ Aa1 AA+ 255

Germany AAA Aaa AAA 82

* End of day

ANALYSIS l Eurozone credit ratings

2010 2011

2500

2500

1500

1000

500

0

Greece IrPortugal SItaly

BY ELIZABETH FOURNIER

EUROZONE

EUROZONE


EUROZONE SEARCHES FOR SOLUTION

German Chancellor Angela Merkel's coali-tion agreed a draft law on an enhancedEurozone bailout fund

Greek Prime Minister George Papandrhas been locked in bailout talks with tparties funding his bailout

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ANALYSIS l Cumulative bond purchases by the ECB, in billions

20112010

125

100

75

50

25

0

Source: ECB; Royal Bank of Scotland

SPAIN saw the cost of its debt rise tothree-year highs at an auction yes-terday, despite a solid level ofinvestor demand.

Madrid sold at the higher end ofits 3.5-4.5bn target range, but buy-ers demanded yields on the one-

year and 18-month bonds that were

around 20 basis points higher thanat the last equivalent sale. The aver-

age yield came in at about 3.59 percent.It is not clear whether the

European Central Bank (ECB) inter-vened in the sale. The Bank recentlyrestarted its bond-purchasing pro-gramme in order to keep a lid on

yields for Spain and Italy, but it isthought that its actions have cen-

tred upon Italy, which has thefourth biggest bond market in the

world.Italys surprise downgrade bycredit ratings agency Standard &Poors yesterday was bad timing forthe bond sale, with Spains second-ary market yields spiking in themorning as the auction got under-

way.MORE: P26

Spanish debt costs rise to three-yearhigh despite solid demand at debt sale

BY JULIET SAMUEL

EUROZONE


Ireland shows austerity does workIRELAND has experienced more aus-terity than most during its troubledhistory. Its 2011 budget was no potatofamine, but tough nonetheless.Social welfare payments were cut byan average of four per cent the firstcuts since 1924 and public sectorpay was slashed by between five and

ten per cent. Last month, the numberof people claiming jobless benefitshit a record high.

So it is hurting, but is it working?The short answer is yes, at least as faras its creditors are concerned. The

yield on its 10-year bonds was 8.65 percent yesterday, much lower than fel-low bailout countries Portugal andGreece (11.65 per cent and 23 per centrespectively).

In dollar terms Irish bonds with a

maturity of more than a year havereturned 17.4 per cent since 17 June the best returns of any sovereign.Despite the cuts equals recessionmantra, the IMF expects the econo-my to eke out growth of 0.4 per centthis year and 1.5 per cent next hard-ly firing on all cylinders but growth

nonetheless.The ECB is very impressed with

its deficit reduction performance sofar. Unlike Greece, there is no emer-gency conference call for Irelandevery time it is due another trancheof aid.

Instead of constant talk of a Plan B,Irelands finance minister wants tomake a budgetary adjustment of4bn (3.5bn) in 2012, compared tothe planned 3.6bn, despite being

confident of meeting the terms of itsbailout. Economic sovereignty high-ly valued by the Irish should berestored in 2015.

There is room for improvement.Capping capital spending at just 3.6per cent of GDP was a silly move,especially for a nation full of con-

struction companies. Nor can Irelandstare smugly at Greece: its exit fromthe Eurozone would surely see theemerald isle come back into focus.

Still, Ireland has taken the medi-cine and is getting better. If onlyGreece could do the same.

[email protected]

BOTTOMLINEAnalysis by David Crow

CB president Jean Claude-Trichet urgedanks in the Eurozone to strengthen theiralance sheets

Silvio Berlusconi lashed out at S&Ps down-grade of Italy, claiming the agency hadbeen led astray by the media

8/4/2019 Cityam 2011-09-21

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RESTAURANTKING CLAIMS

RAMSAY BIDIS A GAMBLE

THE jury is out as to whether GordonRamsays Bread Street Kitchen the One NewChange venture dubbed the acceptable faceof high street food will prove a hit.

Whatever anyone says about Gordon, heknows what people want and he is incrediblyresilient, said restaurant expert SimonDavis, speaking at last nights pre-openingparty ahead of the venues opening nextMonday.

But Cheapside is not a particularly easylocation; people tend not to go into the Cityat the weekend, so it is a bit of a gamble.

Davis, a former Telegraph and EveningStandard journalist, is the founder of theLondon Restaurant Festival, which he start-

ed with critic Fay Maschler in 2009 to cele-brate the fact Londons restaurant scene hasgone from a global laughing stock to some-thing pretty impressive. Among the 775participating restaurants in this years festi-

val, which runs from 3 to 17 October, are LeCoq dArgent, 1 Lombard Street and Bondsat the Threadneedle Hotel, which are alloffering three-course menus for 25.

Grosvenor Estates, Canary Wharf Plc andthe Savoy Hotel are also on board as sponsorsof the event, which includes a culinary pubcrawl on a Routemaster bus and Londons

biggest-ever pub quiz. Times are tough outthere, but there is still a good market forsponsorship, said Davis. Despite what theymight say at the LibDem conference.

FOOTBALLERS LIVES WITH GLAMOUR model Katie Price andsinger Kym Marsh of Hearsay fame on theguest list, there was a solid case for calling

the party the Crme de la Crme Ball. Tamara Ecclestone, the daughter of

Formula One tycoon Bernie, and Wayne andColeen Rooney were also spotted at the event,hosted by ex-Wrexham FC player Ashley Wardand his wife Dawn (bottom left) up in thefootballers spiritual home of Alderley Edge.

Sponsor for the night was Leo Caplan, theentrepreneur who bought the kitchen-makerMark Wilkinson out of administration fromPwC in 2009, who donated 60,000-

worth of cabinetry to theevenings charity auction inaid of Destination Florida.

FREUDIAN SLIPLUCIEN Freud immortalised

banker Nathaniel Rothschild asthe Man in a Chair, so perhapsthe late artist (right) would haveapproved of Bank of AmericaMerrill Lynch supporting themost ambitious exhibition ofhis work for ten years.

We believe thatinvesting in thearts makesgood sense,said the

banks head ofinternational communi-cations John McIvor at yester-days press breakfast to unveilthe collaboration. Arts proj-ects and cultural organisa-

tions such as the National Portrait Galleryare key economic drivers and help tostrengthen communities.

McIvor was joined at the gallery by col-leagues Rena de Sisto, global arts and cul-

ture executive, and Gwendolyn de Silva,vice-president, global banking and market-ing, who saw preview highlights of the 100paintings, drawings and etchings that areon loan to the NPG from museums and pri-

vate collections from next February.

COMMUNITY SERVICEANOTHER DAY, another ceremony for LordMayor Michael Bear to preside over atMansion House this time, the annualDragon Awards.

Last nights awards recognised companiessocial contributions that benefitted not onlycommunity organisations but also

through increased staff morale and rep-utational benefit, said the mayor

the businesses themselves.So it was unfortunate that UBS,

which could do with the lift, lostout to Bank of America MerrillLynch in the education catego-ry, despite working to improvethe Bridge Academy inHackney for the last four years.

Representing BofA MerrillLynch was chief operating offi-

cer Rob Everett, who was joined by William Maltby, vice chairman ofinvestment banking at DeutscheBank; Catherine Usher, head of UKreal estate at DLA Piper; Paul Jardine,group chief operating officer ofCatlin Holdings; and Deloittes UKchairman David Cruickshank.

Gordon Ramsay at the pop-up restaurant in the London Eye pods at last years London Restaurant Festival

Ashley Ward, Janine and Leo Caplan, Dawn Ward

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SHARES in British Airways parent IAGfell 2.9 per cent yesterday after rivalLufthansa issued a profit warning.

Germanys Lufthansa, which islooking to sell its British-based BMIairline, said a weaker than expectedAugust had dented operating profits,which are no longer expected to beatlast years figure of876m (762m).

The firm also expects passengerbookings to be weaker than forecast,

a downgrade it blames on economicuncertainties.

Lufthansa has followed in the foot-steps of several airlines that havetrimmed or missed forecasts this year.

IAG, formed out of the merger between BA and Iberia last year, isseen as one of the frontrunners ifLufthansa goes ahead with the sell offthe loss-making BMI.

Lufthansa appointed MorganStanley earlier this month to kick offa review of the business.

IAG chief executive Willie Walshsaid earlier this year that he was look-ing at 12 possible takeover candidatesas the new firm looks to expand.

The gloomy outlook for airlines was compounded yesterday whenindustry body IATA forecast a 29 percent fall in 2012 industry-wide profiton the back of a weak global economyand stubbornly high jet fuel prices.

IATA said that while 2011 profitshave been upgraded to $6.9bn, mar-gins will fall to a paltry 0.8 per centin 2012.

Lufthansawarning hitsshares at IAG INVESTMENT bank Jefferies Groupsaid yesterday its quarterly revenuedipped two per cent, hurt by a toughtrading environment, but the mid-

sized player raised its buyback pro-gramme to 20m shares.

Revenue at Jefferies fell to $509.2m(323.6m), hurt by a loss of $74m fromtrades the bank made on its ownaccount.

For the quarter ended 31 August, Jefferies posted a profit for commonshareholders of $68.2m, comparedwith $44.8m a year ago.

Much of the profit came from thefirms nearly $500m purchase ofPrudential Bache.

As the first investment bank toreport results, Jefferies is often seen asan indicator for others on Wall Street.

There are no surprises in Jefferies

numbers relative to what others aregoing to produce. You dont know how bad its going to be, all you know isthat its going to be very bad, saidRichard Bove, analyst with RochdaleSecurities.

The company is going through asubstantial expansion programme at aperiod when the markets are contract-ing dramatically...if they cant get theirrevenue to go up because the marketsarent going to go up, their earningsare going to be squeezed terribly.

SEVERAL UK small-cap companies sawtheir shares boosted yesterday, a dayafter new takeover rules forced poten-tial targets to tell the market thenames of their prospective buyers.

Arena Leisure, which had a marketcapitalisation of around 132m at yes-terdays close, saw its shares rise by 17per cent during trading after it said itwas in talks with Reuben Brothers, theprivate equity and venture capital

group run by brothers David and

Simon Reuben. A day earlier Arena had told the

market it was exempted from the newdisclosure rule, but mounting specula-tion led the company to confirm theapproach yesterday. The ReubenBrothers now have until 18 October tomake an offer for the company.

Travelzest also closed up almost fiveper cent yesterday, after saying afterthe markets shut on Monday that itwas in talks with Canadian firm RedLabel Vacations.

Revenues fall atJefferies aftertrade backfires

UK small caps get boostfrom new takeover rules

The Reuben brothers have been named as possible bidders for Arena LeisureBYMARION DAKERS

TRANSPORT

BANKING

NewsCITYA.M. 21 SEPTEMBER 2011

BY ELIZABETH FOURNIER

M&A

11

ANALYSIS l International Consolidated

Airlinesp

15 Sept14 Sept 16 Sept 19 Sept 20 Sept

157.50

152.50

147.50

150.2020 Sept

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BRITISH oil explorer Max Petroleumsaid it was encouraged by drillingresults at a well in Kazakhstan, indicat-ing 36 metres of potential net oil pay.

Oil pay or net pay refers to the zoneof a reservoir that contains economi-cally producible oil. The Kazakhstan-focused company also said it recordedsignificant shows of oil and gas in theKungurian salt near total depth of theUTS-4 well in Uytas field.

The oil and gas show below the saltwas a pleasant surprise we plan to eval-uate further through future wells and

the development 3D seismic data wewill acquire in October, the companysaid in a statement.

KURDISTAN-FOCUSED explorer GulfKeystone said it raised $200m (127m)in a placing to help accelerate thedevelopment of the massive oil discov-eries it has made in the semi-autonomous region of Iraq.

The company said yesterday itissued 91m new shares in an oversub-scribed placing at a price of 140p, rep-resenting a 14 per cent discount toMondays closing price.

Gulf Keystone, which confirmedthat it was considering its options

with regards to a fundraising earlier inthe week, said the proceeds would beused to fund an aggressive explorationand appraisal programme inKurdistan where it has found at least12bn barrels of oil so far.

The company is planning to build apipeline from its Shaikan oil field tothe vital Kirkuk-Ceyhan exportpipeline, which transports some500,000 barrels per day of crude fromnorthern Iraq to Turkey.

Cash will also be spent on a develop-ment plan for the field, upgrading pro-duction facilities at Shaikan anddrilling another well on its Sheikh Adi

oil field. The company, which is seeking a

move to Londons main market fromthe junior alternative investment mar-ket, also plans to raise additionalfunds from selling a minority interestin one of its Kurdistan blocks.

Kurdistan has enjoyed a surge ofinvestment in the past year as rela-tions between its regional governmentand Iraqs national government inBaghdad improved. BPs former boss

Tony Hayward staged a reversetakeover of Turkish explorer GenelEnergy earlier this month to create aKurdistan-focused group worth $4bn.

Shares in Gulf Keystone closeddown six per cent at 152.5p yesterday,

valuing the company at 1.2bn.

Gulf Keystone

raises $200min rights issue

CHINAS Sany Heavy Industry hasdelayed the retail portion of itsplanned $3.3bn (2.09bn) Hong Kongshare offering, saying it needs moretime to meet investors before pricing.

Any delay during a share-saleprocess is usually indicative of lack ofinterest in the deal, but it wasunclear whether Sany Heavy, Chinaslargest construction machinerymaker, would be under pressure tore-price the offer as global marketsstruggle.

The road show is still ongoing,

but the timing of the relaunch has to be confirmed, a companyspokesman said yesterday.

Sany Heavy todelay retail IPOSuccess for Maxat Kazakh well

BYHARRY BANKS

ENERGY

ENERGY

INDUSTRIALS

Gulf Keystone, led by chief executive Todd Kozel, said yesterday it had raised $200m


NEWS | IN BRIEF

Glasenberg buys more sharesGlencore chief Ivan Glasenberg hasbought another 1.5m shares in the com-modities trader at 437.67p per share,adding to the 13.5m he bought onMonday and the 10m he spent last week.Glasenberg plans to use his dividendincome to buy up shares, with yesterdays

6.56m investment topping up his totalspend to around 30m nearing the34m total he plans to buy by today.

Rio Tinto says demand is on trackMiner Rio Tinto said demand has held upin recent weeks despite signs of marketunease. We are seeing softer marketsthan we would have, even a few monthsago. Customers are more cautious, butdemand is not unwinding as some wouldfear, chief Tom Albanese said.

ANALYSIS l Gulf Keystone

p

15 Sept14 Sept 16 Sept 19 Sept 20 Sept

180

160

152.5020 Sept

8/4/2019 Cityam 2011-09-21

14/36


DEBENHAMS said yesterday itexpects profits to beat forecastsdespite flat sales in the year to 3September.

Sales excluding the effects ofnew store openings and the VATrise fell 0.3 per cent over the year,the company said.

However, group like-for-like salesrose by 0.4 per cent in the last nineweeks of trading.

Despite underlying sales havingfallen slightly for the year as awhole, Debenhams said its marketshare grew in all product cate-gories.

Chief executive Michael Sharp(pictured), in his first set of results

since taking the reins from previ-

ous boss Rob Templeman, said thecompany had performed stronglyagainst tough comparatives.

We believe our decision to max-imise cash profit by investing in topline growth has proven successfuland this will result in headline prof-its before tax for the year coming inahead of consensus forecasts, hesaid.

Markets had been expecting afive per cent profit rise for the year,to 158m.

Danish subsidiary, Magasin duNord, is seen as one of the retailerssuccess stories. Debenhams saidsales have risen 4.8 per cent since itbought the business in November2009.

Online sales helped drive uptotal non-store multi-channel

sales by 72 per cent during the year.

The department store started itssummer sales five days early.

Meanwhile, British Land con-firmed that it had pre-let space incentral London to Debenhams forits new headquarters. The RegentsPlace office is under development, with completion expected in thesummer of 2013.

Debenhams profitsto beat forecastsBY JOHN DUNNE

RETAIL

ANALYST VIEWS: IS DEBENHAMS STRATEGY WORKING? By John Dunne

KATE CALVERTSEYMOUR PIERCE

The beat is down to the 53rdweek contribution, we believe, which man-agement expects to add 5-7m in profit,higher than previously thought.Management expects 53-week full yearprofit before tax to be ahead of consensusof 158m, according to the company withinthe range of 160-165m.

RICHARD HUNTERHARGREAVES LANSDOWN

Gross margin remains under somepressure, but the company has made strideson several fronts in improving its outlook.There has been significant growth from itsmulti-channel sales, whilst its diversificationis also reaping dividend. Debenhams stillseems set on an on an improving trajectory;the shares are a buy.

MATTHEW MCEACHRAN |

SINGER CAPITAL MARKETS

The pre-close interim management statement indicates that Debenhams performance was consider-ably better in the final period than many had feared. This means that full year profit before tax will be slightlyhigher than market expectations, including on an adjusted 52-week basis. With market share gains andstrong cash generation, Debenhams should stand-out today given its valuation, on just 6x and with ayield of over six per cent. Expect a bounce.

8/4/2019 Cityam 2011-09-21

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ENGINEER GKN has appointed NigelStein chief executive designateahead of the retirement of Sir KevinSmith, the company announced yes-terday.

Stein has been at the heart of thecar parts and aerospace supplierafter being put in charge of the auto-motive division in 2007.

He is seen as a safe pair of hands who analysts suggested had beenlined up for the job to ensure asmooth transition.

The company has seen sales rises

in recent market updates as the for-tunes of car manufacturers like

Toyota start to improve.Sir Kevin Smith said: I am

pleased to announce the abovechanges which will provide the exec-utive leadership for the next stage ofthe companys development.

The firm added that responsibilityfor GKNs automotive business will

be assumed by Andrew ReynoldsSmith, currently responsible forpowder metallurgy and land sys-tems.

Stein will officially take over thereins from 1 January next year.

GKN says Stein willbe new chief execENGINEERING

Burberry upafter debutof collection

BURBERRY shares rose yesterday in aboost fuelled by a positive reaction toits new collection unveiled at LondonFashion Week.

The stock was up around 3.7 percent after images from the luxuryretailers catwalk show attended bythe likes of actresses Sienna Millerand Gemma Arterton were

beamed across the world. The show was held in Hyde Park

and was touted as a return to tradi-tion by Christopher Bailey, Burberryscreative director. The Burberrytrench coat has been among theproducts helping to fuel a string ofsales rises, with Asian demand prov-ing particularly strong.

LIFESTYLE: PAGE 29

BY JOHN DUNNE

RETAIL

NEWS | IN BRIEF

William Hill confirms Probability talksBookmaker William Hill yesterday confirmedits interest in online gaming firm Probability,saying it was in preliminary talks with theGibraltar-based firm but there was no certain-ty an offer would be made. Probability, whichmakes casino and slot machines games includ-ing Lady Luck, told the market yesterday ithad received an approach from William Hill.Under new UK rules on takeovers that came inthis week, William Hill has until 17 October tomake an offer or walk away from the deal.

Anglo Asian doubles its profitsAnglo Asian Mining, the Aim-listed emergingmarket gold producer, said yesterday that itsprofits had more than doubled in the first sixmonths of the year as demand for gold pushedup prices. The firm unveiled a pre-tax profit up129 per cent to 9m, on revenues 35 per centhigher. The company also revealed plans toincrease its resource base and increase themine life of its flagship Gedabek mine inAzerbaijan.

Porta moves to acquire ThreadneedleInternational communications and marketingbusiness Porta Communications has taken thefirst steps towards acquiring ThreadneedleCommunications, signing a contract to buy 80per cent of the issued share capital ofThreadneedle for 3.8m. Porta, previouslyknown as sports advisory agency TSE, has saidthat it plans to build upon the quality of theagency, which will become NewgateThreadneedle.

Mobile retail to replace high streetUp to 30 per cent of the UKs retail space couldbecome obsolete in the next decade, as moreshoppers rely on internet and mobile shoppingto make their purchases, according to JonesLang LaSalle. Massive out-of-town locationsfor click and collect services will start toreplace high streets, the real estate firm pre-dicted at a conference yesterday. The BritishCouncil of Shopping Centres expects up to 14per cent of high street shops to be empty nextyear, up from six per cent before the downturn.

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BRITISH filtration specialistPorvair said it expected full-yearoperating performance to beahead of expectations, after astrong performance from its met-als filtration and microfiltrationdivisions.

Porvair, which makes filtrationand separation equipment foraviation, energy and environ-mental technology businesses,said it continued to trade well inthe final quarter, with revenuefor the nine months to 31

August, up seven per cent fromlast year.

The company also said pre-taxprofit was ahead of last year andit reduced its net debt by 3m.

Two analysts on average wereexpecting the company to post afull-year pre-tax profit of 3.8mon revenue of 65.4m.

At the end of June Porvairraised its full-year forecast afterposting a 27 per cent rise in prof-its, saying that its order book hadsteadily increased over the firsthalf of the year and the outlookfor the second half was promis-ing.

Investors reacted well to theupdate, rising more than eightper cent in morning trading

before closing 6.6 per cent up at88.5p.

The group strategy is deliver-ing, there is greater downsideprotection than before and netdebt is reducing even faster thanexpected, Peel Hunt analyst

Andrew Shepherd-Barron said.Our outlook reflects Porvair

increasingly delivering on itsstrategy of growing revenue in itshighly profitable microfiltration

business whilst extracting highermargins in its steadier state met-als filtration business.

Upbeat Porvair ontrack for the yearBYHARRY BANKSINDUSTRIALS


NEWS | IN BRIEF

Cyprus starts drilling off south of islandCyprus has started drilling south of the island fornatural gas, its government said yesterday, markinga turning point in an escalating row with Turkey over

offshore gas resources in the eastern Mediterranean.The drilling process has been started by NobleEnergy on the basis of the agreement with theRepublic of Cyprus," said deputy governmentspokesman Christos Christofides. Noble Energy

started preparatory work for the drilling prospect onSunday evening, officials said earlier. Turkey hasthreatened to give naval escorts to Turkish explo-ration vessels off Cyprus unless the Greek Cypriot

government halted its exploration plans.

Profits up at cruise operator CarnivalCarnivals quarterly profit has jumped, helped byhigher spending per passenger in North America

that offset weakness in other regions, and the cruiseline operator said that bookings for the rest of 2011and first half of 2012 are at higher prices so far.Chief executive officer Micky Arison said in a state-

ment yesterday that higher revenue yields, a meas-ure of profitability based on revenue per passenger,rose enough to make up for a spike in fuel costs.Miami-based Carnival reported third-quarter netincome of $1.33bn (846m), on revenue of $5.06bn.

New chief executive for HolcimHolcims long-serving chief executive MarkusAkermann will retire early next year and be replacedby newcomer to the cement industry Bernard

Fontana, head of stainless steel producer Aperam.Fontana, 50, who once worked for steel makerArcelorMittal and since 2010 has headed its recent-ly spun off Aperam unit, will take up his post at theworlds second-largest cement maker in February.

ANALYSIS l Porvair

p

15 Sept 16 Sept 19 Sept 20 Sept

90

86

82

88.5020 Sept

CITY VIEWS: WOULD YOU BE MORE LIKELY TO CHANGE YOUR ENERGYPROVIDER IF IT WAS EASIER? Interviews by Phoebe Torrance

If it was made easier yes, but it dependson the deal you are changing to. You have tobe so mindful of the fact that it is possiblefor the rates to change once youjoin another energy provider.

CLIVE GILBERT | INCEPTA

Yes, because it would give me morefreedom of choice. There are always tie-ins in contracts and if the deal was sim-ple it would give me control tomake a less stressful decision.

AARON CROMBIE | NIG CORP

I already think that it is fairly easy to switch energy providers. I have previously investigated it afew times but have never found a cheaper deal than the one I have now. So I would probably

not change even if it was easier.

PETER GODFREY | JRP UNDERWRITING

Leaders fight to convince public over recovery

AS we drift towards a potentialeconomic crisis, leaders findthemselves constrained in theirpolicy choices by public opin-

ion. The rational leader model, which

imagines political decision-makers asfirst seeking expert advice, coming toconclusions based on analysis of evi-dence, and then winning the argu-

ment in public, doesnt fit todaysreality, if it ever did. The continuallyfelt presence of public opinion createsthe conditions within which leadersmerely manoeuvre.

In Germany, a YouGov poll showsAngela Merkel facing 3-to-1 oppositionto spending German tax revenues on

bailing out the Greeks, and approvalfor keeping the euro is in the balanceat 48 per cent to 44 per cent.

She is caught between what heradvisers say and what the public says,

and hence seems unable to act.Here in the UK, high anxiety about

the economy provides politicians aneasy pay-off for attacking high-earners.

A recent YouGov poll showed 2-to-1support for the 50p income tax bandeven though, by the same margin,they thought it either made no differ-ence to the economy or actually dam-aged it.

Forty-two per cent said that even if it brought in no extra revenue, it wasmorally right that the rich shouldpay more. Such an environmentmakes it harder for the chancellor tochampion pro-growth policies.

However, the coalition government

retains support for their policy of cutsfrom roughly half of the population(August figures showed 40 per cent say

we should be cutting public spending

less versus 46 per cent who say itsabout right or we should cut more).But theres little sense among the

public that were making much head- way out of the current economicmalaise. According to YouGovsHousehold Economic Activity Tracker,sentiment towards job security andgrowth among working consumers inthe UK remains stagnant.

Since April, sentiment has not fallenlower than -15.9 per cent nor risenabove -12.8 per cent, remaining within

a range of just three per cent. Positivesentiment in April at 13.2 per cent is atexactly the same point of 13.2 per centin August. Stephan Shakespeare is the

chief executive of YouGov

BRANDINDEX

STEPHAN SHAKESPEARE

ANALYSIS l UK business landscape

Business activity (UK)

Job security (UK)

April May June July August

20

10

0

-10

-20

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Introduction by City AM Editor, Allister Heath

HE MAY be an old, saggy cloth cat,baggy, and a bit loose at the seams,but Bagpuss owner has agreed to sellhim for 4.2m.

The announcement that mediarights owner Coolabi has agreed to a7.75p a share deal with NorthPromotions sent its stock tumbling byalmost a quarter yesterday, as the offerfailed to live up to pre-bid hype.

But sources close to one majorinvestor told City A.M. the offer is likely

to receive the backing of shareholders.A round of fundraising in June val-

ued the stock at 6.75p and shares weretrading hands for between 6-7p beforespeculation of a sale surfaced lastmonth.

However Coolabi, which also ownsthe intellectual property rights toPurple Ronnie, previously surged to asmuch as 10.62p as investors salivatedover the prospect of a juicy premium.

An independent director at the com-pany said Coolabi consulted share-

holders about the potential benefits ofa further round of fundraising or aperiod of organic growth and conclud-ed the offer represents the best option.

North Promotions, an investment vehicle owned by Edge PerformanceVCT, says it attaches great importanceto the skills and experience of theexisting management, who are expect-ed to maintain their five per cent hold-ing in the firm if the transactioncloses.

North Promotions will hope to cashin on the lucrative marketing rights to37-year-old Bagpuss and his friends.

Bagpuss to getnew ownerafter 4m bid VODAFONE has signed a partnershipagreement with some of Asias biggesttelecoms providers to expand its pres-

ence in the region and offer moreservices to its international businesscustomers.

The deal with the Conexus MobileAlliance means Vodafone will partnerwith firms including NTT Docomo in Japan, Hutchison Telecom in HongKong and FarEasTone in Taiwan.

Vodafone will reciprocate by offer-ing its new partners access to its foot-print.

The deal will allow Vodafones enter-prise and multinational customers toextend their managed services to theConexus countries, which are anincreasingly important destination for

business travellers.

The new agreement with the vari-ous partners will come into effect

when existing contracts expire.Vodafone chief commercial officer

Morten Lundal said: The value to Vodafone of collaborating withConexus will be significant given thegrowing importance of Asia to ourenterprise customers.

Conexus said the unprecedentedpartnership is a realisation of itsgrowth strategy and will help drive itsinternational expansion.

Vodafone signsdeal with Asiantelecoms giants

BY STEVE DINNEEN

MEDIA


JEREMY Ellis is heading up theEvolution Securities team advisingCoolabi.

The corporate finance directorjoined Evolution in 1997, workingacross the spectrum of corporatefinance and broking activities. He hasadvised on clients on initial publicofferings, secondary fund raisings and

general M&A, including publictakeovers.

Recent transactions include themerger of Wichford and RedefineInternational and the admission ofAureus Mining to AIM. Other high-

profile media clients include ErosInternational. He has also handledtransactions on the Official List andNasdaq Europe, and has advised bothUK and overseas companies.

Also on the Evo team is ChrisClarke, who joined Evolution Securitiesin 2005.

The associate director in corporatefinance worked alongside Ellis on theWichford/Redefine merger and alsoadvises Eros International.

MEET THE ADVISERS: EVOLUTION SECURITIES

JEREMY ELLIS

CORPORATE

FINANCE

DIRECTOR

Bagpuss rights owner Coolabi has agreed to a takeover

ANALYSIS l Coolabi

p

15 Sept 16 Sept 19 Sept 20 Sept

9.00

8.00

7.00

7.0020 Sept

BY STEVE DINNEENTELECOMS

8/4/2019 Cityam 2011-09-21

19/36

THE ESCALATING smartphone patentwar saw another salvo yesterday, withSamsung considering a legal bid to block the sale of the as-yet-unseeniPhone 5, according to sources closeto the matter.

The move follows a series of suitsbrought by Apple against the Koreanfirm, which culminated in sales ofSamsungs latest tablet being blocked inGermany, alongside

some smartphone mod-els in the Netherlandsand an indefinite delayin launching newtablets in Australia.

Apple accused itsrival of slavishly copy-ing its designs, prompt-ing Samsung tocounter-sue.

The two technologyfirms are locked inintensifying legal bat-tles in nine countriesover their flagshipsmartphone and tabletproducts.

The much-anticipat-ed iPhone 5 isrumoured to have anOctober launch date,

with Apple hoping to continue themomentum that saw it shift morethan 20m smartphones in the lastquarter.

Samsung, meanwhile, is becomingan increasingly serious rival toApples dominance at the high end ofthe smartphone market.

Sales of its flagship Galaxy S phonerivalled iPhone sales last quarter andit recently overtook struggling Nokiaas the worlds biggest smartphonemanufacturer.

The legal war was fur-ther ignited last month

following Googlesshock acquisition ofphone-maker Motorolafor $12.5bn (7.8bn),motivated by its port-folio of more than17,000 patents.

Analysts say themove was an attemptto buy insuranceagainst legal attacksfrom rivals.

Google subsequentlyprovided HTC withammunition in itsunrelated legal battlewith Apple by selling ita number of keypatents, which theTaiwanese firm addedto its case.

Samsung maytry to blocknew iPhoneBY STEVE DINNEEN

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MEDICAL device makerClearStream Technologies said ithas agreed to be bought by New Jersey-based CR Bard for about43.8m in cash.

The company, whose medicaldevices are used to clear blocks inthe coronary and peripheral arter-ies, said the offer had been pitched

at 85p a share, at a premium of 84per cent to the stocks Monday close.Ireland-based ClearStream, which

has been advised by finnCap, consid-ers the terms of the offer fair andreasonable.

Bard, which manufacturers vas-cular, urology, oncology and surgi-cal speciality products, has madethe offer through Bard Bidco, itsIrish unit.

The acquisition of ClearStreamrepresents a compelling strategicopportunity for Bard, enabling us tostrengthen our leadership in vascu-

lar medical devices, Bard chairmanand chief executive Timothy Ringsaid.

ClearStream chief executive Andrew Jones said: The Boardbelieves that the offer being madeby Bard represents a very attractiveopportunity for ClearStream share-holders to realise the value createdby ClearStreams development andgrowth since being admitted to Aimin 2004.

There will be further growthunder the Bard stewardship.

London-listed shares in

ClearStream shot up 75 per cent yes-terday to 81.25p, just short of thepremium offer price.

ClearStream to be sold to Bard in43m move to extend heart products

BY JOHN DUNNE

HEALTHCARE

ARM bossesnet fortunein share sale

ARM Holdings president TudoBrown has sold shares worth600,000, cashing in on the technol-ogy firms sky-high valuation.

He offloaded 100,000 shares at600p each. The transaction marksthe second windfall in a month forthe firms former chief operatingofficer, after he recently trousered1m for cashing in 182,000 shares at550p each.

He now owns in the region of150,000 shares in the Cambridge-based chip designer.

Earlier this month fellow directorMike Inglis also sold shares, nettinghim 800,000.

The management sell-offs failed todeter investors, with ARM stock ris-ing a further two per cent yesterdayto hit 619p, with the firm provingresilient to the recent market tur-moil.

It has surged more than 50 percent in the last 12 months, boostedby its relationship with Apple.

An ARM spokesman said: we can-not provide comment on any person-al share dealings carried out by theexecutive board.

BY STEVE DINNEEN

TECHNOLOGY


Has Labour got better or worsesince Ed Miliband became leader?

In association withPoliticsHome.com

Apply to join today atwww.cityam.com/panel

This week, were asking members ofour reader panel whether the Labourparty has gone up in their estima-tions since Gordon Brown resignedand Ed Miliband took over.We also want to know how Ed Ballscompares to Alistair Darling, hispredecessor, and whether he has

successfully used the cuts as a politi-cal weapon against the coalition.And is there anyone in the Labourparty who would make a betterleader? The results will be publishedon Monday, when the Labour partyconference kicks off. To have yoursay apply at www.cityam.com/panel

PoliticsHome.comPol

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