cityam 2012-03-01

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BUSINESS WITH PERSONALITY

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THE NEW JOBSITEFOR LONDONS PROFESSIONALS

FTSE 100 5,871.51 -56.40 DOW 12,951.61 -53.51 NASDAQ 2,966.89 -19.87 /$ 1.59 unc / 1.19+0.01 /$ 1.33 -0.02

Barclays in

key hiringfrom rival

BARCLAYS Capital has demonstratedits ambition to become a leading play-er in UK investment banking, hiringMark Astaire, head of corporatebroking, from rival Bank of AmericaMerrill Lynch.

Astaire, who is now on threemonths gardening leave, joins his for-mer colleague Richard Taylor atBarCap, where he will be charged withdriving the team further up theleague tables. Taylor is head of invest-ment banking for UK and Ireland.

BarCap, whose broking teamincludes former UBS star JimRenwick, is already broker to eightFTSE 100 companies, includingResolution, British Airways owner IAGand Legal & General. In the past fewweeks it won the brokership of TullowOil away from Bank of AmericaMerrill Lynch and Hoare Govett.

The team has won 26 mandatessince March 2010 in its push tobecome one of the top three corpo-rate brokers.

Corporate broking is not in itself aprofit-driving business, but it is anactivity that encourages long-termrelationships with clients that oftenleads to other profitable opportuni-ties such as M&A work.

Astaire, who is in his early 50s, andwhose clients include BSkyB and WmMorrison, will be vice chairman of

investment banking for Europe andthe Middle East. Formerly at HoareGovett, Astaire has been at MerrillLynch for seven and a half years.

BY DAVID HELLIER

BANKING

Ben Bernanke lowered expectations for more monetary easing yesterday, owing to positive signs in the American economy

GOLD plummeted yesterday as tradersgambled that the American recoveryis set to rule out further monetarystimulus, dubbed QE3.

Federal Reserve chief Ben Bernankeappeared more upbeat than usualduring his testimony to politicians inWashington DC, giving no hint thatmore quantitative easing is on thecards.

Ultra-loose money has previouslybeen one of the drivers of high pre-cious metal prices as the dollar isdevalued and economic worries seeinvestors turn to safe haven assets.

But yesterday the greenback hit ses-sion highs against the euro followingBernankes comments. Gold sankaround five per cent to below $1,690an ounce, while silver also lost overfive per cent.

The US economy grew by a betterthan expected three per cent annu-alised in the fourth quarter of last year, according to official datareleased yesterday.

The Fed expects the economy willexpand at or somewhat above thepace registered in the second half oflast year, which was 2.25 per centyear-on-year.

And last night the Feds Beige Book a survey of business conditions in adozen American districts struck acautiously optimistic tone.

GOLD SLUMPS ASFED COOLS ON QE3BY JULIAN HARRIS

WORLD ECONOMY

www.cityam.comIssue 1,582 Thursday 1 March 2012BUSINESS WITH PERSONALITY

Overall economic activity contin-ued to increase at a modest to moder-ate pace in January and earlyFebruary, the Book said.

Reports of consumer spending were generally positive except forsales of seasonal items, and the salesoutlook for the near future was most-

ly optimistic.Manufacturing and services haveboth begun the year on a reasonablystrong footing, the survey suggested.

Bernanke had earlier cited somepositive developments in the labourmarket, during his testimony. Thedecline in the unemployment rateover the past year has been somewhatmore rapid than might have beenexpected, he said.

Unemployment in the worlds

largest economy remains elevated,Bernanke stressed, after describingthe recovery as uneven and modestby historical standards.

But even that is more upbeat whencompared with the frustratinglyslow language he had been using inrecent speeches, noted PaulAshworth of Capital Economics.

[Bernankes] statement thatemployment is recovering at a better-than-expected rate implies that if

quantitative easing is coming, it wontbe for a while, said Steve Scacalossi,director of global precious metals atTD Securities. NASDAQ AT 3,000: P2

Certified Distribution

02/01/12 till 29/01/12 is 92,258

JAMES Murdoch has quit his job asexecutive chairman of NewsInternational, in a move that cementshis exit from the British newspaperindustry and his recent relocation toparent firm News Corps New York

headquarters. A News Corp statement said his

departure would allow him to concen-trate on the companys expandingglobal television branches.

Murdoch Junior will remain asdeputy chief operating officer at NewsCorp and chairman of BSkyB.

In the last year, the outgoing

Murdoch has overseen the closure ofthe News of the World amid an ongo-ing investigation into illegal phonehacking, and he has appeared twice infront of a parliamentary inquiry intothe matter.

James Murdoch resigned as chair-man of News Group Newspapers, theholding company of News

Internationals publications, inNovember.

His resignation yesterday comeshours after News Corp presidentChase Carey indicated that the boardhas looked at the possibility of sellingthe groups newspaper unit. But hesaid the focus right now was onimproving their profitability.

BY LAUREN DAVIDSON

MEDIA

FREE

James Murdoch quits as News International chairman

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News2 CITYA.M. 1 MARCH 2012

Nasdaq hits3,000 at last THE NASDAQ Composite indexskimmed the 3,000 mark yesterday forthe first time in over a decade, pro-pelled by Apples surge, before sinkingback below the line.

In a hopeful hint that investor faithcould be returning to a pre-dotcomlevel the Nasdaq was last above 3,000as the shutters closed on the internetbubble in 2000 the index touched3000.11 in yesterdays trading.

But the triumph was short-lived, asFederal Reserve chairman BenBernanke gave no indication of consid-ering further measures to spur theeconomy.

This sent a chill through the mar-kets. The Nasdaq closed at 2966.89 down almost 20 points on the previ-ous days close.

The Nasdaq historically attractstechnology stocks, adding Zynga andGroupon to its list last year in a stringof high-profile tech IPOs.

Apple floated on the Nasdaq in 1980and has since become the worldsmost valuable company, with a mar-ket cap of $504.4bn (316.3bn).

Apple, which has grown its stock bya third since the start of the year,accounts for 11 per cent of the NasdaqComposite.

And all eyes will be on Facebooksimminent float, to see whether itplumps for the Nasdaq or NYSE.

BY LAUREN DAVIDSON

CAPITAL MARKETS

ATTARA CAPITAL TO LIQUIDATEOPERATIONSAttara Capital, the hedge fund co-chaired and founded by NatRothschild and the successor to thenow-defunct activist fund AtticusCapital, is to liquidate its operations.Attara, which is run by David Slager,a former Atticus partner, is shuttingas a result of adverse trading condi-tions and difficulty raising newmoney from investors, people closeto the fund told the Financial Times.

RASPBERRY PI COMPUTERS SELL OUTON LAUNCHA 22 mini-computer, aimed at help-ing children learn programmingskills, was sold out within hours of

its UK launch yesterday. TheRaspberry Pi is a credit card-sized

motherboard, sold without a case, which can be connected to a TV,monitor, mouse or keyboard.

FACEBOOK SHOWS OFF ITS NEWMARKETING TOOLSFacebook pitched a series of newmarketing tools to advertisers yester-day, including mobile advertise-ments and more sophisticatedFacebook pages for businesses, as itattempts to increase its appeal tomarketers before its launch as a pub-lic company in the coming months. The social networks first big eventfor advertisers, held in New York,will generate new business not onlyfor itself but also for its range ofthird-party advertising and market-ing intermediaries.

MISS MARPLE GOES TO SOLVE DEBTPROBLEMAcorn Media, a DVD publisher, strucka deal yesterday to buy 64 per cent ofthe Agatha Christie canon from thetroubled intellectual property groupChorion, which has been selling offassets to repay its debts. The transac-tion includes ownership of 80 novelsand short-story collections, 19 playsand a library of 40 television films.

NEW LOOK LOSES CREATIVE DIRECTORThe creative director of New Look hasleft the company, months after it lostits second-in-command. BarbaraHorspool is leaving a year after she per-formed a U-turn by reversing a deci-sion to take a role with Oasis.

JAMES MURDOCH COULD LOSE JOB ASSKY CHAIRMAN AFTER NEWS INT EXITOne of BSkyBs biggest investors has warned that James Murdochs exitfrom News International suggests hewill soon also lose his position as chair-man of the pay-TV broadcaster. MrOdey, whose fund Odey AssetManagement owns 2.7 per cent ofBSkyB, said Wednesdays move suggest-ed Mr Murdoch was now out of favourin the News Corporation empire.

WORRIED ITALIANS FLOG OFF THEIRSUPERCARS Wealthy but worried Italians are sell-ing off their Porsches, Ferraris andother luxury cars at a record rate toavoid the scrutiny of tax inspectors.

ARGENTINA MOVES TO SNUB UK GOODSArgentinas government asked compa-nies to stop importing products fromthe UK in the latest escalation of ten-sions between the countries over theFalkland Islands. Industry MinisterDbora Giorgi has called 20 of thenations top executives and askedthem to replace goods from the UK.

FTC ATTORNEY TO JOIN MICROSOFT A senior Federal Trade Commissionattorney who led several of theagencys antitrust investigations intoGoogle has been hired by the compa-nys archrival, Microsoft. Randall Long will take the helm of the softwaregiants regulatory affairs departmentat the end of March.

WHAT THE OTHER PAPERS SAY THIS MORNING

Entrepreneurs finally fighting back

BUSINESS people have a tendency torun scared of political debate. Theyrarely want to criticise politicians onthe record (though they are oftenextremely outspoken in private). Theyvery rarely agree to give interviews todiscuss controversial subjects. This is agreat tragedy: capitalists are failing tospeak up for capitalism, allowingthose who hate businesses, the profitmotive, entrepreneurs and the City todominate the debate.

So it is good to see that 507 entrepre-neurs have put their names to a cam-paign to abolish the 50p tax rate. The

website is www.scrapthetax.co.uk andis recruiting more signatories. This isan issue virtually every business execu-tive and job-creating entrepreneur Italk to including those who dont

earn enough to pay the tax say is amajor problem for the economy. It dis-courages investment, reduces incen-tives, chases away talent and sends amessage to the world that the UK nolonger values achievement and suc-cess. The rich suffer but not as muchas the poor and the middle classes, forwhom job opportunities are reduced.The tax raises hardly anything and willactually reduce revenues over time.

The signatories, mainly from smalland medium sized enterprises, aredrawn from a wide spectrum, includ-ing manufacturing, exporters, phar-maceuticals, cleaning services, hairsalons, care homes, digital media, skiphiring services, construction, securityinstallation, plumbing and engineer-ing. Andrew Denny, box of Fix-a-FormInternational, put it well on thegroups website: I am simply trying to

create wealth for me, my kids and myloyal staff. Why are high earners treat-ed like they have committed a crimeand should be punished? The govern-ment must listen to entrepreneurs. It

is they who are creating the jobs andthe growth that the UK economy des-perately needs. You cant tax a countryback to prosperity.

CONSUMER POWERONE of my most fascinating encoun-ters recently was with a major insur-ance executive. He told me thelong-established principal of caveatemptor let the buyer beware hasnow been completely eradicated fromhis industry. Individuals are no longerheld responsible and accountable fortheir decisions; the onus is entirely onregulators and companies.

It has long been obvious that caveatemptor is being undermined acrossthe economy it still exists in thehousing market, where buyers areresponsible for hiring surveyors andmaking sure they are happy with their

purchase, but it has been in declineelsewhere. Yet this is the first time Ivebeen told it is already finished in a keyindustry. This is depressing. Insuranceis now on its way to becoming a utility-

style industry, with regulators likely toconcern themselves even with theprofitability of individual products.

Such micro-management isnt theright solution. Utilities arent knownfor their commitment to customersand innovation; regulators inevitablyfail to protect consumers. We need adynamic marketplace where con-sumers are empowered. The financialindustry must make products drasti-cally simpler and more transparent and the government needs to focus onfinancial literacy. Personal financeneeds to be taught in schools; the nextgeneration must be equipped with thetools to control its own financial des-tiny and to make the right choices. Thealternative is stultifying and ultimate-ly self-defeating state paternalism.

[email protected] me on Twitter: @allisterheath

HUNDREDS of business owners andentrepreneurs have called on thechancellor to scrap the 50p tax ratein his Budget this month, claimingthe levy is an unfair, politicallymotivated tax.

The business owners and direc-tors said the top rate introduced byLabour is penalising high earnersand cutting it would contribute tothe governments growth agenda,in a letter to the Telegraph.

But the Labour Party defendedthe tax rate last night, saying thecurrent economic climate means itis the wrong time to cut tax for thetop earners.

But these business owners areright to call on the government totake action to stimulate growth andjobs in our economy, added shadowchief secretary to the Treasury,Rachel Reeves.

George Osborne is due to deliverhis 2012 Budget on 21 March.

Chancellor George Osborne has come under pressure to cut the top rate of tax Pic: GETTY

NEWS | IN BRIEF

More Lehman clients to get refundBritains highest court yesterday ruledthat billions of dollars earmarked asbelonging to clients when LehmanBrothers collapsed should be divided upamong all its clients, including thosewhose cash the investment bank hadmixed with its own. By law, firms must

keep money they trade on clients behalfseparately to their own, keeping it safefrom creditors seeking to recuperatelosses in the event of a bankruptcy. Theruling said that Lehman BrothersInternational failed to do this on a trulyspectacular scale.

Wall Street bonuses in fresh fallWall Street cash bonuses for 2011 fell totheir lowest level in three years as volatiletrading and stiffer regulations took a tollon profits, said New York States comp-troller yesterday. The securities industry'sbonus pool was expected to total $19.7bn,comptroller Thomas DiNapoli said. Thatwould be down 14 per cent from 2010but well short of the 30 to 40 per centcuts predicted by some industry consult-ants. But lay-offs resumed, with WallStreet cutting 4,300 jobs between Apriland December, he said.

EDITORS LETTER

ALLISTER HEATH

Editorial StatementThis newspaper adheres to the system of

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

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]

Apple, the tech giantlef by chief exec TimCook, accounts foraround 11 per cent ofthe Nasdaq Composite

4th Floor, 33 Queen Street, London, EC4R 1BRTel: 020 3201 8900 Fax: 020 7248 2711Email: [email protected] www.cityam.com

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

CommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

The new jobs website for London professionalsCAREERS.com

POLITICSCalls to cut 50p tax rate

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EUROPES banks borrowed anotherhalf-trillion euros at rock bottom inter-est rates yesterday as the EuropeanCentral Bank (ECB) again pumped thesystem full of cheap cash.

Bank stocks rose after 800 firmstook part in the second three-yearlong-term refinancing operation(LTRO), borrowing 529bn (443.3bn)at one per cent interest rates, takingthe total lent to over 1 trillion.

British part-nationalised bankLloyds was one participant, borrowing11.4bn to fund a pool of non-coreeuro-denominated assets.

The aim is to take bad assets offbanks and boost liquidity, preventinga collapse which would devastate thealready very weak economy.

The first LTRO in December saw 523banks borrow498bn. That operation was credited with staving off a newcredit crunch, and the borrowingcosts of the likes of Italy and Spain

plummeted as the risk of a bankingsystem bailout receded and banks hadmore cash to invest in sovereignbonds.

Yields on 10-year Italian and Spanishbonds fell to 5.188 per cent and 4.99per cent respectively yesterday wellbelow the high levels seen last year.

But economists warned the meas-ures are not enough by themselves topermanently fix the banking systemsproblems.

The ECBs actions do not addressthe underlying structural issues in the

banking sector, said a report fromStandard and Poors. Issues includecapital shortfalls at various banks, thequestionable viability of some busi-ness models in the medium term, andcontinued uncertainty over the appro-priate carrying values of assets such ascertain sovereign exposures.

The agency believes the LTRO doesgive banks more time to clean up theirbalance sheets and adapt to new rules,and so expects further deleveragingand downsizing over the next year.

Banks lap upmassive ECBcash injection

GAME GROUPS shares plunged 16per cent yesterday and its futurelooked more uncertain after thechain admitted that one of the biggest video game makers wasrefusing to forward several newreleases.

The ailing retailer said in a state-ment that, after approaching its sup-pliers for support, it had been

unable to agree terms over a smallnumber of titles, namely ElectronicArts Mass Effect 3 the most antici-pated game of the year so far.

Game, which has been hit by adearth of new consoles coming on tothe market, struck a deal with banksearlier this month to avoid breach-ing the terms of its loans.

In an internal memo to staff yes-terday Game said: We will not stockproducts if the terms are not rightfor our business.

Game Group could be left on the shelfas EA refuses to send top new games

Shares tanked as retailer Game, under boss Ian Shepherd, revealed it was struggling to procure new releases including Mass Effect 3BY TIMWALLACE

BANKING

NewsCITYA.M. 1 MARCH 2012

BYKASMIRA JEFFORDRETAIL

3

ANALYSIS l GAME Group PLC

p

23 Feb 24 Feb 27 Feb 28 Feb 29 Feb

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5.00

4.75

4.9229 Feb

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THE CHIEF executive of StandardChartered has warned of the dangerof an avalanche of global regulationas the bank posted record profits forthe ninth consecutive year.

Peter Sands said new capital rulescould increase protectionism anddescribed the regulatory agenda asdriven through the rear view mirror.

All of us [banks] face the challengeof the ongoing avalanche of regula-tion. None of us can be complacent

about the continuing fragility of thesystem.

Sands said Standard Chartered issupportive of Basel III but warned thatnational variations are creatingincredible complexity, huge costs,and a multitude of unintended conse-quences, such as protectionism.

The bank posted an 11 per cent risein pre-tax profit to $6.78bn (4.25bn)for 2011. Bonuses were flat at 800mand total staff costs rose 15 per cent

with underlying wage inflation of

about five per cent. Sands said thebank faces acute competition to hireand retain staff, echoing concernsexpressed by HSBC earlier in the week.

He also warned over central bankinjections on the day 800 banks butnot Standard Chartered took530bn(443.58bn) in cheap ECB loans.Central bankers are pumping moneyin but, in doing so, risk laying theseeds for the next crisis.

The bank, which makes most of itsprofit in Asia, said its growth was led

by Singapore but its surplus fell in themajor markets of India and Korea. It

paid a British bank levy of $165m.

Sands soundswarning overred tape rush

BANK of England governor MervynKing hit out at the previous Labourgovernment during a tense committeeappearance in Westminster yesterday,and also accused banks of thwartingefforts to boost lending to small firms.

King reacted testily to Labour MP Andrew Love who had said that theBank chief appeared relaxed aboutthe UKs economic plight.

I am actually rather concernedabout it, King responded. He said hehad told the previous Labour adminis-tration that the scale of the recapital-isation of the banks was inadequateand their actions in making sure

banks lend to SMEs was also inade-quate. I made that very clear.

The Treasury is working on a crediteasing scheme which aims to boostlending to small firms.

However, King warned that if banksget to decide which loans to keep on

their books and which to share withthe government, the state will receivethe worst loans and the banks willkeep the best ones.

The banks opposed state involve-ment because they didnt want toshare the fruits of the most profitableloans to small businesses, King said.

Meanwhile, Kings colleague Martin Weale said last night that the Bankwill likely have no reason to furtherexpand its asset buying after the cur-rent tranche ends in May.

Mervyn King hits out at Labour andbanks for failing to help small firms

BY PETER EDWARDS

BANKING


BY TIM WALLACE AND JULIAN HARRISUK ECONOMY

ANALYSIS l Standard Chartered PLC

p


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Bank of England governor Mervyn King said banks were opposed to government plans to boost lending Picture: PA

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THE CHIEF executive of fund managerHenderson has warned more clientscould pull their cash this year as theEurozone crisis buffets the industry.

The Anglo-Australian firm reportednet outflows of 6.4bn during last yearand Andrew Formica told City A.M. thepattern would not be reversed quickly.

There is still a lot of nervousness

out there... The ability of world growthto get underway is being hampered bythe dithering in the Eurozone but theUS is starting to develop an improvedoutlook.

We still have the potential for fur-ther outflows but at a more modestrate.

Formica said much of last years out-flow was due to exits from Europeanand US mutual funds as well as theloss of some institutional mandates.

The UK retail book remained relative-ly stable through last years marketturmoil, he added.

Despite market turbulence leadingto a hard year for the industry,Henderson said contributions fromGartmore, the rival it bought last year,had pushed up profit.

Underlying pre-tax profit jumped 58per cent to 159m as Gartmores boostand broader corporate cost controlshelped increase Hendersons operat-

ing margin to 36.3 per cent. The absorption of Gartmore alsohelped boost Hendersons manage-ment fees by 28 per cent to 360.5mand transaction fees were up 39 percent to 51.1m.

The acquisition of Gartmore hasexceeded our expectations on all met-rics, Formica said.

Hendersons hedge funds con-tributed a 52 per cent lift in perform-ance fees to 65.2m.

Profit soars but Henderson chiefsays euro crisis still hitting flows

Andrew Formica remains cautious

BY PETER EDWARDSASSET MANAGEMENT

News 5CITYA.M. 1 MARCH 2012

NEWS | IN BRIEF

North Korea halts nuclear testsNorth Korea agreed yesterday to stopnuclear tests, uranium enrichment andlong-range missile launches, and to allowchecks by nuclear inspectors, in anapparent policy shift that paves the way

for resuming long-stalled disarmamenttalks. The surprise breakthrough,announced simultaneously by the US andNorth Korea, makes possible the resump-tion of six-nation nuclear negotiations.

Fannie Mae needs more state cashFannie Mae, the biggest source of moneyfor US home loans, said yesterday itwould seek $4.6bn (2.9bn) in additionalfederal aid after reporting a fourth-quar-ter loss. The government-controlled

mortgage finance company posted a lossof $2.4bn for the last three months of2011. Fannie Mae has borrowed morethan $116bn from the government andpaid back almost $20bn in dividends.

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MANY investors are calling forquarterly reporting to be abolishedas it encourages short-term deci-sion-making, a government reviewinto short-termism claimed yester-day.

The review, chaired by econom-ics professor John Kay (pictured),said in its interim report that manyrespondents think reporting everythree months encourages firms topad the results with useless ormisleading statements and fig-ures.

The noise positive ornegative arising in response toquarterly interim managementstatements is an unwelcome dis-

traction in the context ofencouraging boards to focuson the long term develop-ment of the business,Standard Life Investors toldthe review.

Insurance firms are beingparticularly hard hit byreporting rules, in thewake of the new SolvencyII regulations, it added.

Lots of respondents alsocriticised mark to marketaccounting, which can bemisleading by forcingfirms to mark to marketassets and liabilitieswhich they may have nointention of realising.

Business secretaryVince Cable, who com-

missioned the review last year toexamine the impact of equitymarkets on UK firms perform-ance, said yesterday: One of the

big overriding themes in econom-ic policy has to be generating

in both equity marketsand corporate Britaingenerally a belief inthe importance of thelong-term perspective.

The review also saidexecutive pay was aprincipal source offriction betweengroups representingshareholders and com-pany managers.

Kay is expected todeliver his final reportin the summer.

Quarterly reportingdistorts, claims KayBYMARION DAKERS

POLITICS

REGULATORS have warned that plansfor European reforms of credit ratingagencies (CRAs) could have unintend-ed consequences, as proposalsemerged yesterday to give the EU newpowers over the controversial bodies.

Giving evidence at the opening ofthe Treasury Select Committeesenquiry into CRAs, the FinancialServices Authoritys David Lawton saidthat forcing companies to rotate theagency they use every year could leadto a lack of continuity in ratings.

His views were echoed by MarkHyde Harrison, chairman of theNational Association of Pension Funds,who said rotation would add costs tocompanies to get [the agency] up toscratch, and may create instabilities.

A report yesterday proposed new EUpowers that could include banning

sovereign credit ratings if countries donot want them. But other EU lawmak-ers said that would be a step too far,and would not stop the financial sec-tor relying on ratings.

Regulators slamEU credit ratingreform plan


HSBC is about to complete a 1bndeal to sell its general insurance armto rivals AXA and QBE, according toreports.

Under the deal French insurancegiant AXA would take over HSBCsbusiness in Mexico and Asia, exclud-ing Hong Kong. Australian firm QBEwould then take over the Hang Sengoperation in Hong Kong and opera-tions in Argentina.

The double deal could beannounced as early as next Thursday,according to Sky News.

An AXA spokesman declined to

comment while HSBCs Hong Kongoperation, which is handling the sale,could not be contacted.

Reports earlier this month suggest-ed that it was two-horse race between

AXA and ACE for control of the globalinsurance division. The emergence ofQBE suggests that HSBC has seenmore value in splitting the unit alonggeographic lines.

Although HSBC recently declaredits intention to focus on Asian opera-tions, the decision to sell this arm ofthe business fits with the firms over-all corporate strategy.

It is looking to concentrate on itscommercial banking business in anattempt to increase shareholderreturns and is open to offers for non-core operations.

Since last May it has disposed ofassets worth over $4.9bn.

On Monday HSBC, which has

escaped the worst of the Eurozone cri-sis, announced its year-end pre-taxprofits had risen 15 per cent to$21.9bn (13.84bn), ranking it as themost profitable Western bank.

HSBC near sale ofits insurance arm

to rivals for 1bnBY JAMESWATERSON

INSURANCE

RESPONSES TO THE KAY REVIEW INTO SHORT-TERMISM

STEPHEN HADDRILLFINANCIAL REPORTING COUNCIL

Quarterly reporting adds little byway of new information and can be easilymanipulated, but it does provide a regularshort-term trading opportunity, and, giventhe continuing requirement on companiesfor timely disclosure of market sensitiveinformation, we support its abolition.

SIR TERRY LEAHYFORMER TESCO CHIEF EXECUTIVE

Sir Terry told the review he didnot feel he had enjoyed such a relationshipwith analysts and fund managers... Theinteraction had deteriorated rather thanimproved: that analysts and fund managershad become more concerned with quarterlynumbers and with earnings guidance, andless with the strategic direction ofthe business.

NEIL WOODFORD | INVESCO

The fund management industry should be to connect the nations savings with the capital needs of busi-ness, and hold professional management to account... I believe that the industry has been and still is failing to performthese fundamental roles adequately. At the heart of this is the all-pervasive culture of short-termism. It isprobably best represented by the average holding period in the UK market of less than 10 months.

THE CO-FOUNDER of Blackstone has become the latest US private equitytitan to win a bumper payout with a

$213.5m (133.88m) award in 2011.Most of Stephen Schwarzmans

package, which rose by a third, camefrom dividends on his 21 per centstake in the worlds largest private

equity firm and realised investmentsfrom funds predating the companyspartial float in 2007.

It comes days after KKR revealedthat co-founders Henry Kravis andGeorge Roberts each received about

$94m in compensation and cash divi-dends. Last month Carlyle Group saidfounders William Conway, DanielDAniello and David Rubensteinreceived around $200m each.

Blackstone boss boomyear as he earns $213m

Stephen Schwarzman co -founded Blackstone in 1985 Picture: REUTERS

BYPETER EDWARDS

PRIVATE EQUITY

BY ELIZABETH FOURNIER

REGULATION

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News 9CITYA.M. 1 MARCH 2012

DIAGEO, the drinks company behindGuinness and Johnnie Walker, has pro-moted Ivan Menezes to a new role ofchief operating officer, in a move thatcould see him eventually take overfrom chief executive Paul Walsh.

Menezes, who is president ofDiageos North American business andchairman of its operations in AsiaPacific and Latin America, will take uphis new role on 1 March.

He will lead Diageos operating busi-

ness globally, adding Europe andAfrica to his responsibilities and mak-ing him the front-runner for the top

job.Walsh is expected to remain in his

role until the summer of 2014 to seehis three-year drive to increase sales,

margins and earnings through to com-pletion. If the strategy were to progress

well, he could leave earlier.Charlie Mills at Diageos house bro-

ker Credit Suisse flagged Menezesstrong reputation with the marketand said he would be viewed bymany, we believe, as the natural suc-cessor to the current chief executive.

Diageo linesup successorfor chief execBYKASMIRA JEFFORD

LEISURE

THE GOVERNMENT has bowed to enor-mous pressure and removed the threatof benefit sanctions from jobseekers

who do not wish to complete theirplacement in an opinion-splitting

work experience scheme.Previously, participants who work

unpaid for eight weeks while continu-ing to receive jobseekers allowance lost their benefits for two weeks if theydropped out of the programme after aone week probationary period.

But now these sanctions will onlyapply in cases of gross misconductsuch as theft or racist abuse.

Employment minister ChrisGrayling called critics of the schememisguided and announced a stringof new sign-ups to the programme,including Airbus and HP Enterprise.

But Boots removed some of its

stores, saying it was against companypolicy to join schemes that compelpeople to work.

According to the government, just220 of 34,200 participants in Januaryand November were sanctioned fordropping out of the programme early.

Work schemedrops sanctionsfor the quitters

EMPLOYMENT

Ivan Menezes followingWalshs path to the top

IVAN MENEZES journey to top ofthe worlds largest drinks compa-ny mirrors that of the firms chiefexecutive Paul Walsh.

Walsh became chief operatingofficer at the start of 2000 withthe stated aim of taking over aschief executive from JohnMcGrath. By September that yearhe had moved into the top role.

That journey looks set to berepeated when Menezes, who has

been president of Diageos biggestregion Latin America for eight

years, becomes chief operatingofficer today.

Menezes, 52, a naturalised American born in India, joinedGuinness in 1997 in the same yearit merged with GrandMetropolitan to form Diageo.

Before joining Guinness

he held senior marketingpositions with

Whirlpool Europe inMilan and was a princi-pal with managementconsultancy firm Booz

Allen Hamilton in Chicago andLondon.

He became president ofDiageos venture markets in 2000and was made chief operatingofficer of North America in 2002.

BYKASMIRA JEFFORD

LEISURE

ANALYSIS l Diageo PLC

p


1,510

1,505

1,500

1,495

1,490

1,485

1,480

1,475

1,503.5029 Feb

The firm owns restaurant chain Frankie & Bennys

THE RESTAURANT Group, the ownerof the Garfunkels and Frankie &Bennys chains, said another 600 jobs

were in the pipeline for this year afterboasting of another corking set offull-year results for 2011.

Revenue increased to 487m in the year to January, while like-for-likesales were up 3.25 per cent. Pre-taxprofit was up 12 per cent to 60.3m.

The group opened 25 new sites last year and now operates 400 restau-rants and pub restaurants across theUK. It plans storm ahead with 30 new

sites this year, creating 600 jobs.The performance of our recent

years openings has been outstandingand this bodes well for the future,chief executive Andrew Page said.

He warned the economic climatein 2012 would be every bit as toughas 2011 but insisted there was scopefor quite an uptick in the secondhalf as the groups restaurants inretail parks benefit from a strongline-up of film releases.

Trading for the first eight weeks ofthis year slowed, with like-for-likesales down two per cent, sending

shares tumbling 4.3 per cent yester-day. However Page expects sales toimprove as inflation abates.

We are comparing against a peri-od last year when there was a bounce

back from the weather in Decemberand film like the Kings Speech werereleased, he said.

Peel Hunt analyst Nick Batramsaid: The Restaurant Groups proven

business model, excellent manage-ment, solid balance sheet and strongcash flow place the group in a strongposition for when the recovery comesthrough.

Restaurant Group plots moresite openings as profits jumpLEISURE

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sell half of its share in 150m worthof West End property to GreatPortland Estates out of the pairs joint venture Great CapitalPartnership.

The deal includes three primeproperties on Regent Street, which

are home to tenants including theBody Shop, jeweller Folli Follie andshoemaker Russell & Bromley. Thetwo other properties are located onBroadwick Street and Dufours Place.

GPE chief executive TobyCourtauld said in a statement:

CVC Capital Partners is to buy Nordicconstruction products and machinerydistributor Ahlsell from Cinven andGoldman Sachs Capital Partners for1.8bn (1.5bn), in Europes biggest pri-vate equity deal since last summer.

Our acquisition of Ahlsell offers anexciting platform for growth, bothorganically and through acquisitions,CVC partners Peter Tornquist andSoren Vestergaard-Poulsen said yester-day.

Ahlsell specialises in providinggoods and services in heating, plumb-ing, electricals, tools and machinery.In 2011, Ahlsell made a profit beforeinterest, depreciation and amortisa-tion of192m on revenue of2.3bn.

The deal is Europes biggest buyoutsince BC Partners agreed to buySwedish cable company Com Hem inJuly.

It is also the first big deal in a stringof expected private equity sales in theregion this year which include toiletand bath maker Sanitec, owned byEQT, and installation services firmBravida, owned by Triton.

Goldman Sachs and Nordea advisedCinven and Goldman Sachs CapitalPartners on the deal. Deutsche Bankadvised CVC. Financing was led byNordea, Deutsche Bank, GoldmanSachs, Barclays Capital, DNB Nor andDanske Bank.

CVC is set tobreak privateequity dry spellacross Europe

PRIVATE EQUITY


CAPITAL & COUNTIES (CapCo), theowner of Covent Garden Market andEarls Court, has unveiled an 11.7 percent hike in net asset value and thedisposal of its West End properties.

The listed developer reported a jump in NAV to 166p per share in2011 thanks in part to a rise in itstotal property value of 9.2 per centlike-for-like to 1.6bn.

Profit before tax was 161.9m, upfrom 132.5 the previous year, whilenet rental income stayed the same at69m. Revenue fell from 113.7m to108.4m.

The group said its exhibition busi-ness at Earls Court and Olympia per-formed in line with expectations andproposals for the redevelopment ofthe estate passed several milestones,including the submission of plan-ning applications for Seagrave Roadand the wider scheme.

At Covent Garden, the group made113m of key property acquisitionsand a series of tenancy changeswhich helped boost the estates valueto 808m.

Ian Hawksworth, chief executive,said: The transformation of CoventGarden into one of the most vibrantretail and leisure destinations inLondon continues to create value andattract new brands.

CapCo also said it had agreed to

DAVID Cameron has condemned callsfrom the leader of the UKs biggesttrade union for strike action duringthe Olympics as completely unac-ceptable and unpatriotic.

Len McCluskey, head of Unite, hadsaid workers should consider disrupt-ing the Games as a protest against thegovernments planned slowdown ofpublic spending.

McCluskey said people coming toBritain for the Games should be

made aware of union anger. Theattacks that are being launched onpublic sector workers at the momentare so deep and ideological that theidea the world should arrive inLondon and have these wonderfulOlympic Games as though everythingis nice and rosy in the garden isunthinkable, he told the Guardian.

Londons transport infrastructurewill already be stretched to the limitduring the Games and the Tube isparticularly vulnerable.

Strikes would also make it harderfor businesses trying to maintain nor-

mal working patterns.MWB Business Exchange, a firm

that specialises in flexible work-spaces, said yesterday that followingMcCluskeys pronouncement theyhad received more than 255 callsfrom different companies, allspecifically asking about relocatingout of central London during theOlympics.

Labour leader Ed Miliband, whoseparty receives a substantial propor-tion of its funding from Unite, said

any threat to the Olympics is totallyunacceptable and wrong.

Camerons anger as unions mull massstrike action during London Olympics

PSA PEUGEOT and General Motors yes-terday confirmed their long-trailedplans for a strategic alliance that thefirms say will create $2bn in synergieswithin five years.

GM will take a seven per cent stakein struggling Peugeot, making it theFrench firms second-biggest share-holder, and the companies will poolresearch, development and supplierrelationships, they said in a statement.

Peugeot plans to raise 1bn in a

rights issue in connection with the tie-in. The Peugeot familys holding com-

pany will invest 150m in the capitalhike, remaining the carmakers largestshareholder.

This alliance means more productsand technology in more countries. Weexpect to learn from PSAs experience,especially in smaller cars, GMs chair-man and chief executive Dan Akersonsaid in a conference call.

Just to be clear, this is an alliance,not a merger, and doesnt impact onmeasures we were already taking.

Peugeot and GM confirmtie-up and capital raising

TRANSPORT

TAYLOR WIMPEY resumed paying adividend yesterday as its tactic of

focusing on margin rather than vol-ume saw it swing back to a full-yearprofit.

The sale of its North American busi-ness in 2011 had also improved itsfinancial position, the housebuildersaid, allowing it to reduce debt to117m from 655m, and propose afinal dividend of 0.38p.

Off the back of strong financialreturns, a stable market, a very strong balance sheet and capital base, we

have resumed dividend payments forthe first time since 2007, chief execu-tive Pete Redfern told journalists.

We are also starting to talk aboutthe potential for capital returns over

the cycle. Not immediately...but as weget into a stronger market, businesswill generate an awful lot of cash andwe do think that it is appropriate toreturn that cash to shareholders.

He was speaking as the groupunveiled a return to profit last year,with pre-tax underlying profits up to90m from a loss of 28m in 2010.These results were flagged in a tradingupdate in January with only the divi-dend coming in as a surprise.

The housebuilder said the firstweeks of 2012 had mirrored the posi-tive environment of the second half of2011, with strong visitor numbers andreservations and an increase of 18 per-

cent in its order book. The companys order book ended2011 up 17 per cent at 835m, while itsoperating margin hit 10 per cent inthe second half of the year, ahead of itsscheduled goal of a double digit mar-gin in 2012.

Shares closed down 5.6 per cent yes-terday, having risen six per cent on Tuesday after fellow housebuilderPersimmon said it would return1.9bn to shareholders.

Taylor Wimpey pays dividendBYHARRY BANKS

CONSTRUCTION

CapCo enjoys value hike and

sells properties in West EndBYKASMIRA JEFFORD

PROPERTY

BY JAMESWATERSON

POLITICS

ANALYSIS l Capital & Counties Properties PLC

p


193

192

191

190

189

188

187

190.3029 Feb

Whilst perhaps non-core to GCP,these are classic Great Portland assetsso it makes good sense to buy in thehalf we dont already own.

The acquisition both enables therefurbishment of Walmar House and13/14 Great Castle Street in the nearterm and provides medium termrepositioning opportunities in bothSoho and Regent Street with a solidincome return in the meantime.

In a separate announcement,Great Portland said it had signed a150m five-year revolving credit facil-ity, with four banks including RoyalBank of Scotland, Lloyds BankingGroup and Santander.

The deal replaces an existing 50mfacility, which was due to mature inJuly and has a headline margin of 175 basis points more than the Londoninterbank offered rate.

It also has an existing 350mrevolving credit that matures inNovember 2015.

CapCo has sold its stake in Carrington House on Regent Street to joint owner GPE

www.RateSetter.com Customer Phoneline: 08442490115

In association with RateSetter: A better way to Save and Borrow, Peer to Peer

YILMAZ OZTURK | ENIGIN UK

Its unfair. Its part of their role they get paid all through theyear and extra passengers would not be coming into their cab.

CITY VIEWS: SHOULD TUBE DRIVERS GO ON STRIKEDURING THE OLYMPICS? Interviews by James Waterson

JAMES WADDELL | CITY OF LONDON

The Olympics is a time for Londoners to come together and unite.Its important that all Londoners help to put on a good show.

KONSTANTIN SYVOKHIN | INVESTMENT BANKER

Its nonsense. Their compensation is fair: they get lots of holiday andcan retire earlier. We all think we dont get paid enough.

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

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12 The Capitalist

ZIGGO PLUMPS FOR STJIN BUMPER FLOTATION

THERE was a terrible rumpus last year after City A.M. unearthed andpublished documents showing thatindependent bank advisory groupSTJ Advisors had been accusingsome of the larger investment banksof distorting investor feedback inthe course of running IPO transac-tions. So sore were some of the big

banks that they even consideredsqueezing STJ out of future dealsaltogether.

But yesterday STJ emerged as theindependent adviser on the IPO ofZiggo for what is being hailed as thefirst major European IPO of the year.STJs name is not on the officialZiggo press release but it is the mainadviser to Warburg Pincus andCinven, the two private equitygroups that are selling shares in t heoffering.

Theres a past relationship between Ziggo chairman AndrewSukawaty and STJs John St John,

which dates back to the 2004 flota-tion of Inmarsat, where Sukawaty

was until recently chairman andchief executive.

Ahead of the f lotation, St John, who was then at Dresdner Kleinwort,advised the satellite group on who its

bankers should be to advise it on its1bn flotation.

Some say this link could have beenbeneficial to STJ in winning its latestmandate.

But a spokesman for Inmarsat saysthat the STJ pitch to Ziggo and the pri-

vate equity owners was won in a per-fectly competitive manner and thatthere has been little, if any, contact,

between Sukawaty and St John sincethe 2004 Inmarsat float.

JP Morgan and Morgan Stanley arethe joint global coordinators for theZiggo offering, and joint bookrunnersalong with Deutsche Bank and UBS.

ABN Amro, HSBC, Nomura andRabobank are acting as joint leadmanagers and ABN Amro andRabobank are the joint retail

bookrunners. Societe Generale is co-lead manager.

Ziggos chairman Andrew Sukawaty has appointed STJ Picture : GETTY

ED BREWSTER MAKES A STARTON HIS LATEST PR ADVENTUREFORMER Pru spinner Ed Brewster hasmade an appearance at giant tele-coms event Mobile World Congress.Brewster is now tasked with lookingafter PR for Chinese behemothHuawei as it attempts to conquer theconsumer handset market.

Attempting to break Apple andGoogles stranglehold over the indus-try may seem like a tall order but itssurely a walk in the park after the dis-aster that was the Prus failedtakeover of AIA group. He could learna thing or two from the marketingteam over at Apple, who managed tosteal the thunder from Google chair-man Eric Schmidt yesterday by send-ing out invites to what is expected to

be the iPad 3 launch just minutesafter the search boss took to the stage.

GOT A STORY? EMAIL [email protected]

8/2/2019 Cityam 2012-03-01

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BRIT Insurance yesterday announceda profit for 2011 despite a generallymiserable year for the industry.

Profit before tax was 75.8m, downa third on 2010s figure of 116.4m.

Most of this was due to a doublingof one-off catastrophe-related claimsto 141.9m, a result of earthquakes in

Japan and New Zealand and tornadosin the US.

Gross written premiums also

declined from 1,530m to 1,489m.Unlike many of its rival insurers,

Brit does not have any exposure tobad European sovereign debt.

Chief executive Mark Cloutier com-mented: Brit delivered a solid resultin 2011 against a weak market, whileat the same time making goodprogress in our efforts to repositionthe group for the future.

With record natural catastropheand other large losses, low interestrates, volatile investment markets

and a broadly flat pricing environ-ment, 2011 was an extremely chal-lenging year for the sector. We are

very pleased to have delivered areturn on equity of nine per centagainst this backdrop.

The Amsterdam-based firm wasbought in early 2011 by private equityfirm Achilles in a deal that valued theinsurer at around 888m.

Since then they have sought to hirenew talent and the firm recently cre-ated a new Global Specialty division

by combining the former global mar-

kets and reinsurance businesses.It now intends to focus on the prop-

erty and energy market and growingits UK business.

Insurer Britturns a profitagainst odds THE BRITISH former chief executiveof Olympus is due to open employ-ment tribunal proceedings againstthe Japanese technology firm today.

Michael Woodford, who said hewas sacked after blowing the whistleon an accounting scandal, is due toappear for a preliminary hearing atEast London Tribunal Service inStratford.

Woodford was based in Japan whenhe lost his job but has gone to a tribu-nal in London because he worked inBritain for much of his 30-year careerat Olympus.

He dropped his attempt to winback his old job in January.

His public campaign againstOlympus directors has won him aseries of accolades, however, includ-ing being named business person of

the year by three national newspa-pers in 2011.

The Liverpool-raised businessmanis now planning to publish a book onhis time at Olympus.

The technology firm, which makescameras and medical equipment, isin the throes of a boardroom reshuf-fle and is believed to be considering acapital raising.

Nobody from Olympus operationin Britain could be contacted lastnight.

Woodford inlegal bid overOlympus job

BY JAMESWATERSON

INSURANCE

TECHNOLOGY

In 2010 Brit signed a four year deal to spon-sor the English cricket teams. They have sponsored the Brit Insurance

Design Awards for the last four years, in associ-ation with the Design Museum.

FAST FACTS | BRIT INSURANCE

NewsCITYA.M. 1 MARCH 2012 13

FRANCOIS Hollande met with fel-low left wing leader Ed Miliband inLondon yesterday after Cameron,

who publicly backs Sarkozy, deniedhim a meeting.

The French socialist presidentialcandidate touched down in the cityahead of the election, scheduled for22 April and 6 May, to woo the400,000 or so French citizens wholive in London.

Hollande said the purpose of his

visit was to say that finance mustbe in the service of the economy tocreate wealth and not to enrichitself on the real economy.

He said: I go to the Europeancountries to meet with those whoare closest to my own approach.

But Miliband refused to concur with Hollandes proposals of a 75per cent tax rate for incomes over1m, confirming the Labour Partyspolicy would not go above a maxi-mum tax rate of 50 per cent.

Francois Hollande and Ed Miliband met in London yesterday Picture: GETTY

POLITICS

Francois Hollande hits theelection trail in London

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OUTSOURCING giant Interservesaid new markets and growing sup-port services work would balanceanother weak year in its construc-tion division.

The company, whose servicesrange from cleaning Sainsburyssupermarkets to building shoppingcentres in the Middle East, posted a4.6 per cent rise in 2011 underlyingpre-tax profits to 72.8m, meetinganalysts expectations.

The FTSE 250 company, whichemploys around 50,000 people,said it had a forward order book of5.6bn -- more than twice its 2011revenue of 2.32bn -- with a further7bn of opportunities identified, as

work in markets such as justice,healthcare and local governmentpicks up in the UK and the appetitefor outsourcing in countries likeQatar and the UAE increases in theMiddle East.

Our order book is up, our netdebt is down, we are generating alot of cash, we are winning work,and we have got some very clearguidance on our margin develop-ment, chief executive AdrianRingrose said.

It also raised its full-year divi-dend by 5.6 per cent to 19p.Revenues in its support servicesdivision were flat, while a 10 percent rise in its concrete mouldingequipment arm, helped by growthin Australasia and the Far East, waslargely countered by a slump in its

construction division, hit by sub-dued activity across much of thedeveloped world.

These are good results fromInterserve, with pre-tax profit com-ing in at the top end of expecta-tions, Panmure Gordon analysts

wrote in a note.

Interserve targetsnew markets driveBYHARRY BANKS

SUPPORT SERVICES

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RSM Tenon plans staff cutsAdvisory and accountancy groupRSM Tenon is planning staff cuts asits costs rise, as it confirmed it hadmade a loss in the first half of itsfinancial year. In the six months to31 December, the company saw rev-enues fall 9.3 per cent to 107.8m.Taking into account a goodwill pay-ment of 60.7m, the companys over-all loss on continuing operationscame to 70.6m, compared to a lossof 1.9m in 2010. But chief executiveChris Merry attempted to reassureinvestors by pointing out that thecompany sees the majority of its rev-enues and cash generation in the sec-ond half of the year.

Siemens wins UK train contractSiemens has won a $230m (144m)

contract to supply electric trains foruse on British railways, the latest

British train contract awarded to theGerman industrial group. The dealwill see Siemens supply 20 Desiro UKtrains to Go-Ahead Groups LondonMidland and First GroupsTransPennine Express regional routefranchises, to be used on routes inand out of London and Birmingham.The trains, which will be delivered in2013 and 2014, will be maintained atSiemens's depot in Manchester, thecompany said. Last year a Siemens-led consortium won a $2.2bn con-tract to build and maintain 1,200carriages for the Thameslink cross-London railway.

Energy finance boss sells sharesThe finance chief of FTSE 100 listedpower generator InternationalPower has sold more than 1m of

shares that he held in the firm,reducing his stake to zero. Mark

Williamson, who has been financechief of the company since 2003,sold 409,684 shares belonging tohim and his wife for 340.5p each,making the total sale worth almost1.4m.

Lawsuit for Healthcare LocumsShares in troubled nursing recruit-ment agency Healthcare Locums fellby more than 20 per cent yesterdayafter several of its US investorslaunched a lawsuit against the com-pany. Healthcare Locums came closeto collapsing last year when account-ing irregularities were found in itsbooks. Hedge funds includingPermian and Arundel have joinedforces to file suits against the firmand several of its executives, claimingthat they were mislead during 2010

about the companys profitability andaccounting practices.

National Express boss Dean Finch said passenger numbers were up in the past six months

BRITISH transport firm NationalExpress Groups full-year profit hasrisen on strong performance at itsUS school bus and UK coach divi-sions, and the company said it wasconfident about growth in 2012.

It added that it was not looking toexit its UK rail business, whichaccounted for 31 per cent of its 2011revenue, despite the loss of a con-tract that would significantly reduceits exposure to rail.

National Express said it expectedpassenger revenue to continue togrow in its bus and coach divisions

in 2012, and raised its final dividendby 8.3 per cent.

There has been a dramatic turn-around in passenger numbers in thelast six months, chief executive

Dean Finch said.Passenger journeys rose by 5.4m

journeys to 656.6m in 2011.National Express is benefitting

from an increase in the use of publictransport prompted by higher fuelcosts, expensive rail travel and risingcar park fees in city centres.

Its order value at the end of 2011was 3.7bn.

Full-year pre-tax profit rose to180.2m, from 160.5m a year ago.Revenue rose five per cent to2.24bn.

National Express North Americarevenue jumped five per cent in 2011as budget constraints at US schoolsencouraged the use of outsourced

bus operations.Its UK coach business -- which pro-

vides airport, long-haul and com-muter services -- saw revenue growfour per cent.

National Expressgets boost from

US school busesBYHARRY BANKS

TRANSPORT

ONLINE gaming firm Sportingbet post-ed a first-half loss hurt by a drop in

sports betting in its European segment yesterday, but said its third quarterhad started well.

The company, which operates insports betting, casino gaming andpoker, said pre-tax loss for its first halfto 31 January was 7.2m, compared

with a profit before tax of 19.6m ayear ago.

In Europe, the companys businesswas hit by the disposal of its Turkishlanguage website -- which accountedfor 29 per cent of European and emerg-ing markets gaming revenue as wellas by the ongoing recessionary envi-ronment in the region.

Sportingbet, which has more than2m customers in 30 markets acrossEurope, Australia, Canada, South

America and South Africa, said first-half revenue grew two per cent to109.4m.

Amounts wagered grew about 18

per cent to about 1.27bn, backed byan 86 per cent surge in Australiansports betting that included benefitsof its Centrebet acquisition, which wascompleted in August.

Sportingbet infirst-half loss

LEISURE

ANALYSIS l Interserve PLC

p


325

320

315

310

305

300

295

290

305.1029 Feb

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UK MORTGAGE lending surged in January and consumer credit alsoexpanded, official figures showed yes-terday, though economists do notexpect the jump to be sustained.

Analysts believe loans rose becausethe stamp duty holiday for first-time

buyers ends later this month,prompting a short-term rise in loanapplications, though numbersremain well below pre-recession lev-els.

The Bank of Englands datarevealed a 1.8bn rise in lending toindividuals, compared with a six-month average of 1.1bn monthlygrowth, largely focused in loanssecured on homes.

Mortgage lending jumped 1.6bn double the average 0.8bn increaseover each of the last six months, andtaking home-secured lending to13.2bn.

Consumer credit increased by amuch lower 0.1bn, less than the0.3bn average seen over the last sixmonths.

Credit card lending remainedunchanged in the month, though itis down 0.2 per cent on the level seen

three months ago.Over the last 12 months, credit

card debt grew 2.1 per cent deceler-ating from growth of 2.3 per cent inthe year to December and 2.5 per centin the 12 months to November.

Consumer credit remains very lowcompared to long-term norms whichsuggests that even though confi-dence has improved, there is still verylow appetite for taking on new bor-rowing and also on ongoing strongdesire of many people to reduce theirdebt, said economist Howard Archerfrom IHS Global Insight

Consumer desire to get a tightgrip on their finances is clearly theconsequence of still serious concernsover the outlook for the economy and

jobs.

GREECE has invited bids for state-owned gas company DEPA, as itmoves ahead with a privatisation pro-gramme meant to raise 19bn(15.9bn) by 2015.

According to an offer documentpublished yesterday, the governmentis considering a bundled sale ofDEPA, combining its wholesale, trad-

ing and gas supply business as well asits DESFA networks and liquefied nat-

ural gas arm, or an unbundled dealin which DESFA would be sold sepa-rately.

In either case, Greece, which ownsa 65 per cent stake in DEPA, wouldretain a 34 per cent stake. The dead-line for bids is 22 March.

The offer comes a day after envi-ronment minister GeorgePapaconstantinou met the presidentof Russias Gazprom Export,

Alexander Medvedev, to discuss ener-

gy policy and Greeces privatisationscheme, according to a ministry state-

ment. The head of Prometheus Gas, a

joint venture between Gazprom andGreeces Copelouzos group, alsoattended the meeting.

Greek daily Ta Nea, citingunnamed sources, said yesterday thatPrometheus Gas would be amongcompanies bidding.

According to the paper, at least 20companies and funds have expressedan interest, including Spains Gas

Natural, French Gas de France, ItalysENI and Austrian OMV.

Greece puts gas group up for sale asprivatisation programme kicks off

LONDON First, a business group whose members represent over aquarter of the capitals GDP, have setout their demands for the mayoralelection.

The organisation, which includessuch firms as KPMG, HSBC andDeloitte, have told the mayoral candi-dates of their common sensedemands to improve infrastructure

and keep the city open for business.London Firsts demands include

increasing airport capacity, flexibleimmigration controls that are not

based on fixed numbers, ending the50 per cent tax rate, ensuring thatmajor rail projects arrive on time andexploiting the international appeal ofthe Olympics to boost Londons econ-omy.

London Firsts chief executive,Baroness Jo Valentine, said: Weexpect the incoming Mayor to sup-port measures that not only bring

jobs and prosperity, but ensure thatLondon is truly open for business.

London firms call on newMayor to invest in the city

LONDON

EUROZONE growth prospectslooked uneven after data out yester-

day showed unemployment heldsteady in Germany in February, where credit conditions continuedto ease and weaker signs camefrom France, where householdspending dropped unexpectedlysharply.

Eurozone inflation was reviseddown to 2.6 per cent in the year to

January, which economists believereflects low demand in the curren-cy area, though poor weather is

expected to push up food prices inthe coming months and oil pricesalso represent an upside risk.

Germany maintained its 20-yearlow rate of unemployment at 6.8

per cent, and the Ifo measure ofcredit constraints reported 21.1 percent of firms suffering from banksrestrictive credit policies, down 1.7percentage points on Januarys levelto the lowest since the survey beganin 2003.

Ireland saw unemployment sta- bilise at 14.2 per cent, unchangedfrom Januarys figure and downslightly from 14.3 per cent inDecember.

However, French householdspending fell 0.4 per cent in

January, doubling the 0.2 per centdrop in December and counteringeconomists predictions of a small

increase.This is a weak start to the quar-ter, and the deepening downwardtrend seen in each month since the

beginning of the fourth quarter of2011 bodes ill for private consump-tion momentum in the currentquarter, said Barclays CapitalsFrancois Cabau.

Januarys household spendinghighlights the downside risks to our

baseline scenario.

Eurozone growth stays shakyBY TIMWALLACE

EUROZONE

Mortgages up

as stamp dutyreturn nearsBY TIMWALLACE

UK ECONOMY

BYHARRY BANKS

GREEK ECONOMY

BEST OF THE BROKERS

To appear in Best of the Brokers email your research to [email protected]

ANALYSIS lImagination Technologies

600

550

650

500

450

FebJan

p

615.5029 Feb

IMAGINATION TECHNOLOGIESPeel Hunt has upgraded the microprocessortechnology firm from hold to buy follow-ing some positive announcements from the

company at Mobile World Congress on nextgeneration chips. The broker has also uppedits target price to 723p from 550p, as aresult of increased confidence in forecasts,particularly ahead of an expected productlaunch from customer Apple. The companyhas also confirmed that eight partners havelicensed its new Rogue platform.

ANALYSIS lUBM PLC

575

525

475

600

550

500

450

FebJan

p583.00

29 Feb

ANALYSIS lVocento SA

1.9

1.7

2.0

1.8

1.6

FebJan

1.87

29 Feb

UNITED BUSINESS MEDIANomura has maintained its buy rating onthe media and communications group andupped its target price to 665p from 635pafter impressive organic growth of 7.9 percent at the company in 2011. The brokersays that no other media company in itscoverage can match UBM for exposure toChina, which makes up 15 per cent ofgroup sales. It expects organic growth of

4.7 per cent in 2012, towards the upperend of the guidance range.

VOCENTOUBS has downgraded the Spanish multime-dia group from hold to sell and lowered itstarget price to 1.60 from 1.70, due to itshigh share price despite its high exposure tothe strongly declining Spanish advertisingmarket. Though the broker says low liquiditycould support the price, it says therisk/reward profile is not compelling.Following aggressive restructuring to save200m over the past three years, the brokersees limited further cost cutting.

The weak economy is not helping President Sarkozys election hopes Picture: GETTY

ANALYSIS l Mortgage lending growth iswell below its pre-crisis peak%

97 03 0501 07 09 11991995

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12

14

16

6

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THE FINNISH parliament approvedthe Greek bailout yesterday after atense debate in parliament.

MPs voted in favour of the 130bn(108.8bn) bailout by a margin of111 to 72 after opposition politi-cians described Greeces member-ship of the euro as a hangmansknot.

Finland is set to contribute1.25bn to the rescue package,which is contingent on private sec-tor holders of Greek debt taking amassive haircut on their assets andthe country slashing its huge budg-et deficit.

Supporters of the bailoutacknowledged that it may not be asuccess in the long run.

Unfortunately, no easy solutionsexist, said Prime Minister JyrkiKatainen of the National CoalitionParty.

Greek Prime Minister LucasPapademos met EuropeanCommission President Jose ManuelBarroso yesterday to discuss howGreece will meet the bailout condi-tions and how the country fiscaland economic progress will be mon-itored.

This is not just a programme offiscal consolidation, it is a pro-gramme for structural reforms,competitiveness and growth inGreece, said Barroso, stressing thelengthy and difficult nature of thereforms that lie ahead.

Greek bailoutdraws closer on

Finns approvalEUROZONE

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ALL financial regulation is inherently pro-

cyclical. After a crisis has occurred, theimmediate, inherent response is thatmust never be allowed to happen again.

Thus after the South Sea Bubble, limited liabili-ty, joint stock incorporation was effectively for-

bidden. The problem is that regulations preventagents doing what they want to do, and hencelimit innovation and growth. As time passes,and no further crisis ensues, the drawbacks ofsuch restrictions come to appear more damag-ing and unnecessary than the benefits. Alsothere is often a national race to the bottom:

buzzwords such as light touch or we canmove to a nicer country and so forth ensureregulation erodes over time. The next major cri-sis can be plausibly dated as occurring in 20

years time.Also market forces make regulation procycli-

cal. Market values, profits, capital and ease ofmarket access to liquidity and funding moregenerally are all easier to achieve in a boom. So agiven capital/liquidity ratio can also be moreeasily achieved then. Current developments,especially in Europe, represent an extremeexample. Regulatory equity requirements havegone from around 2 per cent or less of risk-

weighted assets in 2007 to 9 per cent by June2012. Liquidity requirements, the LiquidityCoverage Ratio (LCR) and Net Stable FundingRatio (NSFR), are following along, though fortu-nately with long lead times and long lags beforefull introduction. Even so, the imposition oftoughened regulatory measures is one of themore important factors behind the current mas-sive deleveraging in European banks. Many ofthe main banks, such as RBS, are cutting their

balance sheets now almost as aggressively asthey expanded them before 2008; and both ten-dencies will have aggravated the cycle.

Does it matter? If you are a monetarist, it cer-tainly does. Less so if one focuses on bank credit,

because a shift from deposits to capital shouldhave relatively little effect, even perhaps posi-tive for example, reducing zombie loans andincreasing loans for new, better enterprises.

Nevertheless it is hardly to be recommended.

So, how do we deal with such procyclicality?First we must recognise the syndrome. There isan attempt by the Basel Committee in BankingSupervision (BCBS) to use capital adequacyrequirements in a counter-cyclical manner, witha 2.5 per cent add-on. There are, however, justifi-able doubts whether it will work. First, 2.5 percent is just too small: compare financial condi-tions in 2006 and 2012. Second, it will be diffi-cult and unpopular to claim that an increase inprices and market values is unsustainable; sothere is a need for presumptive indicators, butthere is considerable disagreement on which touse. Third, uncertainty about the transmissionmechanism will make for caution, at least for atime.

What else can be done? The application ofratio control was not based on any proper eco-nomic analysis. It was purely pragmatic in1987/88. Basel I and II requirements actually

worsened the use of equity as a buffer againstunexpected losses for a going concern. Bankmanagers focus on return on equity, becausethey answer to shareholders. Capital adequacyrequirements (CAR) make achievement of ahigh return on equity more difficult. Bank man-agers therefore responded by lowering the qual-ity of CAR capital, increasing leverage relative torisk-weighted assets and reducing the bufferabove the minimum required CAR.

We need a new approach to ratio controls.Instead of one ratio, two. A much lower ratio

where a bank becomes too dangerous to allowmanagement to continue, and a much higher,

fully satisfactory level. The two need to be con-

nected by a ladder of sanctions, mild to beginwith, more severe as we move towards closurepoint. Sanctions could be charges for mildershortfalls, with limits on out-payments, divi-dends, buy-backs and bonuses for more seriousshortfalls. There is a precedent in the BCBS con-servation range for a higher ratio of 7 per centand a floor ratio of 4.5 per cent.

Equity shareholders, with limited liability,share the same incentives to take on extra riskas the managers have, with a limited downsideand unlimited upside potential. As the market

value of equity falls, more of the potential (tail)risk of absorbing losses falls onto bond-holdersand/or taxpayers. The need then is to find a wayto transfer governance and control to such otherrisk-bearers increasingly as equity values fall.

The call for Co-Cos and bail-in-able bonds goessome way in this direction, but there can be con-tagion problems. There should be a muchgreater willingness to embrace taking weakfinancial intermediaries into temporary publicownership, if and when necessary, before theyhave completely crashed into the rocks of bank-ruptcy.

Charles Goodhart is emeritus professor at the LondonSchool of Economics and a former member of the Monetary Policy Committee. He will be deliveringtodays keynote speech at Gresham Colleges Long Finance event, Into the Folly of Value, at Bank ofAmerica Merrill Lynch. www.gresham.ac.uk

18 The ForumCITYA.M. 1 MARCH 2012

The next major crisis canbe plausibly dated as

occurring in 20 years time.

A leading economists viewon how to manage financialregulation for the long term

cityam.com/forum

CHARLES GOODHART

Agree? Disagree? Got a sharp comment?The Forum wants you to join the debate.

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AS THE top graph clearly shows, there

have been many ups and downs in theCity hiring market over the last fiveyears. The fluctuations in financial serv-

ices hiring are traditionally seasonal, withChristmas, bonus season and mid-summerbeing the less active periods of the year.

However, over the last five years the jobsmarket has been significantly affected byadditional political and economic factors,some of which in isolation have had a ratherdramatic knock-on effect on hiring. For exam-ple, in September 2008, after LehmanBrothers collapsed, the hiring market wentfrom decline into freefall.

Looking at the picture overall, the MorganMcKinley Employment Monitor data sum-marises how the global and, therefore, UKeconomy has fared pre-credit crunch andpost-credit crunch.

From February 2007 to the middle of 2008there was clearly a very bullish jobs and can-didate market, with some of the highest evermonthly job vacancies across the City. Thesubsequent effect of the onset of the sub-prime/credit crunch caused a steep decline inthe jobs market, followed by a (relative) bounce-back from the end of 2009 into thefirst part of 2011.

The spiking of candidate numbers overthe last five years reflects two things:increased job opportunities, which encourageprofessionals to enter the market, and con-versely announcements of imposed headcountreductions by City institutions.

Coming back to more recent times, the rapidexpansion of the sovereign debt crisis in theEurozone can clearly be illustrated with whatare now some of the lowest job volumes the Cityhas ever seen.

With the financial services jobs marketremaining relatively challenged, those lookingfor new roles should note that, whichever direc-tion the market moves, often there may be two oreven three consecutive months of increase ordecline in job vacancies.

Relevant experience and skillsets, however, arekey. Whether the shape of the graph in regard to jobopportunities moves up or down, it remains truethat the highest calibre professionals, with strongtrack records, are still in demand.

Andrew Evans is chief operating officer of MorganMcKinley Financial Services UK.

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More than

ANALYSIS l Five-year financial services jobs and candidates timeline

Source: Morgan McKinley London Employment Monitor, February 2012

Feb2007

Feb2008

Feb2009

Aug2008

Aug2009

Feb2010

Aug2010

Feb2011

Feb2012

Aug2011

Aug2007

New Jobs

New Candidates16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

ANALYSIS l One-year salaries timeline

Source: Morgan McKinley London Employment Monitor, February 2012

Feb2011

Mar2011

Apr2011

May2011

Jun2011

Jul2011

Aug2011

Sep2011

Oct2011

Nov2011

Support/Admin

Middle Market Professionals

Total Average

Snr Professionals/Directors

Dec2011

Jan2012

Feb2012

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

Financial service jobsrise in February 2012But job volumes are still some of the lowest the City has ever seen

Scan here to go to

CITYAMCAREERS.COM

ANDREWEVANSMORGAN MCKINLEY

FINANCIAL SERVICES

The financial services job market is unlikely to stay in one place Picture: GETTY

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Buyer beware: Probe

past headline figuresEMBA rankingsare not always thebest way to judgethe right course,writes Tom Welsh

these rankings contain elements thatneed close attention from candidatesto prove their value. Their worth isalso bound to the student knowingwhat they want from the course.

Figures for average alumnus salarygrowth may sound uncontroversiallyuseful, for example, but applicantsmust weigh this information againstother research and their priorities.

Class profile matters. It can be stark-ly different and affects salary growthscores. The average student in the cur-rent Cass cohort is 30 years old andhas seven years, seven months busi-ness experience. Saids average stu-dent has double the work experience.

The relative seniority of Saids stu-dents could affect how quickly theirsalaries grow post-EMBA. According toCousins, measures of career progressmay not be as noticeable if a courseattracts more senior executives.

Similarly, executives should consid-er whether some ranking criteria arerelevant to their needs. IE BusinessSchool saw alumni salaries increase by153 per cent in the three years follow-ing graduation, pushing the course upto eighth in the world. But for execu-tives who want to set up a businesses,salary growth may be relatively unim-portant. They must calculate how IEsoverall ranking is conditioned by thishigh individual score.

Rankings are also a historical pic-ture of past achievement. An alum-nuss perception of how his or hercareer has progressed is gaugedthrough a retrospective interview. Inthe dynamic world of course develop-ment, historical promise may fade andpoor performance one year may dra-matically turn around the next.

The FT mitigates against dispropor-tionate skews to individual measuresby using three years of data where pos-sible. But some schools are new to thelist. This is a problem for Said, saysHarvey. The schools course has onlybeen included since 2010 and its resultdoes not yet benefit from the three-year stabilising effect.

E ACH year, the Financial Times(FT) creates an interactive guideto the worlds best executiveMBA (EMBA) programmes. Its

headline figures are the result of aweighted formula average alumnus

salary contends with diversity indicesand career progress rankings -- andschools make proud use of these find-ings in their marketing. Described as alist of the best management pro-grammes available, it is a useful toolfor applicants to find the right EMBA.

But the FT ranking, like competitorsat Businessweek and The Economist,should not be used without thought.It has limitations as well as benefits,and executives planning to spendmore than 50,000 on an EMBAshould be conscious that the FT can-not provide a simple answer to thecomplex dilemma of course selection.

Rankings are just one measureapplicants should use, says KathyHarvey, director of the EMBA pro-gramme at the Said Business School. They are a good starting point,agrees Steve Cousins, MBA admissionsmanager at Cass Business School. Theycan roughly narrow lots of potentialprogrammes into a smaller group.

But how rough is this startingpoint? How should EMBA rankings beused to analyse differences betweenbusiness schools and to find the rightcourse for the right candidate?

Schools themselves have a love-haterelationship with them. Harvey viewsthem as informal external audits. Weshouldnt be sitting in our ivory tow-ers, complaining about the rankings.

But beneath the top-line positions,

Perhaps the rankings greatest limi-tation lies in an inability to accuratelydepict differences in organisationaland teaching culture. This may soundsomewhat woolly, but understandingdifferences between programmes iscrucial if the potential candidate is toget the most out of his or her EMBA.

Harvey cites one striking example atSaid. It is penalised in the rankings fora low number of teaching hours spentabroad, but the school consciouslydoes not offer pairings with foreignpartners. Oxford is a world-class university which offers an Oxforddegree and not anything else. Someof the special benefits of studying at

Said being part of the fabric ofOxford and membership of a college are skewed into criticism in a listthat puts a premium on hours spentlearning outside Britain.

This example emphasises the impor-tance of cautious research. This cau-tion must be more than naturalmindfulness that the buyer mustbeware. It should spring from a clearidea of what is wanted from an EMBA,from understanding the differentapproaches schools take, and from adetermination to delve beneath themarketing slogans. All this will ensurethat EMBA rankings are a useful start-ing point and not a misleading routedown a blind alley.

1Kellogg/ Hong Kong UST Business School2 Trium: HEC Paris/ LSE/ New York University: Stern

3 Columbia/ London Business School

4 Insead

5 University of Chicago: Booth

6 Duke University: Fuqua

7 University of Pennsylvania: Wharton

8 IE Business School

9 UCLA/NUS

10 London Business School

1 IE Business School

2 Korea University Business School

3 Columbia/London Business School

4 Imperial College Business School

5 Kellogg/ WHU-Otto Beishelm School

6 Warwick Business School

7 City University: Cass

8 Essec/ Manheim

9 UCLAS/ NUS

10 Ceibs

Source: Financial Times EMBA Rankings 2011Source: Financial Times EMBA Rankings 2011

Top 10 executive MBA programmesin the world

Top 10 executive MBA programmesby percentage salary growth

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UK schools can give global benefits

T

HE PRESSURES of globalisa-tion have inspired many sen-

ior managers either to leaveBritain for their executiveMBA (EMBA) or to join one of a grow-ing number of joint programmesbetween British and foreign businessschools.

One such course is the Trium, apartnership between the LSE, NewYork University: Stern and the HECSchool of Management in Paris. Itoffers a unique, international cur-riculum, which challenges entre-preneurial-minded, senior-levelexecutives to think and act within asocioeconomic and geopolitical con-text.

Some, of course, need to study out-

side the UK because they workabroad and the EMBA allows stu-dents to work full-time alongsidetheir studies. They must be close totheir workplace, or at least withinan easy commute if EMBA classestake place at the weekend.

Still, the hyperbole around foreignstudy demands closer attention. Isthis really a unique experience forexecutives, or can potential candi-dates get similar advantages byremaining in Britain?

One benefit of studying abroad is

national and cultural diversity with-in the student cohort. Executiveswant and need to make a wide rangeof new contacts to help them intheir career progression. Global networking opportunities will assistmanagers in multinational corpora-tions or those who want to expandtheir businesses into foreign mar-kets.

But domestic British businessschools are hardly monocultural. The current Said Business SchoolEMBA cohort is only 20 per cent

British and includes many studentsfrom developing economies in Africaand Asia. The Imperial College EMBAis less mixed but manages to getalong with 34 per cent of foreign stu-dents.

Ebrahim Mohamed, director ofthe MBA programmes at Imperial,says that the schools diverse mix ofnationalities provides a stimulat-ing mix of views and potential forlearning. Global networking oppor-tunities can clearly be found inBritain. The fact that so many for-eign executives come to the UK forstudy suggests that Britain itself is atthe forefront of globalised contact-making.

Another benefit of studyingabroad is the chance to gain foreign

business experience on the ground. The London Business School (LBS)EMBA in Dubai claims that it offersunrivalled access to the worldsmost influential markets, and itsstudents can gain the global busi-ness skills and insights to operatesuccessfully anywhere in the world.

But candidates should separatethe g

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