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THE CITY is today bracing itself for plannedprotests over student fees, as police said theyhad taken precautions in case the demonstra-tions turn violent.

Four thousand officers will be on duty inan attempt to prevent the 10,000-strongprotest descending into a similar frenzy of

violence to that seen last year, when demon-strators took police by surprise and attackedConservative Party headquarters.

Today members of the tent city camp out-side St Pauls are expected to join the NationalCampaign Against Fees and Cuts march,

although the route will bypass the cathedral.Police have pledged to prevent groups fromgetting close to the London Stock Exchange,the original target for Occupy LSX.

Commander Simon Pountain, who is incharge of the Met Police operation, said that

baton rounds non-lethal rubber bullets would be used only in an emergency, such asto rescue officers from attack.

If theyre stuck and their lives are at risk,then I would use that to protect them.

After moving from Bloomsbury to TheStrand protesters are due to march throughFleet Street, Holborn and Newgate Street

before a rally, due to last an hour, begins atLondon Wall at 3.30pm. Fixed and temporary

road closures will be in use from 9am.Meanwhile Prime Minister David Cameron

yesterday poured scorn on the St Pauls groupand rejected claims its appearance is part ofthe Big Society.

Protest is, to me, a separate issue. It is cer-tainly a right that people have, but I have gotthis rather quaint view that you shouldnt beable to erect tents all over the place.

I think protesting is something you, onthe whole, should do on two feet rather thanlying down in some cases in a fairly coma-tose state.

BUSINESS WITH PERSONALITYwww.cityam.comIssue 1,507 Wednesday 9 November 2011 FREE

FTSE 100 5,567.34 +56.52 DOW 12,170.26 +101.87 NASDAQ 2,727.49 +32.24 /$ 1.61 unc /1.16 -0.01 /$ 1.38 unc

EMBATTLED Italian Prime Minister SilvioBerlusconi will step down once new austeri-

ty measures are passed, President GiorgioNapolitano announced last night.

The government successfully passed a usu-ally routine finance bill yesterday, but only

because the opposition Democratic Partyabstained. Berlusconi lost his majority in theprocess, triggering calls for his departure.

The euro bounced back on news of theannouncement, touching $1.384, a spike onthe days trading of around 0.5 per cent.

Markets have previously reactedfavourably to rumours of Berlusconis resig-nation, as he has failed to reform Italys pub-lic finances and slow economy.

Austerity measures could be passed assoon as mid-November, at which point he

would be expected to resign, although thelegislative process so far has been slow andunpredictable. Continued uncertainty overBerlusconis ability to secure these all-impor-tant reforms has driven investors away fromItaly.

Earlier in the day yields on 10-year bondspeaked at 6.77 per cent, creeping perilouslyclose to the highly significant seven per centmark, beyond which Portugal and Ireland

were forced to seek bailouts as they couldnot support their debts.

Five-year credit default swaps on Italiandebt rose by 1.62 per cent, reflectingincreased perceived risk of a default.

However, analysts worry that Berlusconisdeparture may not bring any more certaintythan his shaky premiership.

It might lift sentiment for a while, but itis not obvious his successors would do any

better, said Dario Perkins, an economist atLombard Street Research.

Italian governments are always fragileand fractious and the economys problemsare deep and structural. Significant partsneed a complete overhaul and this would bepolitically difficult even for the strongest

BERLUSCONI TOQUIT AT LASTBY TIM WALLACE

EUROZONE

Italian government which history suggestsis virtually an oxymoron.

Although negotiations could take place between existing parliamentary parties toform a government, Berlusconi told Italian

TV station Channel 5 that he wants earlyelections to be held.

The political chaos was again mirrored

across the Ionian sea, as an internal row inconservative ranks hindered a deal to form aGreek coalition led by Lucas Papademos, theformer European Central Bank vice presi-dent. Bickering continues to prevent a quickresolution in Greece, where the EU wantsthe latest bailout deal pushed through

before fresh elections. ALLISTER HEATH: P2

CITY BRACED FOR DAY OF RAGEBY PETER EDWARDSPOLITICS

Berlusconi has lost hisgrip on power at lastPicture: REUTERS

Certified Distribution

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WHATSWRONGWITHJAPANPLC?THE FORUMPAGE 26

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News2 CITYA.M. 9 NOVEMBER 2011

Prices tumbleat UKs storesPRICE wars between supermarketsare driving down the cost of food andother items, as stores fight for theattention of increasingly squeezedshoppers.

Food was half a per cent cheaperlast month than in September, theBritish Retail Consortium (BRC)revealed this morning.

Tesco has been pushing its BigPrice Drop, while Asdas PriceGuarantee, Sainsburys BrandMatch and Morrisons PriceCrunch are all marketing aggressivediscounts.

Yet the squeeze on consumers is sotight that budget stores are benefit-ing the most, according to separateresearch from Kantar Worldpanel.

Aldi grew 18.8 per cent in the 12

weeks to the end of October, com-pared to the same time last year.Iceland was up 11.6 per cent and Lidl8.9 per cent, the figures showed.

Heavy discounting promotions atlarger supermarkets are largely can-celling each other out, according toKantar.

Performances from the big fourshow only marginal differences thisperiod, with no outright winner,said Kantars director Edward Garner.

Asda (5.1 per cent) and Morrisons(5.5 per cent) narrowly exceededgrowth of 4.6 per cent in the wholegrocery market, while Tesco andSainsburys both lagged a littlebehind, with takings up 4.1 per cent.

Falling food prices pulled overallshop prices down by 0.3 per cent fromSeptember to October, the BRC saidthis morning.

Shop price inflation compared to

BY JULIAN HARRIS

RETAIL

Berlusconis exit wont end the crisis

ONE by one, they fall: the Eurozonespoisonous, tarantula-like bite has justclaimed its second major politicalscalp in under a week. Following daysof intense pressure by global bondinvestors, who had lost confidence inhis ability to turn around the Italianeconomy, Silvio Berlusconi was finallyforced to announce that he would bestanding down as Italys prime minis-ter. The markets joy may yet be short-lived, however: the divorce has yet toactually happen and could be verymessy. But this does seem to be theend of the line for Berlusconi, a billion-

aire media magnate who singularlyfailed to reform his nation and thuscondemned it to years of stagnation.He will not be missed.

Berlusconis ridiculous shenanigans

with young women provided lots ofgood copy (and pictures) for us journal-ists; but it sent out a terrible messageat a time when economic crisis andpossibly catastrophe required a clear-headed and determined leadership. The only thing that can be said inBerlusconis defence is that he facedextreme pressure from vested interestsresistant to change in 2002, MarcoBiagi, an academic adviser toBerlusconi, was murdered by members of the Leninist group New RedBrigades because he supported freeingup the labour market. But a betterleader would have soldiered on anddelivered the change he promised;instead he put hedonism and politicalsurvival ahead of national interest.

The problem is that nobody knows what will happen next. There is noguarantee that another government

would be any better than Berlusconis.Yields on Italian bonds wont collapseany time soon and could go on rising.The same is true of Greece. Since the beginning of last year, $63.5bn of

deposits have been pulled out of Greekbanks and moved abroad or under peo-ples mattresses. A fifth to a third ofthis capital flight a giant, inexorablebank run took place in the last twomonths alone. It now seems as if for-mer European Central Bank vice presi-dent Lucas Papademos will be namedas head of an interim Greek govern-ment; but he will most likely be almostas ineffective as his predecessor.

On balance, yesterday was a bad dayfor global stability, world prosperityand the prospects for peace. If any-thing, Berlusconis welcome demisewas merely a sideshow to the confir-mation by the United Nations that Iranis working to obtain nuclear arms. Itwas the first time the UNs agency the International Atomic Energy Agency (IAEA) went that far; itsreport is as devastating as it is worry-

ing. It contains a huge amount ofdetail, including a 13-page annexdescribing in great detail years ofIranian research with explosives andcomputer-based simulations of the

kind that clearly suggests work onnuclear weapons. The report says thatIran has been trying to buy high speedelectronic switches and spark gaps fordetonators, neutron sources, radiationdetection and measuring equipmentand has conducted high-scale explo-sive experiments. It has produced4,922 kg of low-enriched uraniumsince 2007, which enriched furtherwould be enough for several bombs.

This is the last thing anybody needs:the Eurozone is in existential crisis;Iran is trying to build nuclear weaponsthat could trigger a disastrous war inthe Middle East and beyond. Its not all bad the US economy is improving,many companies are delivering greatprofits but only a fool would denythe world is in a very precarious place.

[email protected] me on Twitter: @allisterheath

the same time the previous yearcame in at 2.1 per cent last month --its lowest rate since last December.

The official consumer price index(CPI) measure of inflation hit 5.2 percent in September. Its clear infla-tion is not coming from shops, com-mented the BRC director generalStephen Robertson. Rising utility,fuel and insurance bills are the bigpressures on household budgets.

Mike Watkins of researchersNielsen, which helped to compile thedata, said: Christmas shopping isnow underway and shoppers are hav-

ing to make their spending money gofurther this year, so its encouragingto see shop price inflation falling thismonth.

Retailers in general are offeringmore discounts than last year andfood retailers in particular are look-ing to encourage loyalty of shoppersover the next eight weeks.

Non-food prices also fell fromSeptember to October, down 0.1 percent. Annualised inflation of non-food items sold in shops tumbled to0.8 per cent in October, compared to1.3 per cent the previous month.

NEWS | IN BRIEF

Treasury to close VAT loopholeHM Treasury announced yesterday thata loophole which allows retailers basedin the Channel Islands to avoid payingVAT on good worth 15 or less. From 1April next year, retailers sending goodsfrom Guernsey and Jersey will no longerbe exempted from the levy, after the

government said the loophole was cost-ing 140m a year. The change in therules is likely to hit companies sellinglow cost goods such as CDs and DVDs,including Play.com and The Hut Group,which have benefitted from the lowvalue consignment relief.

US budget boss positive on debtUS President Barack Obamas budgetchief said yesterday he saw some signsthat US lawmakers could strike a deficitreduction deal by a 23 November deadlinedespite no visible indications of progress intalks. White House budget director JackLew said that Republicans had begun toshow some flexibility on taxes, an issuethat has pitted them against Democrats,and seemed serious about avoiding anoth-er divisive budget showdown. It certainlyseems ... that theres a desire to get thingsdone, he said.

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

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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 Owen

Head of Distribution Nick Owen

Shops have been slashing price tags, research shows Picture: REUTERS

GRAFF PLANS $1BN HONG KONG IPOGraff Diamonds, retailer of some ofthe worlds most expensive jewellery,is planning a Hong Kong initial pub-lic offering that could raise $1bn andvalue the companys equity at about$5bn. The London-based company,known for high-end jewellery itemssuch as 100-carat diamond tiaras, israising capital to expand in Asia.

OSBORNE PUSHES FOR TOLL ON A14George Osborne and Vince Cable arepushing for a new road toll scheme tounblock a key business artery inEngland as part of the coalitionsefforts to boost Britains flaggingeconomy. The Ministers, backed by No10, are keen to bring the private sec-tor on board to widen the heavily con-gested A14, which is used to ferrycargo from the Midlands manufac-

turing base to the Felixstowe docks inSuffolk.

HAIRCUT LEAVES BANKS EXPOSEDThe restructuring of Greek sovereign

debt risks leaving banks moreexposed to future financial crises ofother countries, according to theman who helped to orchestrate theso-called private sector involvementin the rescue plan for Athens. Banksand other bondholders that volun-teer for a 50 per cent cut in the valueof Greek sovereign debt could set aprecedent for other sovereign hair-cuts, according to Josef Ackermann,chief executive of Deutsche Bank.

UNIVERSAL REVIVES EMI TALKSUniversal Music has resumed activenegotiations with Citigroup overEMIs recorded music division,according to people close to the talks.But Universals offer remains belowthe price the US bank wants and facescompetition from rival bidders as theauction enters what could be its finalweek. Impala, an independent music

trade body, said it could ask regula-tors to intervene in any deal.

SPAIN STANDING BY TO RUN TRAINSIN BRITAINSpanish national rail company Renfehas unveiled ambitious plans to crackthe British train market by launchingbids for several franchises. Renfe alsoadmitted that it had looked at buyingits way into Britain by potentiallyoffering to acquire one of the incum-bent operators an admission thatindicates it has taken a look at Go-Ahead Group.

YOUNG IN NORTH AND LONDON LOSE INTHREAT TO BENEFITS FOR WORKSHYThe number of young people signingup for jobseekers allowance has risenby more than 100 per cent in 30 con-stituencies since the coalition cameto power. The worst-hit region is theNorth East, where the number ofyoung people signing on has risen by

43.9 per cent, followed by Londonwith a 38.5 per cent increase.

OFGEM TO PROBE RISK OF UK GASDROUGHTEnergy regulator Ofgem has beenordered to launch an investigation intowhether the UKs long-term gas supplyis safe, amid mounting worries aboutrising electricity prices and Britainsenergy security. The Government toldthe watchdog to weigh up whetherfurther action is needed to ensurethat medium- to long-term gas suppliesfor consumers remain secure.

GKN TO SELL WHEELS ARMEngineering company GKN is prepar-ing to sell its Wheels division foraround 130m. The FTSE 100 companyhas been talking to advisers about sell-ing the unit which makes wheels forhigh power tractors, fork lift trucksand wheeled excavators. It recentlyappointed boutique advisory firm

Gleacher Shacklock to work on thedeal.

GLITCHES SHOW HURDLES TOMOSCOWS FINANCIAL BIDRussias biggest equity exchange sus-pended trade for the second time intwo weeks because of a computerglitch, highlighting Moscows finan-cial growing pains. Just seven minutes before the normal opening time oftrading yesterday, the Micex StockExchange disclosed that the tradingsystem wasnt working and openingwas eventually delayed an hour.

WELLS FARGO, MUNICIPALITIES SETTLEBID-RIGGING SUITWells Fargo & Co has reached a civilsettlement with municipalities thatsued it over the way the bankingindustry held auctions for municipal bonds, though it still faces govern-ment probes. The bank said it wouldpay at least $37m to plaintiffs in the

case, disclosing the 21 October agree-ment in its quarterly filing.

WHAT THE OTHER PAPERS SAY THIS MORNING

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DIRECT regulation of shadow bankingmay be introduced to tackle the risksthat could shift there from a moreheavily supervised mainstream bank-ing sector, a global watchdog chief saidyesterday.

Mark Carney, appointed last weekby world leaders to head the FinancialStability Board, said regulating theshadow banking industry will be oneof the boards top priorities in comingmonths. Carney, also Bank of Canadagovernor, said higher capital and liq-uidity standards for mainstream

banks will create incentives to pushactivities to the shadow sector.

GEORGE Osborne yesterday slammedplans for a Europe-wide Tobin tax as abig tax on pensioners, even as theBritish government continues to sup-port a global version of the levy.

The chancellor told a stormy meet-ing of finance ministers in Brusselsthat a transaction tax applied only inEurope would cost the region 995,000jobs.

But his decision to also attack aTobin tax on the grounds that it woulddisproportionately hurt those withretirement schemes muddied the gov-ernments negotiating position,because even a global version of thelevy would hit pensioners.

I would suggest that we put to restthe idea that there is going to be someEuropean financial transaction tax,he said.

David Cameron has previously saidthe coalition supports a global tax inprinciple but yesterday Osborne saidthe prospect of it winning global back-ing was fanciful, adding: We haveto ask ourselves whether this [debate]is the best use of our time.

German finance minister Wolfgang

Schaeuble admitted there had been alively discussion but vowed to presson with the proposal.

Last night the EuropeanCommission claimed a 0.1 per centtax on most financial transactions, with a 0.01 per cent rate on deriva-tives, would generate57bn a year.

France, Germany, Spain andBelgium have spoken out in support ofthe plan while Britain, Denmark,Sweden, the Czech Republic, Bulgariaand Romania oppose it. Finland,Holland, Italy and Ireland are amongthose with doubts.

Osbornes concerns echo Dutch pen-sion group APG Algemene PensioenGroep, which last week wrote to com-missioners to say the levy would be atax on current and future retirees.

Osborne fears that a European taxwould lead to financial services com-panies leaving London and Europe forthe US and Asia. He has called for anEU vote on the tax in an attempt toflush out other sceptics.

Last week Osborne was accused ofhypocrisy after City A.M. revealed hehad expressed doubts about the tax ina private letter to bank chiefs despitepublicly saying he would support oneif it was adopted globally.

Osborne fury

over plans forEU Tobin tax

BRITAIN will avoid a recession aslong as Eurozone leaders resolve theircrisis by the spring, leading businessorganisation the Confederation ofBritish Industry (CBI) claimed today.

The Eurozone will experience amild recession over the winter whileBritains economy stagnates, accord-ing to the CBIs forecasts.

Economic growth is expected tocome in at 0.9 per cent in 2011 and 1.2per cent in 2012, down from Julys fore-casts of 1.3 per cent and 2.2 per cent.

However, as the Eurozoneeconomies are so closely linked withthe UKs, any deeper recession willlead to a corresponding dip in Britain.

Such a danger means the UK shouldbe prepared to increase IMF contribu-tions to help out, said the CBIs direc-tor general John Cridland.

CBI: Eurozone maycause UK recession

GERMANYS trade surplus shot up inSeptember as imports fell and exportsincreased.

The surplus widened from11.8bn(10.1bn) to17.4bn in the month fromAugust.

Meanwhile, Frances trade deficitincreased to 6.3bn in September,from 4.31bn in August. The customsdepartment said falling aviation saleswere the main factor in cutting exportby2.26bn in the month. However,imports also fell, declining by0.26bn.

Overall, the change may reflect

falling demand in the Eurozones sec-ond-largest economy.

Germany staysahead on tradeFSB may policeshadow banking

BY PETER EDWARDS

POLITICS

REGULATION

EUROZONE

George Osbornestruck his mostsceptical note so faron plans for atransaction tax

Picture: REUTERS

BY TIMWALLACEUK ECONOMY

News 3CITYA.M. 9 NOVEMBER 2011

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SOCIT Gnrale has scrapped its2011 dividend to bring its capital holedown by 1.2bn (1.03bn), itannounced in its third-quarter resultsyesterday.

The French lender brought its capi-tal-raising requirement down to2.1bn, in part by ditching the pay-out.It must find the cash by the middle ofnext year under Europes bank recapi-talisation scheme.

The bank also took a 333m hit onGreek debt holdings, which it has writ-ten down from a 21 per cent to a 60per cent haircut harsher than the 50per cent agreed by Eurozone leaders.

The bank also dumped 10bn inassets between July and November.

However, the size of its balancesheet increased to 1.25 trillion, a jump of 10 per cent year-to-date thatwas largely driven by an increase inthe overall value of its assets.

Chief executive Frdric Ouda said

that the priority above all was to getthe banks capital and liquidity base inorder. To that end, SocGen reduced itsliquidity requirements by40bn, par-ticularly focusing on cutting down itsdollar funding needs, an issue that hasspooked investors recently.

Overall, the banks quarterly operat-ing profit was 1.34bn, down five percent on the same period last year, withits investment bank hit by slowingactivity. The divisions revenuesdropped by 36.8 per cent to1.25bn.

Terms apply. Subject to credit check.

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SocGen sacrifices dividend tocut down capital-raising needsBY JULIET SAMUEL

BANKING


MORE NEWSONLINE

www.cityam.com

SocGen chief Frdric Ouda Pic: REUTERS

Will the Lloyds boss return to work?This week were asking members ofour readers panel whether or notthey think Antonio Horta-Osorio willreturn to work, having taken a tem-porary leave of absence due to

stress.We also want to know how likely youthink it is that Greece is ejected fromor leaves the Eurozone. Apply to jointhe panel at www.cityam.com/panel

PoliticsHome.comPoliticsHome.comIn partnershipwith

Apply to join today at www.cityam.com/panelIn association with PoliticsHome.com

ANALYSIS l Societe Generale

2 Nov 3 Nov 4 Nov 7 Nov 8 Nov

19.0

18.5

18.0

17.5

17.0

18.768 Nov

@

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LLOYDS continued to bear down on itsfunding gap in the third quarter of2011, it revealed yesterday, despiteposting a nine-month loss of 3.86bn.

Interim chief executive Tim Tookeyinsisted that it was business as usualat the beleaguered lender despite starCEO Antnio Horta-Osrios shock dis-appearance on sick leave last week dueto exhaustion.

Tookey was forced to admit thatsome of the banks targets, like achiev-ing a net interest margin of at least 2.15

per cent and a loan-to-deposit (LTD)ratio of 130 per cent by 2014 could beput off due to economic turmoil.

Its margins went backwards in thethird quarter by four basis points,dropping to 2.05 per cent due to high-er wholesale funding costs.

But investors were buoyed by theprogress on improving the banks bal-ance sheet: its current LTD ratio standsat 140 per cent a four per centdecrease in the quarter and substan-tially below Decembers 154 per cent.

Lloyds also managed to keep up itsshrinkage of non-core assets: it ditched11bn-worth in the third quarter, bringing the portfolio down to151.4bn, down 22 per cent this year.

Contrary to some analysts expecta-tions, it announced that its fundingrequirements for the rest of the yearhave been met after 5.4bn in bondissuance in the third quarter and anadditional 3bn in October.

However, half of its 281.9bn whole-sale funding will mature in the nextyear, with capital markets showing lit-tle sign of a sustained thaw.

Lloyds dumpsassets to cutfunding gap

Lloyds chief Antnio Horta-Osrio has taken a leave of absence Picture: REUTERS

BY JULIET SAMUEL

BANKING

NewsCITYA.M. 9 NOVEMBER 2011 5

ANALYSIS l Lloyds Banking Group PLC

p


31

30

29

28

28.908 Nov

ANALYST VIEWS: HOW DO YOU RATE LLOYDS?

FRANK BRADEN | S&P EQUITY RESEARCH

Non-core assets have been reduced 22 per cent year to date, but furtherreductions of the 151bn balance will prove challenging in the current environment, inour view... With Antnio Horta-Osrio out on medical leave until Christmas and inter-im Tim Tookey leaving the company in February, management successionremains a concern. We recommend a sell.

BRUCE PACKARD | SEYMOUR PIERCE

IAN GORDON | EVOLUTION SECURITIES

Antniois very highly regarded but is he really thatgood? For all thehyperbole, todays statement is hardly worse than expected third quarter netinterest margins of 2.05 per cent is (as promised two weeks ago) consistent withguidance given in August despite the headwind of sharply rising short-term wholesale funding costs... We see a clear value opportunity. Buy.

If the current weaker economic conditions persist, medium-termincome targets may be delayed to beyond 2014. There dont seem to be any mon-sters in these results and we welcome Lloyds eventual acknowledgement of reali-ty, but we would offer an alternative explanation for the rebasing of expectations:over-ambitious guidance to investors in the first half of 2010. Hold.

NEWS | IN BRIEF

Credit Suisse gives US tax namesCredit Suisse will hand over details ofwealthy Americans with hidden Swissaccounts to the Swiss government,bringing US authorities one step closerto obtaining names of alleged taxcheats. The bank said yesterday it wascomplying with a request from the

Swiss government for account informa-tion after US authorities requestedSwitzerlands help in catchingAmericans suspected of tax fraud.

Job cuts loom at Intesa SanpaoloIntesa Sanpaolo, Italys biggest retailbank, stuck to its plan to pay a dividendfor 2011 yesterday as it announceddeeper than expected job cuts that willfurther trim costs in the face of the sov-ereign debt crisis. Reporting a 29 percent quarterly fall in net income due to a593m writedown on Greek debt andtrading losses, chief executive CorradoPassera said he had reached a deal withunions for 5,000 job cuts by the end of2013, up from 3,000 cuts announced inApril. For those cuts, Intesa booked471m of restructuring charges. Staffredeployments, previously estimated at5,000, will now be reduced to 3,000.

HSBC boss: Asia may face crunchA credit crunch stemming fromEuropean banks could also hit Asia,HSBC chief executive Stuart Gulliverwarned yesterday. Speaking in HongKong, Gulliver told the Financial Timesthat policymakers must be aware of apotential slowdown in the availability ofcredit. The strong increases in creditavailability in Asia that has supporteddemand growth cannot continue indefi-nitely, Gulliver said. HSBC is due toannounce its third quarter results today.

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THE IPO machine is set to roar backinto life this month with 16 floatsdue in the US.

The 11 deals scheduled for nextweek will make it the busiest sevenday period since November 2007,according to investment advisor

Renaissance Capital.The US listings include consumer

reviews website Angies List, whichwants to raise $106m (65.81m), vehi-cle supplier Delphi Automotive, which is aiming for $554m, andChinese daily-deals website LashouGroup, which has filed terms for a$75m offering.

Last week Groupon finallylaunched its $700m flotation, afterslashing the size and valuation of the

IPO, in an offering valuing the compa-ny at $17bn, while fertiliser producer

Rentech Nitrogen and energy firmEnduro Royalty Trust also priceddeals last week.

After a two month long dry peri-od, the US deal calendar has explodedin the past two weeks as bankers tryto take advantage of a more construc-tive equity trading environment,Renaissance said.

Global market turmoil has forced

the postponement of IPOs in the US,Britain and Singapore.

IPOs set for November rebound in the US

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LARGE catastrophe losses and the col-lapse in the value of Greek sovereign

debt slashed profits at Munich Re thisyear, it said yesterday. The worlds biggest reinsurance

group made just 80m (68.7m) netprofit in the nine months toSeptember, down from almost 2bn in

the same period in 2010, despite itsrevenues from premiums rising morethan nine per cent to 34.2bn.

Third quarter profits were higher at290m, though still down 63 per cent

compared with a year earlier.Our result was certainly affected by the capital-market and currencyturbulence, chief financial officerJoerg Schneider said.

Munich Re took a 1.5bn pre-tax

loss from natural disasters earlier inthe year and another 195m loss fromHurricane Irene in the third quarter.

Munich Re had to write off933mof the value of its Greek bonds, and

cut the value of its Italian bond hold-ings by1.4bn.It instead ploughed capital into

AAA-rated bonds issued by Germany,France and the Netherlands as well asstrong states outside the Eurozone.

Munich Re profits slumpBYALISON LOCK

INSURANCE

THE UKs share of mergers andtakeovers globally has slumped to thelowest on record as just five per centof world deals now involve UK targetcompanies, data from Dealogic yester-day showed.

Dealmaking in the UK this year hasbeen worth only $116.3bn (72.6bn),14 per cent lower than in the sameperiod in 2010 and the lowest M&Avalue since 2003.

Both deal size and frequency havefallen, with average deal size down 12per cent on 2010 at $142m, the lowestsince 2004.

Failed deals such as G4S abortedattempt to buy Danish group ISS for$5.2bn earlier this month will havereduced the M&A statistics for theyear still further.

The low level of global deal sharecontinues a downward trend seensince 2008 as the UKs share hasslipped for three consecutive years,the data provider warned.

It is losing share to both the US andChina, with the Asian giant announc-ing 68 per cent more deals than theUK this year the widest gap everseen as it continues to ploughinvestment into foreign acquisitions.

The US has attracted $933.2bn ofmerger and takeover interest this yearso far, while Chinese companies saw$155.2bn of foreign interest in buyingits firms this year.

But over the past decade on aver-age, the UK still outperforms China inM&A terms it has seen almost 1.5times the number of deals in 10 yearsthan Asias biggest economy.

Among investment banks, GoldmanSachs is the leading UK adviser to M&A

deals it advised on $109.7bn of thetotal this year, Dealogic said. It is fol-lowed by JPMorgan, which advised on$70.1bn of deals and Barclays Capitalon $61.3bn.

M&A dealsat lowestsince 2003

TWO Russian miners are set to jointhe FTSE 100 next month, reignitingconcerns over corporate governanceand the composition of the index.

Roman Abramovichs steelmakinggroup Evraz and gold miner Polymetalwill both join the index if the FTSEGroup agrees at its next meeting.

Evraz, with a 4.7bn market cap,and Polymetal, at 3.5bn, are likely todisplace Investec and Inmarsat, Numisanalysts said, despite Evraz havingonly 23 per cent of its shares in thehands of minority investors.

If Polyus Gold, a third Russianminer, makes it into the FTSE 100 itcould bump Hargreaves Lansdowndown to the FTSE 250. Polyus plans tolist just 20 per cent of shares, prompt-ing a backlash from some institutions.

Some think that listing a small freefloat can be a tactic to ensure sharesare largely mopped up by passiveindex tracker funds mandated toinvest in every FTSE 100 stock, causingthe price to keep moving up as buyersoutnumber sellers.

But the companies inclusion in theindex is causing headaches for fundmanagers that see them as a risky bet.

Karina Litvak, head of governance atF&C Asset Management said in a letterto the Financial Times that the FTSE100 has progressively admitted a dis-proportionate share of extractive com-panies based in jurisdictions whererule of law is often called into ques-tion and small free floats raisefresh concerns about the rigour of thelisting process.

The fears have been echoed in a newPwC survey of the small-cap Aim mar-ket in London, which has no mini-

mum free float limit. Just 15 per centof fund managers said they thought afree float of less than 25 per cent wasappropriate, and more than half want-ed a 26 to 50 per cent free float level.

Two moreRussians toenter FTSE

GOLD miner Polymetal yesterday saidit should know the outcome of a rul-ing on buying out its Russian minori-ty shareholders by the regulator inMoscow in about 15 days time.

Polymetal, which started tradingon the London Stock Exchange on 2November after switching from a

Moscow listing, said its subsidiaryPolymetal Holding had sent off an

application to allow its remaininglocal shareholders to tender theirshares to complete its swap to the UK.

Most of its investors have swappedtheir shares for new ones in a UK-incorporated holding company toenable its UK listing, but 17 per centhave not yet done so. Polymetal needsto buy these out and will wait for theRussian Federal Service for Financial

Markets to approve a compulsory ten-der offer to do so.

Polymetal expects rulingCAPITAL MARKETS

Munich Re chief executive Nikolaus von Bomhard saw profits slide Picture: REUTERS

BYALISON LOCK

CAPITAL MARKETS

BY PETER EDWARDS

CAPITAL MARKETS

BYALISON LOCK

M&A

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PENSIONS group Prudential said surg-ing growth in its US and Asian busi-nesses this year raised its profits, butfund flows fell in its M&G investmentarm as investors took fright over theEurozone crisis.

Prudentials sales were 2.7bn inthe nine months to September, 10 percent higher than in the same periodin 2010, while its new business profitsrose 14 per cent to 1.5bn.

Record sales in Asia created almost

half its income, with 719m new busi-ness profits, up 16 per cent from 2010.Hong Kong, Malaysia, Indonesia andSingapore were bright spots.

Chief executive Tidjane Thiamshrugged off concerns over theEurozone. As a company we are notfocused on Eurozone; we have noexposure to Greece, he told reporters.

Our main strategy focus is on Asia,we are growing at 15-20 per cent perannum in Asia so the business dou-bles in size every 3-5 years.

But UK profits were just one percent higher this year, at 194m.

Thiam said the UK was still critical.I cant emphasise enough how

important the UK is for the group. It isnot for cash, it is for capital, he said,adding that UK cash was no longerthe driver for its Asian expansion.

What we need the UK for is ourbalance sheet, we have a huge capitalsurplus in the UK which supports ourbalance sheet and our borrowing.

M&G saw inflows shrink to 2.6bnthis year, with 288m of outflows inthe third quarter, over Eurozone fears

Asia powersPru but M&Gflows reduce

Prudential chief executive Tidjane Thiam defended its UK business Picture: GETTY

BYALISON LOCK

INSURANCE


NEWS | IN BRIEF

Phoenix soars on solid resultsShares in life insurance group Phoenixclosed more than seven per cent higheryesterday as it said the market turmoilcaused by the Eurozone crisis had notaffected its business. Despite poor stockand bond markets, Phoenix said it hadgenerated 603m cash in the year to

the end of September, while its assetsunder management were almostunchanged since June at 68.3bn. Itschief executive Clive Bannister said thegroup had a deep well of expertisethat enables us to accelerate cashgeneration. Phoenix has generated100m cash since the end of Septemberalone, and is on track to meet its targetof 750-800m of cash by the end of theyear. It also attracted 1.1bn of newcapital to its asset management busi-ness Ignis in the period.

JLT on track despite tough timeInsurance broker Jardine LloydThompson said its business was tradingin line with expectations as growth inits emerging markets businesses offsetchallenging conditions in Europe. Itsaid companies had little appetite topay higher insurance premium rates,and clients in its employee benefits divi-

sion were cutting back on discretionaryspending such as insurance. Job losseswere also hurting that division, it said.JLT's financial performance is naturallyinfluenced by the general level of eco-nomic activity in the markets in which ittrades and the current global economicoutlook remains uncertain, it said. Butit said its Latin American and Asianbusinesses were strong and set out itsrecent takeovers to expand into Chileand Italy. Its shares closed down 2.1per cent.

ANALYSIS l Prudential PLC

p


640

630

620

610

636.508 Nov

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JAPANS Olympus admitted yesterdayit hid losses on securities investmentsdating back two decades, bowing toweeks of pressure to explain a series ofbaffling transactions that have put thefuture of the firm in doubt.

The revelations by the 92-year-oldcompany seem to vindicate ex-CEOMichael Woodford, who has staged acampaign since being sacked on 14October to force the firm to comeclean on nearly $1.5bn in payments.

Yesterday Woodford told the BBC thatthere was a cancer in the boardroomof Olympus. He said that the companyhad not done enough to get to the bot-tom of the affair. Who has receivedthe monies? he asked.

Olympus president ShuichiTakayama blamed Tsuyoshi Kikukawa, who quit as president and chairmanon 26 October, vice-president HisashiMori and internal auditor Hideo Yamada for the cover-up, saying he would consider criminal complaints

against them. The admission shockedinvestors, sending shares in the cam-era maker skidding almost 30 per centand prompting the biggest non- Japanese shareholder to demand thereplacement of the entire board.

Olympus said it had found thatfunds related to its $2.2bn purchase ofBritish medical equipment makerGyrus in 2008, which involved a hugeadvisory fee of $687m, as well as pay-ment of $773m for three tiny domesticfirms, were used to hide losses on thesecurities investments.

THE FORUM: P26

Olympus hidlosses duringtwo decades A FEDERAL judge has ordered RajRajaratnam, the Galleon Grouphedge fund founder sentenced to 11years in prison for insider trading, to

pay a record $92.8m (57.7m) penaltyin a related Securities and ExchangeCommission civil case.

The penalty imposed by US DistrictJudge Jed Rakoff in Manhattan is inaddition to the $63.8m thatRajaratnams lawyers said their clienthas already paid in his criminal case,including $53.8m that was forfeitedand a $10m fine.

Rajaratnam was convicted of 14counts of securities fraud and con-spiracy in the criminal case in May.He was given an 11-year prison term,the longest recorded US sentence forinsider trading, and is due to beginhis sentence on 5 December.

The SEC said Rajaratnams civilpenalty is the largest against an indi- vidual in an insider trading casebrought by the regulator.

Rakoff said a severe civil penalty forRajaratnam was needed to make clearthat insider trading should be amoney-losing proposition for all whoconsider it.

The net worth of Rajaratnam, a for-mer billionaire, considerablyexceeds the penalties in the criminalcase, the judge added.

Galleon Grouptrader fined arecord $92m

Shamed Galleon Group trader Raj Rajaratnam has been fined $90m Picture: REUTERS

BYHARRY BANKS

TECHNOLOGY

HEDGE FUNDS


ANALYSIS l Olympus Corp


1,000

900

800

1,100

1,2007348 Nov

8/3/2019 Cityam 2011-11-09

9/40

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TWO of the UKs biggest house-builders yesterday reported a boost indemand as the sector picked-up withfirst time buyers helping to lift thegloom.

Persimmon said the number offirst-time buyers has risen by over 35per cent since the same period lastyear, a welcome boost to the industrythat has seen first-time buyers frozenout of the market by high-depositrequirements.

The largest UK housebuilder bymarket value said visitor levels andprices remained firm, while cancella-tion rates were at historically low lev-els, echoing comments from peers ofa stable market.

Persimmon said weekly privatesales rates from the start ofSeptember were 19 per cent higherthan a year ago, and it is fully sold for

the year, with 460m of sales alreadyreserved beyond 2011. It added it isconfident of delivering further mar-

gin improvement in the second half.However it said that the average

selling price for the full-year will beslightly lower than last year due tothe rise in number of first time buy-ers, aided by the governmentsFirstBuy shared equity scheme.

Meanwhile rival Bovis Homes saidit is on track for double-digit margingrowth and reported a 29 per cent liftin reservations since August thanksto a rise in the number of sales out-lets. The housebuilder, which said itis trading in line with its expecta-tions, said visitor levels rose 40 percent in the 10 week period from theend-August. It posted a sales rate persite per week of 0.49 compared with0.45 in the same period last year.

Bovis said continued cost cuttingwill push its full-year operating mar-gin up to 10 per cent. The group,which has opened 29 new sales out-lets since the start of year, added it isconfident of delivering an increase in

return on capital of nearly five percent in 2011, and at least seven percent in 2012.

Persimmonand Bovis see

demand rise

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BY JOHN DUNNE

PROPERTY

BRITISH defence services groupBabcock International reported a 46per cent rise in first-half profit yes-terday, and said it expected to winsignificant contracts in comingmonths as military and engineeringclients outsource activities to cutcosts.

Babcock, which maintains RoyalNavy submarines, posted a pretax

profit of 132.8m for the sixmonths to the end of September, inline with an average forecast of133.8m according to a poll of ana-lysts, on sales up 30 per cent at1.58bn.

Babcock said its 2010 acquisitionof VT Group continued to generatesignificant operational and finan-cial benefits. It said its order book

was flat at 12bn but its bid pipelinehad doubled in the last year.

Babcock International profitssoar as acquisitions yield benefits

DEFENCE

THE SEARCH for $600m (373m) inmissing customer money fromdefunct broker MF Global Holdingsmay begin with a lender in Chicago, itemerged last night.

A Harris Bank branch office wasthe main repository for money frommany of MF Globals 150,000 cus-tomers, according to customers andrepresentatives with smaller invest-

ment firms that introduced clients tothe brokerage.The FBI is set to begin its search for

the missing money with Harris Bank,which holds client money for manylarge futures brokerage firms and ispart of the Bank of Montreal.

Sources said investigators are look-ing into what happened to customermoney held in segregated accounts atHarris Bank. Segregated accounts areused by brokers to keep customersmoney separate from the firms cash.

Harris Bank said it could not dis-cuss customer accounts.Meanwhile traders said yesterday

that futures giants Newedge, BNPParibas and JP Morgan are favouritesto attract the European clients of MFGlobal. Customers want to restarttrading but are said to be choosingtheir new clearing brokers carefully.

Some clearing brokers are deemedsafer and the biggest names in thebusiness are Newedge, JPM and BNP,said an options broker in London.

Hunt for $600m MF Globalcash begins to produce resultsBY PETER EDWARDS

FINANCIAL SERVICES


Persimmon boss Mike Farley (left) and Bovis David Ritchie (right) have seen a lift in demand

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SHARES in DTZ rallied by as much as50 per cent yesterday after the dis-tressed property agent revealed that it was in advanced takeover talks with Australian engineering-to-propertyservices group UGL.

DTZ, which put itself up for sale lastmonth, saw its shares collapse by morethan 86 per cent on Monday, knocking44m off its market value after thefirm said the equity in its business was

worth minimal value, if anything.Shares rose sharply before closing

up 11.4 per cent yesterday after theproperty consultancy named UGL asits preferred bidder, without confirm-ing the sale price, with a 6 Decemberdeadline for a deal to be tabled underUK Takeover Code rules.

John Forester, DTZs chief executivesaid the firm had been holding discus-sions with UGL, a 1.4bn Asian-Pacificcompany listed on the Australian stockexchange, for a number of years.

It is a really interesting geographicand services fit. Many of [UGLs] servicelines will benefit from access to theEurope markets and of course ourstrength in China, he said.

The combined business would have24,000 staff across 45 countries and apro forma 2011 revenue of $1.2bn.

DTZs net debt stood at 64m inmid-April, and its borrowings arearound 106m.

The firm has suffered since makingseveral acquisitions at the top of themarket before the crisis in 2008.

DTZ confirmstalks with an

Aussie bidderBYKASMIRA JEFFORD

PROPERTY

NewsCITYA.M. 9 NOVEMBER 2011 11

ANALYSIS l DTZ Holdings PLC

p


20

15

10

5

3.188 Nov

ANGLO-FRENCH property developerHammerson plans to begin construc-tion on its 485m Principal Placeoffice scheme in April next year afterthe group said it expected to sign itsfirst pre-let deal before Christmas.

Hammerson said yesterday negotia-tions are progressing with law firmCMS Cameron McKenna to take upone-third of the 600,000 square feet ofoffice space in the scheme nearLondons Liverpool Street.

The development comes as econom-ic uncertainty continues to dampenrental demand in the sector.Occupancy across Hammersons over-all portfolio fell to 97.1 per cent in thethird quarter from 97.2 per cent while

retail occupancy fell from 97.2to 96.9 per cent.

BYKASMIRA JEFFORD

PROPERTY

Hammerson tostart on officetower in April

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News12

THE HEAD of the UK Border Agencyresigned yesterday and accusedTheresa May of misleading the publicduring the immigration controls row.

Brodie Clark plans to pursue a claimfor unfair dismissal on the groundsthat Mays comments had made hisposition untenable. The HomeSecretary had earlier told Parliamentthat Clark should take full responsi-bility for his actions and accused himof going beyond her initial approval

of a limited trial of relaxed immigra-tion controls for Europeans.

Last night Clark said: Those state-ments are wrong and were made with-out the benefit of hearing myresponse to formal allegations. Thecivil servant, who had been suspend-ed, insists he was given authority foradditional measures in 2008-09.

May has said she will not resign herpost, despite admitting she has noidea how many foreign nationals mayhave entered Britain without the offi-cial checks.

BY PETER EDWARDS

POLITICS

Border Agency chief quitsand criticises Theresa May

FRENCH LUXURY OUTFIT BUYS 007 SUITMAKER

LUXURY French retail group PPR yesterday said it has agreed terms to acquire the Italiansuitmaker that once clothed Pierce Brosnans James Bond (pictured), beefing up its presencein high-end mens fashion. PPR, owner of Gucci and Yves Saint Laurent, did not disclose the

price it paid for family-owned Brioni, but analysts estimate Brionis enterprise value at275m (236m), including100m in debt. Picture: REX

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MARKS & SPENCER yesterday revealeda fall in first half profits after it chosenot to pass on the full extent of spi-ralling costs to cash-strapped shoppersand battled with a challenging eco-nomic environment.

Britains biggest clothing retailerreported underlying pre-tax profits of315.2m in the six months to 1October, 10 per cent lower than thesame period last year as cash-strappedshoppers spent less on clothes and

homewares.M&Ss food division held its own

during the six months, with like-for-like sales rising 2.1 per cent in the firsthalf of the year compared with a 1.3per cent fall at its general merchan-dise arm, which includes fashion.

Chief executive Marc Bolland saidthe retailer had taken decisiveaction by offering promotions andbetter value to shoppers despite high-er commodities costs, as it fights toremain competitive in an increasingly

promotional environment.Bolland, who took over the reins

last year, said the group remainedcautious about the outlook but saidthe firm was well set up for the allimportant Christmas period, expect-ing families to splash out and protectChristmas while choosing to stay infor New Year.

Despite the fall in profits, M&Ssresults were in line with expectations,and its shares rose 4.1 per cent in earlytrading before closing down 0.77 percent at 323.50p.

THE FORUM: P27

M&S predictsshoppers willflock at Xmas

Marc Bolland, CEO of M&S said he expected shoppers to splash out at Christmas but stay in for New YearBYKASMIRA JEFFORDRETAILs

CITY VIEWS: WILL MARKS & SPENCER STILL BE A MAINSTAY OF THE HIGH STREET IN20 YEARS ? Interviews by Phoebe Torrance

In association withwww.RateSetter.com Customer Phoneline: 08442490115

Yes. The brand isstrong and there is suchloyalty among its cus-tomers. It defines retail-ing for the middleclass it evendefines the foodthey eat

ANDREW BALLIE |KENEXA

In 20 years, shoppingwill be done online andin out-of-town centres.If M&S can keep upwith thechanges,then it willsurvive.

DAVID PHILLIPS |LLOYDS OF LONDON

Yes. It is a very estab-lished brand that hasadapted over the yearsand moved with thetimes. Who is to saythey won't beable to do itagain?

KEITH JULIAN |JRP UNDERWRITING

4.7bnGroup sales excl. VAT

s 2.4%

315mUnderlying pre-taxprofits 10%

s0.5%Like-for-like sales

excl .VAT

ANALYSIS l Marks And Spencer

p


350

315

320

325

330

335

340

345

323.508 Nov

Save or Borrow peer to peer at RateSetter.com

* These views are those of the individuals above and not necessarily those of their company.

8/3/2019 Cityam 2011-11-09

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OIL and gas explorer Gulf KeystonePetroleum yesterday raised its esti-mates for reserves at its Shaikanprospect in Kurdistan.

It is estimated that the site holdsup to 13.4bn barrels of oil, up fromthe previous prediction of 10.8bn bar-rels. Shares in the company went upeight per cent after the announce-ment. Evolution Securities analystRichard Griffith said in a note: Theincrease is further confirmation ofthe world class discovery at Shaikan.

The brokerage has an add rating

and price target of 210 pence on thestock.

INTERCONTINENTAL Hotels Group,the worlds largest hotelier, yesterday

beat expectations with a 33 per centincrease in third-quarter operatingprofit thanks to strong growth inChina and the United States.

InterContinental, which owns theCrowne Plaza and Holiday Inn brands,said operating profit rose to $153m(95m) in the quarter to endSeptember, from $115m the year

before.Market expectations had ranged

between $138m and $153m, accord-ing to a company-supplied poll of nineanalysts.

The economic environment con-tinues to be uncertain, but we remainconfident in our future due to ourresilient business model, robust bal-ance sheet and powerful brand portfo-lio, chief executive Richard Solomonssaid.

Revenue per available room(RevPAR), a key industry measure, rose

by 6.4 per cent, including a 2.8 percent rise in room rates, boosted by10.8 per cent growth in China and 8per cent in the US, where the compa-ny said it benefited from the relaunchof its Holiday Inn brand. Total revenuerose by 11 per cent to $467m.

Rival Accor said in October it hadyet to see signs of an economic slow-down and expected steady growth tocontinue in the fourth quarter.

Number onehotelier seesprofits jump

CAIRN Energy yesterday gave a posi-tive update on one of its exploration

wells in Greenland after disappoint-ing drilling results so far this year.

The FTSE-100 company found signsof oil and gas at the AT7-1 well,although it has been unable to evalu-ate the results fully because of diffi-cult operating conditions.

The companys first three explo-ration wells drilled in Greenland this

year, as part of its five drill pro-gramme, were found to be dry.

Cairn has concentrated on explo-

ration in Greenland after agreeing toreduce its stake in its Indian unit.

Greenland oiltrace for CairnKeystone in liftfrom Kurdistan

BYHARRY BANKS

CONSUMER

OIL

ECONOMY

News14

MCDONALDS REVENUES BOOSTED BY SALAD

MCDONALDS, the worlds largest restaurant chain, reported yesterday a 5.5 per cent riseworldwide as it continues to outperform its competitors. Revenue at stores open at least 13months rose 4.8 per cent in Europe and 5.2 per cent in the US, beating analysts expecta-tions. Sales in the US were helped by its Monopoly game promotion, along with better salesof items on the menu which appeal to healthier customers. Picture: CITY A.M.

ANALYSIS l Intercontinental Hotels

p


1,150

1,050

1,075

1,100

1,1251,073.00

8 Nov

8/3/2019 Cityam 2011-11-09

15/40

US BANKS have written down $54bn(33.5bn) in losses resulting fromtheir exposure to monoline insurersover the past four years, according tonew data released by theInternational Swaps and Derivatives

Association (Isda) yesterday. The trade body for the over-the-

counter derivatives market saidthat losses were greater than a fig-ure of $2.7bn given by the US Officeof the Comptroller of the Currencyearlier in the year, after furtheranalysis took into account deriva-

tives related to subprime mortgagerisks booked outside the domestic

US banking system.The new data covers 12 banks and

bank holding companies, with fourof the banks investigated accountingfor $43bn of the total losses.

This and the earlier study on loss-es from counterparty defaults pro-

vide additional evidence thatstructured real estate risk taken insynthetic form resulted in a largemajority of losses taken by banks onderivatives during the crisis, saidConrad Voldstad, Isdas chief execu-tive.

Losses on plain vanilla productsoccurred but were relatively modest

as the earlier paper revealed, headded.

RECORD profits at Associated BritishFoods (ABF) sugar arm have helped off-set weaker results at its discount-cloth-ing chain Primark, which was hit afterthe group chose not to pass the rise incotton prices onto shoppers.

Primarks profits slumped by eightper cent to 309m in the year to 17September, after its operating profitmargins fell from 12.5 to 10.2 percent but the retailer said new storeopenings and falling cotton prices

would help it bounce back.We grew sales by 13 per cent in the

year, which we see as a consequence ofopening new stores here and on thecontinent, George Weston, chief exec-utive, told City A.M, adding the 223-strong chain was now 25 per cent

bigger than it was two years ago.Weston warned the economic back-

ground was tough and would remainsubdued in the medium term but said

commodity costs, which also impactedits grocery and ingredients business,appear to be subsiding.

Overall ABF, which owns the Twinings and Silver Spoon brands,reported a two per cent rise in earn-ings per share to 74p after high worldsugar prices helped boost profits at itssugar production arm by 31 per cent.

The group was upbeat in its out-look and said it expects to see growthin both sales and adjusted operatingprofit next year.

Sugar arm issweet spotfor AB Foods

Banks have seen a $54bn hit frommonoline exposures since 2007

BYKASMIRA JEFFORD

CONSUMER

FINANCIAL SERVICES

George Weston, AB Foods CEO, said Primarks priority was to open new stores

News 15

ANALYSIS l Associated British Foods

p


1,150

1,140

1,130

1,120

1,110

1,100

1,090

1,080

1,128.008 Nov

8/3/2019 Cityam 2011-11-09

16/40


BDOThe accountancy and business advisory

firm has appointed Simon Pringle tolead the sustainability & climate change

practice. Pringle was formerly a partnerat a global management consultancyand is one of the founding trustees ofCarbon Leapfrog.

AvivaJohn Lister has been appointed as UK

chief risk officer, effective from March2012. Lister, who has been chief actuaryat the firm since 2005, succeeds CraigThornton, who became UK chief com-mercial director on 1 November.

Seyfarth ShawThe US law firm has hired internationalemployment lawyer Ming Henderson-Vu

Thi as a partner in the firms Londonoffice. Henderson-Vu Thi joins fromOracle, where she was director and sen-ior employment counsel for Europe, theMiddle East and Africa.

Lazard

Ranjit Munro has joined the firms finan-cial advisory business as a managingdirector in the debt advisory group.Munro joins Lazard from Rothschild,where she was also a managing directorin debt advisory.

The Inzito PracticeLouise Palmer is joining the board of the

executive search firm founded by CarolLeonard as a partner. As a co-founder ofconsultancy 7days, Palmer assistedblue-chip firms including Whitbread,Avis, Guardian News & Media, ITV andGala Coral. Prior to that, she was a sen-ior consultant at Coopers & Lybrand.

Squire Sanders HammondsThe law firm has boosted its intellectualproperty technology team in Londonwith the appointment of IT and out-sourcing expert Garfield Smith. Smith

joins from Pinsent Masons, where hewas a partner for four years and led thefinancial services outsourcing group.

CITY MOVES | WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

Cushman & WakefieldThe property consultant has appointed busi-ness consulting real estate executive NeilMcLocklin as a partner and head of itsEMEA business consulting group, based inLondon. He joins from Capita Symonds,

where he was director of consultancy andadvisory services. In addition, ElizavetaShaforostova will transfer to the Londonteam from C&Ms Moscow office, where shemanages the Moscow occupier team.

NEWS | IN BRIEF

Vacancy rate drops at SegroBritish industrial landlord Segro said ithad a strong third quarter, with annu-alised rental income rising, and itremained well placed for the current

environment. Segro secured 11.9m ofnew annualised rental income in thethree months to end-September, upfrom 9.5m in the 2010 period. Itsvacancy rate dropped to 10.2 per cent,from 11.4 per cent on 30 June.

Capco riding out tough economyLandlord Capital & Counties Propertiessaid yesterday that its businesses had per-formed well over the summer, despite thechallenging economic backdrop. The com-

pany said occupancy at Covent Garden isstrong, and that planning for the develop-ment of the Earls Court & West KensingtonOpportunity Area was progressing well.Capco said it was confident it could contin-ue to deliver returns across the business.

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GEORGE Osborne didnt exactly saygive me all your money to theassembled business leaders at theOrange National Business Awards.

No, he phrased it rather more ele-gantly than that. We need to seecash coming out of corporate bal-ance sheets and into real investmentprospects, ifThe Capitalists memoryserves correctly.

So no prizes for guessing who thechancellor made a beeline for whenhe arrived at the pre-dinner drinks inthe Orange VIP area: Victor Zhang,UK chief executive of Huawei, thesecond-biggest telecoms company inthe world with global revenue of$28bn and the largest investor frommainland China in the UK.

Osborne was very impressed byHuaweis plans to double its pres-ence in the UK within three years,said Sir Andrew Cahn, chairman ofthe Chinese operators advisory board and Osborne returned thefavour in his opening address,reminding his audience that UK

exports to China were up 30 per centin the first six months of the year.

Disappointingly, however, therewas only one joke among Osbornestales of Eurozone woes. Apologiesfor not being properly dressed, saidthe business-suited budgeter, whohad spent the day at a meeting ofEuropean finance ministers inBrussels. But I thought it would bebetter to turn up here in a suit ratherthan there in a dinner jacket.

And so to the actual awards, whereLiverpudlian shipping firm BibbyLine Group won the 3i private busi-ness of the year, chemicals business Johnson Matthey won the Coutts &Co Large-Cap Business of the Year,and manufacturer Renishaw won

the Grant Thornton Mid-CapBusiness of the Year.

Nexts chief executive Lord Wolfson was awarded the Decade ofExcellence in Business accolade,while the Orange Leader of the Yearaward went to Ruby McGregor-Smith,chief executive of Mitie Group.

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

The CapitalistCITYA.M. 9 NOVEMBER 2011

CHANCELLOR COURTSCHINESE CASHFLOW AT

BUSINESS AWARDS

Martin McCourt, chief executive ofDyson and his daughter Amanda

Miles Shipside of Rightmove with Lucy Canning, Louise Weller and Wendy Watherstonof Grant Thornton

Chancellor George Osborne

Richard Steer, chairman of Gleeds Worldwide and Michael Morley, chief executive of Coutts

Tim Scott, chairman of Ener-g, KirstyMcDonald of 3i and Patrick Stannah ofStannah Holdings

Olaf Swantee, chief executive ofEverything Everywhere

Mitie chief executive Ruby McGregor-Smith andher husband Graham

Victor Zhang, Sir Andrew Cahn and Wells Li of Huawei

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THE EUROZONE crisis tainted anotherwise robust set of results forVodafone, with a 450m writedownon its Greek business helping pushprofits down 11 per cent.

Vodafone, facing tough compara-tives against last year when it booked the sale of its minorityshareholding in China Mobile, sawits revenues increase 4.1 per cent to23.5bn, adding 9.4m new cus-tomers to its network.

The company raised its full-yearguidance, boosted by a strong per-formance in emerging markets,which chief executive Vittorio Colao

said are an increasingly importantpart of Vodafones business.

He also said the companys enter-prise operations have performed well despite the torrid economicenvironment.

Overall profits for the first halfwere 6.68bn, down from 7.54bnlast year. Ebitda rose 2.3 per cent to7.53bn from 7.36bn.

Colao defended his companys1.25bn HMRC tax settlement,which critics have suggested shouldhave been closer to 6bn, saying thesum was based on the best advice

available and followed years of nego-tiations. The Italian chief executive said

that, while he is not immediately

considering abandoning VodafonesUK base, he would be forced to if taxor visa regulations were to becomematerially worse. He said: We haveto be able to operate on a level play-ing field with the rest of the world.

Voda results robust

despite euro woesBY STEVE DINNEEN

TELECOMS


NEWS | IN BRIEF

Sony Ericsson sees parts shortageSony Ericsson said yesterday a shortage ofkey components will limit the production ofsome of its feature phones in the key holi-day sales period. A spokesman for theworlds ninth-biggest handset maker did notspecify which components were in shortsupply but said the problem was not relatedto the Thai floods. We are experiencing a

shortage of key components used in somefeature phones, the spokesman said,adding that the phones affected are the txt,txt pro and Mix Walkman models. Lastmonth Sony agreed to buy Ericsson out oftheir 10-year old venture which has shiftedits focus to smartphones, but featurephones still make up some 20 per cent of itssales volumes.

Vodafone boss Vittorio Colao said he was pleased with the results Pic:REUTERS

Shareholders have reasons to cheer

Its not just Angela Merkel whohas discovered PIGS in herointment. Vodafones solidfirst half was (slightly) tar-

nished by a drop in the key servicerevenue metric in Italy (2.3 percent) and Spain (9.6 per cent),while Greece received its secondwritedown in a year, bringing thetotal to 1.2bn.

Chief executive Vittorio Colaostressed the importance of remain-

ing competitive in these markets

while riding out the storm but alsosaid consolidation is on the cards,with Vodafone actively looking atmerger opportunities. StrongerEuropean markets have performedwell, with the UK beating estimates service revenue is up 2.5 per cent and Germany up slightly at 0.2per cent.

The overall service revenue dropof 0.2 per cent in Europe was off-set by strong growth in emerging

markets, with Vodafone proving

to be fairly recession proof.From an investor point of view,

the resumption of the Verizon div-idend is manna from heaven. Vodafone now accounts for anastonishing 1 of every 8 paidout in dividends by FTSE 100 com-panies. Shareholders certainlyhave reasons to be cheerful.

BOTTOMLINEAnalysis by Steve Dinneen

ANALYSIS l Vodafone Group PLC

p


180

178

176

174

172

170

176.008 Nov

VODAFONES RESULTS IN NUMBERS

Group revenues jumped 4.1 percent after outper-

forming estimates across the board

23.5bn

The key servicerevenue metric was up 3.1 per

cent, boosted by emerging markets

21.9bn

of all dividends paid outby FTSE 100 companiesnow come from

Vodafone, one of the highest in the UK

1/8th

Writedown o Vodafones Greekbusiness, the sec-

ond in a year, taking the total to 1.2bn

450m

Vodafones ndebt, reduced13.8 per cent

from last years 30.4bn

26.2bn

Tax paid Vodafone in the UK.The firm says it pays

25 per cent of its global profits in tax

2.6bn

Adjusted pro

before tax, down 8.7per cent from a year

earlier amid Eurozone pressures5.1bn

New customers to Vodafones netwooutpacing rivals includ-

ing Everything Everywhere in the UK

9.4m

Dividend to be paid by Wireless, ending a

lengthy period of negotiations

2.8bn

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LORD Bells ChimeCommunications has been hit bythe shock loss of its contract withthe US government, prompting adramatic refocusing of its business.

It now says it is not forecastingany significant income from theUS government, its biggest client,next year.

The company will be forced tolay off staff and take a restructur-ing charge as it shifts its attentionaway from its PR operations to itssports marketing division.

It is not clear how many jobsmay go from its PR business, which

traditionally accounts for half ofthe firms revenues.

Lord Bell said: Because of theweak global economy we contin-ue to expect growth, but not atthe same rate as the last few

years.We are at that point

in the cycle where weneed to make someinvestments particu-larly in public rela-tions. We willcontinue to be acquisi-tive and we expectorganic growth fromour existing business-es and their expan-sion into disciplines

and geographies in which we do not currently oper-ate.

We have continued totrade well in a difficult eco-nomic environment.

Chime shares fell 2.2 percent yesterday, with thefirm falling by a thirdfrom its year-high of300p. In its latest resultsthe firm saw its profitssurge 15 per cent to

14.2m. Revenue rose13 per cent to153.4m, with salesfrom its sports mar-keting division up 62

per cent in its first half.

Chime hit by loss of

its biggest contract

Yell doubles profitsdespite sales drop

BY STEVE DINNEEN

MARKETING

DIRECTORIES publisher Yell Groupsfirst-half profit has more than doubledthanks to a significant fall in interestcharges as a result of lower debt.

The company, which was slow toadapt to the shift to online advertis-ing, said its sales fell 12 per cent to787.2m as growth in digital servicesonly partly offset the decline in print-ed and digital directories.

Yell, which expects to be in full com-pliance with its covenants for the restof the year, said it had started talks

with its lenders regarding the loanterms.

It posted first half pretax profits of69.2m, compared with 33.2m a yearago.

Despite the impact of lower fixedcosts and improved margins, thedecline in revenue led to a 10 per centfall in ebitda to 231.4m.

Net debt was 2.63bn, down five percent from six months ago.

Yell shares, which have lost nearlyhalf their value over the last sixmonths, closed virtually unchanged at3.63p, valuing the firm at 86m

The firm announced its digital turn-around plan over the summer, with anew emphasis on providing digital

services to local markets through itsYell Connect platform.

BYHARRY BANKS

PUBLISHING


CARPHONE Warehouse tankedyesterday as investors appearedto cool on its announcementthat it has offloaded its USmobile retail business.

The firm said it has sold thehigh-growth unit for $1.3bn(810m) roughly equal to ana-lysts sum-of-the-parts valua-tions.

The firms shares closed upfollowing the announcement

on Monday but lost 7.2 per centyesterday to end at 323p.

Carphone

shares lose7 per cent

RETAIL

HARMAN SLAMS PREDATORY BOOKIES

HARRIET Harman yesterday accused bookies of being predatory as she launched a campaign against high street betting inpoor areas. She published an incendiary report claiming gambling is destroying neighbourhoods. But the Association ofBritish Bookmakers hit back, saying: We are extremely disappointed by this statement. There is no evidence to support thisunwarranted attack on a responsible and well regulated leisure industry. Picture: REUTERS

NEWS | IN BRIEF

Bwin shrugs off Eurozone turmoilBwin.party Digital, the world's biggest listedonline gaming company, shrugged off eco-nomic worries to post a rise in third-quarterrevenue, helped by the launch of new gamesin Italy and strong growth in its casino divi-sion. The Gibraltar-based company, whosebrands include bwin, PartyPoker.com,PartyCasino.com and Foxy Bingo, said total

revenues grew three per cent to 201.1m(172.4m) in the third quarter. The company,which offers up to 30,000 bets daily acrossmore than 90 sports, said it had also bene-fited from a bar on US website Full TiltPoker in April following charges of illegalgambling. Bwin.party said current tradingwas robust and in line with management'sexpectations.

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INDUSTRIAL production and manufac-turing output both increased in thethree months to September, accordingto figures out yesterday from theOffice for National Statistics (ONS).

But analysts believe the growth rep-resents a temporary rise, with declinecoming in the next few months.

The ONS index of productionshowed output in the third quarter

was 0.4 per cent higher than in theprevious three months. Similarly, theindex of manufacturing rose by 0.2 percent. The energy sector performedmost strongly, rising by 2.4 per cent.

However, analysts believe thegrowth merely represents a temporaryrebound from poor figures in the sec-ond quarter, when production fell 1.2per cent and manufacturing declined

by 0.1 per cent.Domestic demand for manufac-

tured goods is being held back by tightfiscal policy and the major squeeze onconsumers purchasing power, while amarked slowdown in global economicactivity is clearly hitting manufactur-ers export orders hard, said Howard

Archer from IHS Global Insight.The latest evidence suggests that

the manufacturing sector is in seriousdanger of contracting in the fourthquarter.

EMPLOYERS are increasingly reluctantto take on permanent staff, preferringtemporary contracts because they areuncertain about the strength of theeconomy, a report published todayfrom KPMG reveals.

Permanent placements fell for the

first time in two years in October. The

surveys index now stands at 49.7,down from 51.2 in September and 52.4in August. Any figure over 50 indicatesexpansion in permanent placements.

Over the last year growth indemand for financial and accounting

workers has declined, with the indexfalling from 55 to 51.6.

Growth in salaries has ground to ahalt, according to the study. The index

for permanent staffs salaries came in

at 50.1, down from 52.9 in September.The UKs permanent jobs market

has stalled for the first time since July2009, said Kevin Green, chief execu-tive of the Recruitment andEmployment Confederation.

The government must do more tohelp especially in encouraging smallprivate sector employers to take on

young people the situation is becom-

ing critical, he added.

Demand for permanent staff declinesas Britains economic outlook worsens

THE RICH and poor will both experi-ence rising living standards next

year, while middle earners will seedisposable incomes stagnate, accord-ing to a report out today from theCentre for Economics and BusinessResearch (CEBR).

Disposable income is set to rise by

0.5 per cent for the top and bottomearners, but only by 0.1 per cent forthose on middle incomes.

The think-tank claims that thehighest earners face higher pay risesand lower inflation than people onlower incomes.

Meanwhile those at the bottomwill see incomes rise because their

benefits are linked to inflation.

People on middle incomesto suffer the most in 2012

UK ECONOMY

CONTRACTION looms in the UK asbusiness confidence has plummeted,according to the ICAEW/Grant

Thornton business confidence moni-tor published today.

The index has fallen from 8.1 in thethird quarter to minus 9.7 in thefourth.

This is the largest decline the mon-itor has ever recorded, taking confi-dence to levels last seen in the depthsof the previous recession, and impliesa contraction of 0.2 per cent in GDP inthe fourth quarter, the organisations

believe.

Record fall

in businessconfidenceUK ECONOMY

UK industrys

output pointsto recessionBY TIMWALLACE

UK ECONOMY

BY TIMWALLACE

EMPLOYMENT


INFLATION IS BRITONS BIGGEST CONCERN

THE MAIN concern of most consumers is inflation, according to a survey out yesterdayfrom Absolute Strategy Research. Ninety-one per cent are concerned about householdfinances, up from 83 per cent last year. Jobs are high up the list of concerns, but 52 per

cent cite inflation, at 5.2 per cent in September, as their main worry. Picture: GETTY

NEWS | IN BRIEF

Encouraging US sales figuresChain-store sales rose by 3.1 per centlast week, compared with the same peri-od of 2010, figures out yesterday fromRedbook Research showed. Sales forNovember are 1.4 per cent higher thanthose in October, Redbook reported.Meanwhile the International Council ofShopping Centres and Goldman Sachsindex showed chain store sales for lastweek up 2.7 per cent on the previousyear. Compared with the previous week,sales are up one per cent. Both reportsadd to hopes that the US has avoidedthe recession that the Eurozone appears

to be falling into.

Squeezed households to cut back on Christmas

WITH experts increasingly pre-dicting tougher economictimes ahead now seems agood time to look at the pub-

lics economic confidence from YouGovs HEAT report. The October

results show confidence about house-hold finances remaining very low with46 per cent expecting theirs to be

worse in 12 months versus 15 per cent

expecting an improvement.This pessimism is largely driven bycash positions 28 per cent of UKhouseholds had just 125 or less avail-able in discretionary income after pay-ing utilities, housing, and tax lastmonth. This is up from 21 per centlast year.

This cash crunch is affecting allBritons as incomes fail to keep pace

with inflation. Among those house-holds making less than 30,000, 42 percent have less cash available thismonth than last with only seven per

cent seeing more available. Amongtop earning households with over50,000 in income, 25 per cent reportless cash available versus 13 per cent

with an increase. All income groups expect thecrunch to continue. Of households

with 50k+ in income, 44 per centexpect cash available to decline in thecoming 12 months, versus only 16 percent expecting an increase. Amongless well-off households (less than 30kincome), the crunch is more severe,

with 49 per cent expecting a decreasewhile 13 per cent expect an increase.

This reduction in disposable incomeis likely to manifest itself under theChristmas tree. Two fifths of house-

holds are planning to decrease theirspending on gifts this year, with onlyseven per cent increasing. The cuts areconsistent across all incomes and

demographics and are also seen in the

US, where 42 per cent expect spendingto decrease this holiday compared to10 per cent increasing. After a difficult

year for retailers it does not look like

Christmas will bring much cheer.

ANALYSIS lChristmas spend

Increa si ng Same

US

UK

Decreasing

50

60

40

30

10

20

0

ANALYSIS lHousehold situation chart

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

0

-10

-5

-15

-20

-30

-25

-35

-45

-40

-50

UK HEAT Index

ANALYSIS l Industrial production has been down for most of 2011, compared to last year%

Change in output on same 3 mouths of the previous year

Sep SepOct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

6.0

5.0

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

Manufacturing

All production

BRANDINDEX

STEPHAN SHAKESPEARE

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AN EXPERIMENTAL antidepressantfrom AstraZeneca and Targaceptfailed to meet the goal of changing akey depression rating score in thefirst of a series of pivotal clinical tri-als, in a setback for both firms.

The result, announced by the com-panies yesterday, relates to the so-called Renaissance 3 Phase III studyinto TC-5214, a f lexible dose trial con-ducted in Europe.

TC-5214 -- which is viewed by ana-

lysts as a high-risk, high-reward proj-ect -- is designed to work in a novel way by modulating neuronal nico-tinic receptors in the brain. Over-stimulation of these receptors isthought to be associated with depres-sion. AstraZeneca agreed in 2009 topay as much as $1.24bn (771m) forrights to the drug, including anupfront payment of $200m, and TC-5214 has been one of the few poten-tial bright spots in AstraZenecaspipeline.

The setback could dent confidencein the companys line-up of newdrugs, although many analysts haveavoided banking on the medicinessuccess.The success of TC-5214 is morecritical for Targacept, whose shareprice performance is linked closely tothe fate of the new medicine. Thedrug is the product of lengthyresearch at Targacept, a small USdrugmaker that began life as part ofRJ Reynolds Tobacco and has for yearsbeen using its understanding of nico-tine to develop experimental treat-ments for depression.

AstraZenecadepressiondrug fails testBYHARRY BANKS

PHARMACEUTICALS


TOYOTA withdrew its annual profitguidance yesterday as Thai floodsthreaten output just as it had recov-ered from supply shortages that bat-tered production after the Marchearthquake in Japan.

Like Toyota, Honda also dropped itsearnings forecasts after being hardhit by Thailands worst floods in atleast 50 years, although Nissan raised

its outlook as it adapts more quicklyto the disaster, which hit its opera-tions in the country.

Toyota posted a bigger-than-expect-ed 32 per cent slide in quarterly oper-ating profit, partly triggered by asoaring yen as the company wasrecovering from the earthquake andtsunami. Net profit dropped 18.5 percent to 80.42bn yen (642m) whilerevenue fell 4.8 per cent to 4.57 tril-lion yen. Global vehicle sales slid 4.7per cent to 1.805m.

Toyota ditches its profitforecast after Thai floods

Floods in Thailand have crippled some businesses Picture: REUTERS

BY JOHN DUNNEAUTOMOTIVE

ANALYSIS l AstraZeneca

p


3,025

3,000

2,975

2,950

2,925

2,900

2,875

2,850

2,873.008 Nov

NEWS | IN BRIEF

Devro on track for full yearSausage skin maker Devro said yester-day it was on course to meet boardexpectations for 2011, with sales vol-umes showing strong growth comparedto the same period last year. Growth inwestern and

cityam 2011-11-09

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