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FTSE 100 5,568.72 +0.76 DOW 12,150.13 +52.30 NASDAQ 2,649.56 -6.20 /$ 1.56 unc / 1.16-0.01 /$ 1.34 unc

www.cityam.comIssue 1,527 Wednesday 7 December 2011 FREE

AIRLINES FURIOUS AT TAX HIKEWILLIE WALSH LEADS PROTEST P6

BUSINESS WITH PERSONALITY

Certified Distribution

03/10/11 till 30/10/11 is 100,123

Sorrell: Britain must domore to get WPP backBRITAIN has not yet gone far enoughto lure WPP back to London, SirMartin Sorrell told City A.M.yesterday.

Chancellor George Osborne hasstaked a large part of his business-friendly credentials on Sir Martins sig-nal that his marketing firm WPP willcome home in light of reforms to UKtaxes on profits made abroad.

The Treasury unveiled a big loosen-ing of the tax regime in its draftfinance bill yesterday, but Sir Martinsays further progress is needed.

Were still studying the document,he said. It does not go as far as we

thought it might... Its very much inthe right direction but not quite farenough in our case. Were assessingwhat more needs to be done and the

Treasury is being very responsive.Osborne has his work cut out. The

Treasury has been reviewing the con-trolled foreign companies (CFC)regime, which taxes overseas earnings,for four years and wants to have finalproposals in March.

But the target leaves him scram-bling, say experts. It is hard to see howmuch further they can go withoutpeople being able to drive a coach andhorses through, said Baker Tilly taxpartner Kevin Phillips. Theyre run-ning out of time to do much more.

City A.M. understands that theTreasury is mulling an even more gen-erous regime. It is likely to limit thescope of any tax still chargeable on

firms overseas financing profits, hav-ing already loosened the rules. TheTreasury said it has had positive feed-back from businesses.MORE: P4, 6, 15

Sir Martin wants more details before WPP can return Picture:City A.M./Micha Theiner

SENIOR banking executives face hav-ing their pay packages published afterchancellor George Osborne unveiled anew transparency regime for the 15largest banks operating in the UK.

The Treasury says the new rules, which demand the publication ofrewards given to the eight most seniornon-board executives, will helpinvestors police a banks risk profile.

While the 120 executives affectedwill not be named officially, a similar voluntary initiative this year saw theheads of some UK banks investment banking divisions quickly named inthe press because their pay was somuch larger than the others disclosed,making their identities obvious.

The Treasury said the measures,which will be consulted upon in thecoming months, aim to protect priva-cy to the extent that is possible.

The regime laid out yesterday willapply to executives in British banks orBritish subsidiaries of foreign bankswith over 50bn in UK assets. However,it will not apply to highly paid regularstaff such as traders, which means it will likely not capture banks mostwell-paid workers.

The disclosure will detail the com-position and amount of executive pay.

But there is likely to be little varia-tion in the makeup of their packagesdue to existing EU pay regulations thatlimit the percentage that can be paidout in cash and over what period it canbe awarded.

It means that banks in the UK willsoon face three different levels of dis-closure for remuneration: one formembers of the board, which namesindividuals; one for senior executives;and another for code staff employ-

ees chosen by the regulator.The move comes in response to pop-ulist anger over bankers pay and fol-lows a call from the Association of

British Insurers (ABI) for banks to alignpay more closely with results.

Recruiters were dubious about themeasures yesterday. Individuals, andindeed whole companies, can and domigrate to more receptive countriesalready, said Nick Stevens of Eximius.Further legislation against bankerspay is highly questionable.

Regulators are also increasingly wor-ried about banks having enough cashon hand to deal with a credit crunch. The rules already restrict pay-outs ofbonuses and dividends for those thatfall below minimum requirements,but the Bank of England announcedthe launch of a new liquidity facilityyesterday to keep credit flowing.

The Extended Collateral Term Repo(ECTR) will give banks 30-day loans insterling at a minimum cost of 125 basis points. The facility for use by

banks that cannot borrow as much asthey need privately, is unlikely to beaccessed imminently, but illustratesthe depth of regulator concern.

OSBORNE TO

REVEAL PAYOF 120 TOPUK BANKERSBY JULIET SAMUELPOLITICS

BY JULIET SAMUEL

EXCLUSIVE

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News2 CITYA.M. 7 DECEMBER 2011

Price war cutfood inflationCUSTOMERS are benefiting fromintense competition between super-markets, according to data out todayfrom the British Retail Consortium.

Food price inflation fell for a sec-ond consecutive month to 4.0 percent in the year to November, com-pared with 4.2 per cent in October.

Overall shop prices rose 2.0 percent in the twelve-month period,down from 2.1 per cent last month.

Fierce competition in the retailsector is helping hard-pressed fami-lies manage their budgets, said theBRCs Stephen Robertson.

Shop price inflation is now at itslowest for a year despite rising costsfrom suppliers and energy bills.

However, Tesco may be sufferingdue to the price wars intensity,according to Kantar data yesterday.

The supermarket saw its marketshare dip from 30.7 per cent to 30.5per cent as its big price drop sawsales rise but cash taken fall.

With more products available forless, the amount of cash taken at thetills has understandably droppeddespite Tesco attracting more shop-pers to its stores, said Kantar directorEdward Garner.

Meanwhile, Tescos Asia chief exec-utive David Potts announced he willleave in six months to fulfil long-held personal ambitions. Europeboss Trevor Masters will take the role.

BY TIMWALLACE

RETAIL

Coalition is confused about business

WE love you actually, no, we hateyou. That, roughly speaking, seems tobe the governments attitude to busi-ness and business leaders. The signalsare so mixed that they are utterlyincomprehensible.

Take tax policy and incentives. Theofficial position is well, there isntreally one. The coalition is likely toretain the top income tax rate indefi-nitely, even though Tory members pri-vately concede that it isnt raising anyreal money and is damaging growthand investment. But at the same timethat the concerns of supply-side econo-

mists are dismissed when it comes totaxing income, they are enthusiastical-ly embraced in other areas. It was con-firmed yesterday that from April 2013,income from patents will be taxed at a

corporation tax rate of just 10 per cent. Why? To encourage patents and toboost investment into the UK, whichare very good things, but which thegovernment clearly values more than work, which is taxed at 52 per cent(plus employers national insurance at13.8 per cent), even though it is also avery good thing.

So the government doesnt believeincentives matters in some cases butit simultaneously believes that they doin other cases. If you are the firstemployee of a new business, you willpay 1m on your first 10m in capitalgains. Great. But if you are the secondemployee, and are thus not technicallyan entrepreneur even if you were theone who organised and built the firm,you will pay 28 per cent on any capitalgains and obviously up to 52 per centon your salary. Weird.

The government needs to make itsmind up. It loves people who make10m from setting up and selling busi-nesses but it appears to dislike themwhen they make 10m in pay for run-

ning a global multinational whichemploys hundreds of thousands. Anentrepreneur who cashes in early(rather than building a new BritishFacebook) is celebrated but a boss whospends years building up a Plc isdenounced as a fat cat who is probablytaking his shareholders for a ride. There is too much moralising, toomany fatuous distinctions beingdrawn and enshrined in law betweenbroadly equivalent activities.

There was more schizophrenia yes-terday. After a campaign to tell the Citythat the attacks had ended, and on thesame day that the prime minister saidthat protecting it was now a key aim ofEuropean policy, the Treasurylaunched another round of banker- bashing, albeit of a rather inconse-quential nature aimed primarily attelling the public that it is cracking

down. It announced that the top non-board execs at banks would have theirpay disclosed to help tackle unaccept-able bank bonuses by improving paytransparency at large banks and to

help curb unsound compensationpractices. Of course, this is not the pol-icys real aim; pay in banks is alreadyfalling sharply at the moment. For astart, the government keeps confusing bonuses and total compensation.Secondly, compensation is alreadyextremely regulated in all FSA-regis-tered firms EU rules stipulate themix of long-term deferred compensa-tion, salary and bonus to align incen-tives and reduce risk. Does theTreasury not realise this? Even thoughit has previously boasted about having backed this? Finally, there is a wide-spread belief that transparency tendsto boost salaries, not reduce them. Iftrue, that would just be the most sillyof a long series of contradictions at theheart of government policy.

[email protected] me on Twitter: @allisterheath

A GROUP of pension funds is suingasset manager Henderson over thehandling of its investment in construc-tion firm John Laing in 2006.

The full list is not yet known but thepension funds of the BBC, Tesco, BAESystems and Bupa, as well as Kent andSouth Tyneside councils, were amongthose known to have considered legalaction.

The size of the claim could be ashigh as 450m, but a figure nearer to

170m is more likely, sources said.Henderson has been accused of mis-

representation and breach of mandateover the disappointing Henderson PFISecondary Fund II. Most of the capitalraised for the fund was used to buy John Laing, whose pension funddeficit has steadily increased.

Yesterday Henderson said: We areconfident we have no legal liability toinvestors in this fund. We will vigor-ously defend these proceedings.

The asset manager has previouslysaid it believes the PFI Fund II willrecover over its remaining five years.

BY PETER EDWARDS

FUND MANAGEMENT

Henderson in legal rowHenderson, led by chief executive Andrew Formica, is being sued

NEWS | IN BRIEF

Lehman set to exit bankruptcyLehman Brothers Holdings Corp, now

just the odds and ends of the globalfinancial behemoth that collapsed inSeptember 2008, yesterday receivedcourt approval yesterday to exit bank-ruptcy early next year. Lehman may nowwind down its remaining operations, US

bankruptcy judge James Peck told ahearing in New York. Unsecured credi-tors, depending on their type of debt,will receive from about 21 cents to 28cents on the dollar based on the type ofsecurity they held. Shareholders willreceive nothing when payments to credi-tors start in 2012.

Job placements at 25-month lowBritish recruitment firms said the num-ber of people placed in permanent jobsfell at the fastest pace since 2009 inNovember, highlighting the pressures onthe economy at a time of public spend-ing cuts and worries about theEurozone. A survey for the Recruitmentand Employment Confederation (REC)and accountant KPMG released todayshows that private sector job creationslowed to a 25-month low. The pace oftemporary placements also slowed.

EDITORS LETTER

ALLISTER HEATH

Editorial StatementThis newspaper adheres to the system of

self-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the EditorsCode of Practice, a copy of which can be found atwww.pcc.org.uk

Printed by Newsfax International,Beam Reach 5 Business Park,Marsh Way, Rainham, Essex, RM13 8RS

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

David Potts is leavingTesco after 39 years atthe firm. He started hisretail career as a shelf-stacker, aged 16

4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900 Fax: 020 7283 5334Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowActing Night Editor Marion DakersBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Jo SimpsonPictures Alice Hepple

CommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

CLARKE REJECTS CALL FOR EU POWERGRABKen Clarke has told Conservativeeurosceptics to forget about repatria-tion of powers from Brussels at this weeks European Union summit,while urging David Cameron to focuson how to maintain the financialstability of the western world. The justice secretarys comments, in aninterview with the Financial Times,will infuriate the Conservative right,who want Cameron to wring conces-sions from the talks.

US PAYDAY LENDERS TARGET UK POORUS lenders pushing short-term loansthat charge up to 5,000 per cent inter-est per year are targeting low-incomeUK borrowers abandoned by highstreet banks. The so-called paydaylenders, which also include home-

grown companies, are drawn byBritains relatively unchecked market.

GLENCORE FLOTATION BRINGS TAXPERK TO SWISS VILLAGES RESIDENTS

Glencores $11bn flotation has provedan unexpected bonanza for the smallSwiss village that is home to the com-modity groups chief executive. Theresidents of Rschlikon, population5,200, voted on Monday night tolower the local income tax rate aftervillage coffers were swelled by theirshare of the new-found wealth of IvanGlasenberg. Glasenberg is one of sev-eral Glencore executives who benefit-ed from the initial public offeringand reside in Rschlikon.

ANDROID HITS 10BN TO NARROW APPGAP WITH APPLEGoogle is beginning to bridge theapp gap between its Android smart-phones and Apples rival iPhone, asfigures reveal users are downloading1bn software applications per monthon each of the two platforms. Avibrant ecosystem of apps is seen as

vital to customers smartphone choic-es as competition increases.

BLOOD DIAMONDS ON SALE FOR 103MAS CHINA AND MUGABE BENEFIT FROMSPLITA company jointly owned by Chinaand Zimbabwe has started selling dia-monds from the notorious Marangefield, the first such auction since theinternational ban on PresidentMugabes blood diamonds was lift-ed. Gems worth $160m (103m) wereon sale in a secure room of the state-owned Zimbabwe MineralsMarketing Corporation in Harare.

SPORTS DIRECT FINDS UNUSUAL ROUTETO HELP AILING BLACKS LEISURESports Direct has proposed a highlyunusual joint venture with its ailingrival Blacks Leisure that would lead tothe retailers sharing their warehousesand distribution network. Blacks, in which Sports Direct holds a 21 per

cent stake, is desperate to raise freshfunds and refinance its 40m debt.

BOB DUDLEY SAYS HIGH OIL PRICESTHREATEN ECONOMIC RECOVERYOil prices are so high as to risk stunt-ing global economic growth, accord-ing to BP chief executive Bob Dudley.A combination of low supply and highprices could particularly damage theUS and have a knock-on effect on therest of the world, threatening thealready fragile economic recovery, hesaid. Dudley predicted the price ofBrent crude would average between$90 to $100 a barrel next year, whilesome industry analysts have forecastthat it could rise even higher.

DENPLAN PUT UP FOR SALE BY AXA FOR100MAxa has put its dental-insurance busi-ness, Denplan, up for sale for a mouthwatering 100m, the Daily Telegraphcan reveal. Denplan covers more than

1.8m patients across the UK. It is theUK's biggest dental insurance firm.

FORD SUCCESSION PLAN WILL TESTTURNAROUND METTLEOver the last five years, Ford MotorCo. has pulled off a remarkable turn-around under chief executive AlanMulally. Now, the auto maker faces itsmost daunting task: delicately man-aging the CEOs succession. Mulally,who is 66 years old, is expected to giveup the top post at the auto makerwithin the next two years, accordingto people familiar with the matter.

FACEBOOK FLAW EXPOSES ITS CEOA security vulnerability in Facebookssocial-networking site exposed bysome users sent the company scram-bling for a fix after Chief ExecutiveMark Zuckerbergs private photos were published online. In a 27November post on the web forumBodybuilding.com, an anonymous

writer listed step-by-step instructionson how to access private photos.

WHAT THE OTHER PAPERS SAY THIS MORNING

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GREECES new coalition governmentlast night passed an austerity budgetfor 2012, aimed at shrinking its debtmountain with tax hikes and spend-ing cuts.

Three major parties backing tech-nocrat Prime Minister LucasPapademos solidly voted for the budg-et plan, a package of deeply unpopu-lar measures needed to cut the deficitand show foreign lenders the countryis sorting out its finances.

As lawmakers debated the budget,hundreds of masked youths hurled

petrol bombs and clashed with Greekpolice outside parliament.

MOST countries will not get a vote ontighter fiscal integration, allowingGermany to force through new finan-cial controls across the Eurozone,European Council president Herman

Van Rompuy said yesterday in areport sent to EU leaders ahead oftomorrows two-day summit.

US Treasury secretary TimGeithner added his weight to effortsto resolve the crisis rapidly, sayingreforms now would lay the founda-tion for future economic growth.

France and Germany want newrules by which countries would beautomatically punished if they rundeficits of over three per cent of GDP.

By changing only protocol 12 of theEU treaty, which relates to excessivedeficits, Van Rompuy believes theproposed changes do not require rat-ification at national level.

This means rapid and significantchanges can be introduced to stopany repeat of the current debt crisis.

It is crucial to enhance the credi- bility of our budgetary rules and toensure compliance, said VanRompuy, which will help restore

market confidence in the Eurozone. The report also outlined plans to

keep national debts below 60 per centof GDP, and followed German plansfor a golden rule on balanced budg-ets.

In October, opposition fromSlovakian politicians nearly derailedchanges to the bailout fund, and thecountrys government fell in passingthe measure.

Although much of the detail is stillto be discussed, French PM FranoisFillon did warn that it could takeuntil late 2012 to ratify new fiscalcontrols.

Van Rompuy hopes to avoid suchdelays on the basis that enforced fis-cal restraint will give the EuropeanCentral Bank the confidence it needsto give more support to weak banksand governments, helping to end thecrisis.

Global markets rallied late lastnight on reports that Eurozone offi-cials are in talks to ramp up the cur-rencys bailout fund to close to 1trillion, by allowing an existing pot ofcash to continue running once a newpackage is introduced in 2012.

More details are expected toemerge during the summit.

EC boss says

nations cantblock treaty

PRIME Minister David Cameron hasvowed to protect the City by blockingany revised EU treaty if Europeanleaders do not provide safeguards forBritains financial services.

I will not sign a treaty that doesnot have those safeguards in it,around things like the importance ofthe single market and financial serv-

ices, he told the BBC.If they choose to go ahead with aseparate treaty then clearly thats nota treaty Britain would be signing oramending. But if they want to use theEuropean institutions then Britain

will be insisting on the safeguardsand the protections that Britainneeds.

Cameron agreed that Eurozonecountries do need to come together,do need to do more things together.

Cameron pledgesto protect the City

EUROPES financial stability facilitycould be downgraded because itsguarantors credit ratings are all look-ing shaky, Standard and Poors said

yesterday, endangering any futureefforts to save indebted governments.

The warning came as French PrimeMinister Franois Fillon claimed aEurozone break-up could cost 25 percent of GDP for the strongest coun-tries and about 50 per cent for the

weaker economies.Meanwhile, data agency Eurostat

confirmed the currency unions

economies grew by just 0.2 per centin the third quarter.

S&P rating cutlooms for EFSFGreek leadersagree budget

BY TIMWALLACE

EUROZONE

EUROZONE

EUROZONE

BY JENNY FORSYTHUK POLITICS

News 3CITYA.M. 7 DECEMBER 2011

IRELAND PASSES AUSTERITY PLAN AS IT LOWERS GROWTH OUTLOOK

Ireland's coalition govern-ment yesterday announced1.6bn (857m) worth oftax increases in the secondpart of what it hopes willbe the toughest budget ofits five-year term of office.Minister for financeMichael Noonan (left)

aimed the government axeat social welfare payments,the health sector and educa-tion, with fuel and rentallowances, disability pay-ments and student grantsall cut. But income tax andthe corporate tax rateremain the same, the gov-ernment said as it cut its2012 growth forecasts from1.6 to 1.3 per cent.

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BRITAINS entrepreneurs will have toprove their risk exposure to takeadvantage of a series of new taxbreaks, according to draft rules pub-lished yesterday.

The Treasury will allow largerfirms to apply for venture capitaltrust and enterprise investmentscheme (EIS) benefits from April next year, providing the plan meetsEuropean Union rules on state aid.

Firms with up to 249 staff, whichhave assets of 15m and raise 10m ayear from backers, will be eligible, upfrom the previous limit of 49 workers,7m in assets and 2m of support.

A new disqualifying purpose testwill be introduced, however, with theaim of weeding out investors whoapply for relief in the hope of divert-ing the benefit to other companies.

Firms set up for the purpose ofobtaining green energy subsidies,such as feed-in-tariffs, also face beingexcluded, according to the draftfinance bill, published followingGeorge Osbornes Autumn Statement

The aim of the EIS and VCTschemes is to help smaller, riskier UK

companies to compete for equityfinance, recognising a market failurein the supply of such finance, it said.

Philip Hare, tax adviser at PwC,said the proposals could help higher-risk ventures to gain access to cashbut warned the restrictions could putventure capital trusts at a disadvan-tage compared to other VC firms andprivate equity funds.

The Treasury plan also includes adoubling to 1m of the amount thatindividuals can invest in the EIS,which has already been approved bythe EU.

The document also outlines plansfor an increase in tax reliefs onresearch and development for smalland medium-sized enterprises and onthe Patent Box incentive scheme,which encourages firms to commer-cialise their intellectual property.

George Bull, senior tax partner atBaker Tilly, said the patent schemehad the potential to staunch thehaemorrhage of creative industriesto countries with lower taxes.

This is most likely to benefit thepharmaceuticals, life sciences, manu-facturing, electronics, and defenceindustries as well as the highly-publi-cised games creators.

Osborne aims

to reward therisk-takersBY PETER EDWARDS

POLITICS


George Osborne wantsto make it simpler forwealthy people to backyoung companiesPicture: REUTERS

A 2bn tax cut shouldnt be sniffed atCREDIT where credit is due. We arealways quick to criticise the fiddlymicro-measures so beloved by the Treasury, mere baby steps that donothing to boost the competitive-ness of UK Plc.

But when it comes to corporationtax, the coalition has made greatstrides.

By 2015-16, the exchequer will col-lect some 2bn less in tax from UKPlc, according to Treasury estimates,once you add the effect of corpora-tion tax cuts to plans to reform themuch-hated regime that governs for-eign profits (CFC).

It is debatable how much of that

has been chipped away by othertaxes, such as higher national insur-ance contributions, or by the evergrowing burden of red tape. But what is effectively a 2bn tax cutshould not be sniffed at.

The Treasury doesnt believe indynamic forecasting, but we thinkthe changes to corporation tax andCFCs will boost economic activityand government revenues.

Firms who were considering leav-ing the Britain will now seriouslyconsider staying; those who haveleft might return; and some foreignones could even choose to call theUK home.

WPP, the media giant whom thepolicy was essentially designed for,still has its concerns, as we reveal onpage one, but the Treasury is keen toaddress these.

George Osborne has linked the

success of the policy so publicly tothe return of one multinational thatfailure is not an option.

The decision to reform the CFCregime to lure WPP back to Britishshores might have been good poli-tics but it was good economics too.

BOTTOMLINEAnalysis by David Crow

DRAFT FINANCE BILL: KEY POINTS

R&D TAX CREDIT: HM Treasury hasintroduced a patent box a reduced cor-porate tax rate of 10 per cent for earningsfrom patented products, which is aimed atencouraging innovation in science and tech. NON-DOMS: Non-doms will get taxrelief on cash they bring into the country toinvest in UK companies, although not forinvestment in other ventures, but therewas widespread disappointment over theTreasurys decision to delay changing thedefinition of a non-dom. TAXING FOREIGN PROFITS: TheTreasurys changes make for a significantlymore generous regime. Most noteworthy isthe shift to a presumption that overseassubsidiaries profits are not liable for UK taxunless proven otherwise, which is theopposite of the previous stance. CAPITAL GAINS TAX: The allowancefor gains that are exempt from CGT will

now rise in line with the lower consumerprice index, not the retail price index.

TAXATION OF INSURERS: The wholetax regime for insurers is being overhauledto simplify it, but PricewaterhouseCoopersJonathan Howe warns that it remainsvery complex. He adds that the decision toabolish life assurance premium reliefamounts to a cost of 14 per policy. TAX SIMPLIFICATION: While manyrecommendations by the Office of TaxSimplification will be acted upon, such asthe abolition of tax relief for cycle to workdays and luncheon vouchers, late-nighttaxi expenses will continue to get relief. REITs: The draft bill relaxes the rules onwhat can qualify to become a real estateinvestment trust (REIT), opening the doorfor listed firms to re-classify themselves asREITs and abolishing the entry charge oftwo per cent of the entitys assets. SME INVESTMENT: The Treasury aimsto make it easier for small to medium sized

firms to get financing, by expanding theenterprise investment scheme

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HERV BARMASSE, GRESSONEY, VALLE DAOSTA, ITALY. PHOTO: DAMIANO LEVATI

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AIRLINES lined up to condemn the gov-ernments stance on air travel yesterday,calling the governments consultationon air passenger duty a sham and a

waste of taxpayers money. The Treasury confirmed yesterday

that the levy on passengers wouldjump by eight per cent in April, despitea massive lobbying effort by the air-lines, who argue that the charge is hit-ting tourism.

The hike comes at a time when air-lines are already frustrated by the coali-tions lack of ideas for keeping up withinternational growth in air travel, witha third runway at Heathrow scupperedand a plan for a new hub in the

Thames Estuary still in its infancy.British Airways said the most recent

blow had made its plans to create 800new jobs next year impossible, and thatit would cut this number in half, andshelve up to three Boeing 747s.

The government launched a consul-

tation in June about its plans for anAPD rise at double the rate of inflation,but said the 500 responses it receivedhad not changed its mind.

It made clear that the tax is a rev-enue raising exercise rather than anenvironmental levy. Yet it has cut thefee for flights from Northern Ireland even though the Treasury expects theresulting increase in demand to benegligible.

BA, EasyJet, Virgin Atlantic andRyanair said in a joint statement theconsultation has been a sham and a

waste of taxpayers money. We are leftwith a tax that has already cost 25,000jobs, is doing increasing damage to theprospects for economic recovery.

The UK is set to lose a total of 1.1bnfrom tourism spending by 2017 thanksto the rising cost of APD discouragingholidaymakers from visiting, accordingto research by the Tourism Alliance.

But the tax has done little to put offAir China from the UK the firm yes-terday unveiled a new Gatwick toBeijing service, starting in May.

Airlines say

air tax talkswere a sham

Chief executives Steve Ridgeway from Virgin Atlantic, Carolyn McCall from Easyjet, Willie Walsh from IAG and Ryanairs Michael OLeary stood united against the air tax Picture: REUTERS

BYMARION DAKERS

TRANSPORT

News6

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KPMG AZSAs reputation took a hit yesterday when the independentinvestigation into Olympus releaseda report naming substandard exter-nal auditing as one of the central fac-tors in the scandal.

The report censured the Japaneseauditing firm, of which Olympus

was a long-standing client, for issu-ing unqualified clean opinions with-out in-depth evaluation and forneglecting to disclose key informa-

tion in its March 2009 handover toErnst & Young ShinNihon.

We cannot say this was appropri-ate, the report concluded.

The investigation, which waslaunched after former Olympuschief executive Michael Woodford

blew the whistle on the companyssuspicious accounting history, foundno evidence of involvement fromorganised crime groups but said thatthe core of management was rot-ten and should be replaced, corrob-

orating the claims MichaelWoodford has been making since heleft Olympus.

The independent panel alsoplaced former executive vice-presi-dent Hisashi Mori and ex-internalauditor Hideo Yamada at the heartof the problem for their part in thefinancial cover-up.

Headed by former supreme court judge Tatsuo Kainaka, the panelurged legal action against thoseinvolved in the concealment of over1bn in losses.

Woodford commented: The

panels report has made one thingpainfully clear: the massive scale ofthe malfeasance from which thepresent directors and statutory audi-tors averted their gaze.

Todays report must be the begin-ning, and not the end, of our effortsto discover what has happened atOlympus.

Olympus shares jumped 11 percent yesterday morning to 1,255

before levelling out to 1,190 at theclose of Tokyo trading.

Auditors hitby Olympusprobe verdictBY LAUREN DAVIDSON

TECHNOLOGY


THE WHISTLEBLOWERMichael WoodfordOusted after going public with suspi-cions of "murky transactions"."One had to be prepared to bekicked out of the company to makean objection," said report

KPMG AZSAReport said the firm "issued

an unqualified clean opin-ion without in-depth eval-uation when there was a serious conflictover the accounting treatment by Olympus"

Ernst & YoungShinNihonReplaced KPMG AZSA in2009. Not as heavily cen-

sured as KPMG but allowed Olympus to"treat and record a questionable fee asgoodwill, the report found

THE AUDITORS

THE EXECUTIVESMasatoshi Kishimoto (far right)President 1993 - 2001

Tsuyoshi Kikukawa (right)President 2001 - 2011

Hisashi Moriformer executive vice presi-dent - left Nov 2011

Hideo Yamada ex-internal auditor - left Nov 2011

"The core of management wascorrupted and the surroundingportion was contaminated,the report found

SNAPSHOT OF A SCANDAL

CONCLUSION"Olympus should remove itsmalignant tumour and literallyrenew itself"

ANALYSIS l Olympus Corp

Nov 2011Oct 2011 Dec 2011

1,000

1,500

2,000

2,500

500

1,1906 Dec

80per cent

fall in stock price afterWoodford spoke out

117.7billionthe amount of losses

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www.cityam.com

BARCLAYS has ditched JP MorganCazenove as one of its broking advis-ers, replacing it with Deutsche Bank.

Deutsche, which has been buildingup its UK broking business in recentmonths, has a strong financials teamthat is already advising Phoenix, thelife assurance group, and Bank ofIreland. The German bank has alsopicked up a number of financial servic-es clients in recent months, includingStandard Life and RSA.

Barclays will now go forward withthree corporate brokers, Credit Suisse,Deutsche Bank and Barclays Capital,the banks own broking arm, which isalso ramping up its UK broking busi-ness.

JP Morgan Cazenove, which inherit-ed Cazenoves remarkable dominanceof the UK stockbroking market, is stillthe top FTSE 100 broker in terms ofclients, with 35. It is currently fol-

lowed by Bank of America MerrillLynch, with UBS and Deutsche also inhot pursuit.

Broking mandates are rarely prof-itable in their own right but are con-sidered vital for investment banks intheir attempts to win lucrative merg-ers and acquisition work.

Deutsches aim, since hiring NickBowers from Credit Suisse as co-headof corporate broking in 2009 to workalongside Charles Wilkinson, has beento reach 25 FTSE 100 broking clients. Itnow has 21 such clients and has pickedup more net FTSE 100 clients than anyother bank since 2009.

The one blot on an otherwise glow-ing landscape is the banks recent fail-ure to successfully advise G4S in itsattempted acquisition of ISS.

Some say its brokership of G4S isnow vulnerable, although CreditSuisse survived a similar issue at thePrudential, after the insurance groupsmega bid for rival AIA failed amid aninvestor backlash.

Deutsche wins

broking tie-upwith Barclays

Barclays Bob Diamond has shaken up his group of broking advisers

BY DAVID HELLIER AND JULIET SAMUEL

CAPITAL MARKETS

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DUTCH insurance group Aegon hasreassured investors that it had not been blown off course by theEurozone debt crisis and will meetits financial targets to 2015, as itkicked off a two-day investor con-ference in New York yesterday.

Aegon, which received a 3bn(2.6bn) bailout in 2008 and hassold off non-core assets to de-riskits balance sheet since, will set outits strategy to cope with ongoing

very low returns in capital markets.We welcome this opportunity

to reaffirm our commitment todelivering on our 2015 financialtargets based on our currentassumptions, despite the strongheadwinds of the current econom-ic environment, said chief execu-tive Alex Wynaendts. He said thefirm was taking decisive steps tooffset the negative impacts of themarket turmoil.

Aegon will update investors onthe turnaround at its huge US pen-sions business Transamerica. Itsold off the reinsurance arm for$900m in April to refocus the firm

on life insurance and pensions. Itrepaid its state bailout in June.

Aegon to hit2015 targetsdespite crisisBYALISON LOCK

INSURANCE

INNOVATION Group, a supplierof outsourcing services toinsurers, yesterday said majornew client wins such as RBSInsurance helped boost its pre-tax profit by 54 per cent to15.1m in the past year.

The firm said revenues rosenine per cent to 175.9m,while in Europe revenues rose12 per cent as all businessesapart from its Spanish armgrew.

Innovation separately said it bought an Australian claimsspecialist for 13m, and said itexpected more growth in 2012.

We feel strongly that wehave now moved from being aturnaround business to a

business delivering sustainableand profitable growth, it said.

Outsourcinginsurers liftsfirms profits

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SWISS RE SEES $600M THAI FLOOD LOSS

FLOODS that swept Thailand in November, killing more than 600 people and caus-ing $8-11bn (5.1-7bn) of insured losses, will cost reinsurance giant Swiss Re $600m,it said yesterday. The floods hugely damaged factories, adding to the woes of Asianfirms that moved production from Japan after the earthquake. Picture: REUTERS

ASIAN appetite for insuranceproducts should boom next year,outpacing growth in developedmarkets, Swiss Re said yesterday.

The reinsurer forecasts a 4.4per cent jump in life insurancepremiums, up from just 0.6 percent growth this year, as affluentAsian populations seek out moresavings and protection products.

The news bodes well for Asia-focused insurer Prudential.

Emerging Asia is forecasted tocontinue to outperform devel-oped markets, said ClarenceWong, Swiss Res chief economistfor Asia. Non-life premiums areexpected to rise six per cent in2012 after 8.1 per cent this year.

Demand forcoverage inAsia to boom

INSURANCE

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CITY SNAPSUP FLATS IN

DELAUNAYNEIGHBOURNO PRIZES for guessing who was firstthrough the doors of The Delaunay:restaurant reviewer AA Gill, who was yes-terday spotted having breakfast with thenew brasseries co-owner Jeremy King.

Of course, Gill was followed closely byThe Capitalist, who caught up with King ashe studied the architects plans for hisnext opening Brasserie Zdel, which willlaunch next June on the site of the former

Atlantic Bar & Grill off Piccadilly.Friends have remarked how good it is

to see us back on form, said the manwho built up Le Caprice, The Ivy and JSheekey into the pinnacle of London din-ing with business partner Chris Corbin,

only to see them fall into the hands ofrival Richard Caring.

King and Corbins restaurant is part ofthe No. 1 Kingsway estate, bought in 2005

by developer UK & European Investments(UKI), which also contains 105,000 sq ft ofoffice space and seven residential apart-ments with an entrance on Kean Street.

Immediately to the east of the Midtowndevelopment is the City which is whythe seven people who have signed up forthe annually renewed leases on the flatsinclude a fund manager, a banker and a

Greens manager Abelines Geldenhuysdidnt trouble the police they haveenough on at this time of year but hasreplaced the Italian-imported originals

with B&Q fakes. Just in case this storygives any bonus-deprived bankers funnyideas

MEN BEHAVING BADLYLEGAL Business magazine is known for

being an authoritative read. And evenmore so this morning, when it publishesits annual Christmas quiz on the excesses

of City lawyers all anonymous, unfortu-nately, to prevent a landslide of lawsuits.

So over to you to work out which part-ner at a major firm has gained notoriety

by sleeping with every single secretary inthe firms large litigation practice.

Or the individual at a well-to-do WestEnd firm who purchased the adult DVDsNina Hartleys Guide to Spanking andPeeping Tom at St Lukes. Your returnedcheque has been sitting there since April,says the firms plea for said lawyer to visitthe postroom. Discretion guaranteed!

property developer. And a Middle Easternprince although UKIs managing direc-tor Barney Kelham wouldnt confirm

whether the sheikh is the key-holder forthe developments largest property, thethree-bedroom penthouse.

TOWER BLOCKEDMEANWHILE, UKI has quietly withdrawnits planning application to develop theprime sites in Shoreditch it bought in

August from Lloyds Banking Group.So there will be no iconic residential

tower containing 116 private apartmentsnext to members club Shoreditch House,and no affordable housing units at nearbyFleet Street Hill. Both sites are among theeight UKI bought from Lloyds this sum-mer as part of the former assets of HBOS-

backed London & Newcastle, whichremains as manager.

We are in the fortunate position thatall the sites are income-producing assets,Kelham told The Capitalist. So we arereviewing our options and we will decidehow we want to develop the sites when we

believe the time is right.

RARE COMMODITIES TIMES are tough in commodities. But just how bad only became fully clearwhen The Capitalistheard how one met-als trader had to resort to stealing the

brass taps from the mens washroom inGreens on Cornhill.

The guilty party, as captured on CCTV,was wearing a red puffa jacket and car-ried a hessian supermarket eco-bag ineach hand, before making off downLombard Street with a 500 haul of coat-hooks, mirror screws and chrome-plated

brass tap handles.

Left: Number 1Kingsway on Aldwych

Above: GreensRestaurant & OysterBar on Cornhill

Call 0800 049 4448 or visit carphonewarehouse.com

Offeravailableuntil25thDecember20.Allinformationisaccurateatthe timeofgoingto print.Importantdueto thefastmovingnatureofalloffers,pricesandavailabilityaresubjecttochange.1Tabletnotincluded.BlackBerry,RIM,Researchinmotionandrelatedtrademarks,namesandlogosarepropertyofResearchinMotionLimitedandare registeredand/orusedin theU.S.andcountriesaroundtheworld.UsedunderlicensefromResearchinMotionLimited.

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EDITED BY

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

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ANALYST VIEWS: WHAT IS THE OUTLOOK FORWOLSELEY IN TOUGH MARKETS? Interviews by John Dunne

WOLSELEY, the worlds biggest build-ing supplies company, posted a 16 percent rise in first-quarter trading prof-its yesterday and warned it willremain vigilant on costs due to uncer-tainty over the outlook.

The FTSE 100 company said under-lying operating profit rose 16 per centto 185m in the three months to theend of October, helped by stronggrowth across its US businesses.

Overall like-for-like revenue was upfive per cent to 3.64bn.

Wolseley has continued to grow well, with strong growth in the USoffset by lower growth in some of ourEuropean businesses, said chief exec-utive Ian Meakins in a statement.

Given continuing macroeconomicuncertainty, trading conditions mayget tougher in the coming months,he added.

Wolseley, operator of the PlumbCentre and Ferguson chains in

Britain and the United States, saidthat like-for-like revenue rose 10 per-cent in the US, and all its key busi-nesses continued to take marketshare. This compares with a three percent decline in like-for-like revenueduring the first quarter in the UK.

Earlier this year the company soldits French distribution divisionBrossette and its UK-based BuildCentre business for 310m to Saint-Gobain, which also owns the UKchain Jewson, as part of a disposalstrategy.

Wolseley stillwary despitelift in profits PROTESTERS who have taken over adisused UBS building in the City couldbe evicted as soon as today after a HighCourt judgement is handed down.

Mr Justice Roth is due to rule thismorning on the Occupy groups chal-lenge to the injunction obtained bySun Street Properties, a subsidiary ofthe Swiss bank.

The protesters claim that UBS failedto give them sufficient details of a tele-phone hearing presided over by anoth-er High Court judge on the night of 18November, hours after they gainedentry to the Sun Street building.

They are seeking to have the evic-tion dismissed on the grounds it wasawarded without notice and there isno need to protect people from immi-nent, serious injury.

If they lose, however, then the Bank

of Ideas which they describe as acommunity centre for people hit bypublic spending cuts could be quick-ly closed down.

Separately police in New Orleansyesterday shut down another Occupycamp, which was set up two monthsago. Dozens of people had been stay-ing in a public park near City Hall fortwo months.

One person refused to leave and wasarrested but the raid was otherwisepeaceful, police said.

Showdown forUBS activistsin High Court

Wolseley chief executive Ian Meakins said the economic outlook is uncertain

BY JOHN DUNNE

BUILDING

POLITICS


ANALYSIS l Wolseley

p

30 Nov 1 Dec 2 Dec 5 Dec 6 Dec

1,925

1,950

1,975

2,000

1,900

1,875

1,850

1,825

1,972.006 Dec

TONY SHEPARD | CHARLES STANLEY

Over the last two years, Wolseley has done well to deleverage andreposition the Group. It is now more focused and with improving customer serviceit is looking to increase market share and and improve returns. Although Wolseleyis operating in tough markets we expect i t to make further progress.

SIMON BROWN | NORTHLAND CAPITAL PARTNERS

Group structures are now more in-line with European markets and thehard work is shown in these results. Nonetheless, it is a tough trading environmentand despite the improved focus of the group in many markets there are reasonswhy caution has to be taken when looking at the current fiscal year.

ANDY BROWN | PANMURE GORDON

We have concerns about the likely strength of the US residential andcommercial recovery. Recent disposals show that management are doing a goodjob tidying up the portfolio. For now our stock preference remains elsewhere inthe sector.

8/3/2019 Cityam 2011-12-07

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ROYAL Dutch Shell has found shalegas in China, a development thatcould cap imports in a market natu-ral gas producers are hoping willdrive demand.

An official with Shells partnerPetroChina, a unit of the countrystop energy group, state-owned CNPC,said drilling results from two wellsShell drilled had been positive.

Shell has two vertical wells andthey got very good primary produc-

tion, Professor Yuzhang Liu, vicepresident of Petrochinas ResearchInstitute of Petroleum Explorationand Development (RIPED), said at thesidelines of the World PetroleumCongress in Doha.

Its good news for shale gas, saidLiu, who regularly representsPetroChina at industry events aroundthe world.

China currently has no commercialshale gas production.

Some industry executives doubt

the explosion of shale gas in the USthat has revolutionised the marketthere could be replicated elsewheredue to difficult geology, the lack of

water availability or land accessissues.

Liu accepted the rock formations inChina were different from those inthe United States but denied thismeant they were more challenging orless bountiful. In less than decade,shale gas has transformed the USfrom gas shortage to a point wherecompanies are planning to export liq-uefied natural gas (LNG).

Shell boostedby shale gasfind in China

RWEs share sale fell flat yesterday asinvestors held back amid the Standard& Poors warning of a credit rating cutto Eurozone countries.

The German utility said it raised2.1bn (1.8bn) by selling 80.4mshares to institutional investors at26 a piece well below the 2.5bn it

had hoped for when it announced itsplans in August.

RWE has also been hit by theGerman governments decision made in the wake of JapansFukushima nuclear disaster -- tophase out nuclear power completely

by 2022, meaning that RWE will haveto produce electricity at a higher cost

while wholesale prices could falterdue to slow economic growth, stag-

nating populations and rising energyefficiency.

It planned to reduce debt with thecapital raising.

Shares for the company, Germanyssecond largest utility, yesterdayslumped 7.2 per cent to close at28.15. In earlier trading they haddropped as much as 12 per cent andare down 44 per cent from the start ofthe year.

RWEs 2.1bn share sale hampered byS&Ps credit warning to the Eurozone

BYHARRY BANKSENERGY

BY JENNY FORSYTHUTILITIES


ANALYSIS l Royal Dutch Shell

p


2,350

2,300

2,250

2,200

2,150

2,269.506 Dec

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

Yes, of course, if itwould bring business

to this country. Imnot an expert, butsurely additionaltax revenues canonly be agoodthing?

ALAN MEEKMACROBERTS

CITY VIEWS: SHOULD THE GOVERNMENT BE DOING MORE TO ENCOURAGECOMPANIES TO HEADQUARTER IN THE UK? Interviews by Lauren Davidson

It definitely should certainly for larger

global companies and not just byreducing tax, whichseems to be itsmainapproach.

PETER LAWREYPLUS MARKETS

Yes. A lot of business isdone here, but a lot

of revenue escapesus. The governmentis far too soft,although it isimprovingwithCameron.

VALERIE ELLWOODANGEL INVESTMENTS LTD

8/3/2019 Cityam 2011-12-07

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BILLIONAIRE investor Carl Icahn wenthostile with his $1.73bn (1.1bn) bidto buy Commercial Metals yesterday,a day after the metals recycler reject-ed his buy-out attempt.

Icahn, who owns about a 10 percent stake in Commercial Metals, saidhe will start a tender offer and willrequire the support of at least 40 percent of the companys shareholders.

On Monday, Commercial Metalsrejected the corporate raider turnedactivists $15 a share offer, saying itsubstantially undervalued the compa-

ny and was opportunistic. The firmdid not comment on the new bid.

BOND and equity investors should brace themselves for another torridyear as the Eurozone debt crisis entersa final phase, two senior executivesat City fund manager Fidelity warned

yesterday.Stock markets will see another year

of high volatility and falling prices asthe current crisis of confidence in

weak states debt escalates into aglobal sovereign crisis for developedeconomies, warned Dominic Rossi,Fidelitys global chief investment offi-cer for equities.

Andrew Wells, Fidelitys globalchief investment officer for fixedincome, said bond markets were alsolikely to suffer as investors lost faith insafe havens.

In government bonds, we are see-ing a reappraisal of what constitutes asafe haven, he said. The realisationthat some of the largest risks in the

bond universe reside in what was seenas the lowest-risk end of the spectrumis a watershed moment.

Sovereign defaults will remain themajor concern for markets in 2012.

Rossi said investors should targetstocks offering high dividend yieldsfor income, as the prospect of capitalappreciation is very low in developedequity markets.

But he said high market volatilitymay also mark the last down-leg ofthe debt crisis, as equity markets areexcellent discounting mechanisms.

Wells said the rising risk associated with sovereign bonds was makingaggregate bond indices and thefunds that track them increasinglyhazardous. Around half of the risk inthe Bank of America Euro AggregateBond Index comes from sovereign

bonds. More worryingly, the nature ofthat risk is highly correlated since ifone peripheral nation leaves theEurozone, it increases the likelihoodthat others will follow, he said.

Debt crisis tobring marketpain in 2012

Icahn in hostileoffer for metals

BYALISON LOCK

CAPITAL MARKETS

M&A

Fidelity global chief investment officer for equities, Dominic Rossi, warned of tough times

News16

UP TO 200 jobs will go at US foodgroup Krafts Cadbury plants over thenext year, as part of a reorganisationthat will see the company split intotwo.

The firm admitted yesterday thatredeployments and voluntary redun-dancies would hit sites in Bournville,Chirk and Marlbrook from nextMarch but said it would also beinvesting 44m to expand its UK fac-tories.

Both the job losses and the newinvestment will be spread over the

next two years, and biscuit produc-tion will be moved to the UK.

Kraft axes 200jobs at CadburyFINANCIAL SERVICES

8/3/2019 Cityam 2011-12-07

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WEB domain names ending in .xxxwere made available for purchase by

the general public yesterday despiteongoing legal efforts to foil the move.Until now the .xxx pages, of which

around 100,000 have been sold, werereserved for big brands. The first sites

went live in September.Stuart Lawley, chief executive of

ICM Registry, said: The new domainfunctions as a responsible alternativefor sites that offer adult entertain-ment content.

However, pornography providersManwin Licensing and Digital

Playground have filed a lawsuitagainst ICM Registry, claiming the.xxx suffix is anti-competitive.

According to Manwin, which runs

the Playboy websites, ICM Registry ischarging annual fees of about $60(38) per address with the red lightsuffix. This is about ten times higherthan the standard fee for other top-level domain names.

Companies and individuals that donot want their name seen next to .xxx

will be able to pay a one-off fee of upto $300 to disable their page.

Lawley said: It has been 10 years inthe coming and today the floodgatesare open.

INDIA has called for web giantsGoogle, Facebook, Microsoft and

Yahoo to screen content uploaded byinternet users.

The worlds largest democracyunsuccessfully urged the social net-

working sites to remove material thatmight offend Indian sensibilities.

Kapil Sibal, Indias telecoms andinformation technology minister, met

with executives from these companiesearlier this week.

He specifically mentioned web illus-trations which depicted PrimeMinister Manmohan Singh andNational Congress Party PresidentSonia Gandhi in compromising posi-tions as well as a site showing pigs run-ning through Mecca, Islams holy city.

Sibal said he expected the compa-nies to use humans, not technology, toscreen the user content.

Rajesh Chharia, president of theInternet Service Providers Association

of India, said: I am not favouring cen-sorship, but we should not do any-

thing which could harm the peace ofthe country.A Google spokesperson commented:

When content is legal and does not violate our policies, we will notremove it just because it is controver-sial. We believe that peoples differing

views, as long as they are legal, shouldbe respected and protected.

India has more than 100m internetusers, of whom over 25m are onFacebook.

India fails bidto censor web

controversies

Internet domains ending in .xxxnow available to general public

BY LAUREN DAVIDSON

TECHNOLOGY

TECHNOLOGY

Google wont protect Manmohan Singh from legal user content online Picture: REUTERS

News 17

ANALYSIS l Google Inc

$


610

620

630

640

600

623.776 Dec

8/3/2019 Cityam 2011-12-07

18/36

8/3/2019 Cityam 2011-12-07

19/36

THE FINANCE director of Michael Pagesold 2.25m of shares in the strugglingCity recruiter fewer than three weeksbefore it issued a profit warning.

Stephen Puckett and his wife, Amanda, sold nearly 595,000 shareson 17 and 18 November.

They were not the only ones to cashin as Charles-Henri Dumon, managingdirector for continental Europe andthe Americas, sold 130,000 shares,

worth just over 475,000, on 15 and 16November.

Shares in Michael Page, which finds jobs for people in finance, law andaccounting, sank 5.2 per cent onMonday after it warned of falling prof-its for the second time this year. It blamed employers for abandoningplans to hire because of the Eurozonecrisis, leading analysts to talk downthe sector further.

The firms stock inched up 0.06 percent yesterday to close at 346.11p,

down by more than a third over thelast six months.

This weeks profit warning came inan unscheduled announcement andtherefore was not subject to a closedperiod, when directors are bannedfrom trading in their firms shares.

One analyst told City A.M. the tradeswere not best practice but there is nosuggestion that Puckett, his wife orDumon are guilty of wrongdoing.

Puckett is due to leave the firm forpersonal reasons. Michael Pagedeclined to comment.

Job firms FDsold shares

before alert THREE major private equity houseshave agreed an investment link-up with China Development Bank, apower-house of the Eastern economy.

Permira, KKR and TPG Capital yester-day announced strategic agreementswith CDB, which has also launched aforeign investment platform.

Permira will become sole Europeanprivate equity partner to CDB Capital,the Chinese banks asset manager.

Kurt Bjorklund, Permira co-manag-ing partner, said the fund wants toincrease its presence in China, wheresome of its consumer companies, suchas Hugo Boss and pay-television tech-nology firm NDS, have grown quickly.

CDB, which is changing from a gov-ernment-focused bank to a commer-cial lender, has been stepping upinvestment in domestic funds as well

as in several Sino-foreign funds aimedat facilitating cross-border investment.

The foreign investment platformreflects its desire to become a globallycompetitive institution, as well asBeijings desire to fund overseas expan-sion by Chinese companies.

Hong Kong-based CDBInternational will participate in directinvestment and asset management,making use of the CDB brand and gov-ernment resources to help Chinesecompanies invest overseas, CDB said.

PRIVATE equity house Electra is con-sidering a raid on bank assets aslenders deleverage amid theEurozone crisis and tougher regulato-ry demands.

Electra will look healthy business-es, as well as those with a bad bal-ance sheet, chief investment officerAlex Fortescue told City A.M.The buy-out group is not interested in full-

scale turnaround deals, however.He was speaking as Electra beat

analyst expectations to post an 8.5 percent increase in asset valuations to2,225p for the year to 30 September.

Chairman Colette Bowe, pictured,said the results showed Electras abil-ity to invest and divest successfullyduring tough times.

Since the year ended Electra hasagreed terms to sell its stakes in heat-ing products group BDR Thermeaand credit card group SAV Credit.

Private equityhouses in Chinainvestment link

Electra mulls asset raidamid banking shake-up

Electra chairman Colette Bowe hailed their performance in tough timesBY PETER EDWARDS

PROFESSIONAL SERVICES

PRIVATE EQUITY

NewsCITYA.M. 7 DECEMBER 2011

BY PETER EDWARDSPRIVATE EQUITY

19

ANALYSIS l Michael Page International

p


340

360

380

400

320

340.006 Dec

8/3/2019 Cityam 2011-12-07

20/36

HOUSE prices fell in November,reversing Octobers gain as the mar-ket remained unpredictably choppy,Halifax announced yesterday.

The banks monthly house priceindex showed a fall of 0.9 per cent inthe month, taking the annual fall toone per cent and the quarterlydecline to 0.6 per cent.

The fall compares with a 1.2 percent monthly rise in October. Pricesnow stand at an average of 161,731,down from 164,269 last November.

Halifax economist Martin Ellisexpects the market to stabilise incoming months.

Overall house prices have

remained remarkably stable in 2011despite the difficult and deteriorat-ing economic climate and the sub-stantial pressure on householdsfinances, he said.

In addition, activity has recentlyshown a few signs of strengthening alittle. We expect the market toremain broadly unchanged in termsof both prices and sales.

However, estate agent Marsh andParsons believes the market is only being prevented from collapse byloose monetary policy.

These figures point to a marketthat is far from healthy, said chiefexecutive Peter Rollings. It is only ashortage of stock and historically lowmortgage rates that have preventedeven greater price falls.

New car sales fell in the year toNovember, though not as severely aswas feared according to data out yes-terday from the Society of MotorManufacturers and Traders (SMMT).

Car registrations in 2011 so far aredown 4.5 per cent compared with thesame period last year, at 1.82m.

However, the SMMT believes sales will reach nearly 1.94m this year,

exceeding earlier forecasts of 1.92m.Car sales are still some 20 per cent

below their pre-recession levels.The SMMT said car sales continued

to be supported by growth in the fleetmarket and sales promotions. Fleetsales were up 7.5 per cent on the year,but private car sales were down almost16 per cent.

Analysts said the data highlight con-tinued low demand, as a weak eco-nomic outlook weighs on sentiment.

The outlook for car manufacturerslooks challenging, with the economy

struggling markedly, said HowardArcher from IHS Global Insight.

Car sales drop as sluggisheconomy hits UK demand

UK ECONOMY

ASIAN economic growth is slowing asdemand from crisis-hit Europedeclines, the Asia Development Bank(ADB) warned yesterday.

The ADB cut east Asias growthforecasts for 2012 to 7.2 per cent,down from 7.5 per cent predicted inSeptember.

The turmoil emanating fromEurope poses a growing danger totrade and finance, the report stated.

Asias policy-makers must be pre-pared to act decisively and collectivelyto counter what could be an extendedglobal economic slowdown.

Such forecasts are based on expec-tations that the Eurozone economieswill grow by 0.5 per cent in 2012.

If the situation worsens and dragsthe Eurozone and US into a recessionon the scale of that seen in 2009, east Asias growth could fall to 5.4 percent.

China will still lead the region interms of growth, with GDP expectedto expand by 8.8 per cent, down fromearlier predictions of 9.1 per cent.Growth of 8.8 per cent compares with9.3 per cent this year.

However, Asian economies will notbe hit as severely as they were in 2009 because they have diversified theirexport markets, the ADB said.

Exports to Latin America and Africahave increased, while domesticdemand has also grown, reducingreliance on western markets.

Asia hit byEurozones

slowdownAISIAN ECONOMY

House prices

fall again inweak marketBY TIMWALLACE

UK ECONOMY


EURO CRISIS REACHES AUSTRALIA

Glenn Stevens, governor of the Reserve Bank of Australia, slashed interest rates for thesecond consecutive month yesterday, blaming the deteriorating global economic pictureand rising bank funding costs both due to the Eurozone crisis. The cut takes headlineinterest rates down to 4.25 per cent, and represents the first double-cut since the depthsof the financial crisis in 2009. Picture: REUTERS

Consumer confidence gives little to celebrate

AFTER Mervyn Kings dire warn-ings on the economic situation,I wish I could present more pos-itive news on consumer confi-

dence but the November data fromthe YouGov HEAT report paints rathera bleak picture.

The index is at its lowest sinceMarch, job security has fallen to its

worst level in two years, perceived dis-cretionary income continues todecline and if people do have money,they have little inclination to spend it.

The overall HEAT Index (out of 200)is a composite of the publics financialsituation, job security, house pricesand business activity at work. It hasnow fallen for four consecutivemonths and sits at 87, its worst levelsince March. Driving this are job secu-rity fears, which has seen a five point

drop since October and is at its lowestsince mid-2009. Further evidence ofthe extent of worry about unemploy-ment is shown as 30 per cent rate theprospect of unemployment as a 10 out

of 10 in terms of being a major threatto the economy. Its the first time sincewe first asked this question a year agoit has topped the list, overtaking ener-gy prices.

A spending-led recovery looksunlikely, with 37 per cent of Britonsreporting that they have less cashavailable than last month, while onlyseven per cent have more. And if theywere to get a windfall of one monthsincome, only 15 per cent would spend

it, with 48 per cent saving, and 38 percent paying off debts.

Can we find a glimmer of goodnews in all this gloom? While the over-all index chart does show optimism is

very low, levels are not are bad asspring 2009 perhaps there is comfortin the fact that its been worse before?

Stephan Shakespeare is the chief executiveof YouGov

BRANDINDEX

STEPHAN SHAKESPEARE

THIS week were asking members ofour Voice of the City /PoliticsHome.com panel for their

opinion on Standard & Poors shock

decision to put the ratings of 15countries, including Germany andFrance, on review late on Monday.

Was S&P right to act when it did,and do you see any link betweenthe announcement of the latest

euro rescue measures, and the tim-

ing of the rating agencysannouncement?

To become a member of thepanel, and answer these questionsand more, apply to join atcityam.com/panel. Results will be

printed in Mondays paper.

PoliticsHome.comPoliticsHome.com

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

BY ELIZABETH FOURNIER

POLITICS

In partnershipwith

Is S&P right to put Europe on watch?

ANALYSIS l Londons prices remain high

Price ()

London House prices

Q32009

Q12010

Q12011

Q4 Q2 Q2Q3 Q3Q4

275,000

265,000

255,000

245,000

240,000

235,000

270,000

260,000

250,000

ANALYSIS l The fall in house prices slowedthis year

Price ()

UK house prices

Nov09

Mar Jul Nov Mar11

Jul Nov

170,000

166,000

162,000

158,000

156,000

168,000

164,000

160,000

ANALYSIS l

Jan 2011 Apr 2011 Jul 2011 Oct 2011

7678808284868890929496

Job SecurityHEAT index

ANALYSIS l

Mar 09 Mar 10 Sep 10 Mar 11 Sep 11Sep 09

20

40

60

80

100

120

Heat Index

HEAT index v job security Historic HEAT index

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www.icapcharityday.com

For instantmobile access

scan this tag

SAFE, London.

Children running to see SAFEs performance about HIV in Rabai, Coast Province, Kenya. SAFE uses the Performing Artsto inspire, educate, and lead social change. SAFE are one of over 200 charities benefiting from ICAP Charity Day 2010.

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BRITAIN is to begin a wide-rangingconsultation on plain packaging oftobacco products by the end of the

year, informed by the legal challengesAustralia has faced as the first nationto pass such legislation.

Australias parliament approvedlaws last month to introduce plainpackaging from December 2012 toreduce the attraction of smoking, butthree tobacco giants have launchedlawsuits saying the laws infringetrademark rights, with Imperial

Tobacco the latest to launch a chal-lenge yesterday.

Under the legislation, cigarette,pipe tobacco and cigars will have to

be sold in branding-free olive greenpacks displaying the product name ina plain typeface along with graphic

health warnings. Governments inEurope, Canada and New Zealand

will be watching closely.In March, Britains health secretary

Andrew Lansley announced plans tostart considering a move towardsplain packaging under a new tobaccocontrol plan, but he gave notimescale.

The tobacco control plan confirmsa commitment to consult by the endof this year on options to reduce thepromotional impact of tobacco pack-aging, including an option to requireplain packaging, said a departmentof health spokeswoman yesterday.

She added that the departmentwas looking for expert legal advice on

all aspects of a possible move before itpublishes a consultation documentthat would look at the costs as well asthe additional public health benefitsof policy options.

UK government toconsult on tobacco

packaging rulesBYHARRY BANKS

CONSUMER

NEWS | IN BRIEF

EC probing e-book publishersThe European Commission is investigat-ing whether e-book publishers ownedby Lagardere, Pearson, News Corp andtwo other firms fixed prices with Apple,blocking rivals and hurting consumers.The decision by the EuropeanCommission to open an investigation

yesterday followed raids on the compa-nies in March this year. US regulatorsare also looking into pricing dealsimposed under an agency model inwhich publishers set the retail price.Antitrust rules forbid price-fixingagreements designed to shut out com-petitors or that could result in con-sumers paying more.

Northern Rock office to closeUK Asset Resolution, the body set up bythe government to manage the toxicassets resulting from the collapse ofNorthern Rock and Bradford & Bingley,will close down a north east Englandsite in a move that will affect 700 staff.UKAR said in a statement that itplanned to withdraw staff from itsGosforth site by mid-2013. It added thatthe majority of these workers wouldhave the chance to relocate to the near-est UKAR site some 18 miles away. But

chief executive Richard Banks said joblosses were likely under the move toclose the office, which he said was nolonger cost effective now that the firmis winding down some operations.

SOTHEBYS SALE NETS 2.3M

AN AUCTION of European sculpture at Sothebys yesterday proved that art is still seen asa worthy investment, with final prices for the top four lots exceeding estimates by asmuch as three times over. The star lot was an early south German limewood figure of St

John the Baptist, bought by the Getty Museum in Los Angeles for 313,250.

GENERAL Motors said yesterday itwould not support a proposed owner-ship structure for Saab that included aChinese bank, moving the Swedishauto company closer to liquidation.

We have reviewed Saabs proposedchanges regarding the sale of the com-pany, GM spokesman James Cain saidin a statement. Nothing in the pro-posal changes GMs position. We areunable to support the transaction.

GM has said it would be difficult tosupport a sale of Saab that hurts GMscompetitive position in China andother key markets.

Without GMs technology licences

and production contract, analystshave said, Saab would be unable tocontinue in its present form.

Saab owner Swedish Automobilesaid on Monday it was in talks with aChinese bank about taking a stake inSaab.

The new proposal was part of aneffort to address the concerns of GM,

which still has preferential shares inSaab and licenses technology and pre-

viously built a vehicle for the Swedishcarmaker, which halted operations in

April.When asked about GMs rejection,

Swedish Automobile chief executiveVictor Muller said in a text message:There is always Plan B. He said it wastoo early to provide details.

Saab has lurched from crisis to cri-sis in the past year and has not pro-duced any cars for several months asits main factory in Trollhattan,Sweden, has been shut because ofunpaid salaries and bills.

Saab hovers on brinkwithout GM supportBYHARRY BANKS

AUTOMOTIVE

METRO, the worlds fourth-biggestretailer, issued a profit warning thatsent shockwaves through the sector

yesterday, saying Christmas tradinghad started slowly and the Eurozonedebt crisis was undermining con-sumer confidence.

Shares in the German group, whichruns cash and carries, hypermarkets,electrical goods and departmentstores, slumped over 13 per cent.

We feel the resulting consumerrestraint across all sales divisions and

national borders, outgoing chief exec-utive Eckhard Cordes said in a state-ment.

Metro, world number four behind Tesco, Frances Carrefour and USindustry leader Wal-Mart, said itexpected both sales and earnings

before interest, tax and special items tocome in below 2010 levels, should

weak Christmas trading continue.Previously it had forecast earnings

growth of at least five per cent, evenwithout a good Christmas.

A Metro spokesman said shoppers

were particularly holding back on pur-chases of consumer electronics and

clothing, sold mostly through itsMediaMarkt, Saturn and Kaufhofstores.

He said quiet sales last weekend, tra-ditionally the second week of theChristmas shopping season, hadprompted the profit warning fromMetro, which usually waits until

January to give details of Christmastrading.

Bernstein analyst Chris Hogbin saidthe warning did not bode well forrivals like Tesco, which reports third-quarter sales figures tomorrow, and

particularly Carrefour, which is alsohighly exposed to Eurozone countries.

BYHARRY BANKS

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MORE NEWS

ONLINE

www.cityam.com

ANALYSIS l Swedish Automobile NV


0.34

0.36

0.38

0.40

0.32

0.30

0.28

0.26

0.286 Dec

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THE BOSSES of some mining compa-nies are letting their shareholdersdown by ignoring corporate gover-nance issues, a hard hitting report hasfound.

According to the research, dozens ofLondon-listed firms are missing out onmaking more money for theirinvestors through their bungling inthe boardroom.

Half of the 179 listed companieshave lost shareholders 60 per cent oftheir investments over the past five

years, the report by Opus a specialistin running oil, gas and mining compa-nies said.

Out of a possible eight points, thesector only scored an average of threeon corporate governance.

The main market is subject to corpo-rate government rules but the

Alternative Investment Market where many of the problems exist isnot as strictly policed.

The research laid bare the recruit-ment policies of many companies,

with only four per cent of directorsinterviewed formally, and the remain-der coming through personal friend-ships or contacts.

Half of companies have no financedirector while only 3.7 per cent of

board positions are held by women.The Opus figures also revealed that

the top 10 performing companies oncorporate governance increased share-holder value by 92 per cent, while the

bottom 10 decreased value by 80 percent.

Opus managing partner BrianMartin said companies should sharp-en up their act to provide a better dealfor shareholders.

Following corporate governancehelps make more money, its good forthe heads of these companies and theshareholders. Unfortunately some donot see it that way. It is a question ofaccountability.

There are examples where thechiefs of companies are having chauf-feur driven cars or taking private jets

when they do not need to, which isunfair on shareholders.

Some do not want more checksand balances.

Martin called on the FinancialServices Authority to crack down onthose flouting rules. The report comesamid a flurry of Russian resource com-panies looking to list in London but

with some falling short on corporategovernance grounds.

IRISH food group Greencore expectssignificant profit growth in 2012helped by its Uniq acquisition and ascost price inflation eases, after itreported 2011 results in line with ana-lyst expectations.

Greencore, one of the biggest sand- wich and ready meal suppliers toBritain, said it still planned to play a

role in the consolidation of theBritish convenience food sector

despite the failure of a takeoverapproach announced on Monday.

Operating profit will see signifi-cant improvement next year despitechallenging marked conditions in theUS and UK due to the impact of theacquisition of rival Uniq in July, saidchief executive Patrick Coveney.

Greencore bought British rivalUniq for about 113m.

Yesterday it reported an operatingprofit of 51.5m, down from 51.6m

last year but above analyst forecasts of50.8m. Revenues of 804m were up

4.3 per cent on a like-for-like basis.

Greencore operating profits slide butfirm is upbeat after Uniq acquisition

EUROPEAN Goldfields shares werehalted on the Toronto Stock Exchangeafter a report the developer of minesin Greece has been approached abouta takeover by Eldorado Gold.

In a statement, EuropeanGoldfields acknowledged its recenttrading activity and confirmed ithad received preliminary and indica-tive approaches from third partiesregarding potential corporate trans-actions. It said it would not name the

possible bidders for the time being. The Investment Indu

Regulatory Organization of Canada yesterday issued a statement, con-firming the move.

Eldorados proposal to EuropeanGoldfields threatens to scupper QatarHoldings plan to buy a stake inEuropean Goldfields, Sky Newsreported.

European Goldfields Aim-listedshares soared 17.8 per cent yesterday,

while its Canadian stocks rose 15 percent before trading was suspended.

European Goldfields getsfresh takeover approachMINING

VEOLIA Environment, pressured by aslumping share price and twostraight profit warnings, aims to sellits transport business as part of a planto shed 5bn (4.3bn) of assets in thenext two years.

The worlds biggest listed watergroup also plans to slash its dividend

by 42 per cent and aims to cut expens-

es by120m in 2013 as part of a bid to boost operating income and reducedebt.

Yesterdays announcements cameat a much-anticipated investor dayafter Veolia unveiled only part of itsstrategy change in August includingplans to exit about half of the 70countries where it has businesses.

Investors, who have dumped Veoliashares this year, causing them to lose

more than half their value, reactedcautiously. The stock gave up earliergains of as much as 4.5 per cent toclose down 4.5 per cent at 9.09.

Theyve come out with anextremely aggressive objective whichis not going to be easy to realise inthis economic context, UBS analystPer Lekander said. It is the rightthing to do though but they are notout of the woods yet.

Veolia Environment plans transportbusiness sale in a bid to cut its debtUTILITIES

XSTRATA, the worlds fourth-largestcopper miner, expects to benefit from

supply troubles hitting the metalglobally, it said yesterday, as it report-ed increased resources and said itsown key projects were on track.

A drastic fall in output at ChilesEscondida, the worlds largest coppermine and majority owned by globalminer BHP Billiton, as well as ongo-ing strikes at Freeport-McMoRan cop-per operations and weatherdisruptions have hit copper outputand are set to keep the market in

deficit this year.But Xstrata executives said it

expected to increase its market shareand benefit from having investedthrough the 2008 crisis, giving it a

head start on equipment ordering,from a portfolio of new projects andfrom good relations with local gov-ernments as a result of continuedinvestment, helping it to keep work-ing.

The miner said earlier that it hadincreased its resource base at LasBambas and Corroccohuayco projectsin Peru and El Pachon in Argentina.

We do have an edge... we are oneof the few companies that continues

to operate in Peru at the moment... InArgentina we operated through somepretty difficult political periods,Charlie Sartain, head of XstrataCopper, the companys largest divi-

sion, said at an investor presentation.Plus, the portfolio of projects andoperations that we have enables us topick the winners, and identify thoseprojects that we think are going tohave the best chance of progressing.

In 2011, Xstrata has boosted con-tained copper in its mineral resources

by 10 per cent to 97m tonnes. It isaiming for more than a 50 per centrise to 1.5m tonnes per year by theend of 2014.

Xstrata sees resources boostBYHARRY BANKS

MINING

Miners losing

due to poorgovernanceBY JOHN DUNNE

MINING

BYHARRY BANKS

CONSUMER

MOUCHEL NAMES FOURTH CHAIR OF 2011

STRUGGLINGinfrastructure

group Mouchelnamed former

Deloitte senior

partner DavidShearer its newchairman yester-day, making himthe fourth holder ofthe post this year.

Describing him asa turnaround spe-cialist, Mouchelsaid Shearer wouldreplace interimchairman Sir

Michael Lyons on 9January next year.Shearer joins

Mouchel after astring of profitwarnings and amanagement exo-dus in October.

NEWS | IN BRIEF

Total to buy GDF Suez stakeTotal, operator of the Elgin/Franklin fieldsin the British sector of the North Sea, yes-terday announced it was buying GDFSuezs share in the two fields for 590m(507m). This participation is heldthrough a 22.5 per cent interest in thecompany Elgin Franklin Oil & Gas (EFOG).By giving Total control of the whole of thecapital of EFOG, of which it previously held77.5 per cent, the acquisition increases itsshare in the Elgin/Franklin fields from 35.8per cent to 46.2 per cent.

Northgate driving profitsVan-hire group Northgate said it wouldfocus on current assets rather thangrowth, after that approach enabled it to

post a 19 per cent rise in pre-tax profitto 32.3m yesterday.

Frontline plans restructuringFrontline, the largest independent globaloil tanker operator, has unveiled arestructuring plan that should spare itsinvestors a lot of pain and force ShipFinance International to take a big hit.Industry bellwether Frontline will split intwo, with the listed entity relieved ofmuch debt and handed new charterrates, in an attempt to secure its futurein an industry hit by weak demand andovercapacity. The last-minute dealspares existing shareholders dilution,and should mean lower costs. Frontlinessplit will create an unlisted company,Frontline 2012, which will raise $250min equity and take over commitments fornewly built ships and related debt, and

buy 10 tankers from Frontline at marketvalue.

ANALYSIS l Greencore


068

0.70

0.72

0.74

0.66

0.64

0.62

0.646 Dec

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100 Women in Hedge FundsThe not-for-profit body has electedMimi Drake, president of Permit CapitalAdvisors, as chair of the global board

and Sandra Urie, chairman and chiefexecutive of Cambridge Associates, asvice chair, effective from 1 January2012. Kristen Eshak Weldon, managing

director of Blackstone GroupInternational, has been elected as chairof the London board, and KathrynGraham, director at BT Pension SchemeManagement, will join the London exec-utive committee as vice chair.

Towers WatsonThe professional services firm hashired Danny Howell as head of

cityam 2011-12-07

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