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FTSE 100 5,693.95 +36.51 DOW 12,482.07 +60.01 NASDAQ2,728.08 +17.41 /$ 1.53 unc / 1.20 -0.01 /$ 1.27 unc

Greek talkson haircutsto resume

TALKS between Greek authorities andprivate holders of the governmentsdebt will continue today after break-ing down in acrimony last week,although fears the near-bankruptnation will default are growing.

The Institute of InternationalFinance (IIF) which represents pri-

vate bondholders yesterday con-firmed it will return to the table.

A haircut to avoid default is still believed to be widely preferred withinthe IIF, yet Newedges Bill Blain

warned yesterday: Default becomes amore attractive option to voluntary haircuts at some point. Hedge funds

will look forward to CDS execution.Hedge funds that have snapped up

debt expiring in March could hold astrong hand in negotiations. Yet it isnot clear how much influence thehedgies will be able to exert.

For now, the sticking point remainsthe rate of interest on replacement,lower-value bonds.

Private holders want higher rates of interest to mitigate losses endured by a voluntary haircut on existing

bonds, yet government officials areconcerned that greater costs couldcripple Greeces ability to movetowards sustainable levels of debt.

Ratings agency Fitch said that a vol-untary haircut would constitute adefault. It is going to happen. Greeceis insolvent so it will default, EdwardParker, a Fitch managing director,said yesterday. It clearly is a default,however they try to spin it.

MORE EUROZONE: P7

BYJ ULIAN HARRISEUROZONE

CITIGROUP revealed an 11 per cent col-lapse in fourth quarter profits yester-day in an earnings report that fell wellshort of expectations and sent the

banks shares tumbling 8.1 per cent. The bank posted its lowest revenues

since 2008, a year so bad that it led to arescue by the Federal Reserve.

Annual revenues fell 10 per cent on2010 to $78.4bn (51.1bn), althoughthe fourth quarter of last year wasmarginally better, with revenuesshrinking seven per cent to $17.2bn.

Underlining the turmoil engulfingthe industry, the decline was in largepart due to the securities and bankingdivision Citis investment bank

where quarterly revenues have fallen by a tenth to $3.2bn.

The money it makes from capitalmarkets work, in particular, has fallenthrough the floor: equity underwrit-ing revenues dropped 78 per cent to$90m in the fourth quarter of last yearand debt underwriting fell by nearly athird to $389m.

Chief financial officer JohnGerspach said: The operating environ-ment continues to be extraordinarily challenging in a number of businesses,none more so than securities and

banking.Citi Holdings, its non-core portfolio,

also dragged down the bottom line asquarterly revenues tumbled by 30 percent to $2.8bn. The worst hit was fromits special asset pool a hangover of

BYJ ULIET SAMUELBANKING

Issue 1,551 Wednesday 18 January 2012 FREEBUSINESS WITH PERSONALITY

Certified Distribution28/11/11 till 01/01/12 is 92,879

CITI DISAPPOINTSAS PROFIT SLUMPS

Vikram Pandit isstruggling to dig Citi out of a hole

www.cityam.com

*Surprise is the difference between estimated and actual**Per cent change over Q4 2010

Source: Company; Thomson Reuters

EPS SURPRISE*22.4%

REVENUE SURPRISE22.4%

REVENUE **$17.2bn 6.5%

EPS**$0.38 11.6%

toxic loans made before the financialcrisis where profits dropped by half to $596m.

By contrast, quarterly revenues in itsretail division edged up by one percent to $8.2bn.

The bank is trying to bear down oncosts and has promised around 5,000lay-offs, which chief executive VikramPandit revealed has cost $400m in

redundancy pay-outs during thefourth quarter.

The results are a bad portent for Wall Street, with JP Morgan Chase hav-ing disappointed on Friday andGoldman Sachs due to report today.But a source said that Goldman couldavoid cutting bonuses by the mooted50 per cent and instead cut 20-40 percent. BOTTOM LINE: P4

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News2 CITYA.M.18 JANUARY 201

Cinven to buypatents firmPRIVATE equity firm Cinven has wonthe race to buy patents managementgiant CPA in a 950m deal.

Cinven, the firm behind PizzaExpress, is close to signing the deal

with investment group IntermediateCapital Group (ICG), City A.M.has beentold.

ICG sparked an intense auction when it put the business up for sale atthe end of last year in a process whichleft Cinven battling rival BC Partners.

Several other private equity firms,including US giants Carlyle Group andKKR, had considering making an offer

before deciding to walk away.ICG only bought the Jersey-based

company two years ago, investingalongside the companys senior man-agement and founding shareholders,

in a deal worth around 440m. At thattime, the buyout was financed with225m of debt, including mezzanineloans.

The legal services market hasgrown, however, with cost pressuresleading more corporates to outsourcethe protection of their intellectualproperty. CPA reported Ebitda earn-ings of 77m according to its lastannual accounts.

Separately Cinven is continuing with its 5bn (4.16bn) fundraising butexecutives have not put a timescale onthe efforts.

BY P ETER E DWARDSPRIVATE EQUITY

SURGE SEEN IN SELF-EMPLOYMENT A surge in self-employment is theresult of people doing part-time odd

jobs to avoid unemployment ratherthan a genuine increase in entrepre-neurial zeal, according to theChartered Institute of Personnel andDevelopment. The self-employed haverisen by 300,000 since spring 2008 to4.14m the highest since records

began in 1992, representing 14.2 percent of all employment. Over thesame period, the number of employ-ees in work has fallen by 700,000.

John Philpott, the CIPDs chief eco-nomic adviser, said the rise was obvi-ously good news because it helped tokeep the lid on unemployment and

was an important source of privatesector jobs to offset public sector cuts.But the new self-employed lookedmore like an army of part-time odd-

jobbers than the vanguard of a resur-gence in enterprise culture.

UNILEVER STAFF SET TO RESUMESTRIKE ACTION OVER PENSION PLAN

This week will see fewer jars of Marmite and Pot Noodles roll off theproduction lines as disgruntled work-ers at Unilever down tools for the sec-ond time in just over a month. Theconsumer goods conglomerate hith-erto seen as an employer in the classicpaternalistic tradition has angered

workers with plans to close the finalsalary pension scheme.

BEAM BUYS LAST INDEPENDENT IRISHWHISKEY DISTILLERYIrelands last remaining independent

whiskey distillery has passed into for-eign ownership following completionon Tuesday of a $95m takeover of Cooley Distillery by the US spiritsgroup that owns the Jim Beam and

Teachers Scotch brands. Beam, whichalso owns the Canadian Club brand,plans to invest as much as $9m this

year in a bid to drive sales of Cooleys

Kilbeggan, Greenore, Connemara and Tyrconnell whiskey brands.

REVOLT OVER LABOURS RAID ON ITSLOCAL PARTY ASSETSLabour is forcing local parties to handover their headquarters buildings,enabling it to shore up its precariousfinances. The move allows the party,

which has a deficit of millions of pounds, to raise loans against theproperties. It has caused unrest inconstituency offices, which have

been told that they will be thrownout of Labour unless they agree tosign over their assets.

MILLIONS BLOWN PAYING WINDFARMS TO CLOSE

Wind farms are receiving millions of pounds to shut down when the

weather is too windy. Dozens of onshore facilities shared 25m last

year, a 13,733 per cent increase on2010, after a particularly blustery

year, according to the figures released by National Grid.

IKEA SHOULD BE SPLIT UP, SAYS EX-CEOIKEA has become too big and should

be broken up, the former chief execu-tive of the worlds number one furni-ture retailer has said. Anders Dahlvig,the f lat-pack pioneer's boss from 1999until 2009, said IKEA faced theprospect of slowing growth and risingcosts.

STOBART SEALS CONTROVERSIALPROPERTY BUY FROM DIRECTORS

Transport group Stobart has complet-ed a controversial 101m property deal with directors Andrew Tinklerand William Stobart. Under the termsof the deal, Stobart will acquire a port-folio of 18 properties from W.A.Developments, a company owned by Mr Tinkler and Mr Stobart, in returnfor 5.2m in cash, 7.2m in Stobartshares and taking on 88.8m of debt

linked to the properties. The total con-sideration is 101.2m.

WIKIPEDIA TO GO DARK ANTIPIRACY BILL

Wikipedia will black out the Englishlanguage version of its website today to protest antipiracy legislationunder consideration in Congress, thefoundation behind the popular com-munity-based online encyclopediasaid. The website will go dark for 24hours in an unprecedented move.

KRAFT TO CUT JOBSKraft Foods said it plans to eliminateabout 1,600 positions in North

America this year as it works towardsplitting into two separate compa-nies. The company also raised its 2011estimates. It now expects full-yearoperating earnings of at least $2.28 ashare on organic revenue growth of 6.5 per cent, compared with itsNovember guidance for operating

earnings of at least $2.27 on six percent organic revenue growth.

WHAT THE OTHER PAPERS SAY THIS MORNING

Britain is right to oppose a Tobin tax

SUPPORTERS of an EU Tobin tax like tosee themselves as the enemies of finance and supporters of the poor.

They want to punish the City whileraising money for increased publicspending or if the EUs plan goesahead, to finance Brussels.

They are certainly right that such atax would hurt financial institutions,especially those trading on their own

behalf, though most would be able torelocate overseas but what they dontseem to understand is that it wouldalso have a devastating effect on saversand pensioners by slashing their

returns on investment. It is always theend users who end up picking up the

bill: investors and companies, and they are less mobile than hedge funds andhigh frequency trading houses.

Intermediaries tend to pass the costson. The tax would reduce the prices of shares and other assets and increasethe cost of capital for companies,reducing investments and jobs.

The European Commissions propos-al is for a 0.1 per cent tax on the valueof equity and bonds transactions and a0.01 per cent tax on all derivativestransactions. The tax will be applied

whenever investors hand over money to an institutional investor (and when-ever they withdraw funds), as well as toeach transaction conducted on their

behalf by fund managers. Active invest-ments where managers buy and sellto try and beat the market will behammered especially badly.

The Alternative InvestmentManagement Association uses IMFmodelling to calculate that the tax

would reduce the market value of a

typical stock (which changes handsevery three and a half months on aver-age) by 7.60 per cent and increase thecost of capital (for the company issuingthe stock) by a highly significant 0.25

per cent. Investment managers willhave an incentive to hold fewer equi-ties and more derivatives (due to the

bias in proposed tax rates). Active fundmanagers will be less interested inholding boards to account. Spreads

will widen, price discovery will bestymied and volatility will increase.One recent paper showed that high fre-quency traders have helped cut theprice impact of a 1,000-share trade by $0.083, helping traditional investors.

A study out today by Oliver Wymanfocuses on the impact on the foreignexchange markets which employ thou-sands in London and which provides

vital hedging and other services tocompanies and wealth managers.

Around 45 per cent of currency trad-ing is in the swaps market, which is

being targeted; costs for all transac-tions would be hiked by three-seven

times and by 18 times for the mosttraded part of the market. A typicaleuro-dollar one week swap with anotional value of 25,000,000 betweena bank and a pension fund currently

comes with a transaction cost of 279.Under the EU plans, the dealer would be hit with a 2,500 tax, as would thepension fund, an 18-fold increase.

Three quarters of trading would moveoutside the EU; global volumes wouldfall; and liquidity would decline,increasing indirect transaction costs

by up to an extra 110 per cent.Remarkably, the European

Commissions own analysis concludedthe tax would leave the EU worse off,

yet such is its hatred of the City that itstill supports its imposition. It estimat-ed it would raise 25bn- 43bn a year(depending on the extent of the col-lapse in trading) and cut EU GDP by 0.53 per cent ( 86bn) to 1.15 per cent( 186bn). The government is right tooppose this destructive tax.

[email protected] Follow me on Twitter: @allisterheath

THE CO-FOUNDER of strugglingonline firm Yahoo last nightresigned from the company.

Jerry Yang, who started Yahoo in1995, is leaving the companys boardof directors as well as all other posi-tions within the company effectiveimmediately to pursue other inter-ests.

Yang, who held the official title of chief Yahoo, leaves the firm just

two weeks after Scott Thompsontook over as chief executive.

Shares of Yahoo were up 3.4 percent in after-hours trading.

Everyone is going to assume thismeans a deal is more likely with the

Asia counterparts, said Macquarieanalyst Ben Schacter, referring to

Yahoos stake in Alibaba.The perception among share-

holders was Jerry was more focusedon trying to rebuild Yahoo, than onnecessarily on maximizing near-term shareholder value.

BY HARRY B ANKSTECHNOLOGY

Yahoo loses founder Ya Jerry Yang, who held the role of chief Yahoo, has quit the company he co-founded in 1995

NEWS | IN BRIEF

UK fights LSEs corner in EuropBritain will urge EU officials today toreject political interference and vestedinterests when ruling on plans to createthe world's biggest stock exchange.Though the EU has said it plans to blockthe 5.8bn deal between DeutscheBoerse and NYSE, City minister Mark

Hoban will say in a speech at rival boursethe London Stock Exchange that wecannot afford to sit back and sacrificecompetition and customer welfare.

Nomura picks fixed income heaNomura has appointed Steven Ashley ashead of its global fixed income opera-tions, replacing Tarun Jotwani whostepped down last week along withwholesale division chief Jasjit Bhattal.Ashley, who joined Nomura from RBS in2010, was promoted from his positionas global head of macro products.

Samsung denies RIM interestSamsung said last night it was not inter-ested in taking over Research In Motion,after shares of the BlackBerry maker

jumped more than 10 per cent followinga report that it was seeking to sell itself to the South Korean firm.

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 at www.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]

Intermediate Capitalchief executiveChristophe Evain isclose to agreeing adeal with Cinven

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 EditorMarc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Gavin BillennessPictures Alice Hepple

CommercialSales Director Jeremy SlatteryCommercial Director Harry OwenHead of Distribution Nick Owen

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THE COST of trading foreign exchange will soar by up to 18 times if an EU Tobin tax becomes law, according to adamning new report from a leadingfinancial services sector group.

The Global Financial Markets Association (GFMA) said the proposedEuropean financial transaction tax(FTT) would make all FX trades up toseven times more expensive, and moreliquid products up to 18 times morecostly.

The report which came as hedgefunds led another attack on the tax

warned that extra costs will be passedon to end-users such as pensionfunds, insurers and corporates, there-

by damaging the real economy. James Kemp, managing director of

the global FX division at GFMA, whichrepresents the major financial institu-tion trade bodies in Europe, North

America and Asia, said: This study shows that the proposed tax would ineffect penalise Europes businesses for

sensible risk management by usingFX products to manage currency fluc-tuations and also threaten to imposefurther costs on the investmentreturns of pension funds and assetmanagers.

Meanwhile global hedge fundgroup the Alternative InvestmentManagement Association has warnedthe EU faces widespread, unintended[and] damaging consequences fromthe tax, including a slump in the trad-ing of shares, bonds and derivatives.

It said: As well as undermining theEUs single market, the FTT would belikely to reduce EU taxpayers savingsand pensioners incomes, lead to areduction in the level of investment inthe real economy, send asset priceslower, widen spreads, hinder efficientprice discovery and increase market

volatility.Last week Denmarks former foreign

minister Lene Espersen described thetax as bullshit while George Osborneprivately doubts whether the tax will

work even if it is implemented global-ly, City A.M.revealed in November.

Financial levywill harm FX,report warnsBY P ETER EDWARDS

FINANCIAL SERVICES

News 3CITYA.M.18 JANUARY 2012

Mervyn King:I find your viewquite extraordinary...We want to beaccountable to you inparliament.

MPS accused the Bank of Englandof lobbying the Treasury to avoidproper scrutiny during a frosty hearing yesterday.

The Treasury Select Committee(TSC), led by Andrew Tyrie MP, saidthe Bank is proposing an oversightcommittee for itself with a overly

limited remit. Bank governorMervyn King said he found the view extraordinary.

The Bank is fighting back againstMPs accusation that it is too unac-countable, suggesting an oversight

body for itself to judge the decision-making process but not the deci-sions themselves. John Thurso MPdubbed it a committee [to] deter-mine whether all the wrong deci-sions have been taken correctly.

King hit back that the MPs wantanother group of unelected offi-cials... to second guess the decisionsof the first group. But MichaelCohrs, a Bank non-executive direc-tor, agreed with MPs, saying hecant think of a reason to limitthe oversight bodys remit. Cohrsalso admitted that there probably should be an investigation into theBanks role in the financial crisis.

King proposed that its roleshould be clarified by a memoran-dum of understanding betweenthe Bank and the Treasury andassured the committee they would

be very pleased with it. But heincensed MPs by refusing to divulgeany details. They argue the rolesshould be laid out in legislation. I

watch with suspicion this memo-randum, said George Mudie MP.

King also criticised bank bonuses.

The gloves are off: Kingtrades blows with MPs King clashed with MPs over proposals for an oversight body that would

judge the Bank

Jesse Norman MP:"Why have we had towait until this point...before we see aresponse? I think itsrather disrespectful.

BY J ULIET S AMUELREGULATION

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SPREAD betting firm IG Group yester-day said profits jumped by almost athird in the first half, thanks to thedemise of MF Global and volatile mar-kets.

The FTSE 250 firm, which postedpre-tax profits of 103.2m for the sixmonths to 30 November, also said ithad benefitted from growth overseasand investment in its mobile phoneplatform.

IG said it grew client numbers by 15per cent in the six month period whilerevenue per customer increased by 11per cent.

It attracted customers who were hit by the collapse of rival MF Global inOctober, and is now using its strongfinancial position to attract moreclients.

Spread betting involves gamblingon market moves so greater market

volatility provides the opportunity forgreater winnings, attracting addition-al punters. The firm has also benefit-ted from expansion overseas, where itfocuses on contracts for difference and

foreign exchange.Chief executive Tim Howkins told

City A.M. that his companys successrested on our ability to invest in tech-nology and that its position as mar-ket leader meant the firm can affordto spend.

He revealed that the group has forty employees working solely on develop-ment of mobile platforms: Mobileaccounts for 16 per cent of revenue,going up 0.5 per cent a month. Wedlike continued volatility but we cangrow the market even without it.

New clients are typically in theirmid-to-late 30s, have a little bit morerisk capital and want to be more activeinvestors.

IG Group seesprofits jumpon volatilityBY J AMES W ATERSON

CAPITAL MARKETS

DAVID Cameron is considering open-ing a formal consultation on buildingan airport in the Thames Estuary.

A consultation, which could beannounced in the coming weeks,

would be the clearest sign yet thatthe Prime Minister is enthusiasticabout the scheme.

Downing Street insisted last nightthat no decisions have been taken onthe airport, which could be opposed

by the Liberal Democrats. Cameron is believed to be supportive of initial

plans for the Thames Estuary scheme,

which would cost up to 50bn, because of the economic boost itcould provide alongside the 32.7bnnew high speed rail line, which willlink London to the North.

The government has ruled outexpanding Londons existing airports,

but Boris Johnson, the Mayor, has lob- bied for a new hub airport in the Thames Estuary because doing noth-ing will lead to economic stagnation.

Johnson has said that Heathrow isoperating at 98 per cent capacity anddoes not have the ability to add routesto growing markets in the Far East,resulting in foreign airlines going to

rival European airports.

Consultation planfor Estuary airpo

News4 CITYA.M. 18 JANUARY 201

Whatever the expectations, lower themDISAPPOINTING is an under-statement. Analysts hadalready cut down their expecta-

tions for Citigroup from a con-sensus of 76 cents in earnings pershare to just 49 cents.

Little wonder that the actual num-

ber 38 cents was a shocker.For those following the decliningstate of the investment bankingindustry, however, the overall narra-tive is hardly surprising.

Banks are struggling to lay off staff, build up capital and grabshare of a shrinking market.

Citis primping and priming of thenumbers was little help although it

will undoubtedly be mimicked by

rivals (Goldman is also said to havehad a slightly better run at the end of the year, after a dire few months).

Citi chose to book a nifty creditreserve release of $8.3bn, for exam-ple, which brought down costs signif-icantly.

So if you look at the headline numbers, full year net profits edged up sixper cent to $11.3bn. But if you stripout the reserve release, they fell 28per cent to just $3bn.

And yet pay costs edged up five percent for the year its no wonder the

bank is cutting thousands of staff.Expectations might be low, but in

this environment they can only goone way.

BOTTOMLINEAnalysis by Juliet Samuel

ANALYSIS l IG Group Holdings PLC

p

11 Jan 12 Jan 13 Jan 16 Jan 17 Jan

490

485

480

475

470

465

488.0017 Jan

Tim Howkins saidthe group hadinvested heavily inits mobile phone

platform

Picture: VISMEDIA

ANALYSIS l Citigroup Inc

$


32

31

30

29

28.2517 Jan

BY P ETER EDWARDSPOLITICS

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THE ADMINISTRATORS of the Britisharm of collapsed US broker MF Globalhave recovered nearly 600m of cus-tomer funds held in segregated funds.

KPMG, the special administrator,has recovered 594m or 82 per cent of the cash, which is supposed to be heldat arms length, City A.M. has beentold.

This figure is likely to rise but cus-tomers may not get all their money

back. The total payout depends onresolving the valuations of outstand-ing claims. KPMGs costs have neared

20m but have not yet been approved by creditors.

ABU Dhabis sovereign wealth fund Aabar yesterday threw its support behind beleaguered Italian bank UniCredit by pledging to raise itsstake to 6.5 per cent.

Aabar said it would increase itsholding through its Luxembourg sub-sidiary as part of UniCredits ongoing 7.5bn (6.2bn) rights issue.

We are intending to participate inthe rights increase and actively sup-port UniCredits management andfranchise in the future, said Aabarchairman Khadem Al Qubaisi in astatement.

We believe in the fundamental value of the bank and its importancein the Italian and European contextIt is our belief that the success of thecurrent rights issue will helpstrengthen UniCredits capital baseand bring with it a more positive out-look for the future.

Morgan Stanley is acting for Aabaron the transaction.

Aabar has been an investor inUniCredit since March 2009, and isset to become its biggest single share-holder when it boosts its holding

from its current 4.99 per cent.Other big shareholders in

UniCredit include Mediobanca, sever-al Libyan organisations andBlackrock.

UniCredit shares have fallensharply since it announced a steepdiscount on the price of its rightsissue, which began last week and isdue to end on 27 January. It is regard-ed as a crucial test of investors confi-dence in the European bankingsector.

The firm priced the issue at 1.94, a69 per cent discount to its share priceat the time, in a bid to drum up suffi-cient interest, though several largeinvestors have yet to announce

whether they will take new shares.

Abu Dhabi set

to raise stakein UniCredit

WELLS Fargo yesterday beat WallStreet estimates with a 20 per centincrease in fourth-quarter profit,

boosted by continued loan growthand improving credit quality.

Americas fourth biggest bank saidnet income in the fourth quarter was$3.89bn, compared with $3.23bn a

year earlier. For all of 2011, Wells post-ed net income applicable to commonshareholders of about $15bn, up from$11.6bn in 2010.

Reflecting a trend demonstratedon Friday by results at JP Morgan

Chase, Wells Fargos loans grew about$9.5bn to $769.6bn in the quarter.

Wells Fargobeats targetsBrokers cashcoming back

BY M ARION DAKERS

EUROZONE

FINANCIAL SERVICES BANKING

Eurozone6 CITYA.M. 18 JANUARY 2012

Khadem Al Qubaisihas shown his sup-

port for UniCredit

Picture: REUTERS

DEBUNKING THE ECB DEPOSIT MYTH

Q.WHATS THIS ABOUT ECB DEPOSITSBEING AT ANOTHER RECORD HIGH?A.Everyday we are treated to a new run of stories about a recordamount of cash being hoarded in

vaults at the European Central Bank (ECB). They are based on daily statis-tics put out by the Bank on theamount in its deposit facility

overnight accounts that lenders keepat their central bank to store excesscash over and above the amount they must hold in their current account.

Yesterday saw the deposit facility storemore than half a trillion euros.

Q.WHAT DOES THIS MEAN?A.If you believe some erroneousmedia reports, it means banksare hoarding the money. It makes a

compelling narrative: the ECB finally agrees to pump cash into Europesfinancial system on an immensescale which it did by offering hun-dreds of billions in loans inDecember and lenders end uphoarding it all in their bank accounts.

Q.WHY IS THAT ERRONEOUS?A. The numbers in fact say nothingof the kind. In fact, the data only tells us what the total amount of cashstored in the deposit facility is. It does-nt tell us which banks put it there.

The cash could easily have circulatedand still ended up in the ECB. So forexample, if bank A takes out an ECBloan and lends it to bank B, whichlends it to a business, which pays an

employee with it, who puts it in hisaccount at bank C,

which stores it at the ECB, it shows upas money hoarded in the depositfacility. In fact, ECB president MarioDraghi was keen to tell the world thatthe banks taking out loans are not thesame as the ones putting it in their

ECB accounts: it is moving around.

Q.SO WHAT TO THESE NUMBERSACTUALLY MEAN?A. They just mean that there has been a huge expansion in themoney supply available to banks. Nokidding: the ECB made it availablelast month. Whether that money is

being hoarded or not remains to beseen.

Juliet Samuel

Q A&

ANALYSIS l UniCredit SpA


3.00

2.90

2.80

2.70

2.60

2.50

3.0117 Jan

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HEALTHY European bond auctionsand strong German confidence fig-ures pushed buoyant marketsupwards yesterday as tradersshrugged off a series of down-grades.

Stocks and the euro shot up onthe unexpectedly good figures,countering the negative sentimentled by Fridays downgrades of eightEuropean sovereigns debt by Standard & Poors.

Despite losing its triple-A ratingon long-term debt on Monday, theEuropean Financial Stability Facility (EFSF) retained its top short-termrating and successfully issued six-month bills yesterday.

The yield came in at 0.2664 percent on 1.501bn (1.25bn) of billssold. This was the EFSFs firstissuance of this maturity.

Spains government which wasdowngraded to A from AA- on

Friday also successfully tapped themarkets.

It issued 3.01bn of 12-monthdebt at 2.05 per cent a sharp dropfrom the 4.05 per cent seen inDecember and 1.87bn in 18-month debt at 2.39 per cent, againdown from 4.23 per cent previously.

The ZEW index of investor confi-dence jumped from minus 53.8 inDecember to minus 21.6 in January.

The German indicator remainsconsistent with a fall in GDP, but isfar less severe than economistsexpected and may show the worst of the downturn could be over.

Yields on high-risk countries bonds fell on the wave of optimism.

Italys ten-year bond yields fell11.9 basis points over the day to6.503 per cent and Portugals slid27.3 basis points to 14.136 per cent.Meanwhile Spains edged down five

basis points to 5.134 per cent. The euro rose 0.49 per cent

against the US dollar and 0.71 percent against the yen.

Downgradesdismissed bybullish buyers THE EUROPEAN Commission (EC)launched legal proceedings againstHungary yesterday over the independ-ence of its central bank, data protec-

tion authorities and judiciary.Hungary brought in legislation to

increase the number of central bank directors and give politicians morecontrol over their appointment at the

beginning of the year, under its con-tentious new constitution.

The commission has identified sev-eral breaches of primary law by

which countries must abide to jointhe EU most notably Article 130 thatstipulates full central bank independ-ence.

President Jose Manuel Barroso sentletters in December voicing concerns.In addition, EC vice-president NeelieKroes was repeatedly in contact withthe Hungarian authorities last year.

Governments must refrain fromseeking to influence their central

bank, said vice-president Olli Rehn.This needs to be addressed before wecan start formal negotiations on therequested EU/IMF financial assis-tance.

The Hungarian government will co-operate fully to find a solution prefer-ably without going through the fullinfringement procedure, according toa spokesperson.

EC starts legaaction in rowwith Hungary

Enough is enough: Protesters object to the new Hungarian constitution Picture: REUTERS

BY T IM W ALLACEEUROZONE

FINANCIAL REGULATION

EurozoneCITYA.M. 18 JANUARY 2012 7

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THE Russian-based oil explorerRuspetro became the first company in 2012 to get a London main mar-ket float off the ground yesterday asinvestors gave the thumbs-up to a$250m (163m) fund-raising.

Ruspetro priced the shares at$134 yesterday evening, towards thelower end of the range. But adviserssaid they were delighted with theresponse, given delicate market con-ditions.

Yesterdays pricing followed a few

days of intense but quiet marketing. Just before Christmas the banks hadalso done some pre-marketing,known as pilot fishing, to test themarket for a flotation.

The issue of new shares meansthe free float will be well above 25per cent, the minimum leveldemanded by corporate governanceexperts and the UK listings authori-ty. The group, which has debts of around $300m, is expected to have acouple of independent directors onits board.

Shares are due to begin tradingon Thursday.

Ruspetro IPOgets the nodBY DAVID H ELLIER

CAPITAL MARKETS


ANALYSIS l Carnival PLC

p


2,300

2,200

2,100

2,000

1,900

1,800

1,909.0017 Jan

Londons first sizeable IPO of the year is being led by Bank of America Merrill Lynch. Merrillsteam, working under AndreaOrcel, includes Paul Wheeler,

Julian Mylchreest and PaulFrankfurt. The bank has beeninvolved in numerous high-pro-file deals in recent months,including acting as lead under-

writer for UniCredits massive 7.5bn rights issue.Merrill Lynchs team is being sup-ported by bookrunnersMirabaud Securities, for whomPeter Krens is the lead on thisdeal, and Renaissance Capital.Renaissance advised on a num-

ber of IPOs in 2011, includingPhosagro and Etalon.

BOA MERRILL LYNCH

MEET THE ADVISERS

Carnival flatlines as death toll risesSHARES in Carnival, the owner of the stricken Costa Concordiacruise ship, yesterday closed uponly 1.6 per cent after suffering a16.4 per cent fall on Monday.

Details of the accident continuedto emerge as divers found anotherfive bodies, taking the death toll to11, with 23 people still unaccount-ed for. The investigation is focusingon the role of captain Francesco

Schettino, who has been chargedwith manslaughter and abandon-ing his ship, and placed underhouse arrest. Proving that humanerror was to blame has enormous

implications for both the shipsinsurers and future sales of cruiseholidays. The boat continues toslip, raising the prospect of envi-ronmental damage if its 2,300tonnes of fuel escape into the sea.

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News 9CITYA.M. 18 JANUARY 2012

Visa Europe saw revenues jump above 1bn last year

VISA EUROPE, which runs the biggest card payments system inthe region, reported a 13 per centrise in the number of transactionsover its platform last year,accounting for a seventh of allconsumer spending in Europe.

The number of cards rose by 6.5per cent to 445m and it processed11.8bn transactions.

The not-for--profit company alsoreported a strong Christmas trad-ing result, with the daily averagenumber of transactions rising 14.4

per cent to 25.2m. Its busiest day was the 23 December as con-sumers rushed to buy presents

before the holiday. The surge in volumes pushed

revenues over 1bn, comparedto 878m in 2010, while itspre-tax profit was 241m more than a three-foldincrease on the 2010 result.

The firm is pushing furtherinto mobile banking andsays it has doubled itsheadcount to 1,600over five years, inaddition toaround 500 con-

tractors on its books.Chief executive Peter Ayliffe(pictured below) told City A.M.

that mobile is the futureof payments and waskeen to focus on thefirms technology push.

The firm is particu-larly focusing on

using mobile phonesfor contactless pay-ment, although Ayliffe

said there would be a lag before

it becomes widespread.

BY J ULIET S AMUELPAYMENTS

GOLD may reach a record highabove $2,000 an ounce in late 2012or early 2013, but the preciousmetal is nearing the end of adecade-long run that has liftedprices by more than 600 per cent,metals consultancy GFMS said yes-terday.

Gold has been a top-performingasset since 2001 as portfolio diversi-fication, concerns over sovereignrisk and rock-bottom interest rateshelped lift prices from a low near$250 an ounce in 2001 to a peak above $1,920 in September 2011.

It is likely to surpass that level inthe final quarter of 2012 or the firstthree months of next year, GFMSsaid, potentially breaking throughthe $2,000 an ounce level. A combi-nation of factors will ensure thatsufficient demand from investorsand to a lesser extent official sector

institutions comes into the marketfor it to clear at higher levels, thecompany said in the second updateto its Gold Survey 2011.

However, a normalisation of the broader financial landscape in thenext few years is likely to take someof the wind out of golds sails.

The report does acknowledgethat the gold market is nearing theclosing stages of its decade-long bullrun, said GFMS.

For the first half, the company forecasts gold prices will average$1,640 an ounce, close to currentlevels. A rising dollar and increasedrisk aversion, which in recentmonths has pressured gold, couldcurb price gains in the short term.

In the second half, it sees prices atan average of $1,840 an ounce.

GFMS expects jewellery demandto soften by 3.1 per cent in the firstsix months of 2012 to 1,027 tonnes,in line with a 2.2 per cent decline inoverall demand to 2,199 tonnes.

BY HARRY B ANKSMETALS

Gold to reach$2,000 per oz

ESSAR Energy lost more than aquarter of its market cap yesterday after the Indian courts overturneda 63bn rupee (809m) tax ruling inits favour.

In a move that took the markets by surprise, the Indian SupremeCourt said Essar Oil, in which theLondon-listed firm owns an 87.1per cent stake, will no longer beable to defer payment of a sales tax.

The company said it will decideon its next steps after studying thecourts decision.

This benefit they were getting, which is reasonably considerable,theyre not going to get going for-

ward. Thats going to hit theirfinancials, said an analyst whodeclined to be named.

Under the previous deal, thesales tax had been repayable from2021 onwards, and the company does not yet know how or when it

would pay back the sum.Essar Energy closed down 26.3

per cent at an all-time low of 127p,having floated at 420p in May 2010.

Essar Energyshares tumbleafter tax case

ENERGY

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DIXONS RETAIL, Europes secondlargest electronics retailer, reported adecline in sales over the Christmasperiod, though it managed to improveits margins in spite of widespread dis-counting on the high street.

The owner of Currys and PC Worldsaid sales at stores open more than a

year fell by five per cent in the 12 weeks to 7 January, driven by poorsales across the UK and Ireland, Greeceand Italy.

However chief executive JohnBrowett said the firm enjoyed itsstrongest ever promotions andincreased its gross margin by 0.4 percent, after selling more products likeiPads and headphones at full price.

This is a solid performance againsta challenging backdrop. Our service-led business model continues to winover customers in all our key markets,Browett said.

Dixons said it had seen a surge in UK trading since the anniversary of the

VAT sales tax rise on 4 January, withlike-for-like sales up 23 per cent over

the 10 days to 14 January. The electronics market is one of the

largest victims of the consumer down-turn, however Dixons said it was out-performing the market, benefittingfrom rival Best Buy exiting the UK andthe sale of Comet.

Its southern Europe arm, includingItaly and Greece, was the worst hit,

with like-for-like sales falling 10 percent, but Browett reiterated Dixonscommitment in those countries.

He also played down concerns over a150m bond repayment due inNovember and said: We are in goodshape...we have the cash and bank facilities to repay the bond.

BY KASMIRA J EFFORDRETAIL

Retail10 CITYA.M. 18 JANUARY 20

Burberry seessales surge asluxury booms

Dixons fights ondespite decline inChristmas takings

BRITISH fashion house Burberry hasposted a 21 per cent uplift inChristmas sales after high-spendingtourists continued to flock to its flag-ship stores in search of its iconictrench-coats and leather goods.

The 156 year-old firm said underly-ing sales rose to 574m in the threemonths to 31 December from 480ma year earlier, with signature outer-

wear and leather accessories fuellinghalf of its total retail growth.

Burberrys share price has been che-quered in recent months amid fearsof an economic slowdown in China,

but the firm said yesterday compara- ble store sales in China grew by 30 percent in the quarter.

Flagship markets includingLondon, Paris, Beijing and Hong Kongoutperformed, attracting well-heeledtravelling consumers, which helpedpush the groups like-for-like sales up

by 13 per cent.Burberry suffered a weaker per-

formance in the US, with sales growthslowing to four per cent from 20 percent in the first half as it chose to cut

back supplies for department stores.Chief executive Angela Ahrendts

said that, looking ahead, Burberry remained focused on its expansionplans while staying mindful of thechallenging macro environment.

The group opened six stores in thequarter, including its first f lagship inParis and a third store in Brazil. Itexpects retail selling space to rise 13-14 per cent in the second half, downfrom 15 per cent growth previously.

Despite the upbeat statement,Burberrys share price flatlined at13.01 yesterday.

Hargreaves Lansdowns head of equities Richard Hunter said this may

be more indicative of the market sen-timent towards retailers.

Nothing wrong with the overallnumbers, however the poor perform-ance in the US and the weak fourthquarter guidance may worry the mar-ket, Liberum analysts added in anote.

BY KASMIRA J EFFORDRETAIL

ANALYSIS l Burberry Group PLC

p


1,310

1,300

1,290

1,280

1,270

1,260

1,301.0017 Jan

ANALYSIS l Dixons Retail PLC

p


11.50

11.00

10.50

10.00

10.9417 Jan

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Retail 11CITYA.M. 18 JANUARY 2012

MORE NEWSONLINE

www.cityam.com

MATALAN has warned of tough trad-ing to come as consumers continue tofeel the pinch, despite the firm post-ing a rise in like-for-like sales and deliv-ering its best sales week since 2005.

The out-of-town fashion and home- ware retailer said like-for-like salesincreased by 9.9 per cent in the five

weeks to 31 December, up from 1.3 percent in the 13 weeks to 26 November,thanks in part to the success of its

Christmas TV campaign. The retailer added that it had

achieved its best sales week to date

during the period, breaking a previ-ous record set in 2005, thanks to atargeted promotional strategy withoffers on selected lines.

Chief executive Darren Blackhurstsaid: It is clear that Matalan is wellpositioned in this increasingly com-petitive market to offer customers thehigher quality, lower cost value propo-sition they seek.

Matalan added that higher cottonprices at the end of 2010 and early

2011 were now putting pressure onmargins, and due to its buying cyclethe recent fall in cotton prices will not

be reflected in its margins until thesecond half of next year.We remain focused and cautious

and recognise the need to maintainhealthy cash levels and tight controlof costs as we look after customers andexceed their expectations going for-

ward, Blackhurst added. The 190-store chain posted total

third quarter revenues of 310.8m with like-for-like sales up 1.3 per cent,it said.

Matalan enjoys a boost in turnobut warns of a tougher year aheBY KASMIRA J EFFORD

RETAIL

Angela Ahrendts, Burberry boss, ismaking hay dueto Asian demand

Picture: REX

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DS Smith is buying the recycled pack-aging operations of SvenskaCellulosa Aktiebolaget for 1.6bn(1.3bn) in a move to secure more

business from the worlds top con-sumer goods companies.

The company said the acquisition, which excludes two mills in Swedenthat use virgin pulp, would befinanced by a combination of debtand 466m from a nine-for-eightrights issue priced at 95p a share.

It said buying the operations would give it a footprint acrossnorthern Europe and the Nordicarea, where its main consumer goodscustomers already operate.

Customers like Procter & Gamble,Nestle, Kraft, Reckitt Benckiser andUnilever wanted us to replicate thesuccess we have in the UK and Franceof using recycled packaging acrossEurope, chief executive MilesRoberts said.

Manufacturers are increasingly

using recycled cardboard rather than virgin paper, plastics and wood, hesaid, creating a bright spot in a papersector long beset by overcapacity andswings in demand.

The macro economic situation isuncertain, and we havent made any heroic assumptions, particularly onrevenue, added Roberts. AnalystDavid OBrien at broker Goodbody said: We believe the deal will be wellreceived as DS Smith demonstratesits ambition and makes significantstrides in reaching its strategicgoals.

DS Smith in

1.3bn dealfor packager

Growing Hyperion mulls IPOINSURANCE group Hyperion hasmoved nearer to a flotation after

reporting a rise in revenue and earn-ings. The broker and underwriter, which

is backed by 3i, Britains oldest privateequity firm, increased revenue by 21per cent to 87m for the year to 30September. The firm bought smallerinsurance groups in Israel and the FarEast during the year but recorded arise in organic growth of 18 per cent,

helping push Ebitda earnings up 45per cent to 18m, after acquisitioncosts. Chief executive David Howdensaid the figures are a reflection of the success of our strategy, our diver-

sified business model and our ability to attract the very best people. The figures appear to take

Hyperion closer to an initial publicoffering (IPO) which would raise morethan 250m.

Executives have declined to say what proportion of the business they would float. Management are expect-ed to retain a stake, however, given

Hyperions repeated annual growth.Howden and his family trust current-ly own 15 per cent of the business.

Going public could provide many mid-level staff with a windfall, as

employees currently own more than50 per cent of the business. After 3i, which has a 27 per cent stake, theother significant investors include BPMarsh, the private equity investor,and two Spanish investment groups.

Hyperion, set up in 1994, has beenlooking at an IPO since 2009 but isnow considering going to marketnext year.

BY J OHN DUNNECONSUMER

BY P ETER E DWARDSINSURANCE

HEDGE fund Lansdowne Partners hasemerged as the latest casualty of a dire2011 for the industry with a slump of more than a fifth at a key British fund.

The Lansdowne UK Fund lost 20.07per cent last year, its first annual losssince it was launched 10 years ago.

The $1.7 trillion (1.1 trillion) hedgefund industry had a wretched year in2011, with the average fund dropping4.8 per cent and some stock-focusedfunds suffering an average decline of 19 per cent, according to research com-piled by Hedge Fund Research andBank of America Merrill Lynch.

Lansdownes fund was hit becauseof its exposure to the financial servicessector. Its shareholding in LloydsBanking Group is second in size only to that of UK Financial Investments,

which manages the governmentsstakes in the bailed-out lenders.

Lansdowne, which made millions of pounds by shorting banking stockssuch as Barclays and Anglo Irish dur-ing the crisis, is known for its connec-tions to politics.

In 2010 it hired Tony Blair to give asmall number of geopolitical talks toits executives and co-founder Sir PaulRuddock has donated to theConservative Party.

Lansdownefund hit by

2011 slumpHEDGE FUNDS


DS Smith boss Miles Roberts talked up the expansion Picture: Nick Sinclair

Malcolm Moir is a managing direc-tor at JP Morgan Cazenove, and ledthe team advising DS Smith on thecompanys successful bid for Frenchpackaging firm Otor in 2010.

He has also worked with Babcock on its takeover bid for VT, and actedfor First on its failed bid forNational Express. Mark Breuer is a

vice chairman who previously served as head of the banks merg-ers and acquisitions team.

He was one of five JP Morganexecutives to make the board in2008, after moving to the firm aspart of Cazenove in 2004.

He advised on LOreals acquisi-tion of The Body Shop, and actedfor George Wimpey on its merger

with Taylor Woodrow.Breuer played a key role in

Lindes acquisition of rival BOC,and is currently advising Chloridefollowing an offer by EmersonElectric. He was a prominent figurein KKRs acquisition of Boots.

MEET THE ADVISERS: JP MORGAN CAZENOVE

MALCOLM MOIRMARK BREUER

ANALYSIS l DS Smith PLC

p


220

215

210

205

200

195

210.2017 Jan

Barack Obama vs Mitt Romne

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Apply to join today atwww.cityam.com/panel

This week, were asking members of our readers panel how they wouldvote if the 2012 Presidential race endsup pitting Republican frontrunner MittRomney against incumbent BarackObama. We also want to know whoyou think is most likely to win.

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ECONOMIC growth in Chinaslowed to a two and a half yearlow in the fourth quarter of 2011, though the data pointsto a soft landing ratherthan the hard deteriora-tion economists feared.

Chinese GDP grew by 8.9per cent in the year, com-pared with 9.1 per cent in the12 months to the third quar-ter.

Over the three-month period theeconomy expanded

by just two per cent, with housing andexports weighing ongrowth.

Investment inproperty fell by almost 40 per centfrom November toDecember, under-scoring risks todomestic demand.

Meanwhile slug-gish demand from a

weak Eurozone akey market has hitexports.

Markets responded well to the fig-ure, and still expect a further loosen-ing of monetary policy to counter the

slowdown.Hong Kongs Hang Seng

stock index jumped 3.24 percent, Japans Nikkei rose 1.05per cent, and the Australian

ASX closed up 1.65 per cent.Regional currencies werealso boosted, with the

Australian and New Zealand dollars both

up against the USdollar.

The recentdip in the con-sumer priceindex measureof inflationdoes give thePeoples Bank of China somescope to cutinterest ratesin order tos t i m u l a t egrowth if required, saidInvestecs LeeMcDarby.

However, thedegree of mone-tary loosening

is likely to be limited Premier Wen Jiabao (pictured) has described hispolicies as fine-tuning.

Official news agency Xinhua wel-comed the GDP figures, arguing thatthe economy is moving to a more sta-

ble long-term footing.For the reform-minded economic

architects in China, slower, more bal-anced growth may bring about a hap-pier ending, the agencys editorialsaid, describing earlier yearsgrowth at levels of 10 per cent andabove as dizzying.

The slowdown is desired by policy-makers who sought to cool down thecountry's property market.

Even when the Chinese engine isdownshifted, it still has the powerand potential to drive the worldeconomy, the agency said.

Soft landing in Chinaas euro hits exportsBY T IM W ALLACE

CHINESE ECONOMY


South America ups ExperianGLOBAL information services groupExperian reported promising growthin the three months to 31 December,largely due to successful operations inLatin America.

The company reported a revenueincrease of 12 per cent at constantexchange rates with organic revenuegrowth of seven per cent year-on-year.

Business in Latin America gave

Experian its biggest boost with a totalrevenue growth of 42 per cent.

The UK ranked third out of Experians four operating regions, pre-senting a revenue growth of 10 percent, or seven per cent considering the

January acquisition of Techlighten-ment and the July buyout of LM Group.

Experians Interactive sector per-formed strongly in the UK however,contributing revenue growth of 29 percent compared to a one per cent globaldecline in Interactive.

Aside from a 98 per cent stake bought in Computec SA for 247m,

there has been little change to thecompanys financial position.

Shares dipped in morning trading before closing level at 8.76.BY LAUREN DAVIDSON

FINANCIAL SERVICES

PUBS and brewery group Greene Kingenjoyed a record Christmas last yearand predicted further growth in thecoming year despite a tough con-sumer environment.

The 213-year-old Suffolk-based firm, which operates 2,410 pubs, restau-rants and hotels, said like-for-like

retail sales rose 8.2 per cent in theseven weeks to 15 January, boosted by

an 11.1 per cent rise in food sales anda record Christmas week when sales

jumped 17 per cent.It is clear that even in these diffi-

cult times, customers still look forenjoyment and some respite from thefinancial pressures they are facing,said Greene King chief executiveRooney Anand.

Britains pubs are benefiting as

cash-strapped customers trade downfrom eating out at restaurants.

Xmas lift for Greene Kas consumers trade dow

LEISURE

NEWS | IN BRIEF

Union rejects Tube Olympics dealTransport union the RMT has rejected anew pay offer from LondonUnderground, warning that it could startdispute action if further progress is notmade. The RMT said the offer of a 100target-based bonus plus a 15 per shiftpayment during the Olympics for opera-

tional staff was derisory, inadequateand that it would push for more in ameeting at the end of the month. Thenegotiations are separate to a deal donewith Tube drivers, who won a bonus of at least 500 for working during theGames this summer.

Study: Stop focus on tech growthGovernments are wrong to focus exclu-sively on technology start-ups whenlooking to promote high-growth busi-nesses, claims research from theStrathclyde Business School. Innovationschemes in many countries focus on thesector and on university research spin-offs, when they only actually producevery few successful firms. It is danger-ous to adopt policies which pre-judgewhere high-growth firms will emerge,said co-author Professor Mason. Instead,he says eligibility rules should be flexibleenough to help firms from any sector.

Romney hints at his tax rateUS Republican presidential candidateMitt Romney, under increasing pressureto release his tax returns now, insistedyesterday he planned to make thempublic in April but said he probablypays a rate of around 15 per cent.Romney, who used to lead Bain Capital,said most of his income came from hisinvestments, suggesting he is taxedunder capital gains rules rather thanincome.

ANALYSIS l Experian PLC

p


875

870

865

860

875.5017 Jan

ANALYSIS l Chinese growth and inflation

%

YEAR

Consumer prices

GDP growth

00 02 04 06 08 10 12

14

12

10

8

6

4

2

0

-2

China lending rate

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CONSUMER prices increased at theirslowest pace for six months inDecember, the Office for NationalStatistics revealed yesterday, with alco-hol and tobacco prices down in themonth and fuel rises slowing.

The headline consumer price indexincreased by 4.2 per cent in the year toDecember down from 4.8 per centthe month before, representing thelargest fall in pace in three years.

Despite the fall, inflation remainsmore than twice the two per cent tar-get Bank of England governor MervynKing (left) is supposed to aim for.

The cost of living, measured by theretail price index, rose by 4.8 per centin the 12-month period, down from5.2 per cent in the year to November.

Meanwhile the tax and price index, which accounts for direct tax, rose by 4.5 per cent, down from 4.8 per cent.

Alcoholic beverages recorded theirlargest monthly fall ever, at 3.1 percent, with wine prices down 3.3 percent. spirits falling 4.4 per cent and

beer prices down 1.7 per cent.

Communications such as mobiletelephones saw a record rise of 6.6 percent over the year.

Economists believe the overall fall ininflation is set to continue into 2012.

This should gather pace over thenext couple of months with tempo-rary factors, most notably the VAT rise,falling out of the year-on-year calcula-tion, said Nida Ali from the Ernst and

Young Item Club.We expect CPI inflation to be back

at the two per cent target by thisautumn. There should still be plenty of room for the MPC to loosen mone-tary policy further this year.

BY T IM W ALLACEUK ECONOMY

News 15CITYA.M. 18 JANUARY 2012

Samsung invests to beat foes TECHNOLOGY giant Samsung is plan-ning to invest a record 47.8 trillionSouth Korean won (27.2bn) this year a 12 per cent increase on 2011 toexpand into new areas ahead of itscompetitors.

South Koreas biggest conglomerateis looking to invest in order to solidi-fy its dominance in key businesses inthe global market and to dominate

new growth areas in advance, thecompany said in a statement.

While Samsung neglected to speci-fy where it would direct the bulk of this investment, speculation suggeststhe focus will be on developing thenext generation of mobile chips andOLED, the organic light emittingdiodes used in flat-screen displays

which is expected to succeed LCD. The company said it will boost its

facilities outlay by 11 per cent to 31tn won this year and direct 13.6tn wontowards research and development.

The remainder will go towards

stake purchases and similar invest-ments.

Samsung, which provides themobile chips for Apples iPhone andiPad, also announced it would add arecord 26,000 employees to its currentteam of 350,000 staff this year.

This follows news earlier this week that Samsung is looking to sell 1bnin five-year bonds to fund its mobilechips operations in the companysfirst overseas debt sale since 1997.

The group will publish its year-endfinancial results on 27 January and isexpected to report record sales of up

to 165.7tn won and an operating prof-it of over 16tn won.

BY LAUREN DAVIDSONTECHNOLOGY

BRITAINS biggest food group PremierFoods plans to slash 600 jobs in theUK in the face of weak consumerdemand and expects 2011 profits atthe lower end of the market forecasts.

The job cuts amount to an accelera-tion of an existing cost cutting plan,and follow a profit warning by the

company in October. They will be made from Premiers

12,000 workforce across head office,support sites and production plants,and will double its cost-cutting targetto over 40m by 2013 from its originalplan for 20m in cuts.

The company, struggling withhefty debts after a buying spree andtough trading conditions, said talks

with its banks over a re-financingpackage are continuing and an agree-

ment is expected soon while it looksto sell more non-core businesses.

Premier Foods axes 60 jobs ahead of refinanc

CONSUMER

Inflation plummetsas high street saleshelp the consumerHOUSE prices in the UK declinedagain in November, the Departmentfor Communities and LocalGovernment (DCLG) revealed yester-

day. The index fell 0.3 per cent on an

annual basis in November, slowerthan the 0.4 per cent decrease seenin October and representing theeighth consecutive monthly fall.

Meanwhile the typical sum paidfor homes by first time buyers hasrisen by 0.7 per cent over the 12-month period.

During the year to Novemberaverage house prices decreased by 0.1 per cent in England to 213,668.

London remains the Englishregion with the highest averagehouse price, at 346,123, whilst theNorth East has the lowest averageprice at 133,230.

London registered an annualhouse price increase of 3.2 per cent.

These figures from the tail endof 2011 paint a decidedly sorry pic-ture of the housing market, saidMichael Brown, director of London-

based estate agents, The Property Lounge.

Its like an exhausted athlete,panting and wheezing towards thefinish line. Trouble is, it has beenrunning just to stand still. 2012looks likely to repeat the pattern.

House pricesdrop for eightmonth runnin

PROPERTY

ANALYSIS l Inflation is starting to fall

Annualchange %

Dec2008

Jun Dec2009

Jun Jun Dec2011

Dec2010

6

5

4

3

2

1

0

-1

CPI

RPI

8/3/2019 Cityam 2012-01-18

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THE COALITIONS new rules on theretirement age could be plunged intoconfusion after a long-running dis-crimination case opened in theSupreme Court yesterday.

Leslie Seldon, who was a partner atLondon law firm Clarkson Wright and

Jakes, is taking his former employer tothe highest court in the land after he

was forced to retire at the age of 65. The firm claims it took the decision

based on its partnership deed and itsattempts to ensure a collegiate atmos-phere by not pushing out older part-ners through performance reviews.

If Seldon is successful in overturn-ing the earlier ruling by the Court of

Appeal which upheld CWJs decision it could force the government to re-think its reform of age discriminationlaws. Last year ministers axed thedefault retirement age, preventingemployers from getting rid of staff solely because they had reached theage of 65.

Seldons case against CWJ is beingfunded by the Equality and HumanRights Commission (EHRC), which hasdemanded clarity on the rules.

John Wadham, group legal director

of the EHRC, said: Forced retirementages have been abolished, but now lawyers and employers need to under-stand when age discrimination is jus-tifiable in terms of the law.

Emma Bartlett, partner at lawyersSpeechly Bircham, said: The govern-ments attitude to retirement haschanged since Seldon was at the Courtof Appeal. The government no longerconsiders it necessary to give employ-ers freedom to retire employees at 65

without justification. The SupremeCourt may therefore find it difficult toconstrue CWJs aims in line with socialpolicy. [However] other cases havemaintained that workplace planningcan be a relevant justification forenforced retirement.

Seldons case is expected to con-clude today, with the judgement beinghanded down several weeks later. It is

being heard before another case of alleged age discrimination, due tomor-row, involving a former legal advisoremployed by West Yorkshire Police.

The Department for Business said:We have always said that, followingthe removal of the default retirementage, it should remain open to employ-ers to retain a set retirement age if itcan be objectively justified. We hopethis case will help to clarify this.

Ministers onalert over agebias wrangleBYP ETER E DWARDS

EMPLOYMENT


It isnt right that employees can be forced out, especially as pensions aregetting lower. The government should be on the side of employees.

The government should enact strong policy to protect older employ-ees. It isnt fair that someone can lose a job basedon their age.

It should be decided by the employer based on whether they are stillproductive at work. The government doesnt have to be involved.

SYED HASSAN |ALLIANCE & LEICESTER

DOMINIC CUMBERBATCH |CSC

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

CITY VIEWS: SHOULD EMPLOYERS REWORKERS BASED ON AGE?

CARLOS LEWIS |MOIP CONSULTANCY

Interviews by Raymond D

Amazon is catching up to Britains top bran

GOOGLE, Amazon and Marks &Spencers remain the healthiest

brands in the UK in the eyes of consumers for the third year

running, according to the annual

YouGov BrandIndex league table of brands. They lead the way on theIndex score, which is a composite of consumers perception of brandsterms of quality, value, customer satis-

faction, corporate reputation, generalimpression, and likelihood to recom-mend, measured on a daily basis.

The importance of perception andhow long it takes to cultivate a positiveimage is shown by the fact that the top20 contains only one new entrant.

Dove is the only new addition to theleader board, appearing at the expenseof mobile phone operator Nokia.Doves ongoing real beauty cam-paign skillfully using social media

has clearly struck a chord. The top six are exactly the same as

2010 with BBC, Heinz and Sony fol-lowing the top three but Amazon hasslightly closed the gap on Google and

actually led in December. So 2012could well see a new top brand. The tough economic environment

may explain why so few brands havemanaged to improve their perceptions.

Amazon is one of only three brands inthe top 20 whose perception score hasrisen. The other two are Fast MovingConsumer Goods brands, Colgate andCathedral City with the latter bene-fiting from an advertising lift.

FMCG brands are the most common

in the top 20, accounting for sevenentries. Four technology brands andtwo broadcasters (BBC and Channel 4)complete the list. Cadbury,

Waterstones and Bosch are the only brands to drop places in the top 20.Stephan Shakespeare is the chief executive of YouGov

BRANDINDEXSTEPHAN SHAKESPEARE

ANALYSIS l Top 3 Brands of 201165.0

60.0

55.0

50.0

45.0

40.0

Google

Amazon

Marks and Spencer

1 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 21 Dec

ANALYSIS l Top 3 Brands of 2010

1 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 21 Dec

65.0

60.0

55.0

50.0

45.0

40.0

Google

Amazon

Marks and Spencer

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BIRLEY CAPSNUMBERS AT

HIS DELAYED20M CLUB

THE DEVELOPMENT of 5 Hertford Street isprogressing more or less on track.

Thats more or less as in originally sched-uled for last November, before beingpushed back to this month and now finalanswer March.

Except thats Easter, says a spokesmanfor Robin Birley, the leisure entrepreneurdeveloping the 20m Shepherd Marketmembers club with the billionaire Reuben

brothers. So it may be April.No rush. After all, the building works to

completely refashion the dilapidated town-houses into a dinner and dancing venue torival Annabels the home from home forproperty tycoon Vincent Tchenguiz thatRichard Caring bought from Birleys fatherMark Birley in 2007 have been 18 monthsin the making.

Even when 5 Hertford Street does even-tually emerge from the scaffolding, the dif-ferent areas the restaurant, bar, cigarlounge, private rooms and roof terrace

will open in stages, with initial member-ship capped at 1,500.

That includes the 500 who have already paid substantial amounts to becomefounding members, limiting the optionssomewhat for would-be City joiners. Robin

LEAVE OF ABSENCESO FAREWELL then Jeff Morton, head of investment for the BlackRock UK property fund, who has left the building with imme-diate effect. Now is an appropriate timefor me to move on and meet new chal-lenges elsewhere, said Morton.

Precisely why right now is so appropri-ate, however, remains a mystery BlackRock policy is not to talk about per-sonal departures in that level of detail.Jeff is no longer at BlackRock, blocked theinvestment giant.

HEDGE FUNDS THE HEDGE fund charity 100 Women inHedge Funds has raised more than $25mglobally. And this year, the target is educa-tion, as the body chooses schools initiativeSkillForce for its third year with the Dukeof Cambridge as patron.

Top of the many fundraising events, saysBlackstone Groups Kristen Eshak Weldon,chair of the London board of 100 Womenin Hedge Funds, is the annual London galain the autumn, which last year raised675,000 for the Child BereavementCharity.

Birley is concerned not to have too many members, says the club. We dont want itto be rammed from the start.

RANGERS PLUS POINTS THE SKYS the limit for Rangers FC, afterthe Glaswegian club yesterday unveiled itsambitions to maximise the Rangers brandin overseas markets. A new London officehas been opened to lead this bold strategy,led by Misha Sher of Soccerex, who startsnext week.

But is this really the time? On 9 January,the Plus exchange suspended RangersFootball Club Plc from trading after itfailed to file its accounts for the year to 30

June 2011 by the deadline of 31 December.Meanwhile, a Plus investigation is ongo-

ing into why Rangers majority shareholderCraig Whyte neglected to point out, whenhe was appointed to the board on 6 May

2011, exactly why he was disqualified fromacting as a director for seven years in 2000.

Over to Rangers, which says it is consid-ering delisting from the Plus market on 6May 2012 anyway. Since becoming chair-man I have always questioned what is real-ly being achieved with a public listing,shrugs Whyte.

BUSMANS HOLIDAYIS THE Competition Commission over-stretched? The Capitalist sees the watchdogis advertising for inquiry directors to pro-

vide chairman Roger Witcomb withsound, timely advice. We offer a fasci-nating variety of work, entices the CC.

An interesting way to describe the inves-tigation into local bus services given as anexample in the ad but with a generousleave allowance and civil service-guaran-teed pension, whos quibbling?

Above: The 5 HertfordStreet development inShepherd Market

Above right: Rangersowner Craig Whyte

Picture: REUTERS

17EDITED BYHARRIET DENNYSGot A Story? [email protected] The Capitaliston Twitter: @dennysharriet

The CapitalistCITYA.M. 18 JANUARY 2012

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Racecourse Media GroupSimon Ellen has been appointed as non-executive chairman of RacecourseMedia Group, the umbrella organisation

for the 30 racecourses that hold aninterest in Racing UK, Turf TV and GBIRacing. Ellen, who joined the RMGBoard in June 2010, is a former

Rothschild and Warburg investmentbanker, and has since chaired a numberof private equity-owned investors.

Thames RiverThe asset manager has hired BrettGolledge as part of a restructuring of its

global credit team. Golledge joins fromUBS, where he was head of credit trad-ing until November 2011.

Orosur MiningMario Caron has stepped down as chair-man of Orosur Mining to dedicate moretime to his new role as chief executive of Aldridge Minerals, but will remain as anon-executive director. Ralph Browning,who has been a non-executive director

of Orosur Mining since December 2010,becomes executive chairman.

United First PartnersThe independent boutique brokerageand advisory firm has expanded itsLondon equity sales team by hiring Jon

Samson and Neil Mckay, who join fromStandard Chartered Bank andArrowgrass Capital respectively.

AMR InternationalThe strategy consultancy hasannounced that Jim Easton has beenpromoted from chief operating officerto chief executive. Current CEO DenzilRankine becomes executive chairmanand relocates to New York.

Gide Loyrette NouelDimitrios Logizidis has been promotedto partner in the law firms Londonoffice. Logizidis joined Gide in 2007, andspecialises in structured finance.

Lombard Medical TechnologiesIan Ardill, formerly finance director atBiocompatibles International, has beenappointed as chief financial officer,effective from 23 January.

Distinction Asset ManagementDistinction has appointed DavidButler as sales director. Butler wasmost recently regional account man-ager for London at Cofunds.

CITY MOVES |WHOS SWITCHING JOBS Edited by Harriet Dennys

+44 (0)20 7092 0053morganmckinley.com

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

in association with

Wall Streets rallleaves Citi behin

US stocks advanced yesterday,pushing the S&P 500 to itshighest since early August, butsharply pared gains late in the

session as Citigroups steep drop inprofit gave investors a reason to

unload bank shares. The financial sector, which hasoutperformed the broader market sofar this year, took a hit on investorsdisappointment with Citigroupsearnings.

Citigroup s stock slid 8.1 per centto $28.25 after it reported weaker-than-expected earnings. The KBW Banks Index lost 1.4 per cent.

Through Friday, the KBW BanksIndex was up about 10 per cent forthe year, while the S&P 500 wasabout two per cent higher.

The banks sell-off poured cold water on a rally that drove the S&P500 through 1,300 for the first timesince August.

Stocks rallied about one per centacross the board after data showedChinas economic growth was betterthan expected, even though itexpanded at the weakest pace in two

and a half years.Citigroups results followed simi-

larly disappointing earnings onFriday from JPMorgan Chase.

The Dow Jones industrial averagerose 60.01 points, or 0.48 per cent, to12,482.07 at the close. The Standard& Poors 500 Index added 4.58points, or 0.36 per cent, to 1,293.67.

The Nasdaq Composite Index gained17.41 points, or 0.64 per cent, to2,728.08.

Bank shares also suffered onFriday ahead of the widely expectedannouncement by Standard & Poor'sthat it was downgrading the credit

ratings of nine Euroone countries. While Wells Fargo posted a 20 percent jump in quarterly profit, itsstock, which earlier had risen morethan one per cent to a session high at$30.69, pulled back sharply fromthat peak and ended up just 0.7 percent at $29.81.

On the downside, Carnival sharesslid 13.7 per cent as its Italian unit,Costa Crociere, struggled to locatemissing passengers after a cruiseliner capsized. Fellow cruise operatorRoyal Caribbean Cruises fell 6.2 percent.

Volume totalled 6.74bn sharestraded on the New York Stock Exchange, NYSE Amex and Nasdaq,

just above the daily average of 6.68bn.

Advancing stocks outnumbereddeclining ones on the NYSE by aboutthree to two, while on the Nasdaq,

advancers beat decliners by about 13to 12.

BRITAINS top shares rose yester-day, aided by mining stocks afterdata from top metals consumerChina eased worries over the

demand picture, although fears of aGreek default kept a lid on the gains.

The UK benchmark closed up 36.51

points, or 0.7 per cent, at 5,693.95, hav-ing earlier baulked just above the near-term 5,720 resistance level.

Miners tracked solid gains in metalsprices after China's economy grew at apace better than some had expected,though expanded at its weakest pacein two and a half years in the latestquarter.

Its a very important focal point forthe macro picture. China needs toavoid a hard landing and this datatoday does assist with that somewhat,said Angus Campbell, head of sales atCapital Spreads.

Rio Tinto was among the top blue-chip risers, up 2.9 per cent, as the posi-tive data helped investors shrug asideits near-flat iron ore productiongrowth for the fourth quarter, which

was weaker than some market expec-tations.

Nomura also weighed in on the

company, saying it was one of its toppicks among European miners.

India-focused refiner and powergenerator Essar Energy was the biggestFTSE 100 casualty after IndiasSupreme Court ruled against it in acase yesterday, meaning it will nolonger benefit from a scheme by

which it is able to defer sales tax.Essars shares sank 26 per cent to

their lowest level since the company listed in London in 2010, in hefty trad-ing volume, at almost eight times its90-day daily average.

Investors were rattled aboutprospects for a Greek default, which

could worsen Europes debt crisis by pushing borrowing costs for countrieson the blocs periphery to unsustain-able levels.

Talks between Greece and its privatesector creditors on a debt swap deal

which broke down last week areexpected to resume today.

Athens requires a swift resolution toavoid defaulting on 14.5bn of bondredemptions that fall due in lateMarch.

Despite these overarching worries,UK banks put in a solid showing, withRoyal Bank of Scotland one of the bestoff, ahead 1.8 per cent, after the Britishlender secured a $7.3bn deal to sell itsaircraft-leasing business.

[The] disposal will release $2.5bn of risk-weighted assets, assisting RBS toreduce its wholesale funding commit-ment and strengthen core Tier 1 capi-tal, Oriel Financials said, reiterating

its buy rating on the stock.Insurers gained, too, with insurance

buyout vehicle Resolution up 1.4 percent as UBS upgraded its rating tobuy, citing valuation grounds, in anote on the UK life and non-life insur-ance sectors.

After a choppy session, Burberryended in positive territory, 0.1 per centfirmer, as the British luxury brandmet forecasts with a 22 per cent rise inthird-quarter revenue.

Some analysts said the figures wereflattered by a pulling forward of

wholesale orders and that the firmsfull-year guidance implied little

growth in fourth-quarter wholesalesales.Even with the positive macro-eco-

nomic news, companies are still strug-gling to maintain expectations abovemarket consensus, Atif Latif, directorof equities and derivatives at GuardianStockbrokers, said. We think that theGreek situation is still a grave concernand it is a case of when an orderly default will occur which will increasethe pressure on the ECB.

Miners rise on China statsdespite lingering euro fearTHELONDONREPORT

THENEW YORKREPORT

BEST OF THE BROKERS To appear in Best of the Brokers email your research [email protected]

ANALYSIS l Imperial Tobacco

2,400

2,350

2,300

2,250

2,450

2,200

Nov Dec Jan

p2,360.00

17 Jan

IMPERIAL TOBACCOJP Morgan Cazenove rates the tobacco firm overweight and hasintroduced a target price of 31.27. The broker thinks the tobacco sec-tor as a whole could be in for a rough start to the year, as reluctantinvestors stay away from the sector. But it points to a strong 2011,where even weaker performers in the sector gave a capital return of 20 per cent.

ANALYSIS l Invensys

220210200

230

190180170

Nov Dec Jan

p181.60

17 Jan

INVENSYSCitigroup rates the engineering and software group buy with a targetprice of 235p. The firms profit warning last week has had only a limitedimpact on Citis positive view, and the broker still expects to see strongearnings per share after 2012. Citi still reckons positive news in the rail sec-tor can only help Invensys shares. However, it has cut its earnings per shareforecasts for this year after the firms warning of 60m extra costs.

ANALYSIS l Derwent

1,650

1,600

1,550

1,700

1,500

Nov Dec Jan

p 1,597.0017 Jan

DERWENT LONDONUBS has lowered its rating of the property group from buy to neuand cut its target price from 18 to 17. UBS forecasts lower growth London office market this year, and now thinks Derwents office valugrow five per cent in 2012 cutting its net asset value by 3.5 per cenearnings per share by two per cent. However, UBS remains positive oLondon market in the medium term.

p

4 Nov17 Oct 24 Nov 14 Dec 6 Jan

5,800

5,200

5,300

5,400

5,100

5,600

5,700

5,500

ANALYSIS l FTSE5,693.95

17 Jan

Ernst & YoungMark Weinberger has been named as Ernst &Youngs next global chairman and chief execu-tive, succeeding Jim Turley, who will retire on30 June after leading the firm since 2001.Weinberger currently sits on Ernst & Youngs

highest governing body, the global executive,and runs the global tax practice. He previouslyserved on the Americas executive and USoperating committee, and was the assistantsecretary of the US Treasury under PresidentBush.


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LONDON-LISTED miner Rio Tinto yesterday reported almost f lat ironore production growth for thefourth quarter, weaker than somemarket expectations, as rival BHPBilliton reported a bounce in ironore, copper and lead output.

Rio Tinto reported a three percent rise in output between thethird and fourth quarters of 2011,down from growth of nearly dou-

ble that at the end of 2010. That was much less than some

commodities analysts had expect-ed, with one analyst having tippeda rise of 20 per cent as Rio Tintocontinues to expand its iron oreoperations.

BHP Billiton said iron ore pro-duction rose four per cent to an all-time high between the third andfourth quarters, and jumped 22 percent on a year ago, as its western

Australian plants delivered recordproduction.

The Anglo-Australian firm saidcopper leapt 27 per cent on the pre-

vious quarter, though it was downseven per cent on a year ago, whilelead rose 20 per cent and zinc wasup 21 per cent.

And the group booked a near700 per cent increase in the miner-al resource tonnage at its Spencecopper mine in Chile, and now expects 222m tonnes.

The results were issued on thesame day that Chinese datashowed the worlds second-biggest

economy grew at its weakest pacein two years in the latest quarter,posing questions about Chinesedemand for raw materials.

Meanwhile Australias third-largest iron ore producer Fortescuereported a 19 per cent jump inquarterly shipments as expected.

Rio Tinto output ishit as BHP bouncesBY J OHN DUNNE

MINING

BRITISH support for nuclear energy is at an all-time high as thenations collective consciousnessmoves away from JapansFukushima disaster.

According to research by IpsosMORI, the dip in favourable atti-tudes towards nuclear power seenin surveys in June 2011 was nomore than a temporary blip, and

backing for a nuclear programmeis now growing year on year.

The dip, which saw support wane from 40 per cent to 28 per

cent and opposition rise seven per-centage points to 24 per cent, isthought to be due to the Japanesenuclear flare-up, which releasedradioactive materials following theearthquake and tsunami lastMarch.

According to surveys conductedin December, 40 per cent of Britainis in favour of the nuclear energy industry, while nineteen per centexpressed opposition.

A record fifty per cent of respon-dents said they would be in favour

of building new nuclear power sta-tions in Britain to replace those

due to be phased out over the nextfew decades.

Backing for new power plantsdropped eleven percentage pointsin the wake of Fukushima, downfrom 47 per cent.

Support for nuclear newbuildhas recovered robustly, said RobertKnight, director at Ipsos MORIReputation Centre.

It seems the public see Japan asa long way away and memories areshort, but concerns about thefuture security of energy supply

closer to home are ongoing andpersistent.

British support for nuclear enerreturns to its pre-Fukushima hiENERGY

AEROSPACE group EADS batted away concerns over the financing neededto maintain a record wave of jetdeliveries this year, as bumper ordersfrom its Airbus unit gave it a strongposition in a recovering market.

Airbus delivered 534 planes in2011, and expects to deliver 570 this

year, the firm said yesterday.It won 1,608 gross orders in 2011,

giving the firm a market share of 64per cent by volume or 54-56 per cent

by value putting it ahead of rivalBoeing.

EADS, whose shares have risen 25per cent in the past year, is in

cityam 2012-01-18

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