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News2 CITYA.M. 9 DECEMBER 2011

China makesKalahari bidKALAHARI Minerals has agreed to a662m takeover by China GuangdongNuclear Power Corp, as the nationcontinues its acquisition spree in a bid to meet its spiralling energyneeds.

AIM-listed Kalahari, which is thetop shareholder in one of the worldslargest uranium projects, had been intalks with the state-owned firm before Japans Fukushima nucleardisaster in March. The disaster led theChinese group to back away from areported 290p a share offer.

The latest offer will see investorstake away 243.55p in cash for eachshare they hold. Kalahari owns 42.5per cent of Extract Resources, whichis working on the Husab Uraniumproject in Namibia.

China has snapped up a string ofenergy firms in recent months andthe government has outlined itsintention to use its foreign exchangereserves to back its companies marchinto foreign territories.

It is particularly keen to secure ura-nium-mining projects to fuel aplanned fleet of new power stations.

Tycoon Li Ka-shing agreed to buyNorthumbrian Water for 2.4bn overthe summer in what had been thebiggest takeover of a UK-listed compa-ny this year. It was later trumped byHPs 6.6bn takeover of Autonomy.

BY STEVE DINNEEN

MINING

GDF SUEZ LAYS OUT FIVE YEAR PLANGDF Suez, the worlds biggest inde-pendent power producer, is to spendup to55bn globally over five years asit tries to double its size in Asia andcut its reliance on Europe, where ithas been locked in dispute with twoof its biggest state customers. GrardMestrallet, chief executive, said GDF was planning capital spending ofbetween 9bn and 11bn in each ofthe years between 2012 and 2017.

TEPCO FACES TAKEOVER BY STATE Tokyo Electric Power, owner of Japans tsunami-crippled nuclearplant, is facing renewed financialpressures that could prompt the gov-ernment to inject capital and effec-tively nationalise the company,according to people familiar withthe matter. Tepcos shares lost 11 per

cent of their remaining value on yes-terday.

WARNER MUSIC DAMPS SELL-OFF TALK Warner Musics new owners have

cooled speculation that they couldsell its music publishing business todefray the cost of Len Blavatniks$3.3bn buy-out, as they said thegroup had a strong independentfuture even after losing out in theauction for EMI. Citigroups sale ofEMIs two divisions, to VivendisUniversal Music and Sony, ended adecade-long pursuit of the Britishmusic company by its US peer.

WELLS AND SEC AGREE TO SETTLEWells Fargo has agreed to pay $148mto settle allegations of rigged bids inthe US municipal bond market by theDepartment of Justice and theSecurities and ExchangeCommission. The bank admittedwrongdoing in its DoJ settlement butthe SEC agreement followed theagencys standard, and of late, contro-versial practice of the bank agreeing

to pay fines without admitting ordenying the regulators complaint.

COUNCIL TAX RISES FACE OBSTACLEBig council tax rises for next yearwere ruled out yesterday when theGovernment effectively imposed a 3.5per cent cap. Eric Pickles, theCommunities Secretary, announcedthat any council setting an increaseover this amount would trigger alocal referendum. If more than 50 percent of the population opposed theincrease, the council would be forcedto reverse the decision.

BDO TURNOVER FALLS FARTHER A dearth of companies going bustcontributed to turnover at BDOfalling seven per cent last year, themid-tier accountancy firm said yester-day. BDOs turnover for the year to July fell for the second consecutiveyear to 281m as demand for profes-sional services among small and

medium-sized businesses remainedsluggish.

AMAZON: WALK OUT OF SHOPS FOR $15Bricks and mortar retailers are used tofeeling threatened by Amazon, butnow the online shopping giant hasstepped up its assault by offeringshoppers up to $15 to walk out ofstores empty handed. Amazon haspromised to reward customers whouse its mobile price comparison app,Price Check, to scan products in store but then buy them on Amazoninstead.

FIRMS TO PICK WATER SUPPLIEREvery business in England would beable to choose its water supplier,under radical plans to increase com-petition in the sector. Companies thatcurrently receive individual bills foreach of their sites and have to dealwith dozens of water suppliers couldpotentially opt for just one national

bill and could benefit from lowerprices.

EXXON DECLARES GAS KINGNatural gas will replace coal as theleading fuel for generating electricityin the US by 2025, when it will alsobecome the worlds number two over-all fuel source thanks to its abun-dance and a drive for cleaner-burningenergy, according to the latest long-term outlook from Exxon Mobil Corp.The closely watched study forecastsglobal energy demand will growabout 30 per cent by 2040.

BOEING STAFF RATIFY CONTRACTBoeing machinists have ratified a land-mark, four-year contract extension, set-ting the stage for the likely dismissal ofa politically charged dispute betweenthe National Labor Relations Boardand the aerospace company. About 74per cent of voting members of theInternational Association of

Machinists and Aerospace Workersapproved the agreement.

WHAT THE OTHER PAPERS SAY THIS MORNING

Three myths that require a rebuttal

Myth number one: Tesco is becoming largerand larger. Fact: it is (very) gradually losingmarket share in the UK grocery market,according to Kantar.

Its share peaked at 31.2 per cent inDecember 2007 and is now back at30.5 per cent, a market share last seenin 2006. When it comes to UK gro-ceries, at least, it has been a case of fivewasted years for Tesco, despite a hugepush and many new stores. The com-pany remains a formidable player andBritish success story but this showsthat market concentration is not aone-way bet. All the talk a few years

back of a Tescopoly turned out to benonsense. Size isnt always self-rein-forcing, especially after a certain point,apart from in network industries (andeven then entire networks can be

ditched in favour of new ones). Retail ismore competitive than ever, and thatcan only be good for consumers.

Myth number two: the government hasbacked the City to the hilt and wants to saveit from Brussels madness. Fact: the govern-ment spent its first 18 months attacking theCity, and is now entirely schizophrenic in itsattitude towards it.

Of course, a revolution was requiredin the City after the mad bubble. Manyof the reforms since 2008 have beengood, including getting banks to holdmore capital, be more liquid and cuttheir leverage. Some have even beenexcellent. The move to introduce reso-lution schemes and living wills toallow even the biggest banks to fail in acontrolled way more advanced in theUK than elsewhere will help banishbailouts for ever. But there have also

been lots of job-destroying, stupid andunnecessary policies, punitive taxesand a relentless stirring up of anti-Citysentiment. The British governmenthas also tolerated or even embraced a

tidal wave of EU rules, nearly of themflawed or disastrous. Hedge funds, pri-vate equity, insurers and now account-ancy firms have all been hammered;new pan-EU regulators have been cre-ated. The coalitions original aim wasto shrink the City; then to shrink it as ashare of GDP; now, with manufactur-ing in recession again, it has suddenlyrealised that it must find growth andjobs wherever they are created. Fine but it shouldnt pretend that it hasalways been the Citys best friend.

Myth number three: business uniformlybacks the EU. Fact: opinions have shiftedmassively since the euro crisis.

Given the onslaught of regulationsin recent years from the EU, and thatthe European market is set for at bestpermanent stagnation, it is patentlyclear that the appetite from real life

business for ever-deeper EU integrationhas waned. Of course, they want freetrade with the EU but the old enthu-siasm of yore has vanished, apart fromat a few refusenik multinationals.

It is time to readjust. There are costsand benefits to EU membership butthe massive benefits promised in the1980s and 1990s have not materialised,and the costs are now immense.Rather than spreading scare storiesabout the UKs isolation or obsessingabout the supposed wonders of the sin-gle market, business groups and tradelobbies need to understand that thereis little the UK can do to influence theEU. With 26 other member states,Britain simply doesnt have enoughvotes. It is time instead for a thoroughrethink of our relationship with theEU and for British business and itsrepresentatives to focus all of theirenergies on those parts of the worldthat are booming, rather than the bitsthat are facing permanent decline.

[email protected] me on Twitter: @allisterheath

THE FORMER chief executive of col-lapsed broker MF Global said henever intended to break any rulesas he admitted he does not knowwhat happened to millions of dollarsof missing client money.

Jon Corzine said he simply doesnot know the location of the cash, when questioned by the US HouseAgriculture Committee, his first pub-lic appearance since the firm filed

for bankruptcy on 31 October.MF Global is under investigation

over claims it raided customers seg-regated funds for its own needs. When Corzine was asked if he per-mitted this type of transfer, he said:If I did, it was a misunderstanding.

Congressmen criticsed Corzine fornot giving straight answers.Democrat David Scott said: I cancount the times you used the wordsnever intend, not to my knowledge,not to my recollection, never intend-ed to.

BY PETER EDWARDS

FINANCIAL SERVICES

Corzine: I know nothingShow me the money: Congress wants to know about missing client cash Pic: Reuters

NEWS | IN BRIEF

New City flats on St Barts siteProperty group Helical Bar hopes toattract City staff to live closer to workwith its latest development. The firmhas released plans for 225 new flats and230,000 square feet of offices on the StBartholemews Hospital site near LittleBritain. The firm and its joint venture

partner Baupost hope to have formalplans ready to submit in February andstart work in two years, having boughtthe site from the NHS for 55m earlierthis year.

Ford brings back dividendFord has turned the ignition on its divi-dend for the first time in five years, witha quarterly payout of five cents a sharethat the number two US automaker saidit could maintain during any futuredownturn. The dividend, payable inMarch, will cost Ford about $760m(485m) a year. The company last paida quarterly dividend, also five cents ashare, in September 2006 when Fordwas in crisis mode. That same month,Ford chairman Bill Ford brought in AlanMulally as chief executive to lead a turn-around credited with staving off a bank-ruptcy.

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THE EUROPEAN Central Bank (ECB)cut interest rates to record lows and

vowed to step up efforts to keep banksafloat but will not fulfil hopes that it

will bail out indebted governments, bank boss Mario Draghi (pictured)announced yesterday.

Acknowledging the credit crunchsweeping the Eurozone, banks cannow access unlimited amounts of liq-uidity for three years, not the previousmaximum of 12 months, and collater-al with lower credit ratings willnow be accepted in return.

Eurozone banks now havemore liquidity support thanthe Bank of England or theFed offers, helping prop upthe embattled institutions.

However, stocksdropped and peripheral

bond yields shot up asmarkets feared the lat-est rescue plan was intatters.

Eurozone leaders hadhoped that measures toforce profligate govern-ments into controllingtheir finances would

give the ECB confidenceto buy bonds and sup-port the governmentsthrough a difficult transi-

tion period.Instead, Draghi explained he was

not in a position to fund governmentsin the way politicians want the ECB

be will become lender of last resort tobanks, like the Bundesbank, but not togovernments.

He also ruled out lending to the IMF,which could in turn help euro states.

If the IMF were to use this moneyexclusively to buy bonds in theEurozone, we think it is not compati-

ble with the treaty, he explained.Economists fear disaster will ensue.It is only the expectation of aggres-

sive ECB bond buying or some formof commitment in that regard thathas been preventing the completemeltdown of European financial mar-kets, said Dario Perkins fromLombard Street Research.

Investors fled risky assets,leaving stocks and weakgovernments bonds,moving to gilts, bundsand Treasuries.

The CAC40 plunged2.53 per cent and theDAX fell 2.01 per cent. Yields on Italian ten- year bonds ended0.467 percentagepoints higher, at 6.458

per cent and Spanishyields rose 0.383 per-centage points to5.814 per cent.

Draghi: I willbail out banksbut not states

EU banks need to raise 114.7bn(97.9bn) to shore up their stability, theEuropean Banking Authority (EBA)said yesterday, revising up its estimateof German banks shortfall by11bn.

The total in new capital required forthe continents lenders was revised upfrom its 106bn estimate in October,

but all of the increase was due to adeterioration in Germanys banks and

some other states totals actually

decreased. The data used was updatedfrom June to September numbers.Commerzbank was told to raise

5.3bn, up from2.9bn while DeutscheBank has been told it must raise3.2bn, which is thought to be signifi-cantly above the previous amount.

Banks have until June next year toreach a core tier one capital ratio ofnine per cent after writing down the

value of their sovereign debt holdingsto market levels.

But the EBA has said that the capital

requirement is a temporary crisismeasure to provide a reassurance tomarkets about the banks ability to

withstand a range of shocks.It also declared that lenders should

not be allowed to reach the target bydeleveraging but will have to tap upprivate markets for cash.

That will be seen by many analystsas highly unrealistic, given investorsreluctance to commit more cash to

banks.

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German banks told to find11bn more in new capital

BY TIMWALLACE

EUROZONE

BY JULIET SAMUEL

BANKING

News 3CITYA.M. 9 DECEMBER 2011

WHY DID MARKETS FALL?

Q.WHY DID MARKETS REACT SOBADLY?A.Politicians, led by Merkel andSarkozy, proposed a plan to cutdeficits and reform their uncompeti-tive economies, stopping a crisis likethis happening again. However, to

work this long-term plan, politiciansneed short term help. They wantedthe ECB to buy the debt of troublednations. ECB boss Draghi had hintedhe might go along with this, as longas government guarantees were inplace. But Draghi snuffed out that

hope, and markets optimism.

Q.DIDNT THERATE CUT HELP?A.Markets expected thiscut, and had priced it in. Oneproblem is that the vote to cut rates

was not unanimous, suggestingfuture cuts are less likely.

Q.WHAT CAN THEY DO TO SAVETHE EURO NOW?A.Today EU leaders are meeting tocome up with a plan, which mayinvolve begging from countries likeChina, or trying again to convince

Draghi to bail them out.

Q A&

A DOZEN EU COUNTRIES BANKS MUST RAISE NEW CAPITAL BUT NOT BRITAIN

Capital shortfall

Austria3.9bn

Belgium6.3bn

Cyprus3.5bn

Germany13.1

Spain26.2bn

UK0

France7.3bn

Capital shortfall

Greece30bn

Italy15.4bn

Netherlands159m

Norway1.5bn

Portugal7bn

Slovenia320m

Total 114.7bn

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CONCERNS that fund managers areoverpaying for newly-listed sharesand investment banks are chargingextortionate fees are unfounded,the London Stock Exchange said yes-terday, in a report recommendingimprovements to the IPO market.

On a series of key areas, from pre-IPO engagement with the investorcommunity and investment bankfees to the number of banks work-ing on floats, the LSE found the UKcompared favourably to counter-parts such as Nasdaq OMX, HongKong and NYSE Euronext.

But there has been public friction between IPO participants this yearand the LSE suggested changes such

as greater transparency over feespaid to investment banks, and alonger window for issuers to engagewith investors, to improve the mar-kets working.

Tracey Pierce, the LSEsdirector of equity pri-mary markets (pic-tured), denied thatconcerns over valua-tion and pricing were hurtingLondon IPOs. Evenin difficult marketconditions this yearthe IPO market per-formed betterthan in 2010, with 67 list-ings, she toldCity A.M.

It is not putting people off but Ithink we want not to be compla-cent and to address these issues.

Using data from Dealogic, theLSE said about 68 per cent ofLondon IPOs traded above theiroffer price a year after listing in both 2010 and 2009, comparedwith less than 60 per cent in NewYork and Hong Kong.

The issue about pricing and valuation has been driven inpart by a concern that banksgive companies unrealisticallyhigh valuations in order to win

their business, the reportsaid. It is concerningthat this beliefappears to be wide-spread amonginvestors.

LSE defends City infloats blame gameBY ALISON LOCK

CAPITAL MARKETS


LLOYDS Banking Group chief execu-tive Antnio Horta Osrio is havingone-to-one meetings with boardmembers with a view to comingback to the firm from sick leave.

Horta Osrio, who stepped backlast month due to extreme fatigue,will also be checked over by an inde-pendent panel before he can return,City A.M. understands.

Independent medical experts have been given access to Antonio, hisdoctors and his medical records.

Institutional shareholders as wellas the Treasury and UK Financial

Investments, which holds the states41 per cent stake in the firm, willalso have a say in whether he canreturn to the fold at the part-nation-alised bank.

It is thought that Horta Osrio iskeen to take up his job, which he hasonly held since March, but is effec-tively being asked to apply for thepost again.

He has already overseen a whirl- wind overhaul at the bank, cutting15,000 jobs and taking a 3.2bncharge for mis-selling payment pro-tection insurance, while Lloydsshare price has plummeted.

The bank is also in the middle ofselling off 632 branches.

The board is expected to make adecision in the next few weeks, oncethe chief completes his round ofmeetings.

Lloyds hopes to have an answer

before Christmas, given that interimchief executive Tim Tookey is set toleave the company in February.

Lloyds declined to comment yes-terday.

Horta Osrio couldreturn to Lloyds if

the board agreesBY JULIET SAMUEL & MARION DAKERS

BANKING

EVRAZ, the Russian miner and steel-making group part-owned by ChelseaFootball Club owner Roman Abramovitch, yesterday said it wasdelighted to be included in theFTSE 100 index.

A second Russian group, gold andsilver miner Polymetal, was alsoadded to the blue-chip index after thequarterly review by the FTSE commit-tee on Wednesday.

Evraz said it was the only steel andmining company in the FTSE all-shareindex.

Evraz chairman AlexanderAbramov said the index place was amark of the strength and diversity ofour assets, the quality of our manage-ment and the prospects of the busi-ness.

The London Stock Exchange pridesitself on its large international listingbase and said it now has almost 3,000companies from more than 110 coun-tries listed and traded on its markets.

BY ALISON LOCK

CAPITAL MARKETS

Russians join FTSE 100Chelsea owner Roman Abramovitch part-owns Evraz Picture: REUTERS

RUSSIAN power grid company MRSKlisted its shares in London yesterday ina move it hopes will boost the liquidityof its stock and enable it to raise fundsin the future, its chief finance officertold City A.M.

The technical listing, in which nomoney is raised, will see MRSK list 25per cent of its stock as global deposi-tary receipts -- the maximum allowed.

Russia owns a more than 50 percent controlling stake in MRSK, whilestate-controlled Gazprom has 10 percent.

Alexei Demidov said: The Londonlisting is very important for us. Londonis a hub which enable us to attractmore investors from across the world.

Rival state-controlled grid firm FSKcompleted the listing of its secondaryshares in London at the end of March.

A wave of Russian companies haverecently sought premium listings oftheir shares, with firms like Polymetallarge enough to seek inclusion in theFTSE 100.

MRSK lists onLSE to attractnew investors

RESOURCES

Companies share price above offer price after one year

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

90%

80%

70%

50%

60%

40%

30%

20%

10%

0

LSE NYSE HKEx

Proportion of IPOs priced below range

2007 2008 2009 2010 2011

40

30

20

10

0

LSE NYSE HKEx%

Proportion of IPOs priced above range

2007 2008 2009 2010 2011

%

15

20

25

10

5

0

LSE NYSE HKExAverage IPO deal syndicate size by major international exchange

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

25

20

15

10

5

0

LSE NYSE HKEx DB NASDAQ

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MAGIC circle law firm Linklaters isplanning cuts to its headcount thatcould see up to 35 equity partnersleave in the next year, sparking fears asecond round of redundancies could

be about to hit the City.It follows confirmation last week

that Allen & Overy is restarting itsannual equity management whichcould see up to three per cent of part-ners asked to leave for the first timesince 2009, when a firm-wide restruc-

turing saw around 450 staff lose theirjobs.

Sources close to Linklaters playeddown reports that the redundancies

were part of an equity restructuring.The cuts are not believed to be linkedto an ongoing review of how the firmorganises its lockstep the structurethat determines partners progressthrough the firm and remuneration.

Since the headline-grabbing staffcuts that hit City firms back in 2009,large-scale redundancies in the sector

have fallen off. Instead firms have con-tinued to trim numbers on a muchmore sporadic basis, as well as target-ing cost cuts through outsourcing,

Its a trend that industry insidersexpect to see continuing into 2012 asmarket conditions remain uncertain,particularly for firms reliant on asteady pipeline of corporate deals.

The legal sector is clearly notimmune to the economic crisis, andfirms are now constantly assessingtheir costs, said James Tsolakis, headof legal services in RBS corporate

banking division.

We would expect the trend for joblosses in the sector for 2012 to contin-ue, but in trickles rather than floods.

A Linklaters spokesperson said yes-terday: We continually look at our

business and partner base in the con-text of the markets and our clientsneeds. A natural part of this processincludes some new partners joiningand some partners moving on. Wheredecisions are taken by the firm, theyare taken reluctantly and only ever inthe long-term interests of the firm.

Linklaters tomake cuts topartner count THE UKs top 100 law firms have man-aged to post strong growth in the sec-ond quarter, despite an uncertainbackdrop thats likely to make condi-

tions tough going into 2012.Fee incomes at the biggest 100 firms

rose by an average of 9.8 per cent in thethree months to 31 October comparedto the same period last year, more thandoubling the average four per centincrease seen in the first quarter.

The figures, taken from professionalservices firm Deloittes latest legal sec-tor survey, show that the boost to rev-enues was driven by an increase inaverage fees per fee earner, which rose

by 5.7 per cent.But results across the sector are far

from consistent, with particularlystrong performances by certain firmsoffsetting weakness elsewhere.

Allen & Overy, Ashurst and TaylorWessing all posted a double digit risein first-half revenues last month, whileNabarros earnings dropped by fourper cent, and Gides fell 16 per cent.

It is pleasing to see strong growthreturning to the UK legal sector ... afteran extended period of challenging con-ditions, said Deloittes Jeremy Black.Whilst firms are relatively positiveabout the next six months, continueduncertainty in the markets means adegree of caution is needed.

Law firms poststrong growthamid turmoil

Linklaters, led by managing partner Simon Davies, is planning partner cuts

BY ELIZABETH FOURNIER

LEGAL SERVICES

LEGAL SERVICES


LAW firms are maintaining a bullishstance on the outside, with yesterdays

quarterly Deloitte survey (see right) see-ing firms forecast an average increase infee income of 6.2 per cent for the 2011-12 financial year.

But behind the scenes caution reigns.Equity locksteps are being reviewed, theintermittent trickle of redundancies isthreatening to turn into a steady flow,and more and more backroom servicesare being outsourced to cut costs. Like somany other sectors that rely on corporatetransactional work to survive, legal serv-

ices changed forever when the pipelinedried up somewhere around November

2008. Sources say a new dawn of pru-dence has permeated the sector, withpenny watching a priority as fee rises dryup and competition increases.

Despite this, the law firm modelremains a stable one, and one whichbanks are happy to help grow. So forevery partner redundancy thats mooted,expect to hear an announcement of anoffice opening in eastern Europe, or ateam lateral hire poached from a rival.Elizabeth Fournier

LAW FIRMS MAY BE REGROUPING, BUT THEYRE ALSO GROWING

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TESCO sales fell for the fourth quar-ter in a row yesterday, hitting thebottom end of analyst forecasts.

Like-for-like UK sales, excluding VAT and petrol, dropped 0.9 percent, equalling last quartersdecline.

This comes despite Tescosattempt to revive sales with its500m Big Price Drop campaign.

The marketing drive enticed anextra 346,000 customers to its storeswith more than 3,000 price cuts, sig-nificantly reducing the rate of infla-tion in its business.

Tesco chief executive Philip Clarkesaid: We have made good progressin our third quarter against the background of challenging condi-tions for consumers in many of ourmarkets.

The Big Price Drop campaign has

lowered prices significantly forhard-pressed families and we arenow being rewarded with stronger

food volume growth. The UK business, where Tesco

makes two thirds of its sales andthree quarters of its profit, contin-ues to grow faster than the industryoverall.

But Tesco suffered in China andKorea due to the unseasonably hotautumn and in Thailand followingthe floods.

Group sales for the periodincreased by 7.2 per cent.

Shares dropped one per cent to alow of 390p after the tradingupdate, closing yesterday at 397.2p.

Price slashescouldnt save

sales at TescoBY LAUREN DAVIDSON

RETAIL

SHOE retailer Barratts has fallen intoadministration, the latest victim of adownturn in consumer spending, put-ting 3,840 jobs under threat.

Business advisory firm Deloitte saidyesterday it had been appointed jointadministrator over the BarrattsPriceless Group, and that it would con-

tinue to keep the stores trading as itseeks a buyer for the business.

Barratts entersadministrationRETAIL


Tesco boss Philip Clarke praised the firms progress in tough conditions Picture: REX

ANALYSIS l Tesco

p

2 Dec 5 Dec 6 Dec 7 Dec 8 Dec

400

410

405

415

395

390

397.208 Dec

Woes in the UK could last for a whileTHERE is a sense of fin de sicle sur-rounding Tesco these days. Sir TerryLeahy, who first joined the super-market giant in 1979, has left the building, with a clutch of his keylieutenants in tow. Sales at existing

stores, which have risen inexorablyin recent years, are flagging. Its mar-ket share, once a source of great con-cern for the chattering classes, hasslipped.

It would be wrong to lay the blameat the feet of Leahys successor PhilipClarke, who has been in post for amatter of months. Although therehas been much hubbub about itsceding British market share over thelast year despite a costly price war,

the truth is its slice of the pie hasbeen shrinking for some time.

In the year to the end of November2007, its share of the UK grocery mar-ket was 31.2 per cent. By 2010, thathad slipped to 30.7 per cent. Earlier

this week, data from Kantar, showedit had shrunk a further 20 basispoints to 30.5 per cent, effectivelyputting it back at 2006 levels.

These fractional changes mightnot sound like much, but convertthem into lost sales and you get a dif-ferent story. The UK grocery market was worth around 103bn in theyear to the end of November. If Tescohad held its market share at 2010 lev-els, it would have booked an extra

206m in UK sales. If it had held it at2007 levels, it would have added anextra 722m to the top line.

The lesson from Wal-Mart,arguably Tescos closest US equiva-lent, is that once sales and market

share start to slip, it takes some timeto turn things around. Wal-Mart suf-fered two years of falling sales in itsdomestic market before registeringgrowth at the start of last month.

Hopefully Tesco shareholderswont have to wait for quite so long.

[email protected]

BOTTOMLINEAnalysis by David Crow

LOW-COST fashion retailer Peacocksis said to be mulling a cost-cuttingplan to close up to 200 of its shops.

The retailer is looking at restruc-turing its 240m debt pile and opera-tions, according to Sky News.

Peacocks currently has more than500 stores worldwide, having started

life as a bazaar in 1884. It delistedfrom the stock exchange in 2006.

Peacocks looksto close shopsRETAIL

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VEDANTA Resources yesterday com-pleted its $8.7bn (5.5bn) purchase ofa majority stake in Cairn Energy that will see Cairn chairman Sir BillGammell receiving a windfall of at

least 5m.London-listed Vedanta now holds58.5 per cent of Cairn India, of which20 per cent is held through its SesaGoa unit.

Cairn Energy, which will retain a22 per cent stake in Cairn India, con-firmed it would return around$3.5bn to shareholders withGammells 3.2m shares ensuring hima healthy payday.

Simon Thompson, who took overas chief executive from Gammell inJuly, will receive around 1m for hisshares.

He said: This transaction... crys-tallises the very significant value cre-ation that we have delivered fromour Indian business.

The company added: Our remain-ing 22 per cent shareholding in CairnIndia, retained cash and balancesheet strength provide financial flex-

ibility and an excellent platform forfuture growth opportunities.

Cairn Energy agreed in August lastyear to sell a majority stake in CairnIndia to Vedanta. But the sale, one ofthe largest in Indias energy sector,was delayed for months due to a dis-agreement over royalty payments.

The closure of the deal marks akey milestone for Vedanta as it puts

to bed a deal drawn out for well overa year that has contributed to under-performance on fears of deal termsuncertainty and balance sheetstress, analysts at Liberum said in anote.

Oil has been a solid performerover the course of 2011 ... we see theCairn India inclusion as the key fac-tor in repairing Vedantas balancesheet and boosting bottom-line per-formance.

Gammell gets5m windfallin Cairn saleBY JOHN DUNNE

ENERGY


ROBERT Leito, Rothschilds head ofUK global financial advisory, has ledthe team advising Cairn during its tor-tuous deal with Vedanta.

He joined the company in 1998after nine years at Morgan Grenfell &Co, where he was appointed a directorin 1995.

Leito has been involved in over150 high profile M&A deals, such asinvestment fund Melroses 525m dis-posal of McKechnie Aerospace in2007 and Thales 51m takeover of

data security firm nCipher in 2008.He was involved in Rolls-Royce

Groups 3.6bn public tender offer forTognum, and Lairds successfuldefence of Cooper Industries bid ear-lier in the year.

A chartered accountant, he quali-

fied at Peat Marwick Mitchell (nowKPMG) in 1987 and holds an engi-neering degree from Imperial CollegeLondon.

Rothschild has a longstanding rela-tionship with Cairn, having advisedthe company on its $1.9bn IPO ofCairn India in 2007 and the $1.6bnrefinancing of its Rajasthan project in2009.

The firm claims to have advised onmore M&A deals than anyone else inthe European oil and gas market dur-ing 2011.

ADVISERS: ROTHSCHILD

ROBERT LEITAO,HEAD OF UKGLOBALFINANCIALADVISORY

MULTI-TALENTED Sir Bill Gammellplayed international rugby forScotland before employing his

competitive skills in the businessworld. The well-connected entrepre-

neur attended Fettes College inEdinburgh with former PrimeMinister Tony Blair before movingon to the University of Stirling, where he obtained a BA inEconomics and Accountancy.

Gammells talents also stretchedto the sports pitch, where heplayed rugby union at both county

level and for the Scottish nationalteam.

A tall winger, he earned fiveinternational caps, with his careerhighlight coming against Japan in1977 in Tokyo when he scored four

tries to lead the Scots to a 74-9 vic-tory.After his rugby career was ended

by injury, he went on to foundCairn in Edinburgh in 1980.

The companys breakthroughcame in 2004, when a field it had bought in 2001 from Shell in theIndian province of Rajasthan wasfound to contain close to 1.1bn bar-rels of oil, catapulting it into theFTSE 100.

In the 1990s, he shifted the focusof the company from the North Seaand the US and the Gulf of Mexico-

Cairn USA effectively mergedwith a subsidiary of Texan compa-ny the Meridian Resource

Corporation in 1997 to SouthAsia, having spotted the opportuni-ty to tap energy supplies in devel-oping economies.

Gammell was paid an annualsalary of 552,000 for his role aschief executive at Cairn, but hisshareholding is worth millions.

On 1 July this year Gammellassumed the role of non-executivechairman.

The entrepreneurial spirit is in

his blood: his father was anEdinburgh investment banker whoset up the Ivory & Sime fund and,in the 1950s, put money into theUS oil company Bush-Overbey.

That made the Gammell family

friends with the Bush clan.Former US President George WBush reportedly took time outfrom the G8 summit at Gleneaglesto meet up with Sir Bill, and thefamilies holidayed together whereclose ties were made.

In 2004 he was awarded UKEntrepreneur of the Year. In the2006 honours list, Gammellwas knighted for services toindustry in Scotland.

BY JOHN DUNNE

TECHNOLOGY

SIR BILL GAMMELL

ANALYSIS l Cairn Energy

p


275.00

280.00

277.50

282.50

272.50

270.00

275.508 Dec

The rugby international who turned business star

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PRIVATE equity firm CVC has failed toreach a deal with creditors to refi-nance A$2.6bn (1.7bn) of debt in NineEntertainment, sources said yesterday,putting the future ownership of theAustralian media network in doubt.

That leaves the London-based buy-out firm facing one of the biggestpotential single equity losses in privateequity history, with $2.2bn at risk.

It will also have to fend off hedgefunds swooping to take control of

Nine. The funds have bought up senior

debt from creditors including Frenchbanks BNP Paribas and Credit AgricoleCommercial and Investment Bank,sources said.

CVCs Asia-Pacific arm had asked

lenders last month to agree to a two-and-a-half year extension on the debtdue in 2013, which represents some 70per cent of Nines total debt, hoping it would buy crucial time for Ninesadvertising revenue to improve.

But over the past week a string oflenders some who needed to repatri-ate cash to debt-stressed Europe soldchunks of their debt to hedge funds.

Sources said that US and Australianhedge funds, including OaktreeCapital, Anchorage Advisors, Och-Ziffand Apollo Global Management, nowcontrol as much as 50 per cent of the

debt and want to take control of Nine.Should CVC ultimately lose control

of the company and is forced to writedown its investment, the firm faces atotal paper equity loss of $2.2bn at cur-rent exchange rates, assuming thefirm has not received any repayment.

CVC stands tolose 1.7bn as

Nine talks fail

BNP PARIBAS yesterday named LarsMachenil, an executive with the banks Fortis unit, as its newfinance chief and said he wouldtake up the position in March.

Machenil, an 11-year veteran ofFortis, will succeed PhilippeBordenave, who last week wasnamed group chief operating offi-cer.

The appointment is the latestpiece of an executive reshuffle trig-gered by BNP veteran Jean-LaurentBonnafes assumption of the chief

executive job at Frances largestbank, following the expected moveof former chief executive BaudouinProt to the post of chairman.

BNP had initially indicated whenannouncing Bonnafes manage-ment team that Bordenave wouldremain finance chief in addition tohis new chief operating officertitle.

Machenil, who has a PhD innuclear science and an engineer-ing degree, had previously workedfor consultancy McKinsey inVenezuela, Italy and Brussels.

Hoban says Solvency IIlikely to start a year late

TOUGH new insurance industry regu-lation is highly likely to be broughtinto effect a year later than firstplanned, Treasury secretary MarkHoban told an industry conferenceyesterday.

Hoban said European governmentsand insurance groups were broadlyagreed that new Solvency II capitalrules for insurers should take effect in2014 rather than 2013.

There is a broad consensus inEurope that firms will be required tocomply by 2014, with some softimplementation from 2013, he toldthe Association of British Insurers

Solvency II conference.The date change had a mixed reac-

tion from insurers, with some callingit an unnecessary delay after they hadinvested large amounts to ensure theywere ready by the earlier deadline.

City watchdog the FinancialServices Authority said in October itwould assume a 2014 implementationdeadline, but European authoritieshave not formally changed the startdate.

Solvency II requires insurers to holdcapital in strict proportion to the risksthey underwrite, replacing nationalrules where capital varies accordingto turnover.

BNP hires financechief from Fortis

BYHARRY BANKS

PRIVATE EQUITY

RUSSIA has agreed to team up withHugo Chavez to produce oil in thelucrative Venezuelan oil fields.

Russias state-owned ventureRosneft has signed a memo of under-standing with Petrleos de Venezuelato explore blocks in the Orinoco Beltthat are thought to contain up to40bn barrels of oil.

Rosneft has paid a $440m entry bonus, with a further $660m dueonce a deal is done.

The firm has also offered a $1.5bnloan facility to the Venezuelan group.

Putin teams upwith Chavez in$2.6bn oil deal

BANKING

ENERGY

INSURANCE


MUNICH RE SEES 500M THAI FLOOD LOSS

FLOODS to hit Thailand last month are the costliest natural disaster ever to hit the coun-try, Munich Re, the worlds biggest reinsurer, said yesterday. Munich Re said it wouldbear losses of500m (429m) from the catastrophe, which has claimed more than 600lives and wrecked critical industrial areas around the capital Bangkok. Picture: REX

SOME of the hedge fund industrys best-known macro hedge fund man-agers are struggling this year to gener-ate returns befitting their star status.

The market segment made famous by George Soros was down 3.09 percent in the 10 months to 31 October,the HFRI Macro (Total) Index showed.

In a 2011 littered with market-mov-ing events, veteran managers such asLouis Bacon and Paul Tudor Jonesmight have been expected to bookrecord profits, but many have fallenflat.

For many macro guys, the reten-tion of profits has been poor. Its not aworld in which macro funds have cov-ered themselves in glory, Luke Ellis,head of Man Groups multi-managerbusiness, said. Overall its been disap-pointing.

Louis Bacons Moore GlobalInvestments fund has fallen 2.6 per-cent in the year to 18 November, whileFortress Investment Groups flagshipmacro fund was down around 10 percent by late November, one investorsaid.

Macro hedgiesstruggling tohold on to gains

BANKING

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venue is named after both its loca-tion on Orchard Street, HousesDutch model girlfriend Rose, andthe rose-planted roof garden thatwill open in time for the summer.

LAUGHING STOCKCOMEDIAN Stephen K Amos wasmeant to be entertaining the miners,energy bankers and lawyers at theMines and Money awards at the HACArtillery Garden on Wednesday night.

But he found far more amusementin the shortlist for the country thathas shown the most improvement,in terms of attractiveness to mineralinvestors over the last year.

Amos started chuckling atAfghanistan, where a major effortis underway to attract miningaccording to the nomination, andwas struggling to control himself bythe time he reached Norway, wherethe government has announced apositive new mining strategy.

Lets have a big hand to Stephenfor getting through that, saidDamien Hackett, head of research atcategory sponsor Canaccord Genuity,as he eventually presented the awardto Liberia. Luckily, Fortescue MetalsGroups founder and chairman Andrew Forrest (pictured below onthe left with Standard Banks directorof mining and metals Vaughn Wickens) also saw the funny side,thanking Amos for his lightheartedattitude to mining as he collected hislifetime achievement award.

After all that excitement, it wastime to continue the party at Rafflesin Chelsea, where GMP Securitiesguests drifted out in the early hours.

PROPERTY PRICESTO THE Dorchester for the fourteenthMovers and Shakers property dinner,the annual fundraiser for the indus-

trys biggest names in aid of theircharity LandAid.On the top table was Mike Slade,

chief executive of Helical Bar andpresident of youth charity LandAid;Liz Peace, CEO of the British PropertyFederation; GVA Grimley boss RobBould; Kier MD Ian Lawson; and RiderLevett Bucknall CEO Lance Taylor.

But the main draw at the sold-out event was Fat Bob, the cus-tomised HarleyDavidson donated with the support of James Caan and hisprivate equity firmH a m i l t o nBradshaw.

Top of theleaderboardin the raceto securethe keys

for the2 0 1 0

FXDF Dyna as the guests sat down todinner was Nick Jacobs of RowanAsset Management but he was latergazumped as Caan encouraged rivalproperty executives in the evenings

bidding war.No word on who that mystery man

was he was very shy and unforth-

coming, said Slade (above) but hepaid 18,500 to help the total raisedfor LandAid hit a record 37,500.

RECORD TRADEON THE subject of record fundraising,new financial futures head GaryPettits 70s disco not to mention thecommission on the Duchess ofCornwalls $27bn (17.3bn) forextrade between Barclays and Citigroup helped ICAPs charity trading day onWednesday ring up 12.75m for goodcauses, up from 12.1m last year.

An incredible achievement inthese difficult times, said groupchief executive Michael Spencer.

PEACE AND QUIET VETERAN City broker Graeme Cullwill hand in his train ticket and hangup his red braces this evening, whenhe retires from the City after four years commuting from Stafford to

London as head of corporate brokingat Merchant Securities.Over his 40 years at Barclays,

Dresdner Kleinwort Benson, ArdenPartners and Old Mutual Securities,the firm he helped set up by bringingAlbert E Sharp and Greig Middleton

together, Culls high-profile dealsincluded the flotations ofOrange, Norwich Union,Powergen and oil and gasexplorer Rockhopper.

From tomorrow, the 59- year-old hopes to

trade his decades ofdeal-making forsettling down to aquieter life ofnon-executivedirectorships.

Although hisf ive -year -oldtwins may have

something tosay about that...

PIPPA MIDDLETON JOINS BANKERSAT MAHIKI DUOS LOW-KEY LAUNCHPIPPA Middleton is out and aboutagain after splitting from herboyfriend Alex Loudon, an analyst atbrewing giant SAB Miller.

And one of the first placesMiddleton has patronised in hernewly single life is the Markham Innon Elystan Street, the latest restaurant venture from Mahiki owners NickHouse and Piers Adam that is gaininga following among the bankers andhedge fund managers of Chelsea.

House was too discreet to say ifMiddleton has dined with her friend Tom Kingston, who until recentlyworked at Schroders I cant possi- bly comment but actress KateHudson has paid a visit, as has modelEva Herzigova and Princess Eugenie.

The Markham Inn, in which super-model Kate Mosss manager SarahDoukas holds a stake, opened to nopublicity as a low-key contrast toHouse and Adams other ventures,

which include the celebrity-filled Whisky Mist and the Punchbowl.We wanted the menu to speak foritself, House told The Capitalist. It isgood quality food at low prices.

Meanwhile, over in Mayfair, NickHouse Entertainment will formallyopen The Rose Club on Monday, fol-lowing a handful of private partiesfor the likes of Next Models.

Designed to resemble a beauti-fully mirrored music box, the

Tom Kingston, formerly of Schroders Private Bank, with Pippa Middleton Picture: Reuters

The Capitalist10 CITYA.M. 9 DECEMBER 2011

EDITED BY

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

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STANDARD Chartered confirmed it will see double-digit profit growththis year of at least 10 per cent,helped by a strong performance inemerging markets such as Singaporeand Hong Kong.

However, the bank said thatalthough it had a strong pipeline indifficult market conditions, incomein 2011 is now expected to grow at just below 10 per cent, compared

with 11 per cent in the first half ofthe year.

The banks results are a stark con-trast to its other UK-based rivals,which are all seeing earnings hit hardby the Eurozone crisis.

But Standard Chartered has notescaped entirely: it said that the debtcrisis had slowed deal activity in somekey Asian markets and caused prob-lems in India and Korea.

A depreciation in Asian curren-cies has hurt income, which is

reported in US dollars, while Indiaand South Korea continued to per-form poorly.

The banks London-listed sharesdipped 1.4 per cent yesterday to closeat 14.34. Its Hong Kong shares weredown 1.2 per cent.

The shine has come off a little with the foreign exchange transla-tion. But its still a very good story,youve got the combination of growthwith capital strength and liquidity,said Mike Trippitt, an analyst at OrielSecurities.

StanChart tosee profitsgrow by 10pc THE JAPANESE arm of Ernst & Youngis to set up an external committee toinvestigate its audit of scandal-riddenOlympus.

The move follows a separate probeinto an accounting scandal at thecamera maker, which raised issueswith its audit and work done by a pre-vious auditor.

Ernst & Young ShinNihon said ithas conducted an internal review ofits Olympus audit and believes there were no problems, but decided toseek an external opinion given thescale of attention on the scandal.

The committee, which includes aformer prosecutor, may report itsfindings this month.

This week an independent panelissued a damning report on a $1.7bn(1bn) accounting scandal at

Olympus, urging legal action againstexecutives responsible for coveringup securities losses dating back tothe 1990s.

In its report, the panel also raisedquestions about whether the twoauditors involved Ernst & Youngtook over as Olympus auditor in 2009from KPMG AZSA could have done a better job in monitoring the firm'saccounting. Olympus has lost morethan half its market value since thescandal broke nearly two months ago.

E&Y to examineits involvementwith Olympus

StanCharts Peter Sands is presiding over a growth story, unlike rivals Picture: REUTERS

BYHARRY BANKS

BANKING

NewsCITYA.M. 9 DECEMBER 2011 11

ANALYST VIEWS: WHAT DO YOU MAKE OFSTANCHARTS LATEST UPDATE? Interviews by Caty Hirst

BRUCE PACKARD | SEYMOUR PIERCE

The bank is currently trading on 1.8 times tangible book value, well aheadof European banks. In one sense we think this is justified given the geographies thatStanChart operates in, however we are concerned that the secondary effects of theEuropean bond turmoil will impact Asian trade Hold.

GARY GREENWOOD | SHORE CAPITAL

Standard Chartered remains our preferred play in the UK banking sec-tor, reflecting its relatively strong balance sheet, exposure to higher growtheconomies and more limited regulatory risk. Nevertheless, we retain our hold rec-ommendation, reflecting the ongoing macroeconomic uncertainty.

KEITH BOWMAN | HARGREAVES LANDSDOWN

To the envy of rivals, Standard continues to forecast strong results.However, the crisis in Europe and the resultant move into the haven of the US dollarhave caused increased currency headwinds While opinion has softened over recentmonths, it continues to be one of the few perceived banking growth stories.

ANALYSIS l Standard Chartered

p


1,350

1,450

1,400

1,500

1,300

1,434.508 Dec

TECHNOLOGY

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INTERDEALER broker Tullett Prebonabruptly announced that its long-serving chief operating officer StephDuckworth was leaving yesterday.

Duckworth, who spent 17 yearswith the company after joining itspredecessor entity Liberty in the1990s, resigned yesterday, Tullettsaid, without specifying when he

would go or who would succeedhim.

A person familiar with his depar-ture said the resignation was com-pletely amicable and thatDuckworth was leaving withoutanother position lined up but wouldpursue other interests. He is not leav-ing to go to a competitor, they said.

No successor has yet been identi-fied and Duckworth is still working atthe company, the person added.

In a brief message, Tullett simplysaid has resigned and intends toleave the company.

Duckworth, 45, was promoted tochief operating officer in November2008, after holding a series of execu-tive positions including heading

Tulletts Europe, Middle East andAfrica division and as chief operatingofficer of Tullett Prebon Energy.

It probably does indicate that ithasnt been the easiest of partings,said Numis analyst James Hamilton,adding that it was impossible to knowthe reason for the resignation.

Tullett Prebon shares fell morethan two per cent on the news.

Tulletts COOto step downafter 17 years THE INVESTMENT chief who tookover half of Anthony Boltons flagshipFidelity fund has left after a series oflosses.

Jorma Korhonen will be replacedby Jeremy Podger as manager of the1.5bn Global Special Situations fund.

Sudipto Banerji, a veteran Fidelitymanager, will take over until Podgerarrives from Threadneedle in March.

Meera Patel at HargreavesLansdown said: Jorma Korhonensstock selection has been disappoint-ing and the fund also had a higherthan average exposure to cash.

The Global Special Situations wasformed in 2006 when Boltons 6bnFidelity Special Situations fund, oneof the most popular portfolios in theUK, was split in two.

The fund reported a 10.7 per cent

drop in asset value in the year toSeptember.

Last month Bolton apologised toinvestors for the very poor perform-ance figures of his Fidelity ChinaSpecial Situations.

Korhonen had been with Fidelitysince 1996, working as a research ana-lyst until becoming a portfolio man-ager in 2002, according to Fidelitys

website.Fidelity could not be reached for

comment last night.

Korhonen outat flaggingFidelity fund

BYALISON LOCK

FINANCIAL SERVICES

FUND MANAGEMENT


ANALYSIS l Tullett Prebon PLC

p


290

300

295

305

310

285

282.408 Dec

GOLDEN ARCHES STILL SHINING

McDonalds last night reported a bigger-than-expected rise in November sales at estab-lished restaurants across the board. The worlds biggest hamburger chain said sales atrestaurants open at least 13 months rose 7.4 per cent globally. In Europe, where the chainderives 40 per cent of revenue, same-restaurant sales rose 6.5 per cent.

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Mulberry bags a big profit overseas

MULBERRY, the affordable luxuryfashion brand whose bags haveadorned the arms of Kate Middletonand Kate Moss, yesterday reported atrebling of pre-tax profits to 15.6m.

It also saw its half-year retail sales jump 47 per cent year-on-year, buoyed by soaring internationaldemand for its designer handbags.

The company reached total rev-enues of 72.3m, up 62 per cent onlast year. Its international revenuemore than doubled to 29.4m, from

13.7m in 2010, helped by the open-ing of a flagship store in New Yorkand five new partner stores in theAsia-Pacific area.

The Somerset-based leather acces-sories company, founded in 1971, hasalready seen an increase of 29 percent in Spring/Summer orders, eventhough there are still months of thefashion season remaining.

Godfrey Davis, chief executive of

Mulberry, said: Our strategy to focuson international expansion contin-ues to bear fruit.

Against the backdrop of economicuncertainty, Mulberry continues to build market share internationallyand we remain cautiously optimisticabout the future prospects of thebusiness.

Mulberry intends to open ninenew stores before the end of thefinancial year.

Shares jumped three per cent fol-lowing the results, peaking at 15.48before closing at 15.00.

BY LAUREN DAVIDSON

RETAIL

P

ICK the right It Girl and yourein clover. For Mulberry, it was

the Alexa satchel designed inhonour of the style icon and

TV presenter Alex Chung thathurled the company into the luxuryretail stratosphere profits quadru-pled in 2010 thanks to that willowyfashionista.

But its not just the Alexa Effect(yes, thats a bona fide term) that hasmade Mulberry the must-have brandfor bag-sporters of both sexes.

Its its perfectly coiffedEnglishness: with a factory inSomerset and a distinctly non-Italianname, cool (and posh) Britannia veri-tably oozes from Mulberry.

With Asian expansion a key strate-gy for all ambitious luxury brands,Chinese tastes matter a lot.

The Chinese may be thrashing useconomically, but when it comes tostyle, they want what weve got: her-itage, class, history, tradition, crafts-manship.

And in those supple, textured,structured pieces of leather, crownedwith that little mulberry bush, they

seem to find those things.Mulberry is inexpensive by cou-

ture standards next to Prada, Gucci,Balenciaga and Hermes, its almostaffordable.

You can do very nicely for under1,000 the Alexa satchel in night-shade blue silky snake costs 950,for example. And in the world of lux-ury fashion brands, thats sayingsomething.

COMMENT

ZOE STRIMPEL

ANALYSIS l Mulberry Group PLCp

Oct Nov Dec

,350

,450

,400

,500

,550

,600

,300

1,500.008 Dec

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SHARES in London & StamfordProperty plunged by more than 13per cent yesterday after its largestshareholder sold its stake in thestruggling business.

London & Stamford stock fell by13.2 per cent during the day beforeclosing down 7.55 per cent at 106.5pafter GE Asset Managementoffloaded all of its 74m shares, raisingaround 74m.

General Electric Pension Trustsinvestment manager is selling upafter a reshuffle of the top tier of the

business. London & Stamford broughtthe external management board in-house after the retirement of JimMara, head of venture capital at theasset management arm of GE.

Mara has known two of thefounders of London & Stamford, vet-eran real estate entrepreneurs

Raymond Mould and PatrickVaughan, for nearly two decades.We understand that the sale of

the stake, although not the timing,was largely anticipated following theinternalisation of the property man-agement last year, Numis said.

GE has intended to sell about 50mshares initially but then decided tocash out because of the strength ofdemand. Credit Suisse was the sole

bookrunner and was joint lead man-ager with Peel Hunt.

London & Stamford, which ownsOne Carter Lane and Fleet Place inthe City, posted a pre-tax loss of 3.4mfor the six months to September,compared with a profit of 23.2m inthe same period last year.

Shares slumpat L&S afterGE pulls outBY PETER EDWARDS

PROPERTY

BELTANE Asset Management has filledits 9 Cloak Lane office block, sixmonths after starting its search fortenants.

The firm has signed up ERIMServices to take the fifth floor, com-pleting its lettings drive for the build-ing near Cannon Street and taking its

average rents to 51 a square foot.Beltane, which was set up by proper-

ty veterans Jonathan Chenery andDuncan Roe last year, kicked off itsacquisition drive when it bought the30,000 square foot building from INGfor an undisclosed sum.

Lombard Street Research, US soft-ware house Guidewire Software andfund management boutiqueBlackfriars Asset Management havealso taken space at 9 Cloak Lane.

Jones Lang LaSalle and Hall Kempacted as lettings agents.

Beltane Asset Management fillsits maiden building at Cloak LanePROPERTY

BRITISH electronic parts distributorPremier Farnell reported a slight dipin third-quarter sales yesterday, andsaid it remained cautious on the glob-al economic outlook.

The quarters profit was in linewith our expectations, compared withlast years strong performance, thecompany said. Although we remaincautious on the global economic out-

look, the business has responded wellto the challenging environment.The firm, which sells products rang-

ing from batteries and chargers tocomputer consumables and securityproducts in Europe, North Americaand Asia Pacific, said adjusted pre-taxprofit fell seven per cent to 21.1m,

while revenue was down one per centat 241.8m.

Gross margin, at 38.6 per cent, wasdown 2.1 per cent.

The company, however, added mar-

gins in November were up from third-quarter levels. It said November salesper day were also above third-quarterlevels, but down slightly from last year.

Last month, rival distributorElectrocomponents posted an 18 percent rise in first-half profit, and said it

would keep second-half costs flat tohelp offset the impact of tougher eco-nomic conditions.

Shares in Premier Farnell closeddown 1.3 per cent at 175.5p yesterday,

valuing the business at 657m.

Premier Farnell cautious asthird quarter sales fall shortBYHARRY BANKSTECHNOLOGY


One Carter Lane, one of London & Stamfords recent acquisitions in the City

ANALYSIS l London & Stamford Property PLCp


105.00

110.00

107.50

112.50

115.00

117.50

102.50

106.508 Dec

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THE UKs 5bn private healthcaremarket is set to come under scrutiny,after The Office of Fair Trading (OFT)said yesterday it planned to examine

whether larger players were prevent-ing competition in the sector.

The OFT said it had provision-ally decided to refer the marketfor privately funded healthcareservices to the CompetitionCommission to establish

whether competition was

being restricted or distorted,and whether smaller players

were being prevented fromentering the market.

Its provisional find-ings suggest thatpatients, doctors andinsurance providersreceived little compa-rable information onthe quality and costof private healthcareproviders, meaning

that competition may not be as strongas it could be.

There are also a limited number ofhealthcare providers and a number of

barriers which prevented new com-petitors from entering the market.

It is important that patientdemand and choice are able to drive

competition and innovation inthis market with a view to bet-ter value for all patients,

OFT chief executive JohnFingleton (pictured) said ina statement.

Interested parties are

being asked to respond tothe consultation by the

end of January andthe OFT

expects toh a v ereached afinal deci-sion onthe fullreferral bythe end ofMarch.

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OFT to reviewprivate healthcare in the UKBYHARRY BANKS

HEALTHCARE


BRITISH soap and shampoo maker PZCussons said its first half profit was

below expectations and it expectedtrading conditions to remain toughgiven pressures on consumer spend-ing.

The maker of Imperial Leathersoaps and Carex anti-bacterial hand

washes said high raw material costsand adverse exchange rate move-

ments impacted margins, while trad-ing conditions remained tough, par-ticularly in Australia, Greece,

Thailand and the Middle East.The trading environment will con-

tinue to be difficult given increasingpressures on consumer spendingpower in all markets, continued highlevels of promotional activity in devel-oped markets and the UK in particu-lar, and ongoing high levels of inputcosts, the company said in a state-ment yesterday.

PZ Cussons says trading istough after first-half miss

PZ Cussons, led by Alex Kanellis, has been hit by squeezed consumer spending Picture: Getty

BYHARRY BANKSCONSUMER

NEWS | IN BRIEF

Samsung confident on 2011 targetSamsung Electronics, the world's top TVbrand, said yesterday its television saleshit a record 5.7m units in November,helped by strong US sales during the longThanksgiving weekend. November salesgrew 14 per cent from the 5m units sold inOctober and Samsung is certain to keep

its top global title for all of 2011, theSouth Korean firm said in a statement. ASamsung spokesman said it was confidentof meeting its 2011 flat-screen TV salestarget of 45m units.

IBM buys DemandTec for $440mInternational Business Machines (IBM)plans to buy analytics software providerDemandTec for about $440m (281.5m)in cash. IBM said DemandTec will extendwhat it calls its smarter commerce initia-tive, which helps retailers analyse and pre-dict consumer behavior to adjust pricesand products accordingly.

Alibaba seeks financing for YahooAlibaba Group is seeking up to $4bn indebt financing, sources said yesterday, in adeal expected to help the Chinese e-com-merce giant buy back a 40 per cent stakein the company owned by Yahoo. AsAlibaba Group is private, there is no public

figure on what Yahoo's stake is worth,though some analysts say it is worth atleast $9bn.

French court denies iPhone banA French court yesterday rejectedSamsungs request for an injunction toprevent Apple from selling its iPhone 4S inFrance, sought on the grounds it copiedelements of Samsung's Galaxy line ofmobiles. Calling the request out of propor-tion, the court also ordered Samsung topay 100,000 of Apple's legal fees.

8/3/2019 Cityam 2011-12-09

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INDUSTRIAL equipment hire firmAshtead has raised profit expectationsfor the second time this year after astrong first half, boosted by cash-strapped customers in its core US mar-ket choosing to rent rather than buy.

The FTSE 250 firm, which inSeptember raised full-year expecta-tions after more than doubling firstquarter profit, continued the trend with pre-tax profit for the threemonths to 31 October rising to 50.6m

from 18.1m in 2010.Ashtead, which makes over 80 per

cent of profit from its US rental unitSunbelt, said pre-tax profit for the firsthalf of the year was 84.4m, up from30m. It now anticipates full-year prof-it to be substantially ahead of its earli-er expectations.

Despite the gloomy economic out-look gripping its British and US basesthe firm, which hires out equipmentfrom diggers to small tools, has seencost conscious customers look to rent

rather than buy expensive items andcompetitors struggling for financeunable to match its scale and prices.

Market share gains, the on-goingstructural shift to rental in the US andoperational efficiency meant we deliv-ered a very strong performance acrossa broad range of metrics despite endconstruction markets being at a cycli-cal low point, said chief executiveGeoff Drabble.

Shares in Ashtead, which raised itsinterim dividend by 7.6 per cent to100p, closed up 13.8 per cent at 211.7pyesterday.

Ashtead liftsoutlook as USmarket grows TECHNOLOGY provider Bango hasagreed to provide services to internetretail giant Amazon but refused toelaborate further.

The Aim-listed mobile phone pay-ments company said in a statement:The terms of this agreement are notbeing disclosed.

The Board believes it is too early inthe relationship to accurately forecastthe level of business which it maygenerate.

This follows news in recent weeksthat Bango, which is based inCambridge, was close to signing up athird major customer for its mobilebilling services, which allow users topay for purchases on their mobilephone bills.

If this is the deal behind the vaguestatement, e-commerce company

Amazon will be joining Research inMotion and Opera Software onBangos client list.

The speculation circulating is thatBango could be providing mobilebilling services for the Amazon AppStore for Android which waslaunched in the US in March and fea-tures prominently on the Kindle Fire,which operates using Android.

Shares spiked 11 per cent from 62pto 70p on release of the statement yes-terday, closing at 69p.

Amazon joinsBango in vaguenew agreement

BYHARRY BANKS

INDUSTRIALS

TECHNOLOGY


TOMTOM, the satellite navigation sys-tem company, yesterday announcedplans to cut 10 per cent of its work-force in an attempt to cut costs.

The reduction of 457 jobs, 255 ofwhich will be redundancies, is part ofa move to save 50m (43m) in 2012.

The Dutch company has struggledin the wake of free navigation apps onsmartphones and inbuilt sat-navs in

new cars. TomTom has also announced a

restructuring, which will see its cur-rent research and development activi-ties regrouped into 10 product unitsincluding maps, traffic and mobile.

The reshuffle will mean the compa-ny takes a 14m charge in the fourthquarter to cover cuts.

Chief executive Harold Goddijn said:The new structure brings more trans-parency and accountability, and andwill reduce our time to market.

TomTom looks to cut tenper cent of its workforce

TomTom, led by Harold Goddijn (pictured), will cut 457 jobs Picture: Reuters

BY LAUREN DAVIDSONTECHNOLOGY

ANALYSIS l Ashtead Group PLCp


190

200

195

205

210

215

185

211.708 Dec

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UK employees have a shorter workingweek because their firms offer moreflexible hours, and jobs have shiftedfrom manufacturing into servicesover the last 20 years, according todata released yesterday by the Officefor National Statistics.

The average number of hoursworked fell from 38.1 per cent in thesecond quarter of 1992 to 36.3 in thesame period of 2011.

Employees in the manufacturingand construction sectors worked anaverage of 41.2 hours a week from

April to June, down from 41.6 and 43.1hours respectively 19 years ago.

Meanwhile, service sector workersspent 35 hours a week working, downfrom 36 hours in 1992.

Part of the average shift is due to arise in service sector employment andthe decline in manufacturing jobs.

In 1992, 68 per cent worked in serv-ices, 21 per cent in manufacturingand seven per cent in construction.

Those have changed to 80 per cent inservices, 10 per cent in manufacturingand seven per cent in construction,shifting the hours worked down-

wards.UK hours worked are below the EU

average overall 36.3 compared with37.4 across the EU. When consideringonly full-time workers, that changesto 42.7 in the UK and 41.6 in the EU.

ECONOMIST Andrew Dilnot will bethe next chairman of the UK Statistics

Authority, after the governmentsfavoured candidate was rejected asinsufficiently independent.

Independent statistics are unbe-lievably important, Dilnot told thepublic administration select commit-tee, which approved his appointment.

You cannot do anything unless youknow what the world looks like, he

added.Committee chairman Bernard

Jenkin said: Dilnot is one of the bestknown advocates of statistics in thiscountry.

We were impressed byhis enthusiasm for bettercommunication of statisti-cal issues.

The authoritys firstchairman, Sir MichaelScholar received praise for

confronting ministers when they appeared to

use statistics in a misleading fashion. The government wanted Dame

Janet Finch, former vice-chancellor ofKeel University to replace him.

However, the committee grilled herin June and found her lack-ing in independence, withsome members fearing she

would be a stooge for thegovernment.

She withdrew her candi-dacy, leading Scholar to con-

tinue in the role until Dilnottakes over next year.

High hopes for new stats boss to holdgovernment to account on dodgy data

JAPANS machinery orders fell muchfaster than expected in October, sug-gesting firms are slashing capitalspending as the Eurozone debt crisisand yen strength cast a pall over theeconomys tentative recovery.

Core machinery orders, an indica-tor of capital spending in the comingsix to nine months, slumped 6.9 percent in October from the previous

month, data showed yesterday. The fall compared with a median

market forecast for a 0.5 per centdrop and follows an 8.2 per centslump in September, leaving orders

just 1.5 per cent above year-ago levels. While Japan has pulled out of a

recession triggered by the Marchearthquake, a slump in exports and

business sentiment add to growingsigns of malaise.

Meanwhile imports surged 21.3 percent on last November as energyrequirements have shot up following

the loss of nuclear power after theearthquake.

Japan slows on Eurozonecrisis and strong currency

JAPANESE ECONOMY

THE BANK of England voted yesterdayto stick to its four-month programmeto pump an extra 75bn of quantita-tive easing (QE) into Britains slowingeconomy.

The Monetary Policy Committee(MPC) also kept interest rates at arecord low 0.5 per cent -- where theyhave been since March 2009 -- as it eyesthe outcome of a critical EU summitaimed at tackling the Eurozone debtcrisis.

Policymakers have been clear overthe past month that they see little

merit in fine-tuning the level of exist-ing gilt purchases, and that the 75bnthe Bank is purchasing from Octoberto February is close to the maximumthe market can easily supply.

However, most economists expect afurther 75bn extension to the QE pro-gramme in February. The Office forBudget Responsibility slashed itsgrowth forecasts, and the OECD think-tank believes the economy has alreadyentered a mild recession.

Bank holds rates and QEahead of EU discussions

UK ECONOMY

Work hours

decline withsectoral shiftBY TIMWALLACE

UK ECONOMY

BY TIMWALLACEUK ECONOMY

NEWS | IN BRIEF

29bn boost from overtimeUnpaid overtime gives a 29bn boost tothe UK economy each year, according todata released yesterday by the Office forNational Statistics (ONS). Managers and

senior officials contribute the most, theONS found, estimating that the averagefull-time manager is paid for 38.5 hoursper week but actually works for 46.2hours a gap of 7.7 hours. Professionalstend to work 36.6 paid hours and 6.8unpaid, whilst plant and machine opera-tives work 44.2 and 41.4 hours respec-tively, but have almost no gap in pay. TheTrades Union Congress (TUC) attackedthe figures. Employers should do moreto recognise the unpaid overtime thattheir staff do, said general secretaryBrendan Barber. UK workers are stilldoing the third longest shifts in Europe.

UK mortgage approvals jumpLoans for home purchases hit their high-est since December 2009 in November,according to data out today from e.survchartered surveyors, thanks largely toloose mortgage conditions. Purchaseapprovals rose from 52,743 in Octoberto 54,658 in November on a seasonallyadjusted basis an increase of four percent, and 15 per cent higher than inNovember 2010. In London, the rise was18 per cent, reversing the 13 per centdecline in October. E.surv put the risedown to wealthier buyers stepping uppurchasing activity. Loans for purchasesabove 500,000 accounted for 32 percent of all lending compared with 11 percent in October. Loan approvals for firsttime buyers in the capital decreased,however, with loans of 250,000 or lessaccounting for 43 per cent of approvals,down from 64 per cent in October. Thehigher cost of renting in the capital, andstronger house price growth, make itmore difficult for would-be buyers inLondon to piece together strong enoughdeposits to access mortgage finance,said e.surv.

London 2012

IMAGE OF THE WEEK

Sebastian Coe, the chairman of theLondon Organising Committee of theOlympic and Paralympic Games(LOCOG) poses for a photograph with12 people selected to be torchbearersat the Tower of London on Wednesday.The first 6,800 conditional offers of atotal of 8,000 places have been madefor the 70-day torchbearers relay,which starts at Lands End on 19 May.

Between now and the 2012 Games,City A.M. is publishing its Olympic

Image of the Week. We welcomephotos from all sources sponsors,athletes, local businesses, commuters,residents if you have a shot youthink readers will like, please email

[email protected] with IOW2012in the subject line. Full details:www.cityam.com/london-2012.

LONDON 2012 | BEARING RESPONSIBILITY Picture: REUTERS

www.RateSetter.com Customer Phoneline: 08442490115In association with RateSetter: A better way to Save and Borrow, Peer to Peer

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

Yes, I do. Britain is a strong country.A lot of the proposals will

affect the UK adverselyand not help theEurozone, such as theTobin tax. I dont thinkBritain should be sec-ond to Europe.

MAK HABIBIYANACSURA CONSULTING

CITY VIEWS: SHOULD DAVID CAMERON DO MORE TO PROTECT THE UKSINTERESTS IN EUROPE? Interviews by Caty Hirst and Marissa Cetin

Yes. If there is a renegotiation of atreaty, we should repatri-

ate powers to Britain.We need to return toBritains position as aleader of free tradepolicy, not governedby Paris or Berlin.

PAUL TRACEYMAITLAND HUDSON

Yes. At the moment were being gov-erned by Brussels, and if the

Eurozone becomes moreintegrated, were goingto lose some of oursovereignty. We needto make more decisionsin Britain, rather thanoutside.

SHANE ROZASTYXCHANGING

ANALYSIS l Average working hours

30 35 40 45

Austria

Greece

UK

Germany

Spain

France

Italy

Ireland

Denmark

43.7

43.7

42.7

42.0

41.6

41.1

40.5

39.7

39.1

EU-41.6

Hours worked

ANALYSIS l Working hours have declined

1992 1995 1998 2001 2004 2007 2010

48

44

40

36

32

Hours per

week

Construction

Manufacturing

All

Services

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Hydrodec GroupThe Aim-listed oil re-refining group hasappointed BP veteran David Robertsonas chief operating officer and ex-

Linklaters energy partner Lee Taylor ascorporate development manager,effective from January 2012. StephenHarker, managing director, oils and

chemicals, will resign from the boardfor personal reasons at the end of theyear, but will continue to work for thegroup until 31 March 2012 to ensurean orderly transition.

Barings

Baring Asset Management has appoint-ed Matthew Whitbread as an invest-ment manager in its multi-asset team,based in Boston. Whitbread joins fromFundquest Incorporated.

RSM TenonThe accountant has appointed CraigSimpson as head of tax innovation. He

joins from Ernst & Young, where he wasan executive director focusing on advis-

ing entrepreneurial businesses and highnet worth individuals.

LinklatersLucio DAmario has been appointed ashead of the law firms Italian competi-tion and antitrust practice in Milan.

DAmario, currently a competition lawspecialist at Allen & Overy in Rome,will join in January 2012.

The Giles GroupBrendan McManus, formerly chiefexecutive of Willis, will start as chiefexecutive of Giles Insurance Group inApril 2012, subject to FSA approval.Giles Group founder Chris Gilesbecomes executive chairman, to focus

on developing international and off-shore institutional business.

Daniels SilvermanThe credit management and debt col-lection company has appointed RachelHart to its client liaison team to advise

on debt recovery matters. Hart hasspent the last five years working as aparalegal, most recently at Cheesman& Company Solicitors.

BIE Interim ExecutiveCharles Wilson has been appointed asa director at BIE Interim Executiveafter spending six years in the interimmanagement division of Penna, wherehe was most recently a sector head.

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

US stocks fall onfears over Europe

US stocks fell on yesterday aftercautious remarks fromEuropean Central BankPresident Mario Draghi about

more bond purchases to ease theregions debt crisis.

The ECB said it would offer fur-ther liquidity measures to help easethe regions debt crisis, but Draghisaid: the outlook remains subjectto high uncertainty and substantialdownside risks.

Stock futures initially rallied inthe premarket session, but theenthusiasm was soon tempered byDraghis cautious remarks, whichseemed to rub off on investors.

Over the last few days whatsbeen coming out of the press is thattheyre readying this big bazooka tostabilise the problem, and some ofthe perceived comments have beenrefuted today, said Tom Donino, co-head of trading at First New YorkSecurities in New York.

The Dow Jones industrial averagewas down 47.87 points, or 0.39 percent, at 12,148.50. The Standard &Poors 500 Index fell 8.27 points, or

0.66 per cent, at 1,252.74. TheNasdaq Composite Index took off

10.65 points, or 0.40 per cent, at2,638.56.

Wall Street rose for three straightdays this week on optimismEuropean leaders forge a plan tofight the crisis at a Eurozone sum-mit on Friday.

Draghis comments are smack-ing the market pretty good but to be honest with you the market isholding in a lot better than I wouldhave anticipated it doing, saidDavid Lutz, managing director oftrading, Stifel Nicolaus Capital

Markets, Baltimore.Losses were limited as US joblessclaims fell more than expected inthe latest week, a sign the labourmarket recovery was gainingmomentum. Claims fell to a nine-month low.Boeings biggest union ratified acontract extension late onWednesday, ensuring a new versionof the planemakers 737 narrow- body plane will be built inWashington state and likely endinga dispute with the National LaborRelations Board. Shares of the Dowcomponent were up 0.4 per cent at$70.89.Costco Wholesale fell 2.2 per centto $85.51 after reporting its first-quarter results.

Mexican stocks fell sharply afterthe European Central Banks cau-tion about stepping up bond pur-

chases. The IPC stock index shed1.13 per cent to 36,635 points.

BRITAINS top shares sank totheir lowest close in more thana week yesterday, havingendured another choppy ses-

sion, as investors jostle for positionahead of a crucial European Unionsummit outcome today.

Sentiment was hurt whenEuropean Central Bank presidentMario Draghi cooled market expecta-tions about the prospect of an acceler-ation in ECB bond purchasing,although the bank did cut interestrates by 25 basis points to one per cent.

The Bank of England, meanwhile,decided to keep interest rates at 0.5per cent, a move widely anticipated byinvestors.

I think the market has had a terrif-ic rally going into the ECB meetingand again the market is very opti-mistic that European politicians willsort out the crisis in the next fewdays, said Lex van Dam, hedge fundmanager at Hampstead Capital, whichmanages $500m of assets.

Experience has taught me that thisis probably very wishful thinking andyet another meeting is a more likelyoutcome.

Against a backdrop of heightenedinvestor uncertainty, traders noted

moves to diversify portfolios by offset-ting riskier assets with defensive sec-tors such as tobaccos andpharmaceuticals -- the best performersyesterday.British American Tobacco toppedthe blue-chip leader board, up 1.5 percent, with peer Imperial Tobaccoahead 0.7 per cent, and drugmakerGlaxoSmithKline 0.8 per cent up.

As investors focused on the EU sum-mit, and the possibility their hopes fora credible solution for stopping thedebt crisis from spreading would be

dashed, commodity stocks and bankscame under heavy pressure.Standard Chartered shed 1.4 percent after the Asia-focused bank saidincome growth will be just below its10 per cent target this year as theEurozone debts crisis slows activity inits key Asian markets, adding to prob-lems in India and Korea.

The FTSE 100 ended down 63.14points, or 1.1 per cent, at 5,483.77, itslowest close since 29 November, after asee-saw session, reversing from anintra-day high of 5,605.27.

You could be seeing people justpositioning themselves a bit of riskaversion, a bit of short covering, just incase investors don't get what they'rehoping to see, Angus Campbell, headof sales at Capital Spreads, said.

Campbell added that in the caseinvestors were disappointed by thesummits outcome, the FTSE 100

could conceivably drop back towardsits lows for the year, around the 5,000

level. Credit Suisse said it is workingon the assumption that there will be adifficult recession in Europe, but is nolonger factoring a global recessioninto its valuations.

The bank maintained its marketweight sec

cityam 2011-12-09

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