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FTSE 100 t5,766.80 -109.02 DOW t12,759.15 -203.66 NASDAQ t2,910.32 -40.16 /$ 1.57t -0.02 / 1.20 unc /$ 1.31 t -0.01

Banks: stop

FSAs blockon credit

BANKS have hit out at the City watch-dog for introducing new rules that arecrippling the flow of credit to smallfirms, according to a secret documentseen byCity A.M.

In a sign of frustration at the FSAshyper-strict regime, banks have calledon a special government taskforce tointervene and curb what they see as anover-zealous approach.

The banks blame the FSA for mak-ing it harder to sell on bundles ofsmall business debt to investors, cut-ting off a major source of credit.

The Cabinet Office has summonedsenior bankers to a pre-Budget meet-ing on how regulation is affectinglending, suggesting that banks argu-ments could gain traction as the coali-tion becomes desperate for growth.

The document, sent to the BreedonTaskforce in the department for busi-ness late last month, points the fingerat the FSA for destroying large parts ofthe small business (SME) credit mar-ket. In failing to create a clear andtransparent framework for unratedissuance [of bundled SME debt], regula-tors are effectively constraining banklending capacity to those borrowers

who need it most, the paper says. Inrecent instances, investors have

walked away from transactions due toregulatory uncertainty.

It claims that resolving the uncer-tainty would have a substantialimpact on credit supply and cost.

The paper also criticises the FSA forbeing inflexible on how banks assessthe riskiness of SME loans. The FSAdeclined to comment. MORE: P7

BRAZILS economy is now biggerthan the UKs, making it the secondemerging market to enter the top-tier of world economies and herald-ing the beginning of the end of

Western economic dominance.Britains star is fading fast the

country now has the seventh biggesteconomy in the world, down fromfourth in 2005, thanks to the long

booms in China and Brazil.The International Monetary Fund

(IMF) expects France to fall behindBrazil by 2015, leaving the US andGermany as the only westerneconomies in the top five.

The news will further fuel fearsthat the UKs high tax, high regula-tion and high debt economic modelis costing growth and jobs.

It will also rekindle the debateabout what should be done to boostthe UKs competitiveness and to pre-

vent a growing exodus of people andcapital to emerging economies,

where opportunities are now oftenmuch greater than in the high-unemployment West.

In US dollars, Brazils output in2011 stood at $2.469 trillion (1.57trillion), some $49.2bn larger than

the UKs GDP of $2.42 trillion. The emerging giant registeredGDP growth of 2.7 per cent in 2011,far outstripping Britains 0.8 per

BY TIM WALLACEWORLD ECONOMY

www.cityam.comIssue 1,586 Wednesday 7 March 2012 FREE

ARSENALCRASH OUTGUNNERS HAMMER

MILAN BUT ITSNOT ENOUGH P27

STANFORD FOUND GUILTYOF $7BN PONZI SCHEMECRICKET TYCOON FACES JAIL P3

BUSINESS WITH PERSONALITY

cent. The lead is set to widen, withthe IMF forecasting growth of threeper cent this year against the UKs0.6 per cent.

However, Brazils 2011 growth rate

is sluggish for a BRIC country Chinas economy expanded by 8.7per cent, Indias by 6.1 per cent and

well below the 7.5 per cent seen in

the country in 2010. Yet there are hints the Brazilian

economy is moving to a strongerfooting. Merger and acquisitionactivity is up 177 per cent in the first

two months of 2012 compared withthe same period of 2011, and con-sumer spending registered healthygrowth in the final quarter of 2011.

British politicians would considergrowth of three per cent a nice prob-lem to have. British GDP is still way

below its pre-recession peak and esti-mates from the Office for Budget

Responsibility (OBR) expect growthto reach the three per cent level by2015-16.

ALLISTER HEATH: P2

Certified Distribution

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

ORDEMEPROGRESSO

USA CHINA JAPAN GERMANY FRANCE

$15.06 trillion $7 trillion $5.86 trillion $3.63 trillion $2.81 trillionBRAZIL UK ITALY INDIA CANADA

$2.47 trillion $2.42 trillion $2.25 trillion $1.56 trillion

BRAZILS ECONOMYOVERTAKES THE UK

$1.84 trillionOverall GDP in 2011 expressed in US dollars at current prices Sources: ONS, Central Bank of Brazil, CIA World Factbook

BY JULIET SAMUEL

EXCLUSIVE

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News2 CITYA.M. 7 MARCH 2012

MITT Romney notched up early winsas he fought to establish his domi-nance in the race for the RepublicanUS presidential nomination last night but Ohio, the biggest prize of theevening, was too close to call.

Romney won as expected in Virginiaand Vermont, while rival NewtGingrich won in his home state ofGeorgia, according to network projec-tions. Results from the seven otherstates holding contests on SuperTuesday were due to follow overnight.

Some 419 of the 1,144 delegatesneeded to win the partys nominationwere at stake. Polls show Romney haseffectively erased Rick Santorums leadin Ohio, a bellwether state.

Contests were also being held inMassachusetts, Oklahoma, Tennessee,Idaho, Alaska and North Dakota.

Romney edgesahead in raceto fight Obama

US POLITICS

Greek nervesdent marketsPRE-BAILOUT nerves set global mar-kets tumbling yesterday, as investorsfretted about the prospect of Greeceslooming bond swap failing as well asthe broader health of the Eurozoneseconomy.

The FTSE 100 lost 1.9 per cent toclose at 5,765.80 points yesterday, suf-fering its biggest one-day fall in nearlythree months, while Pariss CAC 40and the Dax in Frankfurt plunged 3.6and 3.4 per cent respectively.

In the US, the Dow dropped 203points, or 1.6 per cent, in its hardestfall this year, with the S&P and Nasdaqdiving 1.6 and 1.4 per cent.

Wall Streets anxiety gauge, the VIX,jumped about 16 per cent to near 21,above its 50-day moving average forthe first time since November.

Yields on 10-year US bonds droppedfrom 2.02 to 1.94 per cent as nervousinvestors clustered around safehaven assets.

Global financial systemic risk is atthe forefront right now. The questionis whether there will be a successfultender come Thursday of enough pri-vate bondholders to avoid the spectreof default with a capital D, said DavidDietze, investment strategist at PointView Wealth Management.

Greece is racing to sign a deal toenforce haircuts of more than 50 percent on private bondholders by tomor-row night if it is to receive critical bailout funds and avoid a disorderlydefault.

Though UniCredit, Socit Gnraleand six Greek banks yesterday threwtheir weight behind the initiative,Greek authorities resorted to threatsof a default last night to try and obtain

BYMARION DAKERS

MARKETS

FEARS GROW FOR $45BN UTILITY ASBUYOUT GROUPS HEDGES NEAREXPIRY The worlds biggest private equitydeal is facing rising financial pres-sure during the next two years withthe expiry of contracts that under-pinned the takeover of utility TXU.Investors in the $45bn buyout of thecompany, now known as EnergyFuture Holdings, fear a sharp drop inrevenue as hedges that protected itfrom a fall in natural gas prices pro-gressively expire by 2014.

SEARCH FOR MINERALS HINDERED ASEXPLORATION BUDGETS DRY UPMining exploration budgets are beingreined in this year as companies

struggle to raise capital to fund thesearch for new reserves to meet surg-

ing Chinese demand for commoditiesfrom copper to iron ore.

STATOIL IN POLE POSITION TO BUYBRAZILIAN BUSINESS OF ANADARKONorways state-controlled energygroup Statoil is in pole position tobuy the Brazilian business of US-listedexplorer Anadarko for about $3bn,which would mark the latest big forayby a global oil group into the SouthAmerican country.

EX-PEACOCKS MAN TRIES ON CLOTHESROLE AT MORRISONWm Morrison has hired the formermanaging director of Peacocks, TimBettley, as its first head of clothing, tospearhead the development of itsnon-food business.

CAPCOM SAYS GAME MUST BATTLEFOR SURVIVAL WITHOUT STREETFIGHTERThe failure to get Street Fighter on itsside has pushed Game Group evencloser to the brink. Capcoms decisionto withhold its latest releases fromthe ailing entertainments chaincomes after Electronic Arts andNintendo withdrew stock last week.

CAMELOT GIVEN MORE TIME TO HELPGOOD CAUSES AND TO FIGHTDESMONDCamelot is to press the button on a100m expansion of its lottery termi-nal network after winning a four-yearextension to its licence to run theNational Lottery.

HUNDREDS OF JOBS TO GO AS RIOTINTO CLOSES UK ALUMINIUM PLANTMore than 500 people will lose theirjobs after Rio Tinto announced it willclose its Lynemouth aluminiumsmelter at the end of the month. TheFTSE 100 mining company said 323out of the 515 people working at theNorthumberland plant will be maderedundant in May after productionshuts down.

MATALAN PROFITS SLUMP ON HIGHSTREET SLOWDOWN AND LARGE DEBTSMatalan has suffered a slump in prof-its, becoming the latest privately-owned retailer to be hit by aslowdown on the high street and largedebts.

UPS-TNT TALKS HIT A BUMPUnited Parcel Services talks to takeover Dutch rival TNT Express haveslowed as a result of friction betweenthe two package-shipping companiesover a range of issues, according topeople familiar with the matter. Though the people expressed hopethe two sides will still reach a deal,they are unlikely to do so this week.

BOEING FORMS ALLIANCE WITHCHINESE JET MAKERBoeing formed a partnership withCommercial Aircraft of China, orComac, a nascent competitor in jetmanufacturing, to research ways tomake planes more fuel-efficient andcut greenhouse-gas emissions.

WHAT THE OTHER PAPERS SAY THIS MORNING

Industrial policies are doomed to fail

SLOWLY but surely, the British estab-lishment is forgetting the lessons ofthe past 35 years. We have seen thereturn of high taxes, a softer approachto inflation, talk of wealth taxes (eerilysimilar to those supported by theLabour party in 1979), the rationalisa-tion of envy and now even a comebackfor economic nationalism.

On the day the UK economy wasofficially overtaken by Brazils nowthe sixth largest in the world it washard to know what was most depress-ing: Ed Milibands call for an industrialpolicy based on patriotism, by which

he seems to mean uselessly exhortingconsumers to buy UK goods and usinga state-backed bank to lend money topet projects (the laughable example hecited was a windfarm maker in

Scotland); or Vince Cables call for amore ambitious and strategicindustrial policy. Both men have longspecialised in attacking wealth cre-ators and the financial services indus-try a key source of jobs so it washard to take either of them seriously.

The real problem is that theexperts advising politicians donthave a clue about which industries willdo well. Futurologists are inevitably wrong. Of course, technology is agrowth area but a few years ago itseemed flat screen TVs were the futureand that the value added in mobiletelephony was to be found in carryingcalls, rather than producing handsets.That view turned out to be hopelesslyincorrect. Fifteen years ago, everybodythought Microsoft-style software waswhere the money would remain andthat whoever built the best browsers

would control the web. Nobody pre-dicted the return of Apple, or the riseof the smartphone, or social networks.

Attempts at directing resourcesalways end in tears. Take the crucial

decision by John Major and Tony Blairto massively increase the number of young people who go to university:that was a major strategic, industrialand social policy aimed at helping theUK succeed in a new, knowledge basedglobalised world. It was also anappalling failure because the supply ofgraduates has become too great for thenumber of graduate-level jobs, and because some universities are of toolow quality. The result has been manya tragically shattered dream: the per-centage of recent graduates employedin lower skilled jobs has risen from26.7 per cent in 2001 to 35.9 per centtoday. Had so many of the best and brightest graduates not left Britain,especially those with science degrees,the scale of under-employment wouldbe even greater.

Top-down strategic decisions fail not

merely because the future is inherent-ly uncertain but also because ideolo-gy and vote-buying are always thedominant imperative. Many of theUKs most successful industries such

as supermarkets, accountancy firms,hedge funds, currency trading compa-nies or private schools (which are ratedhigher than those of any other econo-my apart from New Zealand on theOECDs league table) are politicallyincorrect or located in the wrongpart of the country. They will never bebacked under an industrial policy.

We need less hubris and more real-ism from governments. They mustfocus on the basics: an education sys-tem which delivers numeracy, literacyand knowledge for all; lower taxes;reduced public spending and red tape;more (privately-financed) infrastruc-ture; a sound monetary policy thatdoesnt fuel booms and busts; no bailouts or hidden subsidies andtrust the private sector to do the rest.

[email protected] me on Twitter: @allisterheath

Greek leader Lucas Papademos has until Thursday to convince bondholders of his plan

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]

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

a deal with the required 75 per cent ofbondholders in time.

The markets were also spooked by a0.3 per cent drop in output in theEurozone, which was revealed by offi-cial statistics office Eurostat.

Brent crude also headed lower, afternews of Tehrans softening stancehelped take the sting out of oils recentprice surge.

Iranian authorities have agreed to anew round of talks with the UnitedStates, Russia, China, France, Britainand Germany over its disputed nuclearprogramme and oil trade.

The price of crude for April deliveryslid nearly $2 during the day to settleat $121.98 a barrel, down from near-record highs of $128 last month.

Other commodities were hit by thechilling effect of Greece, coupled withunexpectedly weak growth forecastsfrom China on Monday.

Copper fell 2.5 per cent to a two-week low of $8289.50 on the LondonMetal Exchange.

Gold fell more than two per cent to$1,674 an ounce and silver tumbledthree per cent, as investors looked tothe dollar as a safer place to park cash.

1 Mar29 Feb 2 Mar 5 Mar 6 Mar

5,950

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5,875

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ANALYSIS l FTSE

5,765.806 Mar

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VINCE Cable, the business secretary,has called for the break-up of RoyalBank of Scotland in a leaked letter thatshows a withering view of the direc-tion of the coalition.

The Treasury should use the loss-making RBS, which is 82 per cent tax-payer-owned, to create a bankdedicated to boosting business lendingand supporting exports, Cable (pic-tured) said in a letter to

David Cameron andNick Clegg.

My suggestionis that we recog-nise that RBSwill not return tothe market in itscurrent shape anduse its time as wardof state to carve out ofit a BritishBusinessB a n k

with a clean balance sheet and a man-date to expand lending rapidly tosound business, he said.

In a four page letter the LiberalDemocrat MP, a regular critic of banklending levels, said the governmentneeded to explain how British peoplewill earn our living in future andhighlighted a series of growth indus-tries such as advanced manufacturingand low carbon technology.

He also said the government lackeda compelling vision for the futurebeyond sorting out the fiscal mess.

The letter, dated 8 February,angered Conservative backbencherswho have clashed with Cable.

Last night Cable told the BBC it cer-tainly wasnt a comprehensive attackon the governments economic poli-cies. Chuka Umunna, Labours shad-ow business secretary, said it

underlines the extent towhich the department ofbusiness lacks clout andhas become margin-alised.

Time to splitup RBS, Cabletells Cameron GEORGE Osborne and Ed Milibandfought over the best way to boost busi-ness in the UK last night, with thechancellor firmly rejecting the

Labour leaders calls for the govern-ment to become more involved withfirms plans and development.

Miliband argued the governmentshould be more patriotic in promot-ing British business, spending moneyin the UK to boost jobs even if bettervalue for money could be gained byprocurement abroad.

Osborne hit out at politicians whoflirt with protectionist rhetoric, say-ing free trade is beneficial to every-one, and undermining free traderisks doing huge damage to businessand jobs and investment in Britain.

Meanwhile immigration ministerDamian Green was forced to defend

his attempts to cut net immigration,claiming he still welcomes migrants with the skills and talents thatBritain needs.

Osborne toned down the anti-immigration rhetoric, arguing oneof our countrys greatest advantagesis our openness.

However, there is still movementtowards more government interven-tion in industry, with Vince Cablearguing in favour of state investmentin research. MORE: P17

ALLEN Stanford was convicted yester-day of running a $7bn (4.5bn) Ponzischeme, a verdict that caps a riches-to-rags trajectory for the former Texasfinancier and Caribbean playboy.

Stanford, who created the Stanford20/20 Cricket tournament, was foundguilty on 13 of 14 criminal counts by aUS jury, including fraud, conspiracyand obstructing a investigation.

Stanford, who has in jail since his June 2009 arrest, is expected to besentenced in the next few months,and is considering an appeal.

The charges carry a potentialprison sentence of more than 200years, but Stanford is more likely toface a maximum of about 20 years.

Most of his victims have receivednone of the money back they investedin his certificates of deposit.Stanfords personal fortune was oncevalued at $2.2bn.

Osborne hitsout at Labourprotectionism

Stanford guilty of runningPonzi scheme worth $7bn

Financier Allen Stanford is facing jail after his 13 convictions Picture: GETTYBY PETER EDWARDS

POLITICS

POLITICS

NewsCITYA.M. 7 MARCH 2012

BYHARRY BANKSCOURTS

3

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ONLINE stockbroker Share saw under-lying profits increase 43 per cent to1.6m during 2011, helped by a sevenper cent rise in income to 14.3m, itsaid yesterday.

Chairman Sir Martin Jacomb saidthe company was still looking toboost revenue through more focuson those who trade frequently andproviding a comprehensive range ofJunior ISAs.

The Aylesbury-based firm, whichmakes most of its money from itsShare Centre business, announced

plans to increase its dividend for 2011by 20 per cent to 0.36p per share.

THE property management companyrun by Vincent Tchenguiz before hebecame embroiled in a fraud probehas been rescued from administrationin a 62m deal.

Peverel has been taken over by private equity houses Chamonix andElectra Partners, who said they wouldsecure more than 4,200 jobs.

It comes nearly a year after the hold-ing companies of Peverel, whichlooks after around 190,000 residen-tial and retirement units, wereplaced in administration followingthe arrest of Vincent Tchenguiz, his brother, Robert, and seven otherpeople in a Serious Fraud Office (SFO)investigation into the collapse ofIcelands Kaupthing Bank.

At the time Vincent Tchenguiz said he had nochoice but to call in adminis-trator Zolfo Cooper afterBank of America MerrillLynch demanded repayment within 24 hours of a124.6m loan plus 11.4m inaccrued interest.

The brothers were released

without charge by the SFO and lastmonth won the right for a judicialreview of the circumstances surround-ing their arrest. The hearing is due tobegin in May.

Yesterdays deal will see Peverelsdebt pile cut by 100m to 25m.

Janet Entwistle (pictured), the for-mer managing director of BT Fleet, has been appointed chief executive andPaul Lester, the former head of VT

Group, the support services firm,becomes non-executive chair-

man.Peverel has previously

faced claims of poor serv-ice and yesterdayEntwistle said: This trans-action marks a new begin-

ning for Peverel. Vincent Tche bought Peverel from its

US owner HolidayR e t i r e m e n tCorporation in 2007,funding the pur-chase with 500mfinance fromMerrill Lynch,before the US bankwas taken over byBank of America.

Ex-Tchenguiz

property firmin 62m deal

THE RECORD $639bn (406.8bn bankruptcy of Lehman Brotherended yesterday, clearing the way forit to start distributing about $65bn tocreditors starting on 17 April, courtdocuments show.

Lehman has said that it expectsthat first group of payments to credi-tors to be at least $10bn.

Lehman, now a small fraction of itsformer size, collapsed on 15September 2008 with $639bn inassets, acting as a catalyst for thefinancial crisis. The legal end to the

case enables Lehman to start payingback its creditors.

Bankruptcy ofLehman endsProfits up 43pcat broker Share

BY PETER EDWARDS

PROPERTY

CAPITAL MARKETS

BANKING

SANTANDER UK has overhauled its board and appointed a new chieffinancial officer in a move widely seenas preparation for the float of the busi-ness when market conditions improve.

Stephen Jones, who the bankpoached from Barclays last year, willjoin the board as CFO and head of reg-ulation, so that the lender has the

management structure of a listed com-pany before it floats.Steve Pateman, meanwhile, has

been promoted from head of corpo-rate banking to head of all UK bank-ing, so that his brief now also includesretail banking and marketing.

Santander UK has been looking for agood opportunity to float in Londonfor over a year in a deal expected toraise around 4bn.

Much of that cash will be used to

pay back its parent company inMadrid for the 5bn it injected so thatSantander UK could snap up 300 RBSbranches.

But delays in integrating those branches and the moribund state ofLondons capital markets have delayedthe deal. The group is keen for the UKbusiness to float as soon as possible but its management in London isinclined to wait for better conditions,with a deal unlikely until next year.

Santander UK prepares forfloat with a board overhaul

Vincent Tchenguiz is still waging war on the SFO Picture: GETTY


BY JULIET SAMUELBANKING

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BANKS could face 3bn in furthercosts from mis-selling payment pro-tection insurance (PPI) after the FSAhit them with new guidelines sayingthey must write to every customerwho could potentially be affected.

That means lenders will now haveto go back through over 16m policiesworth 17bn sold over the last seven years and write to every consumer who could have been mis-sold theinsurance. They might also have to

include those sold before 2005,which were worth another 17bn.

The new guidelines means that PPIwill now switch from being a one-off hit to banks 2011 profits into anongoing and costly headache.

So far, lenders have paid out just1.9bn in compensation, a quarter ofthe total cost of the scandal, which

was a key factor in the FSAs decision. The guidelines also aim to cut

claims management companies outof the equation firms that try toconvince customers that their servic-es are required to claim compensa-tion and who then bag a large chunkof the pay-out.

FSA managing director MartinWheatley said: We think that theredress due from this process may well exceed what has been paid sofar, and that is why we are actingnow to clarify our expectations. TheFSA has warned firms to ensure the

letters are free from financial jar-gon or marketing material.

PPI is insurance to cover loanrepayments for a certain period if a borrower loses her job, but it wasquietly bundled into many productssold to customers who did not wantor need it, increasing the cost oftheir loans.

New FSA rules

add 3bn cost

to PPI scandalBY JULIET SAMUEL

BANKING

THE head of Alliance Trust said shehad witnessed a perfect storm in theglobal economy as the firm offered itslargest dividend increase in 20 years.

Katherine Garrett-Cox, chief execu-tive, said equity markets remain aschallenging as at any time in genera-tions.

We have witnessed a perfect stormcreated by the global financial crisiswhich has culminated in the recentuncertainty within the Eurozone, theincreased dependence on sovereigndebt and the need to substitute con-sumer demand from the West with

that from the Far East, she said.

The firms full-year dividend rose7.2 per cent to 9p as the investmenttrust posted results for the 11 monthsto 31 December. Net asset value totalreturn was minus 5.7 per cent, aheadof the global average.

Alliance hit the headlines last yearwhen investors voted down calls fromhedge fund Laxey Partners to force thetrust to buy back shares whenever itsshare price fell more than ten per centbelow Alliances net asset value.

Yesterday the trust made no refer-ence to the dispute in its results state-ment. However the Dundee-basedfirm called for clarity over the impacton investment trusts should Scotland

vote for independence.

Alliance Trust raises dividenddespite year of global turmoilINVESTMENTS

ENERGY firms Essar and Cairn look setto crash out of the FTSE 100 in nextweeks index reshuffle, based on theirclosing prices yesterday.

Essar, which has seen its share priceslump nearly 60 per cent in the lastthree months on worries about taxand delays at its Indian plants, fellmore than five per cent yesterday to

leave its market capitalisation at a rel-atively paltry 1.6bn.And while Cairn shares have gained

about five per cent since the FTSEslast quarterly review, firms in the FTSE250 index have overtaken it.

Hargreaves Lansdown, whichlooked to be at risk of losing its place,is likely to stay in the blue-chip indexafter its shares rallied 3.1 per cent inheavy trading yesterday one of justtwo rising stocks in the FTSE 100.

The changes will be formallyannounced by the FTSE compiler afterthe market close today, after beingconfirmed by a FTSE committee usingyesterdays closing prices. They will bemade effective after the market closeson Friday 16 March.

Aberdeen Asset Management is setto enter the top index for the f irst timein its history, despite a wobble lastweek when its shares tumbled five percent, as is chemicals firm Croda.

Essar and Cairn expected tolose their places in FTSE 100BYMARION DAKERSMARKETS

News 5CITYA.M. 7 MARCH 2012

Katherine Garrett-Cox said it is a hugely challenging time for working in equity markets

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INSURER Omega has cancelled its div-idend after pre-tax losses doubled to$94.7m (60m) in 2011, up from$42.9m the year before.

Investors were dismayed that thefirm made no mention of a possibletakeover in its annual report and itsshares which have already lost halftheir value in the last year droppeda further two per cent to 49.25p.

Last year Omega turned down atleast three approaches, including an

83p per share bid from rivalCanopius.

The risk remains that the longerthis company is allowed to limp on asan independent entity the less thereis that will be of value to a third partyacquirer, analysts at Peel Hunt wrotein a note.

Independent shareholders shouldtake decisive action to secure what lit-tle value is left.

Gross premiums written declinedfrom $356.1m to $304.6m, contribut-

ing to a negative return on equity ofover 23 per cent.

The entire insurance industry hada tough year following a spate of nat-ural disasters in Japan, New Zealandand Thailand but Omegas results are worse than most of its Lloyds ofLondon rivals.

The firm is one of the smallestoperators on the market and only justsurvived a torrid 2010 during whichalmost its entire board, includingchief executive and chairman, werereplaced as part of a bloody board-room battle.

Losses doubleand biddersdesert Omega

INTER-DEALER broker Tullett Prebonyesterday said it would cut a further80 jobs as it announced that profitshad dropped for a second consecutiveyear.

Terry Smith, chief executive, saidthe group needed to reduce costsand maintain flexibility in the costbusiness and warned the firm facedhigher costs from developing newelectronic platforms and dealingwith new regulation.

The news comes just two months

after it announced that 80 traders inNew York and London would lose

their jobs.Pre-tax profits for 2011 were

119.2m, a drop of 15 per cent, whilerevenue remained flat at 910m.

To make matters worse, ratingsagency Moodys has downgraded thefirms outlook from stable to nega-tive, citing a challenging operatingenvironment due to the deteriorat-ing creditworthiness of many ofTulletts traditional customers andthe potential decline in Tullettsbroking revenues.

Tullett Prebon cuts another80 jobs as profits tumble

Tullett Prebon chief executive Terry Smith has a tough year ahead of him

BY JAMESWATERSON

INSURANCE

CAPITAL MARKETS


ANALYSIS l Omega Insurance Holdings Ltd

p

29 Feb 1 Mar 2 Mar 5 Mar 6 Mar

52.0

51.5

51.0

50.5

50.0

49.5

49.0

p

49.256 Mar

BP paid former chief executive TonyHayward a share-based bonus worthmore than $1m for last year, despitehis resignation from the oil giant inJuly 2010, a US filing showed last night.

Hayward, who quit in the aftermathof the Gulf of Mexico oil spill, received144,422 shares valued at 720,000. TheBriton who now works for oil groupGenel Energy had retained an entitle-ment under a long-term share planlinked to company performance.

The Securities and ExchangCommission filing comes just daysafter BP reached a $7.8bn (6.5bn) set-tlement with more than 100,000 peo-ple and businesses affected by the spillthat killed 11 workers.

Bob Dudley, Haywards successor,received a $6.8m package for 2011, abig rise from the prior year.

A BP spokesman said: Bob Dudleyand his management team performedexceptionally well. They have put BP back on tracks to recovery. Theyturned a $5bn loss in 2010 into a$24bn profit in 2011.

The downstream business deliv-ered a record year of earnings and thecompany generally made hugeprogress in implementing a new safetyorganisation worldwide and funda-mentally restructuring its upstreambusiness.

Tony Haywardpicks up $1mbonus from BP

BY PETER EDWARDS

ENERGY

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MICHAEL Page saw 2011 revenuesboosted by growth in its Asia-Pacificbusiness, but it wasnt enough to liftoperating profits, which fell by threeper cent over the year.

Revenues in the recruitment spe-cialists Asian operations rose 38 percent to 166m while overall revenueshit 1.02bn up from 832m in2010.

Chief executive Steve Ingham said2011 became more challenging as

the year went on, as trading becamemore challenging as general busi-ness confidence fell.

He said all of the countrys geo-graphic regions were hit but thatgrowth had remained positivedespite slowing growth rates.

Ingham was also relatively upbeaton the outlook for 2012, though headmitted that stagnation in the UK banking sector meant its financeand accounting group had stalled.

In the first two months of 2012,with the exception of financial serv-ices, we have seen no significant fur-ther slowing, he said.

Though gross profit at the firmrose by a record 25.2 per cent, it putthe slight fall in operating profitdown to investment in both head-count and growing the businessabroad.

The UK contributed 24 per cent ofthe groups gross profit in 2011, adrop of four per cent on the previous year, with operating profit comingin 6.7 per cent lower at 18.3m.

Shares in Michael Page fell 7.5 percent yesterday to close at 443p.

Finance lagsas recruitergrows in Asia

BANKS are stepping up their efforts toconvince ministers that the FSAsapproach to regulation could perma-nently damage the UK economy.

In a policy paper sent to theBreedon Taskforce, a special govern-ment policy unit set up to examinehow to expand credit supply to smallbusinesses (SMEs), the banks slam theFSA for choking off a major source of

capital. A key issue is the rules govern-ing securitisation the bundling andselling of SME debt to investors who would not buy single loans becausethey are too small to be liquid enough.

Banks argue that the uncertaintyover whether and how they can bun-dle SME debt together means investorsare simply walking away from deals.

But they also claim the FSA is tak-ing too inflexible an approach to let-ting banks assess the riskiness of theirlending to SMEs.

Lenders argue that the governmentshould push the FSA to: Speedily resolve what kinds of SMEsecuritisation are allowed.

Allow banks to classify SMEs thatare suppliers to large, established com-panies as less risky, meaning lenderscould hold less capital against suchloans and lend to them more cheaply. Allow banks to hold less capitalagainst credit facilities that are not inuse, such as an overdraft that an SMEhas arranged but not drawn. This would again make it cheaper toexpand capacity, they say. Impose less harsh rules for when anSME default is triggered, taking intoaccount how much money is past duerather than simply classifying all laterepayments as a default.

The FSA declined to comment.

Swiss parliament votesto weaken bank secrecy

SWITZERLANDS parliament haspassed a proposal that aims to settlean ongoing dispute with the US overthe tax evasion involving hidden off-shore accounts.

The lower house agreed to back theplan which clarifies howSwitzerland would hand over data on Americans suspected of dodgingtaxes at home by 110 votes to 56.

Switzerlands upper house passedthe plan in December.

The proposal will allowSwitzerland to hand over data on sus-pected tax evaders, even if US taxauthorities can only identify alleged

offenders by suspicious patterns of behaviour, rather than by name orbank account.

It seeks to backstop an expecteddeal over US probes into 11 banksincluding Credit Suisse and JuliusBaer that is likely to comprise a datahandover and fine payment.

The move represented a weakeningof Switzerlands secrecy laws, whichhave underpinned its finance indus-try on which the economy relies heav-ily.

But the Swiss authorities haveagreed to compromise after the USindicted Wegelin, a small private bank, for allegedly assistinAmericans to avoid $1.2bn of taxes.

Banks blame FSA for chokingoff credit to small businesses

BY ELIZABETH FOURNIER

RECRUITMENT

BANKING

Steve Ingham said the end of 2011 was challenging

Long-term growthtakes time to payITS becoming a familiar story bynow. Recruiters who built their busi-nesses by focusing on the UK and itsonce lucrative financial services sec-tor are having to turn their back on

the past in search of growth pas-tures new.Michael Pages results only

cement the increasingly downbeatpicture of City jobs financial serv-ices is the only sector that hasntpicked up since the start of the year,and the UK generates four per centless in revenues for the firm than itdid in 2010.

The inevitable flip side is overseasgrowth, and Michael Page certainlyseems hungry for a slice of emerg-ing markets pie, opening 19 newoffices and moving into three newcountries during 2011. Its Asian and Americas revenues are growingnicely as a result but investmentcomes with inevitable costs, andshareholders will be looking for ben-efits to start filtering through soon.

Though shares fell yesterdaytheyve been riding high recently.

We dont think the value is thereyet.

BOTTOMLINEAnalysis by Elizabeth Fournier

LEGAL,

TECH,HR

ANDSECRETARIAL

ENGINEERING&

CONSTRUCTION

MARKETING,SA

LESANDRETAIL

FINANCEANDACCOUNTING

ENGINEERS DRIVE 2011 REVENUE

AT MICHAEL PAGE

1.02BN

2011revenue

22.4%

THE

BANKING FILES

BY JULIET SAMUEL

EXCLUSIVE

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BRITISH new car sales edged down2.5 per cent on the year in Februaryto 61,868 vehicles, the Society ofMotor Manufacturers and Traders(SMMT) said yesterday.

However, February typicallyaccounts for just 3.3 per cent ofannual new car registrations, aheadof the registration plate change inMarch.

The March market will provide amuch better indicator of industryhealth than the relatively low vol-umes traditionally seen in February,

said SMMT chief executive PaulEveritt.

BRITAIN will build at least an extra100,000 Nissan cars each year after theJapanese firm agreed to invest $200m(127m) in its Sunderland site.

Production of the Invitation hatch-back will begin in the middle of next year in a boost to the automotiveindustry, which is becoming moreanxious over the future of GeneralMotors plant in Ellesmere Port, nearMerseyside, after a senior executive yesterday declined to provide solidreassurances publicly.

Nissan, run by Carlos Ghosn, said itwill take on 600 staff in Sunderland,where it makes the Qashqai and Jukemodels, taking the total there to 6,000.

Japans second-largest carmaker,which is being supported by a 9.3mloan from Britains regional growthfund, expects the Invitation to create2,000 jobs in-house and at suppliers.

Business secretary Vince Cable, atthe Geneva motor show yesterday,said: The investment is a boost forjobs at Nissans plant as well as the wider supply chain Global vehiclemanufacturers are beating a path tothe UKs door.

Britain faces a battle, however, topersuade GM to keep its plant inEllesmere Port beyond 2014. Yesterday vice-chairman Steve Girsky, a former Wall Street banker, said he had a viable plan for its loss-makinEuropean arm but gave few details.

Theres uncertainty in the econom-ic environment across Europe. That iswhat we have to live with and what wehave to work our way through.Working together, we think we can getthis done.

Last night the Business Departmentdeclined to say if Cable had met GMexecutives in Geneva. It comes daysafter he flew to New York to make thecase for Ellesmere Port to GM chiefexecutive Dan Akerson.

Nissan in jobs

boost but GMfears mount

GERMAN state prosecutors havecharged three employees atPorsche with credit fraud, the lat-est fallout from a legal disputealleging the sportscar maker ille-gally cornered the market inVolkswagen shares in 2008.

The unnamed Porsche employeesare accused of giving false informa-tion about the number of optionsPorsche held on Volkswagen ordi-nary shares during talks over a10bn (8.35bn) loan refinancingin March 2009, prosecutors in

Stuttgart said in a statement yester-day.

Porsche staffin fraud caseNew car salesfall in February

BY PETER EDWARDS

AUTOMOTIVE

AUTOMOTIVE

AUTOMOTIVE

FRENCH carmaker PSA PeugeotCitroen announced the terms of a1bn (832m) share sale to fund itsalliance with General Motors, offeringa big discount to draw in funds foroverseas expansion and new models.

GM and Peugeot announced analliance last week to co-operate ondeveloping new cars with the aim ofsaving $2bn (1.27bn) annually via

pooling purchasing and research anddevelopment. The French carmakerhopes the deal will help it step upexpansion in lucrative new markets asEuropes car market struggles.

Peugeot said yesterday it would offer16 new shares for every 31 existingshares held by investors at 8.27 each,a 42 per cent discount to its closingstock price on Monday. The deal willsee GM take a seven per cent stake inPeugeot for roughly320m.

Peugeot offers bigdiscount on sharesAUTOMOTIVE

Nissan chief execu-tive Carlos Ghosn isrumoured to beconsidering arevival of theDatsun sports car

Picture: GETTY


ANALYSIS l Nissan Motor Co Ltd


850

840

830

820

810

800

7996 Mar

8/2/2019 Cityam 2012-03-07

9/28

QR SCAN HERE

FINANCE, LEGAL & I.T.

SALARIES UP TO

250K1000OVER

JOBS

WWW.CITYAMCAREERS.COM


HOUSEHOLD spending, invest-ment and exports all fell in thefinal quarter of 2011, official sta-tistics confirmed yesterday,prompting fears the Eurozone willsuffer months of slow growth oreven recession.

The broad based decline inactivity dragged GDP down 0.3 percent in the last three months ofthe year, compared with expan-sion of 0.3 per cent in the previousquarter.

GDP was up 0.7 per cent com-pared with the final quarter of2010 and, thanks to downwardrevisions to earlier growth, tookexpansion over 2011 to just 0.7 per

cent.The worst published performer

in the country was Portugal,where GDP fell 1.3 per cent, andSweden, which contracted by 1.1per cent.

The most recent Greek datacomes from the second quarter of2011, which fell 7.3 per cent com-pared with the same quarter of2010.

Polands economy expanded 1.1per cent in the final quarter, whileLithuanias grew by one per cent.

The underlying outlookremains bleak survey measuresof export orders point to contin-ued weakness in externaldemand, and domestic spending

will continue to suffer the effectsof draconian fiscal tightening,

said Jennifer McKeown fromCapital Economics.

Even in countries with relative-ly sound public finances likeGermany, fears of more bail-outsfor peripheral economies mightprompt households to save ratherthan spend their income.

Recession looms as

investors cut backBY TIMWALLACE

EUROZONE

FRENCH President Nicolas Sarkozysaid yesterday that if re-elected he

would propose a minimum tax onthe profits of big listed companies,

which could raise2bn to 3bn(1.67bn to 2.5bn) in a year to gotowards cutting the public deficit.

As the latest poll showed Sarkozytrailing further behind Socialistpresidential candidate FrancoisHollande, he said: We are going tocreate a tax on minimum profits

for big companies in France, compa-nies in the CAC 40, because I have

discovered something which is notnormal, it's that these big compa-nies maximise their tax benefitsand some of them do not pay tax atall.

The conservative leader told a TVdebate that he would propose themeasure in the 2013 budget.

Sarkozy has been criticised onthe left for changes to the tax sys-tem that favour companies and the

wealthy.He told France 2 television that

the minimum tax would target

international companies like oilgroup Total.

A poll by CSA yesterday showedHollande getting 30 per cent sup-port in the first round of a two-round election, up two percentagepoints, while Sarkozy gained onepoint to 28 per cent.

In the decisive final round of vot-ing on 6 May, Hollande was seenretaining a wide lead over Sarkozy,

beating him by 54 per cent to 46 percent, unchanged from the previousmonth.

Marine Le Pen, head of the far-right National Front, fell two per-

centage points to 15 per centsupport in the first round of voting.

Sarkozy promises to crack down oncorporate tax as he trails in the pollsEUROZONE

PORTUGUESE PM: WE WONT FORCE HAIRCUTS

PORTUGAL will pay its debts and will not follow Greece in forcing haircuts on investors,Prime Minister Pedro Passos Coelho said yesterday. He told Bloomberg TV the countryhas showed to all European partners its commitment to reach the targets in fiscal andeconomic reforms. Picture: GETTY

WEAK economic data cooled investorsdemand for Italian and Spanish debt

yesterday, reversing some of the gainsseen after last weeks huge cash injec-tion from the European Central Bank.

The European Financial StabilityFacility (EFSF), Holland, Austria andthe UK all successfully sold debt, show-ing investor sentiment remainsstronger than at the end of 2011.

Yields rose above five per cent onSpanish and Italian 10-year bonds afterplummeting below the psychological-ly important level last week.

Spanish yields rose 0.173 percentage

points yesterday to 5.145 per cent, andItalian yields rose 0.139 percentagepoints to 5.069 per cent.

Britain successfully sold 1bn in 30-year index linked bonds at a real yield

of 0.044 per cent, maintaining its safe-haven status as a secure governmentfrom which to buy debt.

The EFSF sold3.443bn (2.87bn) ofthree-month bonds at a yield of 0.0516per cent, with Japan buying160m ofthe debt issue.

The country intends to keep buyingthe debt as long as European govern-ments try to resolve the debt crisis.

Italian debt yieldsrise as ECB cash

injection wears offBY TIMWALLACE

EUROZONE

ANALYSIS l EZ GDP growth

%

2008 Q12007 Q1 2009 Q1 2010 Q1 2011 Q1

1.5

1

0.5

0

-0.5

-1

-1.5

-2

-2.5

-3

ANALYSIS l Italian yields

2:00 4:00 6:00 8:00 10:00 12:00

5.1

5.05

5

4.95

A DISORDERLY Greek default wouldcause more than1 trillion (833bn)of damage to the Eurozone and couldleave Italy and Spain dependent onoutside help to stop contagion spread-ing, the main bondholders group hassaid.

There are some very importantand damaging ramifications that

would result from a disorderlydefault, the IIF said in a letter to

bondholders.It is difficult to add all these con-

tingent liabilities up with any degreeof precision although it is hard to seehow they would not exceed 1 tril-lion.

Greek private creditors have untiltomorrow night to say whether they

will participate in a bond swap.Greece ratcheted up the pressure

on bondholders to sign up after sig-nalling it will make the offer bindingand force losses on those who do not

volunteer if it gets enough supportfrom its other creditors.

IIF warns of1 trillion risk ifGreece defaults

EUROZONE

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HINES new UK managing directorsaid there were trillions waitingto be invested into London in theyears to come, highlighting that thecity remained one of the mostattractive global cities to invest inamid the turmoil in the Eurozone.

Ross Blair (pictured) told City A.M.at the Mipim conference in Cannesyesterday that the US investor anddeveloper will plough 1bn into theUK real estate market over the nextthree years and double the size of itsinvestment portfolio from 2m sq ftto about 4m sq ft.

London still remains one of themost attractive cities to invest in,Blair said, while stressing that bid-

ding for core assets coming onto theLondon market continued to befiercely competitive.

The developer of Cannon Place inthe City plans to shift its focus fromdevelopment to investment in theUK in order to balance the booksand provide more steady revenuestreams in an uncertain economicenvironment.

Meanwhile, property adviserCBRE said today that real estateinvestors in Europe view the UnitedKingdom as the most attractivemarket for purchases in 2012, withLondon standing out as the singlemost attractive city.

CBREs survey, completed bymore than 340 leading propertyinvestors, found that the UK is themost attractive real estate market

for investment in Europe for 31 percent of investors, up significantlyfrom 16 per centin 2011.

Germany was the sec-ond mosta t t r a c t i v em a r k e t ,selected by 27per cent ofinvestors.

High hopes for UKat Hines and CBREBY KASMIRA JEFFORD IN CANNES

PROPERTY

THE ARRIVAL of senior debt fundscould provide welcome new sourcesof liquidity in the European proper-ty market as the banks continue toreduce their exposure to real estatelending, new research shows.

Cushman & Wakefields latestEuropean real estate lending sur-vey found that just 36 out of the 78leading global real estate financeproviders interviewed said they would be willing to lend to new

customers, while a further ninewould only lend to existing clients.

This represents a 33 per cent fallin active lenders since the firstquarter of 2011.

Even those willing to lend havehighly restrictive lending criteria,with some only willing to lend inCentral London, for example.

There are 32 senior debt lendersactive in the European market,mostly targeting loan sizes of20m-50m, although five lendersinterviewed did signal their capac-ity to underwrite over 100m.

Lenders continue to target prime

assets, with much of their businessin the short term set to come from

refinancing rather than purchases.According to the report, alterna-

tive finance providers will becomemore established and active butare not expected to fill the debtfunding gap, at least in 2012.

Michael Lindsay, head of EMEAcorporate finance at Cushman & Wakefield, said: Looking ahead,the bright star is the increasedlending activity and intentions ofnon-bank financial institutionsand the potential arrival of seniordebt funds this year which will pro-

vide some welcome new sources ofliquidity.

PROPERTY

ULSTER Bank, the troubled Irish busi-ness unit of Royal Bank of Scotland, isreadying itself to sell off assets worth1bn (833m) according to a sourceclose to the situation.

This could see Ulster Bank compet-ing against the state-run National Asset Management Association(NAMA) in trying to offload propertyportfolios in Ireland.

Ulster Bank, which operates inNorthern Ireland and the Republic ofIreland, has approached agents. Theyare believed to have until the end ofthe week to respond with their pro-posals.

The source said the deal related toasset sales, not loan sales.

Property consultant CBRE said lastweek new properties are expected tocome to market in coming months inIreland, as banks, receivers and

NAMA look to offload sites. The move by Ulster Bank will be

keenly watched to see what level ofpricing can be achieved for suchassets.

Ulster Bank setfor 1bn sale ofproperty assetsPROPERTY

Focus on Mipim10 CITYA.M. 7 MARCH 2012

ROYAL MAIL TO DEVELOP BATTERSEA DEPOT

THE ROYAL Mail has won planning permission from Wandsworth Council to redevelop itsSouth London mail centre next to Battersea Power Station into a residential scheme. The 13-acre development includes 1,800 homes, a primary school and retail and public space. RoyalMail will also invest around 50m in the extension of the Northern line and infrastructure.

THE BRITISH Property Federation hascalled on the government to providemore clarity on the minimum energystandards that will be required bycommercial and residential landlordsbeyond 2018 under new legislation.

Changes being brought by theEnergy Act 2011 will mean that hun-dreds of thousands of UK propertieswith the least energy efficiency rat-ings of F and G could be renderedunlettable by 2018.

Delegates at a seminar in Cannes,where the property industry is gath-ering for its annual Mipim confer-

ence, heard that landlords will beforced to take on the cost of refurbish-ing or refitting their buildings tomeet the government standards andto prevent them from becoming obso-

lete within six years.While there is likely to be a green

premium higher rents for betterperforming properties in the nearterm, government legislation will eatinto the value of F- and G-rated prop-erties, according to British Land bossChris Grigg, who sat on the panel

Patrick Brown, BPFs assistant direc-tor of sustainability, told City A.M. thegovernment needed to make it clearwhether E-rated and better perform-ing properties faced a similar fate.

What the BPF would want to see isan approach that took account of thenatural opportunities that arisewhen a building is vacant. We wouldprefer the government to take an

approach where only lease transac-tions which involved a change inoccupancy were captured by the natu-ral energy efficiencies opportunities,he said.

Green rules couldmake it impossible

to rent some flatsBY KASMIRA JEFFORD IN CANNES

PROPERTY

Real estate firms look to alternativefinance as banks pull out of sector

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FORMER Bank of England MPCmember Andrew Sentance hastaken on a new role on the board

of trustees at Build IT, a charitythat helps with buildinghealth facilities, housingand schools in ruralZambia.

A keen guitar playerin a band calledRevelation, Sentance

joins Build IT at the sametime as the Canadianmusician Bryan Adams of (Everything I Do) I Do It

For You fame (pictured) who fre-quently fills stadiums with his chart-

bothering brand of soft rock.

Sentance, who is currentlyPwCs senior economic adviser,will not be displeased to be

linked with such a leg-endary musicfigure. And onhis appoint-

ment he says: Ihave been veryimpressed by the work

that Build IT International hasdeveloped in Zambia.

NEW GIG FOR SENTANCE

11

The CapitalistCITYA.M. 7 MARCH 2012

Got A Story? [email protected]

WHERE IS BARNABUS ?Well done to the lucky winner who guessed that

Barnabus was at Tower Bridge yesterday! To win apair of VIP tickets to The Gaucho International Polo(www.gauchopolo.com) taking place at The O2 Arena,this week readers have been guessing which iconicLondon landmark their mascot, Barnabus, the small-est polo pony in the world, has got to. Today we aredelighted to offer a pair of VIP tickets and a chance

to win a night's stay at Cannizaro House, the only lux-ury boutique hotel in Wimbledon. To win this incredi-ble prize here is todays clue: Barnabus will becounting every second today, so where's Barnabus? Toenter please let us know where you think he is via theGaucho Polo Twitter site@GauchoPolo

Three of Brewin Dolphins winning team

BREWIN Dolphin took on and beat a team

from Rathbones in a rugby match played lastweek in the City. The match, in front of around 200spectators, was a warm-up for a bigger fundraiserfor Leukaemia & Lymphoma Research: the London-Paris 2012 cycle ride. Brewin Dolphin is proving itspedal power with a team of 16 cyclists for the event,including BBC sports commentator Jill Douglas, ex-Irish international rugby player Paddy Johns, thir-teen of its investment managers and a doctor

working on the charitys clinical trials. Thefundraising target is 50,000, with 10,000 raisedalready from the rugby match.

BREWIN DOLPHIN INVICTORIOUS MOOD

MORE NEWSONLINE

www.cityam.com

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BETFAIR, the online betting group,yesterday said it took 50m of bets onthe marathon Australian Open tennisfinal between Novak Djokovic andRafael Nadal, highlighting the grow-ing popularity of in-play gaming onmajor sporting events.

Horse racing was also a driver ofgrowth, with races such as KautoStars victory in the King George VIChase on Boxing Day stimulatingrenewed interest in the sport, the

worlds biggest betting exchange saidyesterday.

We had our best-ever AustralianOpen, which culminated in almost50m of bets being placed on thefinal, said acting chief executiveStephen Morana.

Betfair, founded 12 years ago byone-time professional gambler

Andrew Black and former JP Morgantrader Ed Wray, reported an 11 percent rise in third-quarter revenue to85.3m, topping a consensus forecast

for 84.8m, according to a company-supplied poll of ten analysts.

Morana, the companys financedirector, is holding the chief execu-tive role on a temporary basis aheadof the arrival of Breon Corcoran, who

will join the company in August fromIrish bookmaker Paddy Power.

The company also confirmed EdWray would step down as chairmanto be replaced by ex-Railtrack chiefexecutive and city veteran GeraldCorbett.

Shares in Betfair, which have risenby 45 per cent in the past six months,

were down 0.45 per cent at 881p.

Betfair getsa boost fromAussie Open BT and TalkTalk lost a court appealyesterday, meaning the internet serv-ice providers (ISPs) will now have toidentify and warn customers who

are suspected of illegally accessingcopyrighted material online.

The two major British ISPs chal-lenged a High Court ruling, claimingthe Digital Economy Act a crackdown on illegal file sharing isincompatible with EU law and couldconstitute an invasion of privacy andrun up significant costs for con-sumers.

But the judges disagreed, so theISPs will now have to send warningletters to customers suspected byfilm studios or record labels of hav-ing illegally accessed pirate sites.

If this scheme is found not to beeffective after one year, further legis-

lation could be implemented to pun-ish persistent offenders by slowingor suspending their internet access.

BT said it would look at the judg-ment carefully to understand itsimplications and consider our nextsteps.

But TalkTalks response wasfirmer. The telecoms group said it

was also considering its options butwill continue fighting to defend ourcustomers rights against this ill-

judged legislation.

Telecom firmsmust warn overweb copyright

Novak Djokovic won the marathon final of the Australian Open Picture: GETTY

BYHARRY BANKS

LEISURE

TELECOMS


ANALYSIS l Betfair Group PLC

p


885

880

875

870

865

860

855

881.006 Mar

8/2/2019 Cityam 2012-03-07

13/28

INMARSAT admitted its future withLightSquared is on the rocks and urgedinvestors to take a conservative stanceon payments being received from theUS wireless company, which was theprimary driver of revenue growth atInmarsat in 2010 but defaulted on itsmost recent $56m (36m) rent cheque.

But the British satellite group said itwas confident of a return to growth albeit a modest one next year.

Inmarsat boss Rupert Pearce toldCity A.M.: No one is optimistic aboutLightSquared getting resuscitated theyve got serious regulatory prob-lems in the US they need to solve.

But green shoots of recovery in thelast year point to a return to growth inour mobile satellite service franchise.

Pearce noted Inmarsats new mar-itime FleetBroadband service is ramp-ing up subscribers at record levels,

with average revenue per user up 15per cent over the year as customers

transfer to the cheaper service but useit more.

Inmarsat grew annual revenues 20per cent to $1.4bn, with pre-tax profitsup 10 per cent to $367m.

Pearce expects future growth ratesto be fuelled by the launch of GlobalXpress, the firms its new super-fast

broadband network for the govern-ment, energy, maritime and aviationsectors, and in-flight connectivity forair passengers, which is at a tippingpoint in a couple of years it will be amust have.

Growth againfor InmarsatBY LAUREN DAVIDSON

TELECOMS

PACE shares jumped 13 per cent yester-day after a fall of nine per cent in theprevious days trading, despite the tele-

vision set-top box developer posting adrastic slump in profits.

After a year in which the companyaxed its senior management team,issued three profit warnings and sawits main hard disk suppliers hit byfloods in Thailand, Pace reported apre-tax profit of $54.7m for fiscal2011, less than half the $110.2m ittook the year before.

But the main impact of the floods

is yet to come, as the Yorkshire-basedbusiness only took a $9m revenue hitlast year, leaving $25m to $35m moreto come in the first half of this year.

Like-for-like revenues at Pace fellseven per cent as Europe whereincome dropped 19.5 per cent from$568.2m to $249.6m failed to delivergrowth.

Organic revenues fell 7.1 per cent, but, including the effect of acquisi-tions, revenues were up 11.9 per centto $2.3bn.

Paces new chief Mike Pulli said he was not fazed by the rise of onlinevideo streaming, reiterating his confi-dence in the pay-TV industry.

BY LAUREN DAVIDSON

TECHNOLOGY

Pace ends a toughyear with a profit


LOVE IS ALL AROUND AS CUPID EXPANDS MORE

Online dating company Cupid more than doubled revenues last year from 25.7m to53.6m, half of which was generated outside the UK in one of the 15 countries the websitenow operates in. The Edinburgh-based group grew pre-tax profits 67 per cent to 7mwebsite subscribers grew to 486,776. The firm also announced it had hired Ian McCaigand Russ Shaw as non-executive directors. Picture: GETTY

ANALYSIS l Inmarsat PLC

p


490

480

470

460

450

440

430

433.206 Mar

NEWS | IN BRIEF

Textile rental boosts JohnsonsYear-end profits at Johnson Service Groupgrew to 13.7m on revenues of 242.3min 2011, up from 4.5m the year before.The results were boosted by a 15.4moperating profit from its textile rental divi-sion, which provides linen to the hotel,catering and corporate hospitality mar-kets. However earnings from the firms

flagship dry cleaning arm, responsible forthe Johnsons Dry Cleaners and Jeeves ofBelgravia chains, stayed static at 2m asrevenues dipped slightly to 77.3m.

UK tops list of matured loansHalf a trillion dollars of European lever-aged buy-out loans are due to maturebetween now and 2016, according to lawfirm Linklaters. The largest burden willfall on the UK with $172bn of loans thatneed refinancing, compared to $86bn inFrance and $83bn in Germany. The tele-coms sector is set to take the biggest hitwith $67bn, followed by retail with$47bn and healthcare with $40bn.

Bwin.party sells poker websiteGaming hybrid Bwin.party has agreed tosell Ongame, its business-to-businessonline poker network, to US rival ShuffleMaster for a maximum of 29.5m. Thedigital entertainment business has been

trying to offload Ongame since June aspart of a strategy to divest peripheralparts of the business since Bwin andPartygamings merger. Shuffle Master willpay an initial 19.5m, with a 10m top-up.

ANALYST VIEWS: CAN PACE DELIVER ON ITSTURNAROUND STRATEGY? Interviews by Lauren Davidson

JONATHAN IMLAH | COLLINS STEWART

While the short term outlook is better than expected, the medium to longterm negatives will continue to outweigh the positives. The price reflects scepticismat Paces ability to execute its turnaround plan and fundamental questions about thelong term relevance of the set-top box and both assumptions are sensible.

NICK JAMES | NUMIS

The new management team provided a much-needed breath of freshair, however fundamentally the story is unchanged. Pace is still in denial of theprospect that Apple could be disruptive to the video/set-top box market and wecontinue to believe this risk is material. We maintain cautious estimates.

IAN ROBERTSON | SEYMOUR PIERCE

It is good to see no kitchen sinking, but the impressive performance bynew chief Mike Pulli is what is driving our change in recommendation from holdto buy. We have greatly increased confidence that the company can deliver on

the strategy set out in November.

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BUDGET airline EasyJet has reported a3.7 per cent year-on-year rise in passen-ger numbers for February.

EasyJet carried 3.97m passengerslast month, compared with 3.83m a

year ago.The figures mark a return to strong

passenger growth for the airline, afterit posted a fall of 0.4 per cent in

January.Its load factor, a measure of how

many available seats are sold, rose 1.2percentage points to 87.6 per cent.

In the year to February 2012, the

carrier reported a 9.5 per cent rise inpassenger numbers to 55.6m.

RWE, Germanys second-biggest utili-ty, plans to sell fewer assets after find-ing another 1bn (834m) of cost cutsand raising its capital as it positionsitself for a future without nuclearpower in its home market.

The company, which owns Britishutility NPower, reported a 45 per centdrop in 2011 net profit yesterday.

It now plans to sell assets worth upto 7bn by the end of 2013, less thanthe previously targeted 11bn.

The future looks much brighterthan it did six months ago, incomingchief executive Peter Terium said,adding he expects operating profit toremain flat this year and next as newpower plant capacity and cost-cuts off-set the impact of asset disposals.

Terium, who takes over as chiefexecutive in July, is expected to lead aswift transformation of RWE to pre-pare for a phasing out of nuclearpower in Germany by 2022, following

Japans Fukushima disaster last year.Shares of RWE rose to their highest

level since early August in morningtrading, rising 2.1 per cent before

falling back to close down 0.1 per cent.RWE, which has already sold 1.5bn

worth of assets, now plans to keep itsDEA oil and gas exploration unit,

which accounted for almost 10 percent of 2011 operating profit, but

would sell stakes in some of its proj-ects.

RWEs earnings before interest, tax,depreciation and amortisation slipped17.5 per cent to8.4bn, hit by a drop inprofits from power generation caused

by the nuclear exit and a wideningloss at its energy trading unit.Its NPower unit reported a 34 per centrise in operating profits to 357m(313m), but it said gains in energysales were hampered by costs relatedto energy saving programmes.

RWE to scale

back its assetsell-off plans

JOHN Menzies yesterday posted a full-year pre-tax profit that topped expec-tations, boosted by contract wins in itsairline ground handling business.

John Menzies, which also distrib-utes newspapers in the UK, said itmade a positive start to the year and

was trading in line with its expecta-tions.

Its Menzies Aviation unit reported a31 per cent jump in operating profit,making it the top profit contributorfor the year.

January-December underlying pre-

tax profit rose 25 per cent to 56.4m.Turnover rose marginally to 2.01bn.

Aviation boostsJohn MenziesEasyJet back intraffic growth

BYHARRY BANKS

ENERGY

TRANSPORT

INDUSTRY

Apple can even generate buzz with no product

APPLES new iPad has had animpact even before it isunveiled. The products overallBuzz score on YouGovs

BrandIndex has increased by twopoints since the announcement of its

release less than a week ago.Looking at longer term trends over

the last year, we have seen the unin-terrupted rise in its recommendscores and most surprising it hasmoved from a luxury product to a

value product, rising from -6.4 on 7March 2011 on that metric to +1.1today.

This doesnt compete with the Value score of, say, Android at 16points, which, despite being availableon both smartphones and tablet, has-nt moved more than one point in thelast 12 months. If the new price isright, we could be seeing substantial-ly more colleagues wandering in withan iPad under their arm.

More surprising results this weekcame out of a YouGov SixthSensereport, which indicated that the shop-ping catalogue remains a firmfavourite for UK consumers. Justunder one quarter ordered an item

direct from a company after browsinga printed catalogue in the last 12months.

Argos was shown to be winning therace on catalogue shopping, with 58per cent of respondents saying theyhave an Argos catalogue at home.

Competitors Tesco Direct, Next andLittlewoods were trailing behind interms of coverage, reaching 27 percent, 11 per cent and six per cent ofUK homes respectively. Over a quarter

of those who buy from shopping cata-logues use three channels to com-plete their purchase using theircatalogue to browse, going online toorder and visiting their local store forcollection.

Such research highlights the newrole of the catalogue, moving from itsoriginal mail-order purpose to that ofcatalyst for online sales.Stephan Shakespeare is the chief executiveof YouGov

BRANDINDEX

STEPHAN SHAKESPEARE

ANALYSIS l Recommend score

2 Jan2011

1 Apr2011

1 Jun2011

1 Aug2011

1 Oct2011

1 Dec2011

1 Jan2012

20.0

15.0

10.0

5.0

iPad Recommend score

ANALYSIS l Value score

2 Jan2011

1 Apr2011

1 Jun2011

1 Aug2011

1 Oct2011

1 Dec2011

1 Jan2012

5.0

0.0

-5.0

-10.0

iPad Value score

ANALYSIS l RWE AG


36.5

36.0

35.5

35.0

34.5

34.0

34.446 Mar

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FRESNILLO, the worlds largest pri-mary silver producer, said high met-als prices boosted 2011 profit andhelped more than double its final div-idend, offsetting rising electricityprices, wages and the cost of tightersafety controls.

The Mexican miner has no debtand $685m (434m) in cash on its bal-ance sheet at the end of 2011, but saidit was unlikely to repeat Decembersextraordinary dividend this yearbecause of its exploration push andspending on new mines to offsetlower grades at its flagship Fresnillomine, active for 500 years.

London-listed Fresnillo also pouredcold water on deal speculation,almost three years after withdrawingits bid for smaller Canadian rivalMAG Silver, still its partner in theJuanicipio project.

Prices at this moment are veryhigh, it is very expensive to buy any-thing. And on top of that, the qualityof many of the projects that we haveevaluated (means they) do not giveproper value to our shareholders,

chief executive Jaime Lomelin said.For the moment we prefer organic

growth. Core profit, or earningsbefore interest, tax, depreciation andamortisation (EBITDA), at theMexican miner rose 63 per cent to$1.54bn in 2011, in line with analystexpectations, while profit beforeinterest and tax rose 39 per cent.

The miner also boosted its final div-idend to 40 cents per share, taking itstotal payment to 102.85 cents from44.8 cents.

A good set of results... I suspectthey will be over a billion dollars incash by the end of this year, analystCailey Barker at Numis said.

Fresnillo sees

silver pricelift its profitsBY HARRY BANKS

MINING

OIL industry services group John Wood yesterday reported a betterthan expected 16 per cent rise in full-year profits, helped by a strong per-formance at its core engineering unit where it expects to see furthergrowth this year.

The company, which designs,builds and maintains oil and gas facil-ities and pipelines, said increasedexploration and production (E&P)

activity drove sales at its engineering

unit, and it expects further growth atthe division. We are forecastingstrong growth in engineering driven by increased E&P capex spend andhave good visibility in our WoodGroup GTS Power Solutions businessinto 2012, the company said.

Last years earnings before interest,tax and amortisation (EBITDA) wereup 15.6 per cent at $398.7m(252.5m), ahead of a consensus mar-ket forecast of $364m according to a

company-supplied survey of analysts

estimates.The engineering divisions EBITDArose 33 per cent, the company said,accounting for nearly half of groupearnings. During 2011, we saw E&Pspend growing at around 10 per centon a global basis, chief executive Allister Langlands said. We see anincrease in the range of 5-10 per centin 2012. It could well be spending ulti-mately grows towards the top of thatrange.

Wood Group profits rise isfuelled by engineering unitOIL


Fresnillo chief executive Jaime Lomelin says he is not on the acquisition trail.

ANALYSIS l Fresnillo PLC

p


1,975

1,950

1,925

1,900

1,875

1,850

1,825

1,830.006 Mar

NEWS | IN BRIEF

Meggitt growth lifts offBritish aircraft parts supplier Meggittexpects to benefit from airlines renewingfleets with more fuel-efficient planes thisyear, after that trend helped it deliverstrong growth in 2011 profit. The compa-ny, which supplies flight displays andwheels to planemakers Airbus andBoeing, said yesterday 2011 pre-tax prof-it rose 26 per cent to 323m on sales 25per cent higher at 1.45bn. Meggitts civilaerospace unit, which accounts for 45per cent of group revenue, grew sales by16 per cent during the year and the com-pany expects this trend to continue in2012. Commercial aircraft demand is ris-ing as soaring oil prices force airlines torenew fleets with more fuel-efficientplanes.

Cape sees record revenues

Industrial service firm Cape said yester-day it had achieved record revenues in its

first year in the FTSE 250. The companyprovides insulation, painting, industrialcleaning and training. Revenue jumped11.1 per cent to 722.5m in 2011 withadjusted pre-tax profits of 69.4m com-pared with 69.1m the year before. Inspite of delays to key construction proj-ects in Algeria and also in Abu Dhabi, thebusiness was able to deliver substantialsecond-half revenue growth," JP MorganCazenove analyst James Thompson said.

Ashstead helped by weatherPlant hire group Ashtead yesterdayreported record third quarter pre-taxprofits. For the three months to 31January the group saw profits of 21mcompared with a 2m loss the sameperiod a year ago. Improved weatherconditions helped the company as moreoutdoor building work was possible.

Meanwhile revenue rose 21 per cent to271.3m during the period.

Picture:REUTERS

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LEADING politicians from Labourand the Liberal Democrats yesterdaypromised manufacturers they willresurrect the idea of an active indus-trial policy, using the governmentsinfluence and funds to supportBritish business.

Labour leader Ed Miliband told theEEF conference that spending moneyto boost jobs, rather than just supply-ing good public services, is a patriot-ic policy, and that Britons should

take more pride in UK manufactur-ing.

Meanwhile business secretary Vince Cable said the governmentwill boost investment in new tech-nologies and aid firms in obtainingoverseas contracts.

Government has a legitimate rolein making choices and addressingthe market failures that hinder thedevelopment of core technologies,especially during the innovationphase, Cable said.

It is often too risky, or simply tooexpensive, for an individual compa-ny to undertake the necessary invest-ment in R&D by itself.

Miliband denied that industrialpatriotism amounted to old fash-ioned protectionism, arguing thatsupporting British firms with subsi-

dies and contracts would boost theeconomy, not cripple the UK by sup-porting inefficient industries asindustrial policies had in the past.

He also gave his backing to theMade in Britain campaign led by amanufacturing firm, arguing it pro-motes pride in British products andshows the sector is still a major force.

A future Labour governmentwould see every government depart-ment focusing on pro-industry, pro-manufacturing policies, not just thedepartment for business,innovationand skills, Miliband said, criticising

current programmes, like theregional growth fund, as beingpatchy and inconsistent.

He pledged to set up a UK invest-ment bank to support small businesslending, and said government pro-curement would have to take intoaccount local jobs under Labour.

Cultural changes are also crucial,Miliband argued, saying that Britainneeds to be more like Germany inseeing the manufacturing sector asoffering a worthwhile and well-paidcareer path for young people enter-ing the workforce.

Speaking earlier in the day, Cablesaid the Lib Dems were open to cut-ting the 50p top rate of income tax as long as it is accompanied by theintroduction of a wealth tax to makesure the rich pay their fair share.

Lib Dems andLabour backindustry aidBY TIMWALLACE

POLITICS

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ple.is simwith usINFLATION across the developed

world dropped again in January asenergy price rises slowed, figuressuggested yesterday.

Data from the Organisation forEconomic Co-operation andDevelopment showed inflationfell to 2.8 per cent in the year to

January across its 34 membercountries.

That represents a small declinefrom the 2.9 per cent seen in the

year to December, and continues

the steady decline from the 3.3 percent peak in September.

Energy prices rose 7.4 per cent,slowing from 8.1 per cent in the

year to December, and food priceinflation slowed from 4.5 per centto 4.3 per cent.

The highest rate of consumerinflation came in Turkey at 10.6per cent, followed by Iceland at 6.5per cent, while the lowest rates

were Japans 0.1 per cent andSwitzerlands deflation at 0.8 percent.

The UKs 3.6 per cent remainsthe highest among the sevenmajor western economies in thegroup, though it is well down on

the 5.2 per cent experienced in theyear to September.

Among the major mergingeconomies, South Africas infla-tion is highest at 6.4 per cent, fol-lowed by Brazils 6.2 per cent andIndias 5.3 per cent.

Inflation slows across world thanksto cooling energy prices in late 2011BY TIMWALLACE

WORLD ECONOMY

House priceslump notfinished yet

HOUSE prices fell again in February,reversing Januarys rise and continu-ing the slow downward trend of the

year.Prices dropped 0.5 per cent in the

month, following Januarys 0.6 percent rise, taking the average price to160,118.

Over the last three months, pricesare down 1.1 per cent, and 1.9 percent on February 2012.

The fall makes houses increasinglyaffordable, with the price to earn-ings ratio sliding to 4.31, based onaverage full-time male earnings,from 4.32 in January and 4.46 a yearago.

Housing activity has picked up in

recent months, in part due to thestamp duty holiday for first time

buyers drawing to a close, but econo-mists expect prices to fall further.

Although the economy looks likeit is returning to growth in the firstquarter, the economic fundamentalsstill look far from rosy for the hous-ing market with unemploymenthigh and likely to rise further, earn-ings growth muted, debt levels highand the outlook uncertain, said IHSGlobal Insights Howard Archer.

In addition, credit conditionsmay well tighten, making it harderto get a mortgage.

In fact, some mortgage rates arenow rising due to lenders higher

borrowing costs in wholesale mar-kets and this could well weigh downon housing market activity.

BY TIMWALLACE

HOUSING


Ed Miliband backed a Made in Britain campaign

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MARK WILLIAMS | PEEL HUNT

No. What an absurd idea. Items should be made in countries thathave a competitive advantage. Making goods in the UK is ridicu-lous, unless they are specialised high-value items.

RICHARD THOMAS | GATEHOUSE BANK

No. It might work for tourists but it is unlikely to appeal to Britishconsumers. For that reason, I think a bigger Made in Britain labelis unlikely to boost manufacturing in this country.

KEVIN SHEPHERD | BACB

Well, Britain did once have a reputation for high quality items,although Im not sure if thats still the case. I do find overseas itemsbreak easily though, and it could boost UK manufacturing.

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

CITY VIEWS: WOULD YOU BE MORE LIKELY TOBUY SOMETHING MADE IN BRITAIN? Interviews by PhoebeTorrance

ANALYSIS l OECD inflation

%

All items lessfood less energ

All items

2005 06 07 08 09 10 11 12

5.0

4.0

30

2.0

1.0

0.0

-1.0

Do you think the UK is becoming more protectionist?

In association with

Apply to join today at www.cityam.com/panel

PoliticsHome.coPoliticsHome.co

Ed Miliband has called for a newMade in Britain label to encour-age people to buy British.The government has asked Britishfirms to stop hiring foreign work-

ers instead of British ones.And multinational firms say theyare finding it hard to bring in tal-ent from abroad due to the immi-gration cap.

So what do you think: are thesepolicies right to boost growth inBritain, or is the government justerecting protectionist barriers?Have your say by joining our panel.

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DC Advisory PartnersThe pan-European corporate financeadvisory firm has appointed a thirdmanaging director to its debt advisory

group. Sergio Ronga will be responsiblefor providing advice on infrastructureand social service transactions. Rongas14-year career in finance includes

almost six years with Macquarie, wherehe was a managing director in the debtadvisory team.

Irwin MitchellThe law firm has appointed JayneSchnider as corporate real estate part-

ner. Schnider joins from Taylor Wessingwhere she is currently a corporate part-ner. Schnider's primar

cityam 2012-03-07

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