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FTSE 100 t5,128.48 -68.36 DOW t10,913.38 -240.60 NASDAQ t2,415.40 -65.36 /$ 1.56 unc / 1.16+0.01 /$ 1.34t -0.02

More UBS

execs to goin shake-up

SEVERAL senior executives from UBSrisk management division are set tobe axed in the next few days as thebank tries to move on from the $2.3bn(1.5bn) rogue trading scandal.

Carsten Kengeter, the head of theinvestment bank, is seeking to regainthe initiative after criticism of UBSfor its lack of communication duringthe crisis and its lack of decisive deci-sion-making.

City A.M. understands more riskmanagers are expected to leave fol-lowing the resignation of JohnHughes, Kweku Adobolis boss, andchief executive Oswald Gruebel.

Carsten has got to open up toinvestors and the public and get backon the front foot, said one sourceclose to the bank.

Kengeter is under pressure to bringforward the publication of a reportinto how the loss emerged, whichcould lead to the investment bankbeing heavily shrunk.

Executives in Switzerland want thedivision to adopt a less riskyapproach and focus more on advisory work, which could lead to the re-introduction of the Warburg name.

UBS said it did not comment onspeculation and said more detailsof its risk strategy will be revealed atits investor day on 17 November.

About 3,500 posts are being cut

across the bank, including in riskmanagement, as part of a SwFr 2bn(1.41bn) a year cost-cutting driveannounced in August.

BY PETER EDWARDS AND DAVID HELLIER

BANKING

Chancellor George Osborne on the way to the conference hall yesterday: Pictures: REUTERS

BORIS Johnson would make a betterfuture Prime Minister than GeorgeOsborne, according to the City A.M. /PoliticsHome Voice of the City panel.

Of those who expressed a prefer-ence, fifty-seven per cent said they- would pick Johnson, the Mayor ofLondon, (inset picture) as the nextTory leader compared to just 43 percent for Osborne, the chancellor.

The choice of Johnson over Osborneis sure to irk the chancellor, who iswidely seen as the heir apparent toDavid Cameron. It echoes a similar setof findings published by City A.M. before the election, when the samepanel said Ken Clarke would make abetter chancellor.

The results suggest Osborne has yetto seal the deal with the City. In aset of findings that will make grimreading for the chancellor, over twothirds of panellists (69 per cent) saidthe Conservative party was not doingenough to promote economicgrowth, which is Osbornes mainresponsibility.

Yesterday, business minister MarkPrisk said the government was find-

ing it difficult to boost growth by cut-ting red tape, admitting I dontthink [firms] are on the ground see-ing that change.

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Speaking on the sidelines of theConservative conference inManchester, he likened the govern-ments attempt at deregulation toturning around a tanker and saidcivil servants were ingrained with aculture of regulation being seen asthe first reaction.

Meanwhile, Osborne is expected touse his speech to conference today toannounce plans to freeze council taxnext year, allowing the Conservativesto honour a manifesto commitmentto freeze the levy for two years in arow.

The move will save the average fam-ily 72 in 2012-13 and is expected tocost the exchequer around 850m, which will be funded by using

Whitehall underspend moneythat departments were expected tospend but havent.ALLISTER HEATH P2: MORE P6, P23

Issue 1,480 Monday 3 October 2011

Certified Distribution

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

BY DAVID CROWAND JULIET SAMUEL

CONSERVATIVE

CONFERENCE

THE AMAZON TABLET:GOOD BUT NO iPAD

COLD WATER ON THE FIRE P29

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News2 CITYA.M. 3 OCTOBER 2011

Greece to miss debt targetsGREECE is set to miss its deficit tar-gets for both this year and next, itsfinance ministry admitted last night.

Finance minister EvangelosVenizelos said that the deficit is dueto come in at 8.5 per cent of GDP this

year, almost a whole percentagepoint above the 7.6 per cent targetagreed with Greeces internationallenders.

It will miss the target by less nextyear, he claimed, forecasting a deficitof 6.8 per cent of GDP versus the 6.5per cent target.

Although markets expect Greece todefault and never held out muchhope of the sovereign meeting its tar-gets, the official admission is a blowto political leaders in the rest ofEurope, tasked with persuading their

voters to fork out for larger bailoutsin the future.

However, the Greek cabinet didmanage to rubber-stamp its 2012 aus-terity budget yesterday, agreed

between Athens and the troika the

ECB, European Commission and IMF.Without it, Greece would not be ableto receive its next 8bn instalment of

bailout aid and would go bankrupt injust over two weeks.

The budget confirms plans to place30,000 civil servants on permanent

holiday with 60 per cent pay and tobegin laying them off after a year. Themeasure has been politically difficultto push through because civil service

jobs are protected under the Greekconstitution and public sector unionsare planning protest strikes.

But it could still prove difficult toimplement on the ground: reportssuggested that as many as eight gov-ernment buildings have been occu-pied by striking civil servants over thelast week, preventing many min-istries from functioning. Amongthose disrupted were the statisticsauthority, which is charged with pro-

viding reliable figures to the troikafor their audit.

Eurozone finance ministers areexpected to discuss Greece at a meet-ing in Brussels today, but will be wait-ing for the troika inspectors report

before taking any new decisions.The inspectors are widely expected

to give a green light to the release ofthe next 8bn tranche of aid to avoidplunging the Eurozone deeper intoturmoil. But all eyes will be on theirforecasts for 2012-2014.

If the inspectors conclude Greecesrecession will continue to be worsethan predicted, EU officials have sug-gested banks that agreed to write off21 per cent of the value of their Greekdebt holdings in July may be forced totake deeper losses.

Its make or break for the Tory party

POLICIES to boost growth. That is what the Conservative Party confer-ence, which started last night, mustfocus on. Growth has ground to ahalt, partly because of global forces

but also because too little has beendone to make the UK once again acompetitive place in which to work,invest and operate a business. Therehas been much rhetoric and very lit-tle action in fact, most of thechanges introduced to tax and regula-tion since last May have actually beendamaging for growth. This astonish-ing situation shows how important it

is for George Osborne and DavidCameron to refocus.

There is some good news. The coali-tion has finally agreed that the quali-fying period for unfair dismissal

claims would be increased from one year to two (from April). Given thatthis was mooted ages ago, it is hard tofathom why this is taking so long butit will help. Such a move may worrysome employees but it will be goodfor overall opportunities in the econo-my as it means bosses will be lessscared to take on new staff.

Unfortunately, the government istrapped as the result of the dysfunc-tional reality of coalition. Many of theUKs problems come from the EU. Yetthe Liberal Democrats oppose therenegotiation of the treaties to decen-tralise even the smallest amount ofpower. Sometimes, the government like all of its predecessors since the1990s makes a song and danceabout resisting one or other especiallyegregious move. But usually it eventu-ally surrenders, or celebrates a com-

promise that merely delays the blowby a few years.

A combination of the EUs bulldoz-er and of the governments mistakesmeans that the UK is a worse place to

conduct business and especially tohire people today than it was whenthe coalition was elected. The agency

workers directive has increased thecost of employing such workers by

between a fifth and one third, accord-ing to the EEF; the elimination of theretirement age has been mismanagedand will mean an explosion in tri-

bunals; billions of pounds of costshave been added as a result of othernew rights. Employment is likeeverything else: if you increase itscost, you cut its demand. The coali-tion wants more jobs but it isembracing maddeningly job-destroy-ing policies. Bizarre.

Corporation tax is falling, andentrepreneurs have greater tax

breaks. But thats about it (Im notincluding trivial proposals such asgetting rid of the need for shops that

sell TVs to collect the addresses ofbuyers). Yet on the debit side needs to be included higher capital gains tax(with no indexation for inflation); ahike in employers national insur-

ance; higher taxes on the City; adestructive raid on oil and gas firms;a disastrous energy policy which willpush up prices, hitting the pooresthardest, while making UK manufac-turing gradually unviable; andnumerous other blows. If he wantsreal ideas, Osborne ought to read theInstitute of Directors manifesto forgrowth, commissioned by its excel-lent new boss Simon Walker.

If one were to conduct a cost-bene-fit analysis of the coalitions impacton firms and the economy, the sorrytruth is that costs are much greaterthan benefits. This conference willeither mark a turning point or it

will confirm the Tories are content tomanage the slow decline of UK Plc.

We will soon find out which it will be.allister.heath@cityam.comFollow me on Twitter: @allisterheath

Greek finance minister Evangelos Venizelos has his work cut out for him Picture: REUTERS

NEWS | IN BRIEF

Slovakia in EFSF vote challengeSlovakia's ruling coalition will have toreallocate cabinet posts or face a snapelection unless it can find its own major-ity in parliament for a crucial vote onthe Eurozones rescue fund, the mainopposition party Smer said yesterday.The Eurozones second poorest country

of 5m people has become a major risk tothe blocs July deal to give the EuropeanFinancial Stability Facility (EFSF) morepower to tackle the crisis threatening itsweaker debtor economies. The centre-right coalition of Iveta Radicova isstruggling to win enough support in par-liament for the EFSF vote, which is dueby 14 October, because junior partnerFreedom and Solidarity (SaS) has so farrefused to support the measure.

Bob Pittman to lead Clear ChannelUS radio and advertising company ClearChannel Media Holdings has promotedBob Pittman to chief executive. Pittman,a well-known media executive andinvestor, has been Clear Channel's chair-man of media and entertainment plat-forms since November 2010. ClearChannel owns an outdoor advertisingspace business in the UK.

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 emaildistribution@cityam.com

4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900 Fax: 020 7283 5334Email: news@cityam.com 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 Hepple

CommercialSales Director Jeremy SlatteryCommercial Director Harry OwenHead of Distribution Nick Owen

BY JULIET SAMUEL

EU ECONOMY

BTG GAINS TOP BANKER AS IT EYESEXPANSIONRoger Jenkins, the high-profile for-mer Barclays executive, has joinedBTG Pactual as a managing partner asBrazils largest independent invest-ment bank and asset manager gearsup its ambitious expansion plans.

Jenkins, a star banker best known fororchestrating a 7bn fundraising forBarclays from Middle East investors atthe height of the financial crisis,

brings with him deep ties to the sov-ereign wealth funds that are nowlooking to tap into Latin Americangrowth.

GOLDMAN SET TO BE LME SALE WIN-NERGoldman Sachs has more thanquadrupled its stake in the LondonMetal Exchange in the past two years,

making the US investment bank the biggest potential winner from the

proposed sale of the 130-year-oldexchange. The LME, the centre for

global metals trading, said last weekit had been approached by more than10 suitors.

PRIVACY CONCERNS OVER ANY CHINAPRESENCE IN YAHOO

The possibility that Yahoo will fallunder Chinese ownership could leadto significant privacy risks for itsusers elsewhere in the world andraise questions about the operation ofUS laws on wiretapping, privacy cam-paigners in the US have warned. The

warnings follow a comment by JackMa, founder of Chinese internetgroup Alibaba, that he is interested inacquiring Yahoo.

AGBANK SHRUGS OFF EARLY RIGHTSISSUE FEARS

The worlds biggest bank by cus-tomers, branches and staff numbers has shrugged off market concerns

that it will have to resort to an earlyrights issue to top up capital buffers.

OLYMPIC BUILDER LAING OROURKEPAYS BOSS 24M DIVIDEND

The construction company that builtLondons Olympics venues paid its

boss a dividend of almost 24m last year. Ray ORourke is the founder,chairman and chief executive ofLaing ORourke, and one of Irelandsrichest men, with an estimated for-tune of 315m in this years Sunday

Times Rich List.

NO 10S GREEN SHOOTSNo 10 is investigating ways to pumpmoney into green building projectsto help kickstart the economy.Representatives of several large com-panies, including Balfour Beatty, JSainsbury and Bovis, were sum-moned to Downing Street on Fridayto discuss energy performance con-tracts a scheme to speed up invest-

ment in insulation, solar panels andother energy-saving improvements.

WATERSTONES BOSS SLAMS AMAZON The new boss of Waterstones hasdescribed Amazon.co.uk as a dispirit-ing place to shop and said that the

business tactics used by the onlineretailer are utterly utterly ruthless.

James Daunt, the managing directorof the countrys biggest high street

book chain, said that 13 years after itsUK launch Amazon now sells almostexactly the same number of books as

Waterstones.

MINIMUM WAGE MAY HARM YOUNG The minimum wage may be pricing young people out of work becauseemployers are finding it too expensiveto give them their first job,Government pay advisers have said.Firms may be reluctant to create jobs

by recruiting inexperienced staff because they are put off by the

increased wage bill, the Low PayCommission has suggested.

CHANNEL ISLANDS REGULATOR INDARK OVER FULL TILT POKER

The top official at the Channel Islandsregulator that licensed Full Tilt Pokerto run an online-poker business saidhe became aware the site had majorfinancial problems only after the USgovernment indicted company execu-tives. What wasnt known to us is thatthe Department of Justice had frozenfunds associated with the operation ofFull Tilt, Andre Wilsenach, chief exec-utive of the Alderney GamblingControl Commission said.

CARGOLUX IN BOEING AGREEMENTCargolux Airlines International hastentatively resolved a contract dispute

with Boeing over deliveries of the firsttwo 747-8 jets, which Cargolux abrupt-ly postponed last month.Luxembourg-based Cargolux said it

reached a tentative agreement withBoeing over contractual issues.

WHAT THE OTHER PAPERS SAY THIS MORNING

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THE disappointing outcome of thetakeover battle for CharterInternational shows that UK M&Adeals are still too skewed in favour ofshort term investors, the 269bn fundmanager Aviva Investors has said.

Avivas UK equities fund managerGraham Elliott-Shircore said Charter'sshareholder base changed as short-term investors bought in during thebid period, leaving the board at oddswith its long-term investors.

Our views on what would have been our preferred outcome havebeen stated it now looks like thatisnt going to happen. From our per-spective that is a bit disappointing;financial markets and shareholdershave played their role in that, he toldCity A.M.

The boards position is very differ-ent to the long term shareholderviews the boards perspective is per-haps that they delivered as high anominal price as possible, whereas

we considered the longer-term value we think an ownership by Melrosecould have delivered, including shar-ing in the future upside.

He stopped short of calling for achange to the Takeover Code, howev-er, as Cadbury chairman Sir RogerCarr did after short-term sharehold-ers approved the chocolate maker'ssale to US foods giant Kraft.

Instead, he supported creating amore level playing field for allinvestors, adding that Like all thesesituations it is a financial decisionand that creates differing opinions.

Elliot-Shircore also defended UKbank stocks, saying unlike many fundmanagers he remains slightly over-weight on the sector in the belief thatinstitutions such as RBS and Lloydshave a positive outlook.

They are certainly high risk,potentially high return shares andthat can work against you, he said,but added that he believed concernsover the threat new regulation posesto their future performance wereoverdone, he said.

Aviva: Charter

bid shows UK

M&A skewedBYALISON LOCK

INSURANCE

News 3CITYA.M. 3 OCTOBER 2011

THOUSANDS of jobs are expected togo in UK financial services as the sec-tor looks to cut costs, according to areport out today from theConfederation of British Industry(CBI) and PwC.

Investment managers, insurers,banks and traders are all expected tocut jobs, the survey found, with theemployment outlook only improvingin building societies.

Back in May the survey showed a

positive balance of five per cent offinancial services firms with a posi-tive employment outlook. A net totalof 1000 jobs was created in the fol-lowing quarter. Now that balancehas dropped to -11 per cent.

That is 8,000 out of around900,000 working in the sector in theUK, said the CBIs Ian McCafferty.Nonetheless, uncertainty aboutfuture demand and worries aboutshifting regulatory sands are weigh-ing on sentiment.

Indeed, the regulatory situation is

adding to costs noticeably. Of thejobs that will be created, many willcome in the institutions compliancearms, said PwCs UK banking leaderAndrew Gray, although headcountin this area is still a small proportionof total costs.

Larger costs will come as capital buffers are increased. However, the2019 deadline set by Basel III and pro-posed in the Vickers Report meanthis should be achievable withouttoo much pain, the report found.

CBI says 8,000 City jobs will be lostby the end of 2011 as costs are cut

ANALYSIS l Optimisim

% Balance

2001 20112009200720052003

60

40

20

0

-40

-20

-80

-60

BY TIMWALLACE

FINANCIAL SERVICES

CBI boss JohnCridland, right, haswarned that thewrong regulationcould damage theCity and the recovery.

8/4/2019 Cityam 2011-10-03

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News4 CITYA.M. 3 OCTOBER 2011

MORE NEWSONLINE

www.cityam.com

EMBATTLED EMI is set to attract atleast five second-round bids, boostingowner Citigroups hopes of offload-ing the asset.

Buy-out specialist Ronald Perelmanhas emerged as a leading contender,alongside Warner Music, Vivendi-owned Universal Music, BMG andSony/ATV, which are all expected totable bids for all or part of the firm.

Warner and Universal Music arethought to be most interested in therecorded music arm of the business,

while BMG and Sony/ATV, the firmhalf owned by the Michael JacksonFamily Trust, are keen on the musicpublishing unit.

Perelmans Macandrews & Forbes isthought to prize the recorded music

business most highly. The possibility of a bidding war

will come as a relief to Citigroup,which has seen a number of private

equity firms back away from theprocess. Terra Firma, the private equity

firm owned by Guy Hands, lost con-trol of the asset it bought for 4.2bnin 2007 after Citigroup decided itsoutstanding debts were unsustain-ably large. The bank, which provided3.4bn of debt to the company, is like-ly to see combined bids of between3-4bn for the two sides of the busi-ness, with the publishing arm seen asthe most valuable.

Five bidders in runningfor iconic music firm EMIBY STEVE DINNEENMEDIA

EMI RUNNERS AND RIDERS

Clockwise from top left: BMG chief executive Hartwig Masuch, buy-out specialist RonPerelman, Warner Music boss Stephen Cooper and Universal Music chief executiveLucian Grainge are all mulling bids for EMI. Inset: Sony/ATV, also in the running, is halfowned by the Michael Jackson Family Trust

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News6 CITYA.M. 3 OCTOBER 2011

CONFERENCE WHISPERS

Second class MPsJournalists and MPs haven't been thebest of friends recently. So politicalhacks on the train to Manchester yes-terday morning were more thanhappy to engage in a bit of petty one-upmanship. Virgin Trains were offer-ing 10 upgrades to First Class,where passengers can use the WiFi

connection for free. Allowing for acup of tea (also free in First Class), itwas actually cheaper to upgrade thanit was to pay for the WiFi in the stan-dard cabin. Soon there was a queue of

journalists waiting to buy an upgrade.Sadly for the Tory MPs, first classtravel like champagne has beenbanned for the duration of the confer-ence because it doesn't really fit inwith the "we're all in it together"mantra. To say the journalists lookedsmug as they left the MPs for theroomier cabins up front is putting itmildly.

A slippery businessEnterprise minister Mark Prisk cameunder heavy fire at a packed fringeevent last night for the governmentsshock 10bn tax raid on North Sea oilcompanies in the last budget. Againand again he was asked how spring-

ing a surprise tax hike on British ener-gy firms is consistent with a growthagenda or deregulation. Prisk said itwas proving very difficult taking onthe civil service on regulation: Wehave to turn the oil tanker that isWhitehall around! he repeated adnauseum. Luckily for Prisk, the latestfigures show UK oil production downby a whopping 16 per cent in the lastquarter. That's one big tanker turnedaround!

PoliticsHome.comPoliticsHome.com

Apply to join today at www.cityam.com/panel

In association with PoliticsHome.com

In partnershipwith

THE Tories are not doing enough topromote economic growth, accord-ing to the overwhelming majority ofpanellists on the City A.M./PoliticsHome Voice of the Citypanel.

Sixty-nine per cent of panellistssaid the Tories were not doingenough to promote growth in theeconomy, against just twenty-nineper cent who thought they were.

Two per cent said they didnt know. Although most panellists recog-

nised that the Conservative partysroom for manoeuvre was limited byits power-sharing agreement withthe Liberal Democrats, many feltthe Tories were giving their junior

coalition partners too much sway.Several panellists used the analogyof the tail wagging the dog.

A significant number of panellistsfelt the environment for businessand finance was not much betterthan it was under Labour, eventhough the Conservatives are seenas the party of private enterprise.

Just as bad at not standing up for business as Labour was, said onemember of the panel.

They havent done anything tomove Britain off the track we wereon under Labour, added another.

Panellists identified several areaswhere the Tories had actively hin-dered growth, including hostilitytowards the City and banking;increasing the regulatory burden oncompanies; failing to fight anti-busi-ness European laws; and introduc-ing a cap on immigration.

The panel said Boris Johnson (pic-tured), the Mayor of London, wouldmake a better future party leaderand Prime Minister than George

Osborne, who as chancellor is mostresponsible for promoting growth.Excluding those who said they didnot know, 57 per cent picked

Johnson compared to 43 per cent forOsborne.

The Voice of the City panel, inassociation with PoliticsHome, has

been selected to represent a cross-section of Londons business andfinancial community. There were435 responses.

Dontknow

Yes

No

%69%

29%

2%%Is the Conservative Party doingenough to promote growth?

Dontknow

BorisJohnson

GeorgeOsborne

%36%

48%

16%

If you were forced to choose,who would you pick as thenext Tory leader?

2%2%

Asexpected

Muchbetter thanexpected

Somewhatbetter thanexpected

Muchworse thanexpected

Don'tknow

Somewhatworse thanexpected%29%

8%

8%

35%

6%

23%

Are the Tories in governmentperforming better or worsethan you expected?

City says Conservatives are notdoing enough to promote growth

BY DAVID CROW IN MANCHESTER

CONSERVATIVE

CONFERENCE

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BANKS have yet to see any progress onthe governments deregulation agen-da for small businesses, according tothe chairman of Lloyds BankingGroup.

During a fringe event of theConservative Party conference inManchester, Sir Win Bischoff (pic-tured) was asked whether he hasseen an impact from govern-ment initiatives aimed atreducing red tape, like the

one in, one out rule forregulations.

No, he said. I'm surethere is a great deal happen-ing or promised to happenbut we dont yet see it. Wesee from our smallenterprise cus-tomers that regu-lation is still aterrible burden.

Bischoff also warned that

additional regulation risks taking thecountry in the opposite direction:Its essential that the future compet-itiveness of the UK is preserved, hesaid.

In response, enterprise ministerMark Prisk compared the Whitehallapparatus to a tanker that the gov-ernment has had trouble in turningaround.

He claimed the government isbeholden to agreements struck

before the election thatenshrine regulation.Referring to the Agency

Workers Directive dealreached between the CBIand TUC, he asked:

Do we try and tinker with a directive

that werenot com-f o r t a b l e with and

t h e nmake it al o tworse?

Lloyds yet tosee cut in redtape for SMEs LOWER corporate taxes, lower statespending and protected infrastructurespending are among 15 measures pro-posed today by the Institute of

Directors (IoD) which it believes wouldboost the economy.

Launched by new director-generalSimon Walker, the IoDs 15-point planto return Britain to a growth trajecto-ry covers taxation, regulation, plan-ning laws and education policy.

The government is cutting corpora-tion tax from 26 per cent to 23 per cent by 2014. That will take the UK from19th to 13th among the OECD coun-tries and is not enough says the IoD.

A 15p rate would put us in 2ndplace, a major competitive advantage.

The report also proposes that statespending be gradually reduced to 35per cent of GDP, compared with 50.1

per cent this year; that the Bank ofEngland expands its quantitative eas-ing programme by a further 50bnimmediately; and that the UK shouldassess whether its uniquely aggres-sive carbon emissions targets put it ata competitive disadvantage.

Walker also hit out at those who callfor more government spending in aneffort to boost short-term demand:The Government's deficit reductionprogramme must go faster and fur-ther before the economy is on track.

IoD: create jobswith 15pc taxon employers

BY JULIET SAMUEL

BANKING

UK ECONOMY

News8 CITYA.M. 3 OCTOBER 2011

THE NEW higher minimum wagewill stifle job creation in the UKsshops, the British Retail Consortium(BRC) has said.

The national minimum wage washiked by 2.5 per cent to 6.08 perhour, taking effect over the week-end.

This is a disproportionate rise which makes it harder for retailersto maintain and create jobs in thecurrent climate, the BRC said.

Retail employs nearly three mil-lion people and a third of our staffare 25 or younger, added BRC direc-

tor general, Stephen Robertson.Retailers are offering young peopletheir first step on the career ladderand backing that up with trainingand development opportunities. The group said next years riseshould be no higher than 2.1 percent.

The government will come underincreasing pressure to limit theincrease or even lower the level ofthe minimum wage, especially foryounger workers.

Increased minimum wagewill cost jobs, say retailers

Retailers are concerned about the rise in the minimum wage Picture: REX

BY JULIAN HARRIS

RETAIL

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11/36

EXPECTATIONS of economic growthare weakening, according to 200 fundmanagers surveyed by Capital Spreads,City A.M. can exclusively reveal.

Lloyds Bank Corporate Markets isreporting low business confidence in aseparate study, also out today.

Fund managers are 18 per centmore pessimistic than they were inMay, according to Capital Spreads. Atthe end of the Q2, 63 per cent expectedthe economy would improve over thenext 12 months; that fell to 43 per cent

by the end of August.Similarly, in May 13 per cent expect-

ed the economy to weaken, comparedwith 31 per cent in August.

Lloyds barometer of business confi-dence found a slight improvement inSeptember, but still anticipates verysluggish growth into 2012.

The survey peaked at a net balanceof 36 per cent of businesses feeling

increasingly positive about the econo-my in June. That plummeted to -3 percent in August and rose again lastmonth to seven per cent.

Virtually every economic indicatorfor the last quarter has been a disap-pointment and, whilst we are probablynot yet in a recession and may neveractually record a technical downturn

we are certainly nowhere near thekind of growth that would restore con-fidence, said Simon Denham, chiefexecutive of London Capital Group.

Despite high inflation in the UK andrising prices in the Eurozone, analysts

believe low confidence will push theBank of England (BoE), EuropeanCentral Bank (ECB) and FederalReserve towards more quantitative eas-ing (QE).

It is very possible that a flurry ofweak data and surveys over the nextfew days could prompt the BoE intolaunching QE2 as soon as Thursday,said IHS Global Insights Howard

Archer.

Confidence islow, says pollBY TIMWALLACE

ECONOMY

News 9

ANALYST VIEWS: WHAT CENTRAL BANKDECISIONS DO YOU EXPECT? Interviews by Tim Wallace

LUIGI SPERANZA | BNP PARIBAS

Despite Eurozone inflation rising sharply from 2.5 per cent to 3 percent we remain of the opinion that the ECB will act boldly in the meeting thisweek. We expect a 25 basis point rate cut, the announcement of a 12-monthLTRO and possibly a new covered bond purchase programme.

CHRIS WILLIAMSON | MARKIT

Ben Bernanke is to speak before a bipartisan congressional panel onthe US economy tomorrow. His words will be watched closely as investors mullover the odds of another round of QE from the Fed. Unemployment figures havebeen weak and anaemic growth is insufficient to prevent those rising.

ALEX LAWSON | MONEYCORP

The pound will come under pressure in the build up to the MPC deci-sion with scope for a bounce if no more QE is announced. There has been specula-tion that the ECB will cut interest rates by 0.5 per cent to 1 per cent, althoughtheir preoccupation with inflation will probably stay their hand for now.

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THE hedge fund run by star traderDavid Harding has defied the indus-trys poor performance this year tomake returns on investments ofaround 6.3 per cent so far.

City A.M. understands that WintonCapital, which uses scientificresearch to spot patterns in market

behaviour, has seen funds undermanagement rise by about 45 percent to $25bn (16.04bn) since 31December.

Market swings meant August wasan especially grim month for hedgefunds but Winton made gains ofaround two per cent. It is understoodreturns were marginally positive lastmonth, when the Eurozone debt cri-sis weighed on markets.

Harding, a Cambridge natural sci-ences graduate, has assembled a largeresearch team which make up abouthalf of Wintons 200 staff. In August it

was ranked as Europes fifth largesthedge fund. Harding has twice builtblack box funds, which use sophisti-cated computer programmes. In 1987he co-founded AHL and ten yearslater, after it was bought by ManGroup, he left to set up Winton. Hereceived a dividend payment of 54min 2009.

Both funds run managed futuresstrategies or commodity trading

advisers complex, computer-drivenstrategies following trends in a rangeof global futures markets, includingoil, equities, bonds and commodities.

Winton Capital Managementincreased pre-tax profits to 183.7mlast year, up from 52.8m.

Star hedgefund Wintonhits $25bn

MARKET turmoil is expected tohave taken its toll on US invest-ment banks in the past quarter,slashing revenues and bonus potsas the major Wall Street brokerssuffer from shrinking trading vol-umes.

Analysts expect Goldman Sachsand Morgan Stanley to be hit partic-ularly hard, with Goldmans ownproprietary investments seen aslikely to record sharp declines.

Analysts at Bank of America/Merrill Lynch expect a

drop of $2.29bn (1.47bn) in quar-terly revenues at the banks invest-ments and loans division, whichrelates to bets made with its owncapital.

If the forecasts are correct,Goldman and many of its rivals will

be forced to cut drastically into bankers pay pots to keep overallpay-to-earnings ratio in line.

US research house Bernstein hassuggested that a three per centreduction in the compensationratio of its trading business willallow Goldman Sachs to beat itscost of capital in [some] units under

Basel III capital rules.But a cut in pay costs is likely to

mean further lay-offs on tradingfloors since many banks haveramped up higher fixed costs in paydue to overhiring and greater regu-lation of bonuses.

Even those who were originallybullish on Wall Street have becomegloomier in this years third-quar-ter previews due to stagnation inthe US economy.

Most major revenue earners forbanks are expected to have been hithard by the slowdown in tradingactivity. Analysts at Keefe, Bruyette

& Woods expect Goldmans com-bined revenues from debt and equi-ty capital markets (DCM and ECM)to decline by some 70 per cent to$255m as volatility and uncertain-ty in the market effectively brought

both DCM and ECM to a halt duringthe quarter.

Bernsteins Brad Hintz has alsorevised down his estimates for near-ly every division in the major

banks. Fixed income trading unitsfaced a difficult third quarter...Equity capital markets desks werequiet... and announced M&A activi-ty slowed, Hintz wrote in a note.

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Reduced profitability for Goldman Sachs andMorgan Stanley set to bite into bankers payouts

BANKING

News10 CITYA.M. 3 OCTOBER 2011

David Harding is seen as a hedge fund pioneer for his work on AHL and Winton Capital

NEWS | IN BRIEF

Intel agrees to buy TelmapChipmaker Intel has agreed to acquiremobile navigation software makerTelmap, the chief executive of the Israel-based company said yesterday. Detailsof the deal were not disclosed but Israelimedia said Intel is paying about $300m(192m) to $350m. Telmap chief Oren

Nissim declined to comment on the priceand said the deal was expected to closebefore the end of the year. Telmap willbecome a wholly-owned subsidiary ofIntel, which has two plants and fourdevelopment centres in Israel.

Old Mutual mulls sale of DwightOld Mutual Asset Management, a sub-sidiary of London-based investmentcompany Old Mutual, is looking to sellDwight Asset Management Company,according to Reuters. Dwight, which had$45.3bn (29bn) in assets as of 30June, is an institutional fixed incomeasset manager that specialises in stable-value funds for retirement plans.

Vale faces bar on Amazon mineVale, the worlds second-largest miningcompany, may be unable to develop amassive new iron-ore mine in theAmazon after archeologically and envi-

ronmentally sensitive caves were foundat the site, the Estado de S. Paulo news-paper reported yesterday. The cavespermeate much of the iron formations inthe 3.4- billion-tonne Serra Sul deposit,Estado said. Serra Sul is part of Vale'sGrande Carajas mining project in Brazil.

INVESTMENT BANK EARNINGS

Goldman 2.98 1.35

Morgan Stanley 0.05 0.37

JP Morgan 1.01 1

Citi 0.7 0.89

Bank of America 0.11 0.2

EPSQ32010 ($)

ForecastEPS Q32011 ($)

BY PETER EDWARDS

HEDGE FUNDS

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GYM chain Fitness First has pulled itsSingapore flotation as global marketturmoil shows little sign of easing.

Private equity owner BC Partnerswas expected to raise around 500min a listing which would have valuedFitness First at between 1bn and1.2bn. It has postponed the initialpublic offering (IPO), however, because of the volatility sweepinginternational markets, and after sim-

ilar moves by several other UK and UScompanies.

Fitness First has built a strong pres-ence in the Far East, including inSingapore, Hong Kong, Thailand, andMalaysia, and has more than 1.4mmembers in 17 countries in total.

City A.M. understands BC Partnershas not yet decided when to re-attempt the listing but reports havesuggested it could look elsewhere foran exit. Earlier this month CVCCapital Partners took a 51 per cent

stake in Virgin Active in a deal valu-ing the gym group at about 900m.

The origins of Fitness First go backto 1992 when entrepreneurs MikeBalfour and Christopher Pearce set uptheir first club in Bournemouth before floating the outfit on theAlternative Investment Market four years later. Private equity houseCinven took over the company for400m in 2001.

BC Partners, which declined tocomment, has 19 portfolio companies with a total turnover of 32bn

(27.48bn). It bought Fitness Firstfrom Cinven at an enterprise value of835m in 2005, vowing to help fuelthe groups international expansion.

Fitness Firstpulls 1.2bnSingapore IPO ADVERTISING spend in the UK fell by1.2 per cent in the second quarter,adding to an increasingly gloomy out-

look for the sector.The fall was in stark contrast to the

global advertising spend, whichincreased 5.7 per cent, according tonew figures from Nielsen.

In an increasingly polarised field,emerging markets saw spending rock-et, led by an 18.2 per cent gain inLatin America, while Europe fell 3.2per cent overall.

Revenue dropped in 16 out of the36 global markets the first signifi-cant decline since the third quarter of2009. Total expenditure for the quar-ter was $127bn (81.5bn).

Declines in spending for the fastmoving consumer goods category in

Europe and North America, and thecontinued decline of newspaper ads,contributed to slower growth in theseregions.

Randall Beard, head of advertisersolutions for Nielsen, said:Compared to the 8.9 per cent growthrate in the first quarter of the year,there was definitely some slowdown.But, based on the global economy andthe financial problems many coun-tries have experienced, the overall fig-ure is still great news.

E.ON is understood to have hiredGoldman Sachs to oversee the sale ofits 2.5bn-rated (2.15bn) Open GridEurope gas distribution network.

Open Grid Europe is a subsidiary ofRuhrgas, the business E.ON acquiredfor10bn in 2003.

The company is under pressure dueto Germanys decision to abandonnuclear power, which tipped it into

its first quarterly loss. In response itannounced an overhaul of its busi-ness aimed at slashing costs by1.5bn, including up to 11,000 jobcuts.

The firm is also amassing a warchest for a push into emerging mar-kets, with chief executive JohannesTeyssen aiming to sell15bn of assetsby the end of 2013.

E.ON employs around 12,000 peo-ple in the UK and more than 79,000worldwide.

UK advertisingspend falls by1.2 per cent

E.ON hires Goldman tooversee sale of gas unit

Johannes Teyssen CEO of German util ity giant E.ON Picture: REUTERSBY PETER EDWARDS

LEISURE

Groupons $750m flotation is on holdwhile Facebooks listing has been putback to next September or later.Manchester Uniteds 640m listing inSingapore has also stalled.

FAST FACTS | LISTINGS

NewsCITYA.M. 3 OCTOBER 2011

BY STEVE DINNEENENERGY

11

BY STEVE DINNEENADVERTISING

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SIR PAUL JUDGE OPENS PENTHOUSEHOME FOR COFFEE AND CHAMPAGNEIT WAS hard to know who won thecake-making competition at Sir Paul

Judges coffee morning on Friday they were all anonymous but

with free champagne from Bollingerand chocolate from Green & Blackson tap, no-one was counting.

The Chartered Institute ofMarketing president threw open hisriverside penthouse for theMacmillan Cancer Support fundrais-

er, co-hosted with The MarketingSocietys chairman Suki Thompson.

Virgin Medias marketing directorJeff Dodds, Sarah Speake of BarclaysCapital and Cass Business Schooldirector Paola Barbarino were amongthe 140 guests who raised 5,400 onthe day, helped by Judge putting hissecond home in Fuerteventura onthe market for 1,200 for one week inthe silent auction.

SUNDAY DRIVERTRUST male supermodel David Gandyto make an appearance in the City onthe quietest day of the week.

But there he was on Sunday morn-ing, signing copies of his new coffeetable book in Searcys Champagne Barat One New Change. Like One NewChange, David epitomises eleganceand style, gushed Gandys PR aide.

The Capitalist12 CITYA.M. 3 OCTOBER 2011

EDITED BY

HARRIET DENNYSGot A Story? Emailthecapitalist@cityam.comFollow The Capitaliston Twitter: @dennysharriet

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T O F R E E S T A Y S.

THEY steered clear of the eight-course taster menuat 150 per head, but the three hedge fund man-agers who visited chef Nigel Mendhams newrestaurant Thirty Six at Dukes Hotel on St JamessPlace still managed to rack up a sizeable tab.Starting with three glasses of Perrier JouetBlanson champagne to accompany their startersof carpaccio, scallops and red mullet, the groupmoved on to a 395 bottle of vintage Chateau

Margaux to help along the salt marsh lamb,Highland venison and lemon sole. Monbazillac pud-ding wine, Fernando de Castilla sherry and RamosPinto 10 Year Old Tawny port completed theevening blowout, which left the three gourmandMayfair financiers 730 lighter.

BILL OF THE WEEK

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News 13CITYA.M. 3 OCTOBER 2011

OIL MAJOR BP is clinging on to theprospect of selling its majoritystake in Pan American Energy, an Argentine oil producer, despitereports that the deal is on thebrink of collapse.

BPs plan to sell its 60 per centstake to Bridas Corp, a companyowned by Chinese oil producerCnooc and Argentinas billionaireBulgheroni family, has hit opposi-tion from politicians and may not be completed when the accordexpires next month, it emergedlast week.

The $7bn (4.5bn) deal,announced in November last year,is part of the companys strategy

sell various assets to cover the costsof the Gulf of Mexico oil spill.

Its collapse could jeopardisechief executive Bob Dudleys futureat the oil firm. Dudley has beenunder mounting pressure to revivethe oil giants share price, current-ly below the level they traded at when the company capped theMacondo well a year ago.

BPs sale of its stake in Pan American has been hampered bythe political situation in Argentina.It is thought that the deal could bedelayed until after the presidentialelections next month, according toreports this weekend.

Deals of this scale take time tofinalise with competition authori-ties we are working with theother shareholders in PAE to secure

competition approvals and com-plete the deal, BP said.

We can confirm the deal hasnot yet closed as Argentine compe-tition approvals remain outstand-ing, but we remain optimistic thatthese approvals will be granted indue course.

BP clinging to $7bnPan American saleBYKASMIRA JEFFORD

OIL & GAS

FRENCH luxury goods makerHermes sees no sign yet of affluent buyers tightening their pursestrings in spite of a sombre globaleconomic outlook.

Speaking at the brands show atParis Fashion Week yesterday, chiefexecutive Patrick Thomas said: Forthe moment, there is no impact onour sales.

He added that he believed thepurchasing power of luxury con-

sumers had not changed yet.But the fact that we see nothing

today, does not mean that we willnot see anything tomorrow, saidThomas.

When there are moments ofmacroeconomic concern, theyalways tend to affect our markets.

The luxury goods industry hascontinued to grow at a solid pacethanks to tourist buyers in Europeand strong appetite in emergingmarkets, while more affordableproducts such as LOreal andClarins cosmetics have felt a slow-down.

Hermes, known for its 10,000euro Kelly handbags, joins the cho-

rus of luxury brands such as Dior,Louis Vuitton and Lanvin who havedeclared buoyant trading, despitelower consumer confidence.

Last week, luxury goods stockssuch as Burberry, LVMH, Swatchand Richemont took a beating asanalysts expressed concern theChinese market the industrysmain growth engine could slowand global demand could weaken.

Late last month, investors start-ed putting pressure on luxury valu-ations, based on the expectation

that market could be hit just asothers have been.

Luxury goods maker Hermes seesno sign of affluent cutting spendingRETAIL

NEWS | IN BRIEF

Cairn finds gas in Sri LankaCairn India, a subsidiary of Cairn Energy,said yesterday it has discovered naturalgas in Sri Lankas offshore MannarBasin, confirming an earlier announce-ment by Sri Lankan President MahindaRajapaksa. Further drilling will berequired to establish the commerciality

of the discovery, Cairn said in a state-ment, referring to the find at the CLPL-Dorado-91H/1z well drilled at a waterdepth of 1,354m.

Japan in bid to stop cyber crimeJapan plans to work more closely withprivate companies by sharing informa-tion on cyber attacks after defence con-tractor Mitsubishi Heavy Industries washacked, Nikkei business daily reportedyesterday. The government also aims toratify an international treaty on onlinecrimes. The US called on Japan to takemore action after Mitsubishi Heavy,which works closely with Boeing, said inSeptember network information such asIP addresses may have been leaked.

China fights back over yuanChina's official news agency yesterdayderided US lawmakers efforts to pres-sure Beijing over its currency policy as

expedient and shallow, saying theywere resorting to an old habit of deflect-ing blame on China. Xinhua said US criti-cism tended to come when the USeconomy is slow or an election looming.The easyJet founder is thinking big in his plans to launch new airline Pictures:REUTERS

EASYJETs founder Sir Stelios Haji-Iaonnou is considering launching atransatlantic airline which would seehim go head to head with BritishAirways and Virgin Atlantic.

The new airline branded Fastjet isunlikely to directly compete witheasyJet, which operates flights mainlyin Europe, according to reports thisweekend.

A source close to the company toldCity A.Mthat Sir Stelios was keepinghis options open and considering anumber of routes.

It was revealed last week that Sir

Stelios had written to easyJet saying heplans to launch a rival airline calledFastjet and accusing the managementof orchestrating a smear campaignagainst him.

Sir Stelios alleged that easyJetbreached the terms of a comfort let-ter dated October last year makingit void, a claim which easyJet said itemphatically rejects.

The letter which prevents himfrom setting up a rival airline includ-ed a mutual respect clause that pre- vents Sir Stelios and easyJet fromspeaking negatively of each other.

EasyJet vowed to take necessaryaction if Fastjet infringes on therights of the airline and its investors.

A two-year row over the licensing ofthe brand was resolved last year, wheneasyJet increased the annual royalty itpaid to easyGroup.

Under the agreement, easyJet said

Sir Stelios agreed not to use any deriva-tion of his name to brand any otherairline within Europe for five years.

A spokesperson for Sir Steliosdeclined to comment last night.

Sir Stelios Fastjetmay compete on

Transatlantic routeBYKASMIRA JEFFORD

AVIATION

ANALYSIS l BP PLC

p

26 Sept 27 Sept 28 Sept 29 Sept 30 Sept

410

395

405

400

390

385

388.5030 Sept

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FINANCIER Nat Rothschild has madea 120m windfall following the com-pletion of the reverse takeover ofIndonesian coal mines in his invest-ment vehicle Vallar.

Rothschild and three partners,including former Anglo-Americanexecutive James Campbell, invested100m into Vallar last year, and put20m into founder shares, whichentitled them to a bigger stake oncethe vehicle made its first acquisition.

In November last year Vallarbought stakes in Berau Coal Energy,Indonesias fifth-largest coal produc-er and Bumi Resources, in a $3bncash and share transaction.

The company, renamed Bumi Plc,revealed the issue of 16m new shares

to the founders after the marketclosed on Friday.

It is understood that Rothschildinvested 86 per cent of the original20m, entitling him to about 120mof the payout, while Campbell, whoholds 10 per cent of the foundersshares, received 13.8m.

Bumi, which is 55 per cent ownedby Indonesias powerful Bakrie fami-ly, part of Indonesias ruling coali-tion, closed at 863p on Friday,valuing the company at 1.5bn.

Rothschild toland 120mBumi windfall

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EQUITY trading platform Chi-XEurope today launches its ownEurope-wide stock index series linkedto its daily trading prices as it seeks tocapitalise on its growing market shareand compete with providers such asFTSE and EuroStoxx.

Chi-X, Europes biggest equitiesplatform by volume, has created twopan-Europe and two eurozone indices

of the biggest and most liquid stocksin those regions, with Russell Indexes.The Chi-X Russell Index series, or

Cheris for short, are designed to openup valuable new trading avenues forChi-X, allowing it to offer clients hedg-ing options such as derivatives andfutures contracts linked to them.

They will also give it access to newrevenues from selling its market data.

Chi-X said the indices use all itsown trading prices rather than thecollated prices of different national

exchanges to achieve unprecedent-ed consistency of results.We believe our index series can

bring a new dynamic to the marketand will be a force for improving uponthe status quo, chief executiveAlasdair Haynes said.

The biggest, Cheri PanEurope, has216 constituents from 14 countries infive currencies and a 60-strong subset,the PanEurope 60. The CheriEurozone includes 130 stocks fromten countries with a 40-stock subset.

Chi-X launches index seriesto rival FTSE and EuroStoxxBYALISON LOCK

CAPITAL MARKETS

News14 CITYA.M. 3 OCTOBER 2011

Nat Rothschild is in line for a 120m pay-out after putting in 17m Picture: REX

Investors can stop being cautious nowSO far investors seem to have been wary of Bumi. Its complexstructure and ongoing acquisi-tion wrangles have meant manyare reluctant to follow theRothschild blank cheque ven-ture, but its unlikely to stay thatway for long.

First-half results in mid-Augustsaw underlying profits of $54m(32m) amid a bullish outlook onthermal coal prices, which thecompany says should remainstrong over the short and medi-um term on higher demand from

Asia and Europe.

Bumi has a unique exposure tothe Indonesian coal market thelargest in the world and aninvestor day last week shouldhave gone some way to allayfears. If prices continue to rise,and once it completes the acqui-sition of a majority stake in PTBumi Resources Minerals thatsbeen making things look compli-cated, then we expect its follow-ing to increase.

BOTTOMLINEAnalysis by Elizabeth Fournier

ANALYSIS l Bumi PLC

p

26 Sept 27 Sept 28 Sept 29 Sept 30 Sept

900

870

890

880

860

850

863.0030 Sept

8/4/2019 Cityam 2011-10-03

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THE QATARI sovereign wealth fund isinvesting $775m (497m) inEuropean Goldfields, the London-list-ed company behind one of the biggest gold-mining projects inGreece, in a move that marks a majorboost for the debt-laden country.

Qatar Holding, the investmentarm of the Qatar InvestmentAuthority which also owns Harrods, will provide a $600m loan facilitythat will allow European Goldfields

to push ahead with production at itsthree key mines.

In July, Greece granted EuropeanGoldfields a long-awaited permitthat allows it to mine for gold in thenorth of the country, a move set toturn the London-based firm into theEuropean Unions largest primarygold producer.

The deal was announced afterQatars Emir Sheikh Hamad binKhalifa al-Thani met Prime MinisterGeorge Papandreou in Athens thisweekend.

Qatars investments show trust inthe Greek economy, Papandreoutold a news conference after the

meeting.The first gold is expected next year

and the project will bring more than1,500 jobs in the north-east of thecountry.

Under the agreement, EuropeanGoldfields shareholders will also beoffered a further $150m of loannotes, with the rights for Qatar toeventually take up 20 per cent in thecompany if the loans are taken upand other options exercised.

Qatar Holding has also bought a9.9 per cent stake in EuropeanGoldfields from an existing share-

holder, the Greek building firmEllaktor.

The deal marks the second majorinvestment in Greece by QatarHolding in two months after the Gulfstate struck a deal in August to pro-vide funding for a merger of two ofthe recession-hit countrys largestbanks.

Ahmad Mohamed Al-Sayed, chiefexecutive of Qatar Holding, said:Our latest investment helps to fur-ther diversify our investment portfo-lio in the commodities sector, with aspecific position in gold resourcesand another long-term partnersecured for the future.

Qatar invests$1bn in Greekgold mining

EUROPES biggest defence contrac-tor BAE Systems has won a $134m(85m) deal from the US for 70M777 howitzers, potentially safe-guarding 380 British jobs.

The company said the weapons will be manufactured in Barrow-in-Furness, northern England, in a

programme to run until October2013.

Final assembly will take place inMississippi in the United States.The howitzers will be used by theUS Armys Infantry BrigadeCombat Teams.

BAE Systems announced lastweek that 2,942 jobs would be lostdue to smaller global defencebudgets hitting orders for its fight-er jets.

BAE yesterday declined to com-ment on the media speculation.

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MINING

Qatar Holdings chiefexecutive Ahmad al-Sayed said the dealwould diversify itsinvestment portfolio

Picture: REUTERS

BYHARRY BANKS

MINING

News 15CITYA.M. 3 OCTOBER 2011

Liberum Capital was appointed nomi-nated adviser to European Goldfieldswhen the gold miner listed on thealternative investment market (Aim)in 2004, with Michael Rawlinson lead-ing the team.

Rawlinson, a well-known name inmining circles, began his career withthe now-defunct merchant bankFlemings, before joining Cazenoveafter its merger with JP Morgan,where he rose through the ranks andwas made partner.

He worked on the initial public

offerings of a number of naturalresources companies including Billiton,Xstrata, Vedanta and AngloAmerican.

Rawlinson also advised Anglo-Swiss miner Xstrata on its $18bnacquisition and $12bn financing oftheir acquisition of Falconbridge, theToronto-based nickel and copper com-pany in 2006.

More recently Rawlinsons expertisein the sector ensured that Liberumwas granted a role in advisingGlencore on its giant IPO. Rawlinsonsits on the board of Liberum andheads the boutique investment banksmining, resources and energy division.

Lazard & Co.s metals and miningteam was appointed as financialadvisers to European Goldfields on itsdeal with Qatari Holding.

MEET THE ADVISERS

MICHAEL

RAWLINSON

LIBERUM

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TESCO reports it half yearly results on Wednesday with analysts predictinginternational sales offsetting sluggishfigure for the UK.

The grocer, which has slashed theprices on thousands of lines in a bidto trigger sales rises, will also be eye-ing second quarter results from rivalSainsburys, which is reporting onthe same day.

New Tesco chief executive PhilipClarke has been putting his stamp onthe company, with a shake-up of prod-uct ranges as well as pulling the busi-ness out of Japan.

The 500m product price reduc-tion plan is being seen a bold move tosteal a march on other supermarketsin the so-called Big Four, particular-ly Asda which has its own price guar-antees.

Keith Bowman of HargreavesLansdown said: Coming results areexpected to see international salesremaining strong, whilst same storeUK sales are forecast to make furthermodest recovery. Prior to the

announcement, analyst opinion cur-rently denotes a buy.

Meanwhile Sainsburys is pinningits hopes on its emphasis on helpingfamilies to budget for their shop.

Its first quarter update saw like-for-like sales excluding fuel, but unlike

Tesco still including VAT, gaining by1.9 per cent.

Bowman said: The coming updateis expected to see a similar like-for-like performance reported, aided byfuel price campaigns.

Nonetheless, worries over profitmargins remain, with analyst opin-ion currently denoting a weak hold.

Other corporate announcementsexpected this week include updatesfrom plumbing group Wolseley,retailer Halfords and recruitment

company Hays.Hays, like many other recruiters

has been relying on internationalgrowth, particularly in Asia, as theUK economic climate remains rela-tively weak.

Tesco and Sainsburys inbattle to step up salesBY JOHN DUNNE

RETAIL

News16 CITYA.M. 3 OCTOBER 2011

BROOKLYN BRIDGE BLOCKED BY PROTESTS

POLICE squared off against protesters on the Brooklyn Bridge during an Occupy Wall Streetmarch in New York over the weekend. More than 700 anti-Wall Street protesters were arrest-ed for blocking traffic lanes and attempting an unauthorised march across the New Yorklandmark. Picture: REUTERS

MORE NEWSONLINE

www.cityam.com

Tesco chief executive Philip Clarke Sainsburys boss Justin King

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News18 CITYA.M. 3 OCTOBER 2011

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HEADHUNTERS have been called into find a new chairman for theEurasian Natural ResourcesCompany (ENRC), despite confirm-ing the incumbent JohannesSittard in the role in its corporategovernance review last Wednesday.

The FTSE 100 Kazakstan miningcompany last week said it wasfully supportive of the board-level reshuffle that kept Sittardat the helm as chairman, withFelix Vulis continuing as chiefexecutive after agreeing to with-draw his resignation.

But headhunter Korn Ferry has

suggested about two dozen namesto replace Sittard, according to

reports, with the list understood toinclude Brian Gilbertson, the for-mer chief executive of BHP Billiton.

Separately, Glencores chief exec-utive Ivan Glasenberg is believed tohave nominated mining veteranTerence Wilkinson, the non-execu-tive chairman of Glencore sub-sidiary Century Aluminium whojoined ENRC last week as an inde-pendent non-executive director.

Sources have suggested Sittardcould be gone by the end of theyear.

ENRC launched its CorporateGovernance Review in June, follow-ing long-running tensions betweenthe groups founder shareholdersand board members that culminat-

ed in Sir Richard Sykes, KennethOlisa and two other directors being

voted off the board with immedi-ate effect earlier that month.

Last weeks streamlined board of11 directors was designed to endthe turmoil at the FTSE 100 firm, whose shares have underperformed the market by almost 20per cent since the start of the year.

Announcing the conclusion ofthe review, ENRC said: Thereview set out to establish a board structure to best supportthe company through the nextphase of its growth and includedextensive research of stakeholderopinion. The review concludedthat the group will be best servedwith Dr Johannes Sittard remain-ing as chairman.

ENRC was unavailable for com-ment.

Kazak miner plots

to oust chairmanBYHARRIET DENNYS

MINING

Asian buyersshow thirst forexpensive wine

PLUNGING global markets and deep-ening fears of another world recessionfailed to dampen Asian buyers thirstfor vintage wines at Sothebys Octoberwine auction in Hong Kong. The two-day event held from 1-2 October putrare Imperials of Chateau Lafite,Latour and Cheval Blanc andJeroboams of Mouton and Haut Brionunder the hammer, as well as a selec-tion of Lafite from the Rothschilds pri-vate cellars. The sale raked in $12.7m(8.15m) in total.

New York-based Sothebys said itsfirst day sale, the eighth part of thelong-running Classic Cellar of a Great American Collector, sold all bottles,fetching a total of $3.5m, just underSothebys highest pre-auction estimateof $4m. One of the auction highlights was the sale of 12 bottles of 1990Chateau Petrus at $43,436.

The second day of the auction raised$9.2m, including The Ultimate Ninefrom The Bordeaux WinebankCollection, with the auction led by 12 bottles of 1988 Domaine de laRomane Conti for $116,346.

BYHARRY BANKS

CONSUMER

NEWS | IN BRIEF

Rail fares wipe benefit of commutingThe projected eight per cent rise in rail faresnext year looks set to tip the balance of afford-ability against young professional families andfirst time city buyers seeking to move out of

London. Research from home finders CountyHomesearch found the combined cost of travelseason tickets and mortgage repayments forhomeowners in commuter towns is nowalmost equal to some areas of London.

Gazprom weighing new Turkey dealsRussia's Gazprom is mulling new deals inTurkey after it received notification fromTurkish state pipeline company Botas that ithad decided to end a contract to buy 6 billion

cubic metres (bcm) of gas annually, aGazprom source said yesterday. Botas decid-ed to end the contract to receive gas via theso-called western line due to a pricing dis-agreement.

A case of 1990 Chateau Petrus sold for $43,436 in Hong Kong at the weekend

Traders need to insure against the downside

EXCUSES, excuses followed bymore excuses. When is the broader asset managementindustry going to put its hands

up and say; We were wrong, or Im

going to fall on my sword, sell my fivehouses on the Wentworth Estate anddistribute the proceeds amongst thosefoolhardy enough to believe I couldmake them money? The answer of

course is never.Weve just had a dreadful quarterfor stocks and the long equity brigadewill be putting on their tin hats wait-ing for the redemptions.

In this very column a month or soago I bemoaned a whole raft of excus-es touted for underperformance.

One of the oldest excuses in thebook which is going round again isabout mandate.

If you look at our mandate, they

say, we arent actually allowed tohedge our long portfolio.

We have to hold a minimum expo-sure in stocks, they say, and theinvestors get very worried whenever

we start talking about protection,overlays and options.Hmm, are these managers sure that

its the investors who are worriedabout overlays? Or is it the fact thatafter all these years of hugely volatilestock markets the broader asset man-agement industry still hasnt both-ered to learn what an option is?

Lets be clear here. No-one is talkingabout adding complicated OTC prod-ucts to a portfolio. What I am suggest-

ing is really basic go and open theDerivative Book for Idiots on page one,read what a long put is. Turn to pagetwo to learn how a long put added to along underlying stock portfolio cre-

ates a hedged downside with only aslightly diminished upside. Then closethe book.

Then the asset manager has to findout which exchange offers a put onthe index or stocks that he or she ismost exposed to and wait for the rallyto buy some protection. That last bit isperhaps the most challenging.

You see people only talk about pro-tection when the VIX, or whatever theEuropean at-the-money volatility

equivalent measure is, is trading skyhigh and accompanying plummetingmarkets.

This is where, I suggest, the prob-lems lie. Downside protection isnt

sexy. In fact for many European regu-lators its downright heresy to want toown downside products.

Until managers gain a little bitmore knowledge about listed prod-ucts available and perhaps are willingto give up on a minimal amount ofupside gains when the times are good,then we are doomed to repeat thesame old mistakes and come up withthe same old tired excuses.

Steve Sedgwick is a CNBC anchor

CNBC COMMENT

STEVE SEDGWICK

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London 2012 TIME TO GET READY

Technology can increase flexibility during GamesThe Transport for London and London 2012 Travel Advicefor Business team answers your Olympic readiness questions

Q.OUR EMPLOYEES RELY HEAVILYON FACE-TO-FACE MEETINGS INOUR OFFICE . HOW CAN WE MAN-

AGE THIS WITHOUT LOSING BUSINESS?

A.During the Olympic andParalympic Games, the trans-port network will be much

busier than normal. This will have abig impact on employees and clients,particularly when they are travellingto and from work. Businesses thathave a lot of meetings should startplanning now to minimise disruptionand ensure their business continuesto run smoothly in the run up, andduring, the Games.

It is essential that you understandyour employees travel behaviour first, before thinking about solutions.Complete a free survey to understandhow your employees currently travel, via: www.london2012.com/traveladviceforbusiness.

You can then start thinking aboutsolutions. As a business that conductsa lot of meetings, there are a variety ofways to manage this without losingbusiness. If meetings are essential, any visitors or employees should beencouraged to avoid travelling during

spectator peak times and should thinkabout alternative ways to travel towork, such as by bike, bus or on foot. Ifmeetings are not essential and can berearranged, think about flexible andremote working, as this is a viableoption for many organisations and will allow employees to reduce non-

essential staff travel during theGames.Another option is to conduct meet-

ings via web or audio conferencing,which is one of the most convenient ways for employees to stay in touchwith colleagues while working fromhome. Audio conferencing allows youto set up a call whenever you need onewith one or more people in differentlocations. Web conferencing works bysending out a meeting link to partici-pants. Once they click on the link and join a session you can transmit any-thing from your PC screen to them.Recent research by BT shows that withthe right flexible working environ-ment, employees can be at least 20 percent more productive, so it is worthconsidering this solution for yourbusiness.

Businesses of all sizes are imple-menting home working technology to

provide employees with the flexibilitythey require during the Games.Baddeley Brother is a family run busi-ness that manufactures stationery.With 25 staff based in Hackney, thebusiness is planning to benefit fromthe Games and is currently workingwith its workforce to ensure the busi-

ness is prepared well ahead of nextsummer. While half of its employeesmanage machinery and are thereforerequired on-site, other employees areable to work remotely. The company iscurrently implementing home work-ing capabilities for its employees whoare able to work from home.

Using technology and decidingwhether meetings are essential dur-ing the Games will provide employeesand customers with the flexibilitythey require during the Games andbeyond. Businesses should work withtheir employees and clients as early aspossible, as their journeys to and fromwork will be affected.

If you are in an affected area and requireadditional support, free workshops areavailable to small and medium businesseswith less than 200 employees in one location.To register your interest email,keeponrunning@London2012.com.

Act early to adaptto the Olympics

Picture: REX

QA&

News20 CITYA.M. 3 OCTOBER 2011

SINKING demand from a cash-strapped population is set to sendhouse prices tumbling in the comingmonths, according to the latest surveyfrom Hometrack, released today.

The number of prospective house-buyers fell in August and September,while supply has outstripped demandso far this year.

Continuing economic uncertaintyboth at home and in the Eurozone islikely to dent consumer confidence

further, said Hometracks RichardDonnell. This can only result indemand slipping further over the finalmonths of the year. As the gapbetween supply and demand widens,we are likely to see an acceleration inthe level of price falls as we headtowards the end of the year, he said.

The survey has found house pricesfalling for 15 consecutive monthsacross the UK. London has bucked thetrend, however. It has been the rela-tive strength of the London market

where growth has averaged +0.2 percent each month that has supportedthe headline rate of growth this year,Donnell added.

Overall prices fell by 0.1 per cent lastmonth, the survey found, and weredown across 25 per cent of the coun-try. There was a 2.5 per cent dip in thenumber of prospective buyers register-ing with estate agents. In August,demand slipped by 1.2 per cent.

Houses in London and the southeast came the closest to matchingtheir asking prices than in any otherregion of the UK, the survey said, with

both regions on course for furtherprice increases.

Final prices in the capital are over 94per cent of the level of asking prices,with properties in the rest of the southeast fetching around 93.5 per cent oftheir asking prices.

At the other end of the scale, housesin the north west and north east areselling for less than 92 per cent of theirasking prices. Along with Wales, thetwo regions are set for further pricedepreciation, Hometrack said.

House pricesto be hit byslow demand MANUFACTURERS will today set out ashopping list of important waysthat the government can avoid sti-fling the industry with red tape.

The coalition must stand upagainst regulations emanating fromBrussels, while modifying its ownplans for fresh regulations, the manu-facturers group EEF is expected to say.

The new Agency Workers Directive will increase the cost of employingagency workers by around 20 per centto one third, the EEF has calculated.

Having just seen the Agency Workers Directive impose a signifi-cant increase on costs, industry willbe alarmed at a range of other poten-tial measures in the pipeline fromEurope and from our own govern-ment, said the EEFs Steve Radley.

This is precisely the time we need

to be encouraging job creation as partof the growth agenda and adding yetmore costs is only going to make thismore difficult.

The EEFs call coincides with thenext stage of the governments RedTape Challenge, which asks firms tonominate which pieces of regulationcould be scrapped or amended.

Yet the group are concerned bynew pan-European regulations, suchas additional rules relating to work-ing time and pregnant workers.

Manufacturerscall for actionover regulation

Supply has outweighed demand in the housing market Picture: REUTERS

BY JULIAN HARRIS

HOUSING

UK ECONOMY

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AXA Real EstateRiccardo Dallolio has been appointed

as European Head of Transactions atAxa Real Estate Investment Managers.

Dallolio joins after six years at GroveInternational Partners, where he was apartner responsible for the origination,execution and management of realestate transactions.

PrestburyPrestbury Investments LLP, the man-ager of Max Property Group, hasappointed Ben Walford to the part-nership. Walford, who joins partnersNick Leslau, Mike Brown, Tim Evansand Sandy Gumm, has worked atPrestbury for nine years as a seniorasset manager.

Marex SpectronKevin Maloney has been appointed aschief operating officer of MarexSpectron North America. Maloney pre-viously worked at UBS, most recently asmanaging director, chief operating offi-

cer and chief administrative officer ofExchange Traded Derivatives and PrimeServices business units.

The VAT ConsultancyThe independent VAT practice has hiredSarah Franklin, formerly a senior man-ager in the Core VAT team at Ernst &Young, as a senior VAT manager.

John LewisMarisa Cassoni has announced herretirement from full-time executiveresponsibilities at the John LewisPartnership, and plans to step down asthe Partnerships finance director after

completing the 2011/12 reporting cycle.

RufferThe independent investment managerhas hired Dave Francis as chief operat-ing officer, responsible for operations, ITand business projects. Francis joins after20 years at Gartmore, where he wasmost recently head of operations.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

Baker & McKenzieGavin Bushell, formerly of Freshfields BruckhausDeringer, has been appointed as a partner in thelaw firms European & Competition Law Practice,based in Brussels. Bushell specialises in EU com-

petition and state aid law, Euratom Treaty law,aviation law and regulation, and litigation beforethe European Courts in Luxembourg. He wasrecently involved in the merger cases ofRyanair/Aer Lingus and Rio Tinto/Alcan.

+44 (0)20 7557 7245morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to citymoves@cityam.com SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

WALL STREET WEEK AHEAD

Fourth quarter set for an inauspicious beginning

EUROPEAN stocks have just suf-fered their worst quarter innine years, but anyone thinkingthat this might present us with

an opportunity of restored calm torepair portfolios, or that some bar-

gain-hunters would be tempted in tothe market will be disappointed; thefourth quarter is expected to openwith another day of dramatic falls.

GFT quotes two-way prices onstock indices around the clock, even when the underlying markets areclosed.

FTSE SET TO OPEN LOWER

The FTSE 100 index is called to opendown 2 per cent around 100 pointsat 5,031. Germanys DAX 30 index is

expected to open down 118 points at5,384, and the French CAC 40 is fore-cast to open lower by 60 points at2,921.

Eurozone finance ministers meetin Luxembourg today to analyse themeasures proposed by Greece to getits econmic adjustment programback on course, but dont expect anydecision just yet on whether the next

loan tranche will be granted.

ECB INTEREST RATE DECISION DUE

The key euro event this week will bethe ECB interest rate decision onThursday, with some analysts predict-ing we could see a cut in rates of asmuch as 50 basis points or 1 per cent.

However last weeks surprise jumpin Eurozone consumer inflation to 3per cent , its highest level in 3 years,will surely have quashed the chancesfor any such move this month at

least.BANK OF ENGLAND MEETING

Just as interesting for traders is theBank of Englands meeting this week,and following the last meetingseveral commentators are forecastinga second round of quantitative eas-ing QE2 could be announced

today, in fact in a Reuters poll lastweek 40 per cent of those questionedbelieve so, although the majority aresuggesting it will come next month.

QE2 FORECAST OF 50-100BN

Nevertheless, its a question of whennot if, and how much: the currentforecast range is for around 50bn to

100bn to be announced.Martin Slaney is director of global dealingoperations at GFT.

MARTINONTHE MARKETS

INVESTORS are worried US earn-ings growth may finally fall backto earth as turmoil in Europe andsigns of a less robust Chinese

economy hurt foreign support. The Eurozones debt crisis and

weakness in China have fuelled

investor concern that the global econ-omy could tip back into recession,

possibly dampening US earningsgrowth at a time when the US econo-my is still struggling to gain ground.

Overseas sales have helped US com-panies beat earnings expectations inthe last couple of years, with foreignsales totalling 30 per cent on average

for Standard & Poors 500 companies.If the euro region is crumbling,

thats going to have a tremendousnegative impact on companies likeMcDonalds, said Todd Schoenberger,managing director at LandColtTrading in Wilmington, Delaware.

Im not expecting a big earningsquarter, he said. Weve been getting

the clues already.The most recent company to trou-

ble investors about the earnings out-look is Ingersoll Rand, whose sharestumbled 12.1 per cent to $28.09 onFriday after the industrial conglomer-ate cut its third-quarter and full-yearearnings forecast to below marketestimates. Investor pessimism is

already high.The S&P 500 finished the quarter

with its worst performance since2008, and many strategists haveslashed their forecasts for year-end.

The S&P 500 dropped 14.3 per centin the third quarter, losing about $1.7trillion in market capitalisation.

A disappointing third-quarter earn-

ings period could only trigger morelosses, analysts said.

MARTIN SLANEY

4 Jul 22 Jul 11 Aug 21 Sep1 Sep

6,200

5,400

5,000

5,800

ANALYSIS l FTSE

5,128.4830 Sept

4 Jul 22 Jul 11 Aug 20 Sep31 Aug

7,500

6,500

5,500

ANALYSIS l DAX

5,502.0230 Sept

BEST OF THE BROKERS To appear in Best of the Brokers email your research to notes@cityam.com

ANALYSIS lH & M Hennes & Mauritz

220

210

200

190

180

4 Jul 1 Aug 1 Sept 30 Sep

SEK 206.70

30 Sept

HENNES & MAURITZJP Morgan Cazenove rates the Swedish clothing retailer as underweightwith a target price of Skr195.80 (18.29), issuing an alert as it sees grossmargin risks accelerate. The broker says H&M has entered the fourth quarterwith very high inventories, with like-for-like sales deteriorating in the firstmonth. With the implication that more price investment is to come, thisimplies gross margin risk, and the broker prefers Zara owner Inditex.

ANALYSIS lGKN PLC

240

220

200

180

4 Jul 1 Aug 1 Sept 30 Sept

p

175.9030 Sept

GKNCiti rates the auto parts and equipment group as a hold/medium risk andreduces its target price to 1.85 from 2.20. The broker presents two revi-sions to its forecasts, firstly based on a three per cent assumption for globalauto growth for 2012 earnings, and secondly to incorporate GKNs 2011