cityam 2012-04-02
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BUSINESS WITH PERSONALITY
Fuel driversset for talksto halt strike
TRADE unionists and fuel haulagefirms are due to meet this week in abid to avoid a strike.
The Unite union has said it willtake part in talks with disputeresolution group Acas and the seventanker companies, where more than2,000 drivers have voted in favour ofindustrial action.
However, thousands of truckersin the Fuel Lobby group have raisedthe stakes of the negotiations byvowing to blockade depots androads in support if a strike does takeplace.
Motorists were still feeling theafter-effects of panic buying at theweekend, with queues at the pumpssubsiding but numerous forecourtsin greater London reportingongoing fuel shortages due todelivery delays.
Londons transport andemergency services representativeswill meet today to review plans tokeep vital services running in theevent of a strike, Mayor BorisJohnson said, adding that he wantsthe dispute knocked on the head.
And foreign secretary WilliamHague has defended cabinet officeminister Francis Maude after hisadvice to store fuel in jerry canssparked frantic stockpiling.
The country is in a better state ofpreparedness than it was a week agofor the eventuality of a tanker strikeso I think [ministers] have handledthat correctly, he told the BBC. Mycolleagues would have beencriticised either way.
But a poll by ComRes showed that
more than 80 per cent of peoplethought the government hascreated an unnecessary panic overthe fuel crisis.
Finance chiefs are predicting a new dawn for the UK economy but business will remain tough
THE UKS top finance chiefs nolonger expect the country to face adouble-dip recession, and areinstead advising their firms toexpand into an increasingly opti-mistic landscape, a new surveyrevealed today.Just 30 per cent of chief financial
officers surveyed in Deloittes land-mark poll now expect a renewedrecession, down from 54 per cent atthe end of the last quarter of 2011. The percentage forecasting a
Eurozone breakup is down from 37per cent to 26 per cent.As macroeconomic concerns have
declined, the 136 chief finance offi-cers surveyed including 39 of theFTSE 100 and 53 FTSE 250 compa-nies have seen credit lines becomeincreasingly available and riskappetites returning to replace thecautious outlook of recent months. That improved confidence has
stemmed the declines in bothinvestment and hiring seen over thesecond half of 2011, although mostfirms are still reluctant to increasespending as they recognise growth will remain weak 53 per centexpect the current slow period tolast for more than a year.
Stronger financial conditions,reflected in rising global equitymarkets, are seen to be benefitinglarger UK companies, with chief
finance officers reporting anincrease in credit availability, saidDeloitte chief economist IanStewart.
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This more than unwinds thedeterioration in credit availabilityseen in December which, at thetime, some feared could be the startof a second credit crunch.
In early 2011 the economic recov-ery looked stable, with companiestaken by surprise when theEurozone crisis deepened rapidly inthe Autumn, slashing economicgrowth forecasts and ruininginvestment plans.
That episode underscored howmacroeconomic risks can escalate,
said Stewart.Having been wrong footed by aweakening of the economy in 2011,businesses may need more evidence
the recovery is on track before com-mitting to more expansionary poli-cies.That experience has fed through
into the businesses actions, and with 84 per cent of chief financeofficers seeing the general level ofuncertainty facing their business asabove normal, they are oftenreluctant to change their defensivebalance sheet strategies.
As a result, even though condi-tions have improved in recentmonths, firms now are more
focused on reducing costs andimproving cash flow than they werein the first quarter of 2011.
Similarly only 16 per cent are
looking to expand by acquisition,down from 26 per cent a year ago,and 14 per cent are trying to reduceleverage, double the seven per centin the first quarter of 2011.
BY MARION DAKERS
FTSE 100 s5,768.45 +26.42 DOW s13,212.19 +66.37 NASDAQt3,091.57 -3.79 /$ s1.60 +0.01 / 1.20 unc /$ 1.33 unc
BY TIM WALLACE
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Probability assigned by UK CFOs to the likelihoodof a double dip in the next two years
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Trade bodies slam Indian tax lawn The CBI and other industry bodieshave written to Manmohan Singh, theprime minister of India, to expressdeep concerns about the taxprovisions proposed in the Finance Bill2012. The new laws would introduce aretrospective tax on overseas deals inIndia over the last 50 years and reversethe judgment of several cases, such asthe Supreme Courts recent dismissalof Vodafones $2.2bn tax bill from its
acquisition of Hutchison WhampoasIndian arm. The tax proposals couldalso hit Kraft, which purchasedCadbury in India in 2010, andSABMillers buyout of Fosters.
Kurdistan halts oil exportsn Iraqs autonomous Kurdistan regionhalted oil exports yesterday, accusingthe central government in Baghdad offailing to make payments to companiesworking there in the latest clash in theirlong-running dispute over oil rights.The row heightens tensions in abroader dispute between Iraqi Arabsand ethnic Kurds over contested land,political autonomy and oil that hasbecome a flashpoint for Iraq since thelast US troops left in December.
ARGENTINA has threatened legalaction against banks linked to oilexplorers in the Falklands, on theeve of the 30th anniversary of itswar with Britain over the islands.
Just weeks after Buenos Airesramped up its objections to Britishfirms in the region, its embassy hassent letters in Spanish to 15 bankswarning that all companiespotentially involved, either directlyor indirectly could be subject tolegal action and boycotts.
Even banks that only publishresearch on the Falkland explorerscould be sued, according to theletter.
A handful of UK-listed firms areactively searching for potentiallylucrative oil and gas deposits in theFalklands: Desire Petroleum,Borders & Southern, Falkland Oil &Gas and Rockhopper.
BSkyB begins board overhaulTwo key independent directors at BSkyBare set to leave as the pay-TV companyembarks on an overhaul of its board thatcould weaken its unanimous backing ofJames Murdoch as chairman. Dame GailRebuck, chief executive of Random House,the publisher, and Lord Wilson of Dinton,former cabinet secretary, are expected tostep down within months.
AIG to rebuild mortgage activityAIG, the insurance group bailed out by the
US government after disastrous bets on themortgage market, is exploring a way oframping up its activity in the sector onceagain by buying home loans.
Banks prepare to pay LTRO loansA clutch of Europes biggest banks arepreparing to return a chunk of the cheapthree-year funding they recently took fromthe European Central Bank as early as thisyear. Senior bankers said Italys UniCredit,Frances BNP Paribas and Socit Gnrale,and La Caixa in Spain are preparing to payback up to a third of the money theyborrowed estimated at 80bn-100bn intotal within the next 12 months.
Ministers dash Sarkozys dream of atax on transactions
Plans for a financial transaction tax acrossEurope were left in tatters by a divisivemeeting of European ministers at the week-end in an embarrassing setback forPresident Sarkozy.
Night deliveries to be allowedduring Games
Businesses in London will be permitted tomake and receive deliveries of goodsthroughout the night during the Games.
GCHQ recruits eight universities tocounter cyber attacks
Intelligence agency GCHQ has selected eightuniversities as collaboration partners toimprove cyber security. The Treasury hasadmitted it has been under sustained attackby foreign intelligence agencies.
RBS to pay 400m dividend on prefsRoyal Bank of Scotland is expected to re-instate dividends on its preference sharesin May, which could lead to a 400mcapital raising.
Total strives to stem leak in North SeaTotals efforts to stem a natural-gas leak ona North Sea platform gathered pace yester-day after an onboard flare that had ham-pered relief plans finally went out, but theFrench company still faces weeks of expen-sive work to end the crisis.
Groupon forced to revise resultsGroupon is revising financial results it report-ed in its first quarter as a public company,after discovering executives failed to setaside enough money for customer refunds.Auditor Ernst & Young called the error amaterial weakness in its internal controls.
WHAT THE OTHER PAPERS SAY THIS MORNING
PRIVACY campaigners yesterdayreacted angrily to governmentplans to allow security services tomonitor email exchanges and
website visits in the UK.Legislation expected in next
months Queens Speech is set toallow GCHQ to examine ondemand any phone call made,text message and email sent and
website accessed.Nick Pickles, director of the Big
Brother Watch campaign group,said: This is an unprecedentedstep that will see Britain adopt thesame kind of surveillance seen inChina and Iran.
The Home Office said the ruleswould apply to the time, durationand dialling numbers of a phonecall, or an email address. It doesnot include the content of anyphone call or email. It said it hadno plans to change rules aboutintercepting communications.
Government toallow real-timeinternet spying
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EXORBITANT: that is the only
way to describe the cripplinglyhigh levels of Air PassengerDuty (APD) now facing
everybody flying from the UK. The eraof cheap flights which had done somuch to make international travelaccessible to the vast majority of the
public is coming to a sorry end: thetax on flying to Australia is up by over600 per cent in just six years.The APD rose another eight per cent
yesterday, dealing a bitter blow tocash-strapped households and impos-ing yet further costs on businesses. Itgets worse: the Treasury is planningto increase APD further over the nextfour years, which means that a familyof four travelling to Australia couldend up paying up to 500 in APD taxby 2016, a preposterous state of affairsand up from just 80 in 2005.Taxing travel inevitably means tax-
ing and reducing trade and giventhat the UKs future lies with export-ing more to Asia, Latin America andother long-haul destinations, the gov-
EDITORSLETTER
ALLISTER HEATH
UKs over-taxed public is running out of patience
MONDAY 2 APRIL 2012
ernments strategy is perverse.The aviation industry and tourism
are two of Britains few success storiesoutside of financial and business serv-ices; it is strange that the governmentwants to clobber what we are good at.Usually business leaders dont speakout enough on controversial matters,preferring instead to resort todubious private lobbying. So it wasgood to see EasyJet chief executiveCarolyn McCall, Ryanair boss MichaelO'Leary and Virgin Atlantic CEO SteveRidgway join Willie Walsh, boss ofBritish Airways owner IAG, in slam-ming the latest rise yesterday. Often,when people of the same trade unite,
they do so to conspire against thepublic interest; in this case, compa-nies and consumers are at one.
Remember which decisions in theBudget triggered all the anger, anddrove a collapse in the governmentsoverall opinion polls, as well as itsperceived economic competence.
Both were tax hikes, or perceived taxincreases: the so-called Granny Tax,and the Pasty Tax. The lesson for ourpolitical class in general and the Toryparty in particular should be clear:the public may not especially likespending cuts but it really hates pay-ing more tax.That is why council tax always trig-
gers such passion it is paid byalmost everybody, and is a very visibletax that people actually have to writea cheque for. Of course, we are a hor-ribly envious nation and the majori-ty want those wealthier than they areto pay more in tax. But most of theanger at the Budget came from thetax hikes on ordinary folk and theshambles that has been the govern-
ments handling of the proposedtanker drivers strike has remindedmany voters of just how much taxthey pay on every litre of petrol.
It is tragic that the governmentdoesnt get this. The public is deeplydivided on spending cuts but it isalmost united in its dislike of mass
market taxes that affect the bulk ofthe public. This is not just true ofBritain: in Ireland, a new property taxis facing mass resistance and couldderail the governments plans.Almost half of Irish households haverefused to pay a new100 poll tax aprecursor of this new wealth levy ontime. A full-scale tax revolt is loomingon the other side of the Irish sea. The problem is that governments
spend too much, not that they tax toolittle. Electorates are at the limit ofwhat they are willing to pay. GeorgeOsborne must urgently do more toshow taxpayers he is on their side.
They have already been threatenedwith criminal and civil action byArgentinas foreign minister HectorTimerman, who called theiractivities illegal and illegitimate.
Banks that have received the latestbatch of threatening letters, thoughtto include RBS, Oriel Securities andGoldman Sachs, declined to
comment yesterday.The Argentinean embassy in
London, which remains closed todayto commemorate the start of the1982 war, did not return calls forcomment. The UK foreign office saidits efforts to intimidate theFalklands are illegal and whollycounter-productive.
Follow me on Twitter: @allisterheath
Argentina threatens bankslinked to Falklands oil firms
BY MARION DAKERS
IN BRIEF
BY JENNY FORSYTH
Argentinas foreign minister Hector Timerman is gunning for UK banks
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GETTY
CRISIS-HIT retailer Game, which wentinto administration last week, was yes-terday rescued by investment firmOpCapita, in a deal which will safe-
guard nearly 3,200 jobs. The turnaround specialist, whichearlier this year acquired British elec-trical chain Comet from Kesa, hasbought Games UK assets including all333 remaining stores, administratorsPwC said in a statement yesterday.
Former Halfords chief executiveDavid Hamid, now an operatingpartner at the firm, has been appointedas chairman of Game tooversee therestructuring ofthe business.
OpCapita, whichset up a vehiclecalled Baker to dothe deal, said it hasno plans for anyfurther store clo-sures and will alsoseek to re-employ asmall number of staff
who previously worked at the retailers head officewho were made redundant last week.
Henry Jackson, the former DeutscheBank rainmaker and founder ofOpCapita said: We strongly believethere is a place on the high street for avideo gaming specialist and Game isthe leading brand in a 2.8bn marketin the UK. We have assembled a strongteam of experienced industry opera-tors to implement the programme ofoperational change that is needed.
Game rescued by OpCapita dealBY KASMIRA JEFFORD
Administrator PwC said last week it would close 277 of Games high-street stores
GAME Group PLC
MarFeb
8
6
4
2
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2.3920 Mar
MONDAY 2 APRIL 20123NEWScityam.com
MEET THE RESCUER:HENRY JACKSONHENRY Jackson,founder of OpCapita,is no stranger to theUK high street.
His company boughtkettles-to-computers groupComet last year for a
nominal 2, andwork is wellunderway to returnthe company toprofit whileavoiding significant store closures.
OpCapita picked DIY chain MFI as itsmaiden takeover, snapping it up for 1 in2006 before shaking up its distributionand selling the firm on for a small profitjust two years later.
OpCapita does not manage funds, butrather invests cash directly, relying on itspartners knowledge of the retail sectorsto push firms back to profitability.
Jackson, a New York native, changed thename of the company from MerchantEquity Partners a little over a year ago,keen to avoid comparisons with moreruthless private equity groups.
Before he set up what is now OpCapita,Jackson was head of Deutsche BanksEuropean consumer and retail group.
The Wharton graduate started his careerat Credit Suisse First Boston, and madethe jump across the pond after he washead-hunted by DLJ.
David Hamid, who was yesterday namedGames new chairman, has long been akey member of OpCapita, alongsidefellow operating partners John vonSpreckelsen and Stephen Alexander.
There is a huge amount to do but welook forward to the challenge of restor-ing GAMEs fortunes.
The company is also lining up a newchief executive after Ian Shepherdstepped down last week after two years
at the business. It is still unclearwhether OpCapita plans to repay credi-tors as part of the deal including suppli-ers, who are owed 40m.
The company also owed around 85to its six lenders led by RBS, who hadalso put in an offer to buy thecompany in a debt-for-equity- swap.
The video games retailer became thelatest high-street casualty aftercosts from its vast UK storeportfolio together an ambi-tious overseas expansion pro-gram left the companyunable to pay its 21m rent bill. PwC closed 277 ofGames badly performingstores on Tuesday last week,leaving more than 2,000staff without jobs.
cityam.com
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surfacedlastweek
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SIR John Buchanan is preparing tostep down from the board of Vodafone where he has served asdeputy chairman since July 2006.
Sir John, who is also chair of med-ical devices business Smith andNephew, will replace Doug Dunn aschairman of Cambridge-based chipmaker ARM Holdings on 3 May.
He has sat on the telecoms giants
John Buchanan
quits Vodafonebut denies rowBY LAUREN DAVIDSON board since April 2003, meaning he
has reached the nine-year thresholdand is no longer considered an inde-pendent board member.
Despite reports to the contrary, thetelecoms group vehemently deniesthat Sir Johns departure is related toa clash with Vodafone boss VittorioColao over a possible bid for Cable & Wireless Worldwide, claiming thatSir John has not voiced an opinionabout the potential takeover.
John Buchanan is to become the new ARM chair
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Just two left in bidding warfor BAAs Edinburgh AirportTHE field of bidders for Edinburgh
Airport has narrowed to a straightfight between a group of investorsled by JP Morgan and GlobalInfrastructure Partners (GIP).
Their private equity rivals forthe asset, 3i and Carlyle, are saidto have pulled out of what isexpected to be a 500m race forthe Scottish transport hub.
BAA, which also ownsHeathrow, is being made to sellthe airport by the Competition
BY JULIET SAMUEL Commission, and is currently in adispute over whether it will alsohave to give up Stansted airport.
GIP benefitted from the previousmandate from competitionauthorities that BAA, which iscontrolled by Spanish companyFerrovial, sell Gatwick.
If GIP snaps up EdinburghAirport, however, regulators coulddecide to prevent any furtheracquisitions by the firm.
BAA is set to make a decision inthe coming weeks over itspreferred bidder, meaning it will
offload the airport before anyconclusion is reached on thepossibility of Scottish
independenceBut there are fears that high airpassenger duty imposed fromWestminster will slash volumes. ABAA-commissioned report hasclaimed that the rising tax couldcut passenger numbers by 1.2m.Currently, over 9m travellers passthrough Edinburgh Airport eachyear on 40 airlines althoughRyanair recently snubbed theairport, reducing its flights there.
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VUE, the private equity-backed cine-ma chain, is set to ramp up its expan-sion plans as Britons spend more onaffordable luxuries in the economicdownturn. The chain, bought by Doughty
Hanson in a 450m deal nearly 18months ago, will open two sites thisyear and two next year as part of adevelopment pipeline of 15 new cin-emas, founder and chief executiveTim Richards told City A.M.
He said the group had experienceda phenomenal 12 months in theperiod to November 2011, despite adip in profits. Turnover fell 4.1 per cent to
291.97m and operating profitdipped 16.9 per cent to 30.98m,according to the accounts of VueEntertainment Holdings (UK), whichwere published last week.
The results cover two spells ofrecord snowfall in Britain, however,which hit receipts, as well as the endof a contract with advertising busi-ness Pearl & Dean. It also represents
a comparison with 2009-10, whichincluded the release of sciencefiction record breaker Avatar.
Vue looks goodas cinema firmset to expand
BY PETER EDWARDS If that weather had not impactedour business we would have had thebiggest year ever, Richards said.
In the accounts Vues directors write: 2012 is shaping up to beanother good year, with a number ofproven successful franchise titles onthe slate. 2D releases include (James)Bond 23, Skyfall, Batman: The DarkKnight Rises and The Twilight Saga:Breaking Dawn Part 2. At its year-end Vue had 71 sites,
including one each in Ireland,Portugal and Taiwan. Its domesticcinemas include the nations highest-grossing complex at Westfield inShepherds Bush, while its site atWestfield Stratford is among the topfive in Britain.
Doughty Hanson agreed to buy Vuefrom Cavendish Square Partners, ajoint venture between private equitygroup Coller Capital and LloydsBanking Group, US hedge fund Och-Ziff and the management, inNovember 2010. The management re-invested at the time of the deal.
Doughty beat rival offers from BCPartners and the private equity arm
of Canadian pension fund OntarioMunicipal Employees RetirementSystem.
Daniel Craigs latest Bond film is one of many blockbusters expected to boost Vue this year
6 NEWS cityam.com
Harrow
Acton
Finchley Road
North Finchley
Wood Green
IslingtonWestfield Stratford
Croydon
Thurrock
Dagenham
Romford
Leicester Square
Fulham Broadway
WestfieldShepherds Bush
Staines
Watford
Vue locations in London
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DIRECTORS at 3i are set to plead forpatience with key investors amid callsfor change at the under-pressure pri-vate equity house.
A group of shareholders, the totalsize of which is unknown, hasdemanded the firm sell off assets aftera long period in which shares havetraded below the underlying value ofinvestments.They spoke out after activist investor
Laxey Partners seized on MichaelQueens announcement last week thathe would stand down as chief execu-tive to call on 3i to quicken the return
of cash from investment sales to share-holders, and freeze new investmentsuntil its poor share price improves.
Insiders say, however, that 3i hasalready taken major steps forward. The firm is three years into a pro-gramme of change, which has cut100m from the operating costs, anddirectors argue that it takes longer forchanges to show through in the pri-vate equity arm.
The infrastructure and debt manage-ment arms are performing well, but
3i in plea forpatience amid
investor angerBY PETER EDWARDS the group as a whole posted a total
negative return of 523m for the sixmonths to 30 September 2011.
Britains oldest private equity househas, however, left the door open toadopting a more aggressive approachfollowing the departure of Queen,who ran the firm conservatively.
A spokesman for 3i said: There hasbeen a huge amount of change at 3iover the last three years. The businesshas transformed in terms of the finan-cial position in terms of investmentquality, costs and management. Wehave received the Laxey letter andacknowledged it and said we will giveit proper consideration.
COLIN Kingsnorths Laxey Partners has areputation for agitating for change on issuessuch as dividend policy and corporate gov-ernance and, as such, Kingsnorth mightseem like the typical hedge fund manager.He has a higher profile than many of hispeers, however, and has publicly defendedhis type of shareholder activism on severaloccasions.Last year, as the row with Alliance Trustdeveloped, he said: Everyone likes to look
at everyone else's activism and say, Theyhave crossed the line there, they are apain... But the activist is almost always ofthe mindset, I am not doing enough.Kingsnorth appears to be living up to themaxim of trying to do more, all by way of
generating returns for investors in Laxey,which describes its investment universeas European value investments in quotedoperating companies, global discount arbi-trage strategies and general global specialand arbitrage situations.Kingsnorth once said that activism is reallygood and useful, as long as its done prop-erly and a real pain in the backside if it isdone wrongly.The next few months, and the future direc-tion of 3i, will prove whether Kingsnorthreally is going about it properly.
COLIN
KINGSNORTH
Buyout boss
leaving butwoes remain
THANKS to a combination of
boardroom decisions, some vocalactivist investors and the long-running economic slump, 3i is
stuck between a rock and a hard place.If it continues to defy those share-
holders calling for an asset sale, then itfaces more public griping, eventhough some rebel investors, such asLaxey, own only around one per cent. The alternative, however, would
hardly inaugurate a new era of calmprosperity. 3i, whose shares have shedabout two-thirds of their value since a2007 peak, would struggle to extractvalue from its assets when the marketknows it wants to sell.
It is that vast portfolio which poses aproblem. 3i has stakes in some well-known high-street names but a falter-ing recovery in spending andwrite-downs on firms it bought beforethe crisis, such as Enterprise Group,have hit performance and its half-yearwere poor.
On top of all this it must find a newchief executive to replace MichaelQueen before the AGM in July. Life forBritains oldest listed buyout firm isnot about to get any smoother.
BOTTOMLINE
PETER EDWARDS
3i Group PLC
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3I HAS STAKES IN A VARIETY OF HIGH PROFILE BUSINESSES
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REUTERS
GOLDMAN Sachs is working closelywith Diageo as the spirits companyhones in on its deal to buy equity in$3bn-plus (1.9bn) tequila brand JoseCuervo.Along with UBS and Credit Suisse,
Goldman is expected to lead Diageoto a deal with Jose Cuervo by the earlysummer, possibly as soon as nextmonth.The tequila company, which has a
19 per cent share of the globalmarket, is currently owned by theBeckmann family.
Diageo distributes the drink in the
US, but chief executive Paul Walshhas made it clear that he will notrenew this agreement when it expiresin June 2013. He told the Wall StreetJournal last week, It is a brand that isnot fully paying its rent in our distri-bution system.
Walsh, who has been Diageo bosssince 2000, is vying for a majoritystake in Cuervo. I wouldnt take any-thing less than control, or a route tocontrol, he said.
But analysts think it unlikely that
Goldman Sachsleads Diageo to
stake in CuervoBY LAUREN DAVIDSON the Beckmanns will relinquish hold
on their family-owned business, pre-dicting that Diageo is more likely toget a minority stake at first withpotential to build on it in the future.
Cuervo fits Diageos plan to buylocally popular spirits to boost salesfrom emerging markets. In August thespirits giant bought Turkish anise-flavoured Mey Icki for 1.3bn.Walsh is also said to have his eye on
Moet Hennessy champagne, 34 percent owned by Diageo, or one of the brands in Beams portfolio, whichincludes Jim Beam and Knob Creek.
Diageo already owns Smirnoff vodkaand Captain Morgans spiced rum.
DIAGEO is keeping its lips zipped overwhich advisers at Goldman Sachs areheading the drinks companys bid to buya stake in Jose Cuervo. The Mexicantequila brand is owned by the
Beckmanns, a family expected by ana-lysts to keep its company clutched tight so Diageo will be making sure it doesntput a foot wrong.But the beverages group has been incohorts with Goldman for some time.In 2005, just days after a successful pitchfor the spirits giant, Goldman Sachs feltthe need to resign as corporate broker toDiageo over a conflict of interest withanother client, rival drinks group AlliedDomecq.The two were reconciled, but last yearMatthew Westerman was forced to fightto keep Diageo on the banks roster whenthe drinks firm appointed a new broker and it looks like his efforts will pay off.Westerman, who was until recently globalhead of equity capital markets andworked on the Prada IPO, today beginshis new job as co-head of Goldmansinvestment banking division for Asia out-side of Japan based in Hong Kong.
But Diageos relationship with GoldmanSachs still has air in its lungs.Philip Shelley joined Goldman just over 18months ago as a managing director. Hewas previously co-head of corporatebroking at UBS when the bank acted asbroker to Diageo.He joined Phil Raper, Goldmans head ofequity capital markets and corporatebroking.Barclays Capital is said to be advising theBeckmann family, which owns Cuervo.by Lauren Davidson
ADVISERS GOLDMAN SACHS
Diageo chief executive Paul Walsh wants a controlling stake in tequila brand Jose Cuervo
Diageo PLC1,502.50
30 Mar
27 Mar26 Mar 28 Mar 29Mar 30 Mar
1,550
1,540
1,520
1,530
1,510
p
MONDAY 2 APRIL 20129NEWScityam.com
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10 NEWS cityam.comMONDAY 2 APRIL 2012
Eversheds boss Bryan Hughes tells Elizabeth Fournier why acareer spent at the top City law firm means that he is perfectlyplaced to make the most of the legal sectors brave new world
L AST weekend, BryanHughes found himselfhanging 50ft above theground, attached to
nothing but a rope. In aneffort to face his sons fear ofheights hed taken him on thehigh wires at Center Parcs, but when they reached thehighest point Hughes foundhimself feeling a growingsense of panic.
I made the mistake of look-ing down and all I could thinkwas that I was not enjoying itat all, and how there were lotsof other ways Id be happy toprove myself. But in the endyou just have to jump off anddangle there to convince your-self its safe.
Its an uncharacteristic
admission of weakness fromthe Eversheds chief executivewho has led the law firm since2009 long enough to hone apolished management stylethat seems perfectly at homein Eversheds slick WoodStreet offices.
Hughes job title is the firsthint that Eversheds is posi-tioning itself at the forefrontof the growing trend for lawfirms to re-brand themselvesas mainstream corporate con-cerns. The traditional manag-ing and senior partner rolesstill exist, but the Evershedsmanagement team is pack-aged into terms a lot morefamiliar to UK plc a tellingmove by a top 10 firm lookingto secure its future in Britainsbrave new legal landscape.
Most of the big firms have
adopted more of a corporate struc-ture, explains Hughes. We are notthe biggest firm in the world but weare a reasonable-sized business.Having said that, were still a part-nership and the culture side is veryimportant to us. It means there arelimitations, but the checks far out-weigh the balances.
Hughes heads up the firms mana-gerial board, comprising the manag-ing partner, finance director,regional director and head of inter-national. From this executive answerable to the partners throughchairman John Heaps thestructure of the firm cascades down-
wards via a senior mentoring teammade up of sector and regionalheads, a group that Hughes calls thedecision making body of the firm.
His move towards the manage-ment side of the business started ata regional level he was made man-aging partner of the Cardiff office 12years ago but has since followed asteady progression through chiefoperating officer and UK managingpartner to his current position atthe top.
Its not a path hes keen to reverse,
despite admitting that he
sometimes misses the client-facingside of the law.
I probably couldnt go back tothat, he says. I think they wouldhave to completely retrain me andsend me back because the intellectu-al challenge and excitement of run-ning a business a big, multi-sidedand multi-national business isquite compelling.
Hughes enthusiasm for the firmmight have something to do withthe amount of time that hes dedi-cated to it. Though its not uncom-mon for a lawyer to stick with onefirm for the majority of their career,even in an industry known for itsloyalty Hughes 27 years of unbrokenservice is notable.
He joined Eversheds Cardiff officeas a trainee fresh out of law schoolin 1984 and has stuck with the firm
ever since, with even his move toLondon not coming until well intohis shift towards the managementside of the business.
Unsurprisingly, Hughes is keen topresent his linear rise to the top hes never even taken time awayfrom Eversheds on a client second-ment as a positive. You under-stand the business, the people, andthe alliances, he says. It meansyou are able to get things done with-in the inevitable organisationalpolitics.As his wife and three sons still live
in the Welsh capital, Hughes whodespite his allegiance displays nohint of a local accent has since joined the ranks of the weekdaycommuter and calls a flat inSmithfields his London home, butstill tries to get back to Cardiff everyThursday night for a weekend with
the family.
Bryan Hughes has led Eversheds for the past three years and plans to run for a second term as chief executive
Were having to facewhat our general and
corporate clients havefaced for the past 15-20years actually having toproduce more for less
The law firmboss whosnot movinganywherebut up
The law firmboss whosnot movinganywherebut up
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LAURALEAN/CITYAM
MONDAY 2 APRIL 201211NEWScityam.com
CV: BRYAN HUGHES
That is, of course, when hes nottravelling around Eversheds grow-ing network of international offices.
This is my first day back inLondon for about three weeks, heexplains. It was Chicago last week,Dubai the week before, and prior tothat we had a couple of Harvard pro-fessors with us for a three-day con-sultancy session. Before that, I thinkI was in Zurich.
Hughes slightly jumbled itinerary,along with a newly acquired talentfor picking up colds from air-condi-tioned planes, is a symptom of theincreasingly international focus ofthe firm one of the major shifts hehas seen in his time at Evershedsand a mission he was keen to takeon when he took the CEO job.
We need to try not to think ofourselves as a UK firm with a globalnetwork, but as an international lawfirm. When I started in Cardiff, part-ners would go out to branch officesdown in the docks and theBirchgrove area. Now our guys go offto Hong Kong and Paris all overthe world.
The firm is currently waiting forits Beijing licence to be cleared bythe Chinese authorities, with all fin-gers crossed for an office openingsometime this year.
Closer to home, Hughes admits theoutlook is far from certain. ThoughEversheds reported an upbeat sevenper cent rise in revenue at its half-year results last November, Hughessays the rate of growth is likely todrop slightly to around three to fourper cent for the full year, after theEurozone crisis kicked in at the endof last summer and put the brakeson a bit.
Still, its something of a turn-around for the firm, which saw flatrevenues in 2010 and a decline of between six and seven per cent inthe two preceeding years.
Bearish markets are somethingHughes has had to deal with
throughout his tenure as chief exec-
utive, and despite having workedthrough the economic downturn ofthe early 90s and the dotcom crash,he calls the most recent financialcrisis unprecedented.
I remember going to board meet-ings where I was reporting on thecash and giving numbers that werelower than last time, and then whenthe next meeting came around hav-ing to adjust the forecasts again.
I used to joke when I started off, when I began the chief executive
role, that I would spend all of myfour-year term dealing with thethreat of recession. With his postdue for re-election next April, itsnot such a joke anymore.
I dont think people are opti-mistic. If you read the reports here,there and everywhere, they preachdoom and gloom, and all the indica-tors are pretty negative. I think ifyoure just sitting there waiting forthe good times to return, waitingfor the cycle to go from there tothere, youre going to be waiting fora long time.
In a shaky macroeconomic envi-ronment and an increasingly com-petitive legal sector, UK law firmsare being forced to shake up the waythey operate and look for newopportunities for growth. ForEversheds, this means following aseries of three-year plans put togeth-
er following months of consulta-tions with partners, managementand external consultants.
Its a process thats taken up mostof Hughes time over the past 10months as the current plan whichkicked off when he began his stintas chief exec comes to a close thissummer.
Continuing to push internationalintegration remains at the top of alengthy list of objectives, and was acommon theme to come out of themyriad one-on-one meetings thatHughes held with the firms equityholders. Far from a battle to consoli-date clashing priorities into a singlecoherent plan, the feedback heencountered was gratifyingly consis-tent, he claims.
One of the many positives of theconsultation was the fact thatalthough there are many different views, we saw a huge degree ofalignment in terms of what peoplefeel are the priorities of the businessand where next, he says.The resulting plan not only has to
build on the firms return to growthover the past 12 months, but mustalso stand it in good stead to negoti-ate a legal sector thats becomingmore and more diversified by theday, with last Octobers implemen-tation of the Legal Services Act marking the culmination ofyears of protracted change.
Combined with a financial sectorstill shaken by the economic crisis, ithas left many law firms contemplat-ing the fact that the easier daysof fee increases and lengthy clientrelationships could be gone forever.
Lawyers used to have the upperhand when it came to
negotiation, says Hughes. Thathas clearly shifted. To put itsimply, there
are too many lawyers and toolittle work.
What were doing now ishaving to face what our gener-al and corporate clients havefaced for the last 15-20 years actually having to producemore for less.
On top of that is the chal-lenge of fending off newentrants to the markets, afterthe introduction ofalternative business
structures (ABS) dubbed the Tesco law allowed non-lawfirms to start offering legalservices for the first time.Just last week, the first ABSs
were licensed, with The Co-operative Group announcingit will soon be able to offerlegal advice in all of its bankbranches. Though high-streetlaw tends to be limited at themoment to personal injuryand family practice, Hughesis already thinking ahead tonew entrants threatening thetraditional corporate mar-kets.
If you look at transactionsthat involve lawyers, there arenow other people circling thatsupply chain the brokers,the consultants, the investors,and the banks. With all of
these people taking roles that we used to do and chargingseparate fees, we have to lookhard at how we can provide a wider base of legal businesssolutions.
In September 2010, the firmlaunched EvershedsConsulting, which offers spe-cialised training and advice tocompanies on how best tomanage their in-house legalteams, and just last October itadded Eversheds Agile, provid-ing temporary legal teams tocompanies on a contract basis. Though both businesses arepart of the firm at themoment, the new rules meantheres now potential foreither to be spun off and runas separate entities. After what Hughes himself
describes as quite a hairyride over the past three years,you might think he would beready to return to a moreclient-facing role or evenbreak a 27-year habit and lookfor a new challengeelsewhere.
But the energetic 50-year oldis adamant that his ambitionsremain firmly with Eversheds at least until hes had achance to see the firmthrough the implementationof its next three-year plan.
I want to be there to see theend of the journey, heinsists.
Youre involved in a veryintense consultation process where youre setting thegame plan for the next three
years. Theres no clear desti-nation, but you keep goingand keep driving.
AGE: 50WORK HISTORY: Joined Eversheds asa trainee in 1984; upon qualification
specialised in commercial litigation;
took over the Cardiff office's collection
arm in early 1990s; appointed manag-
ing partner of the Cardiff office in 2000
and joined the firm's National Senior
Management team; joined Eversheds
National Executive in 2003 when he
was appointed chief operating officer;
became UK managing partner in 2006
and was elected chief executive in May
2009
EDUCATION: Read law at CardiffUniversity
FAMILY: Married with three sons agednine, 11 and 14
LIVES: House in Cardiff and flat inSmithfield in the City
HOBBIES: Coaching and watching chil-dren's football, running and generally
keeping fit, losing golf balls, plus
spending time with family.
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MONDAY 2 APRIL 201213NEWScityam.com
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IN ASSOCIATION with Repskan.com, CityA.M. is measuring the relative Olympicmedia buzz around the London 2012Olympic and Paralympic Games partners,week by week. The leaderboard, right,
reflects their ranking over the past week, inthis case from Wednesday 21 March toWednesday 28 March.
Samsung oftenreceives a similarvolume of onlinementions to Visa,thanks to combined campaigns, particularlya scheme to make contactless payments viamobile phone ready for the Olympics. Thisweek, Samsung gained mentions for itsrelationship with Kenton Cool, amountaineer who is aiming to fulfil a 1924Olympic Games pledge made by anothermountaineer, Lieutenant Colonel Strutt.Strutt and his team received 21 gold medalsfor attempting to climb Mount Everest, andhe pledged to take a gold medal back to thesummit. Samsung hopes to honour thispledge and also find the missing medalsfrom 1924.
OLYMPIC MEDIA BUZZLONDON 2012 PARTNERS
Brand Position change
Adidas 0
Coca-Cola 5
Cisco 0
Visa 0
DOW 8
Samsung -1
Acer 4
McDonalds -2
EDF 2
British Airways -8
SAMSUNG OLYMPIC MENTIONS BY CATEGORY
Regional News
Twitter
Blogs
Other
Topicals
National News
%
10
41
8
29
4
8
TOP TEN PARTNERS BY MENTIONS
IT will be one of the biggest marketevents of the year. Yes, Imreferring to Facebooks InitialPublic Offering (IPO) and D-Day is
getting ever closer. The company filedto go public in February, and last weektrading of its shares was halted on thesecondary market as it tries to cement
its current shareholder base. We thinkit may be targeting May for the IPO,although the exact timing is unclearas its in the hands of the SEC, asopposed to Facebook itself. But anevent that could raise as much as$10bn will be a real market mover.
Equities have put in a very solidperformance over the first quarter
with the FTSE up 3.5 per cent, the
LOUISABOJESEN
CNBC COMMENT
Facebooks float could be the kick the markets need
French CAC rising 8.5 per cent, andGermanys Dax rallying almost 18per cent. Against this backdrop, you
would be forgiven for thinking thatcompanies are feeling confident, andthat the overall IPO market has beenpicking up too. Not so.
In fact, according to Ernst &
Young, global IPO activity fell by asharp 69 per cent in the first quarterof 2012 compared to the same periodlast year. Average deal size decreased
by 42 per cent, and, in terms ofpricing, the report says just seven percent of IPOs were priced above theirinitial filing range.
Despite this, Maria Pinelli, globalIPO leader at Ernst & Young, told methat there still are positive signs
when it comes to fundraisingworldwide. She expects to see a lotmore cross-border activity in 2012,
with companies choosing to list onmarkets outside their home turf.
During the first quarter, IPOactivity on Asian exchanges
accounted for 47 per cent of globalIPO funds raised though Asia stillsaw a 74 per cent drop in capitalraised. Pinelli thinks that China willcontinue to draw IPO interest.
Looking at particular sectors,Pinelli thinks US technologycompanies will continue to
dominate the US listing space. Of the32 IPOs completed in the US, morethan a third of them were done bytechnology companies. Pinellipointed out that the average market
value for US technology firms, at thetime of their IPO, was double theaverage market value versuscompanies from other sectors.
Globally, by funds raised, almost
one in five IPOs came from theindustrials sector, followed byconsumer products and services,according to Ernst & Young. By dealnumbers, over one in five IPOs camefrom the tech sector.
Leading into 2010 and indeed2011, we were optimistic and
thought that the worst was behindus. But then European politics tookover, and confidence went horribly
wrong, both in the IPO market andpractically everywhere else. Let ushope this year will be different and that Facebook is able to serve asa catalyst for better times.
Louisa Bojesen is a CNBC AnchorFollow her on Twitter @louisabojesen
IN BRIEF
Cookson mulls a demerger
n Industrial materials firm Cookson is
considering breaking itself in two.The FTSE 250 firm has appointedRothschild as an adviser and couldseparate and float its electronics
business. Analysts have talked up thebenefit of a demerger over the last twomonths but sources said the review wasa routine matter. Cookson, whoseproducts are used in the glass and solarindustries, currently has a market cap ofjust over 1.9bn. The firm declined tocomment.
PE-backed firms remain upbeat
n Despite continued economic
uncertainty and difficult debt markets,private equity (PE) backed companiesremain focused on growth and expectto increase both turnover and
profitability in 2012. Eight out of tenexpect to grow turnover and almostthree quarters anticipate EBITDAgrowth, says PwC in a new report. Toreach their growth targets, 60 per centof the 77 portfolio companies expect toincrease permanent headcount in thenext year and expect capital injections.
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Commuters at Canary Wharf can travel by bike or boat to avoid the busy trains
CANARY Wharf Group yesterdaystressed that it would be open for
business during the Olympics,following reports the government ispushing for financial services staff to
work from home in order to easetravel congestion while the Gamesare taking place.
More than 300 Boris Bike dockingstations will be available, while anextra 170-seater Thames Clipper willtake commuters between London
Canary Wharf will be open forbusiness during the Olympics
BY MARION DAKERS Bridge and the Docklands.
We are aiming to ensure thatworkers who need to get into theoffice, can do so, a spokesman said.
Cabinet office minister FrancisMaude is said to have encouragedfirms to test out flexible working intime for the Olympics.
A KPMG spokesperson said up to70 per cent of its employees plan totake time off or work elsewhere, andno client meeting rooms or catering
will be available at Canary Wharfduring the Games.
MONDAY 2 APRIL 201214 NEWS cityam.com
What should be the limit for individual donations?
50,000 or less
50,000 to 1m
Over 1m%
14
51
35
IT is reasonable for major donorsto political parties to expectsome access to party leaders inreturn for their cash, according
to a majority of those surveyed byCity A.M./PoliticsHome.com.
Fifty-three per cent of businessprofessionals asked said that those
who give over 250,000 should
expect to be get general meetingswith the party leader, ministers andshadow ministers alongside othermajor donors. A smaller group, 22per cent, said donors should also getindividual private meetings withthe most senior politicians.
But attitudes are sharply divided:38 per cent said, by contrast, thatdonors should not expect to receiveanything in return for their funding.
The strong expectation thatdonors should get some bang for
their buck could discourage anyattempt by the government to cutaccess for those paying parties bills.
The poll also revealed that theCity panel believes that personalgifts are the best funding source forparties, rather than corporate orpublic cash.
One respondent said: Everyoneneeds to grow up and recognise thatmoney buys influence in all walks of
life. Another said: I dont see it asan issue. The Tories meet their pri-
vate donors over dinner, Labourmeet their trade union funders overdinner. So what?
But others expressed concerns: I[would] prefer that donations arefrom a much larger number of peo-ple and not for parties to be relianton a limited number of very largedonations. Another said:Donations are fine, they just needto be transparent and open.
City believes big party donors should getsome senior access in return for their cash
VOICE OF THE CITY
PoliticsHome.comPoliticsHome.com
Inassociation with
Apply to join today atWWW.CITYAM.COM/PANEL
BY JULIET SAMUEL
How favourable or unfavourable are you towards t hese sources of party funding
5%
67%
Donationsfrom
corporations
Donationsfrom
ind
ividuals
Do
nationsfrom
TradeUnions
Publicfunding
80
60
40
20
Neta
pproval
0
-20
-40
%
-30% -22%
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ALMOST half of non-executive
directors feel their knowledge andexperience is not being used to thefull, according to a new study.
Some 46 per cent of those polled inthe Korn/ Ferry Whitehead Mann andKPMG survey felt under-utilised bythe boards they sit on. The research, which involved 300
non-execs from FTSE 350 companiesand was conducted in January,looked into their broad experience asdirectors and the dynamics of theboardroom.
It found that 47 per cent of respon-dents felt executive board membersdid not usually see them as valuedbusiness partners, while one in fivesaid they sometimes or regularly feltout of their depth in boardroom dis-cussions as they had not been givenadequate information.The survey, which was conducted
on behalf of the Good Governance
Forum, found only 37 per cent ofboards regularly consider how theycould improve the quality of board-room debate, while 39 per cent rarelyor never address the issue. Theremaining 24 per cent only considerboardroom dynamics at the time ofthe annual board review.Tony Manwaring, chief executive of
think-tank Tomorrows Company,which created the forum, said: Thesurvey results reinforce discussions with many non-executive directorsthat the range and quality of conver-sations strongly correlate with theeffectiveness of boards.
There is compelling evidence thatmajor corporate failures result frombehavioural and cultural weaknessesresulting in huge losses in sharehold-er value effective conversations build and protect value and help businesses shape strategy, managerisk and build resilience. The study found that the most
important characteristic of thoseboards that have effective conversa-tions is the quality of the chairman,cited by 93 per cent of respondents.Eighty-eight per cent put the most value on board members having areal interest in the company and itsactivities and 75 per cent thoughtadequate preparation the mostimportant thing. Over half (55 percent) said board diversity led to effec-tive boardroom conversations.
Non-execs sayboards are notutilising them
JENNY FORSYTH
GETTY
GETTY
FACTORY output fell again in March, survey
data confirmed yesterday, increasing worriesover the severity of Chinas economic slowdown.
Export orders declined once more, Markitspurchasing managers index showed, boostingexpectations of a further monetary looseningby the authorities which should stimulate eco-nomic activity.
The index came in at 48.3 in March, downfrom 49.6 in February, and the steepestcontraction since November.
Any figure below 50 indicates contraction inoutput.
Employment fell at its fastest pace inthree years, indicating firms were trying toreduce spare capacity in the month,while products purchased for use in the manu-facturing process also declined again.
Low export ordershit Chinese growth
FOXCONN GIVING WORKERS A RAISE
FOXCONNTechnology Groupwill keep onincreasing workersalaries in Chinaand cutting thehours of work,chairman TerryGou saidyesterday.
Foxconn has comeunder fire for poorworkingconditions foremployees makingApple iPhones andiPads. Foxconn isbuildingmanufacturingfacilities in Hainan,as well asexpanding itsoperations inBrazil.
MONDAY 2 APRIL 201215NEWScityam.com
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MORNINGUPDATE
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BY TIM WALLACE
Demand for Chinese manufactured goods has declined, hitting an already slowing economy.
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MANUFACTURING, media and
telecoms will lead the UKs economicrecovery, while construction andbusiness services will struggle tokeep up, a study out today claims.
The weak pound will supportmanufacturing by keeping the sectorinternationally competitive, whichshould see business failures keepfalling into 2013, according to thestudy from accountancy and lawfirm BDO and the Centre forEconomics and Business Research.
The strong demand for digitalsolutions is creating a climate ofinvestment and growth intechnology and telecoms, as othersectors look to it for efficiency gainsand cost-cutting support.
However, the overall growthpicture remains weak, with otherindustries set to suffer inparticular, increasing numbers ofretailers are set to go bust as high
unemployment and continuedgovernment spending restraint holdback consumer spending.
Manufacturersto lead a mildUK recovery
BY TIM WALLACE
CITY firms went on a hiring spree inthe first quarter as profits jumped andoptimism grew on the stabilisation ofthe economy and calming of theEurozone crisis, a survey showedtoday.
Business volumes expanded, feesincreased unusually quickly andinvestment expectations rose,although costs also increased an the value of non-performing loans roseslightly, the Confederation of BritishIndustrys (CBI) quarterly financialservices survey showed.
Business volumes rose for the eighthconsecutive month, with a net balanceof 23 per cent of firms reportingincreases and a balance of 34 per centexpecting further increases over thecoming three months.
Banks, building societies, insurers
and investment managers all reportedgrowth in volumes, although a net bal-ance of 73 per cent of securities traders
Bullish financefirms up hiring
BY TIM WALLACEsaid volumes were down.A balance of 32 per cent said they aremore optimistic about the overall situ-ation of their industry, the first posi-tive figure in a year. The quarter saw an unexpected
jump in headcount with a balance of19 per cent reporting increasedemployment compared with anexpected balance of minus 18 per centand in stark contrast to the balance of13 per cent reporting falling head-count in the final quarter of 2011.
Investment expectations have alsorisen, with a balance of 44 per centexpecting to increase IT spending andtwo per cent expecting to increasemarketing spending over the nextyear, up from minus 46 per cent threemonths ago.
However, a balance of 75 per centsaid low demand will limit growth inthe coming year, while recruiters
Astbury Marden said new vacancies inthe City fell 11 per cent in March asfirms only replaced leaving staff,
House prices rise as supply failsto keep up with solid demandHOUSE prices rose sharply in Marchthanks to a lack of supply and theexpiry of the stamp duty holiday,but are set to stagnate over the restof the year, figures from Hometracksuggested today.
Prices rose 0.2 per cent in themonth, the survey of 1,500 agentsand surveyors showed, after 20months without growth.
The small rise in prices reducesthe annual fall to one per cent, fromthe 1.4 per cent in the year toFebruary and 1.6 per cent in theyear to January.
The proportion being sold for theasking price rose from 92.5 per centin January to 93 per cent in March,
BY TIM WALLACE indicating growth strength in themarket.
The number of new buyersregistering with estate agents rosefor the second month running,though at 4.4 per cent it was wellbelow Februarys 18.1 per cent rise.
Meanwhile new house pricesreached a 40-month high of 229,398according to Smart New Homes, up0.2 per cent on the month and 4.7per cent on the year. The highestprices are in London, at 358,363.
The number of new homes rosefor the third month in a row inFebruary, and the Smart New Homesexpects this trend to continue.
The shortage of property is thebiggest threat to home ownership,but the introduction of the national
policy planning framework promisesa step change in how planning isgranted for new developments,meaning many more new homes areexpected to be built in areas wherethey are most needed, said directorSteven Lees.
New house price growth
Feb FebApr Jun Aug Oct Dec
7
6
5
4
3
2
1
0
-1
%
MONDAY 2 APRIL 201216 NEWS cityam.com
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The recovery is on infinancial services
+47%IT Spending
+32%Optimism
+19%Employment +23%
BusinessVolumes
+21%Profitability
% net balance of
respondents reportinggrowth in the first
quarter of 2012
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Mid-sized firms pick up profitsin technology and outsourcingTHE FASTEST-GROWING mid-sizedcompanies in Britain have brushed
off the downturn over the last fouryears to increase sales by an average44 per cent, according to researchby Investec.
Energy, commodities andfinancial companies featureprominently among rising privatebusinesses, with London-based solarfirm Alternergy topping InvestecsHot 100 table, released today.
The research also pointed to aboom in outsourcing groups, which
BY MARION DAKERS are snapping up work as thegovernment and big businessesjettison tasks such as IT, securityand training.
Gold companies such as BairdInvestments and Gaimarley havecashed in on cautious investorsduring the financial crisis, with thegroups posting compound salesgrowth of 115 and 95 per centrespectively over the last fourfinancial years.
Gambling firms including Betfredand Bet365 are in the top 30 mid-sized private firms, while financialcompanies Ria Capital Markets and
Troy Asset Mangement are alsolauded as fast-growing groups,according to Companies Housefigures compiled by Investec.
The big lesson from this yearsresearch is that, even in a toughclimate, Hot 100 companies stayrelevant As one market declines,they possess the high-energyleadership and finely tunedantennae to shift decisively intonew growth areas, said MatthewRock, founder-editor of RealBusiness, which published theresearch.
EASTON DREAMS: NEW BVCA CHAIRMAN NAMED
MONDAY 2 APRIL 201217NEWS
cityam.com
Market indexeslikely to provemixed in short
trading weekTODAYThe purchasing managers index (PMI)manufacturing reading is expected at50.7 against 51.2 previously. This is asector that performed strongly afterthe banking crisis, but which is nowstruggling. A reading less than 50would indicate that the UK manufac-turing sector is contracting.
Earnings: Punch Taverns.
TUESDAYThe PMI construction reading isexpected at 53.5, against 54.3 previ-ously. Construction is a sector that ishovering in growth territory, but hasstruggled to push.
Earnings: Johnston Press, Huntsworth, andGulfsands Petroleum.
WEDNESDAYThe PMI services reading is expectedat 53.4, against a previous 53.8. Thesector is remaining in growth territo-ry but, as with construction, it isstruggling to break out.
Earnings: Desire Petroleum, PLUS Markets.Ex-Dividends: 4Imprint, Amino Tech, Amlin,Avesco Group, Begbies Traynor, Bodycote,Dialight, Interserve, Jardine Lloyd, MDYHealthcare, Melrose, Pearson, Rentokil, Savills,and Wolseley.
THURSDAYThe industrial production index isexpected at 0.5 per cent against 0.4percent previously. The manufactur-ing production index is expected at
0.2 per cent, against a previous 0.1per cent.
MANOJ onthe MARKETS
MANOJ LADWA
The Bank of England makes itsinterest rate decision today. Marketexpectations are for the Old Lady tokeep the rate unchanged, but anysign of weakness in economic num-bers could prompt it to increase theasset purchase programme soonerrather than later.
Earnings: Tanfield, VSA Capital, and ShoreCapital.
FRIDAYIts Good Friday, so there is no trad-ing in Britain, but non-farm payrolland unemployment numbers fromthe United States could set the tonefor the following week.
Manoj Ladwa, professional trader at ETXCapital, is running an open long/shortportfolio using his systematic tradingmethod. To follow Manojs trading journeymore closely go to:www.etxcapital.co.uk/manoj
THE FORUM: Page 22
PRIVATE equity industry group the BVCA has named an ex-investment banker as its newchair. Robert Easton, a managing director at Carlyle Group, has succeeded Richard Anton. DrEaston has been with Carlyle since 2000 and is now co-head of Carlyle Europe TechnologyPartners. He trained as a chemist and previously worked at CSFB and Wasserstein Perella.
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THE Capitalist attends theswankiest openings on thecalendar, from galleries inMayfair to fashion shows in
Milan. But weve never seenanything like the hysteria ondisplay at the launch of Greggs200th London store on Cheapsidein the heart of the City last Friday.
As staff proffered free pastriesand passers-by queued to sign asave our savouries petition, thebakerys chief executiveKennedy McMeikan stoodthere, overwhelmed byadoration on display forhis FTSE 250 firm. Butone VIP was missing:We did invite GeorgeOsborne but I hadno call. Im stillhopeful hellcome. Osbornehas endured aweek of ridiculeafter a seeminglyinnocuousdecision tochargeVAT onbakedproductsbecame amajor politicalissue, leading thegovernment to beaccused of being outof touch with ordinarypeople.
While munching ona lukewarm sausageroll McMeikandelivered hisChurchillian call for thechancellor to act on the
roll tax: You still have time tochange the decision. You need tolisten to the UK public and helpbusinesses stimulate growth.
Thrusting a popcorncoateddoughnut into The Capitalistshands he emphasised just howpopular Greggs has become:
Weve now got 200 stores in
London and Pret a Manger onlyhas 230 in the whole country.Were substantially cheaper thanthem but we still make oursandwiches by hand in our shopsevery day and we bake the breadourselves.
And he says its time for snobs todrop their objections to Greggs
cheap and cheerful approach andtake a stand against the pastytax: Our customers areeveryone from builders tobarristers; we have peoplein suits alongside guys inhi-vis jackets.
The only reasonpeople dont go to
Greggs is becausethere isnt one near
them. Mostrequests I get are
people writing inand asking us to open nearthem. The Capitalist thinksMcMeikan should nowexpect a flurry of emailsfrom jokers demandingthat Greggs open on HorseGuards Road just oppositethe Treasury.
Got A Story? [email protected]
Follow The Capitaliston Twitter: @citycapitalist
18cityam.com
cityam.com/the-capitalistTHECAPITALIST
SIR Richard is rarely spottedwithout a toothy grin on his face
and who can blame him? If The Capitalistwere the fourth richest person in the UK,wed be smiling too. And now you can getyour hands on some of Sir Richards cash,although not from his own $4.2bn pot.Virgin Holidays yesterday unveiled its
own currency, the Branson, replete withthe tycoons beaming face. Available in10, 20 and 50 notes, the Branson is worth2 so you can forget about fluctuatingexchange rates. The Capitalistgot veryexcited about Bransons latest scheme,but then we noticed that US talk showhost Conan OBrien had bought Mashablefor $3,500, despite the $200,000 comingPete Cashmores way from CNN. And whenwe heard that Google had launched a new app called Jargon Bot which translates businesslingo into everyday language (e.g. I dont disagree means I totally disagree, but yououtrank me), The Capitalistsighed and admitted to ourself that as juicy as these storiessound, theyre probably to be taken with a pinch of April salt. Were no fool, after all.
MONDAY 2 APRIL 2012
+(*"+0*!%*.0-4%*$!+),*42.+0#$/4%**"+((+2%*#/$!)!-#!-2%/$%*0(4%./+4+*!+"/$!(-#!./#(+("%**%(+))0*%/%+*.#-+0,.!"+-!"+0*%*#%*.0-4$!2+-'!."%**%(&+0-*(%.///$!%**%(%)!.$!0*4+--!.,+*!*/*$!%)!.!%.-0./!!+"/$!+4(,!-+0.!*$!0/%+*),(+4!-..'"+-!$%-)*+"/$!/!.+-,+-/!1%.+-4-+0,*+*3!0/%1!%-!/+-+*/$!-)4+-!%.(.+
)!)!-+"/$!-!/-)+*/-!!/+.,%/(!*/-!"+--!%.!.!!.!-$0*-%.%*#,,!(+-,/-+*+"/$!*/$!+0*!-*$%-+"/$!!#4$-%/(!#%1%*#),%#*+(*%.(.+/$!"+0*%*#$%-)*+"0.%*!.."+-!20-+,!*)!)!-+"/$!!*/-!"+-0-+,!*!"+-)6.1%.+-4+-55%*/$!%/4+*55%.'%*(4.,+*.+-!4#(+("0*)*#!-!-!!*..!/*#!)!*/
#"'$!#"("$%&"'%"#"++"''*#"++&'"#"'#*%&'"')))++!#!
Fools gold: Virgin launches newcurrency this April, the Branson
2 for one Branson (cash, that is, not the Sir)
Greggs in theCity up in armsover pasty tax
Sausage rollsaplenty in the Citylast Friday
ABERDEEN TO SPONSOR THE SCOTTISH OPEN
From petrol pumpsto beer taps - itstime to panic buy
AMID the misery of massivequeues for the petrol forecourtand sold out signs at manystations, at least one retailer haskept a sense of humour andmarketing initiative. Eager tocash in on the panic buyingfrenzy sweeping the nation, TheLounge in Chislehurst, Kent,responded with this cheekyadvert for its beer.It reminds TheCapitalistof anequally catchy
butchers sloganyears ago asWatership Downwas released.Youve read the
book, youve seenthe movie...now tryour pies, it urged.
ABERDEEN Asset Managements chief executive Martin Gilbert (left) has come to the rescue of the Scottish Open, the annual golftournament, in a sponsorship deal that will protect the competition for at least two years. Gilbert is pictured here with Alex Salmond,Scotlands First Minister (in the centre) and competition organiser European Tour chief executive George OGrady after a pressconference to announce the deal at Edinburgh Castle.
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ADVERTISING on mobile devices isovertaking the success of using desktopcomputers for marketing, with the UKleading the charge in Europe accordingto a report from Marin Software, pub-lished this morning.
Some 15.1 per cent of Googles paidclicks in the UK in December camefrom adverts on smartphone andtablets a 280 per cent increase on the5.4 per cent in January 2011.
Europe showed a similar growth rate,despite being slower in its adoption ofsmart mobile devices. Across the conti-nent, mobiles share of Googles paid
clicks jumped from 2.1 per cent to 5.8per cent.
Marketing companies have respond-ed accordingly, with UK advertisersupping their search budget for mobiledevices from 3.2 per cent at the start oflast year to 9.3 per cent by the end.Advertisers in Europe made a 400 percent jump, growing search budgets formobile from 1.2 per cent in January2011 to 4.7 per cent by December.This could come as worrying news to
Facebook, which in its IPO filing in
Advertising onmobile proving
better than PCBY LAUREN DAVIDSON February said that it had not yet mas-
tered mobile marketing despite gener-ating 85 per cent of its revenuesthrough advertising.The social network will have to unveil
a plan to make money from its mobileusers to keep investors happy after itsplanned $5bn IPO.
Smartphones and tablets areinvading the market, while sales ofdesktop computers are lagging. Applesold more mobile devices in 2011 alonethan the total number of Macs sold inthe 28 years since the computer hit theshelves in 1984.
Marins report also shows that mobiledevices in the UK have much higher
click-through rates than PCs, meaningadverts on mobiles are more successfulin catching a consumers eye.The cost per click is also cheaper on
mobile devices, so advertisers spendless per successful advert on mobile.While conversion rates (translating asuccessful click to actual consumerspend) are lower on smartphones,tablets are fast catching up with PCs.
Mobile advertising in the UK outstripsEurope and on a global level is thirdonly to Japan and Australia.
Caledonia Mining Corp 5.8830 Mar
Feb 2012Jan 2012 Mar 2012
9.00
8.00
7.00
6.00
p
MONDAY 2 APRIL 201220 NEWS cityam.com
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AFRICAN miner Caledonia has
doubled its gold production in thelast year and more than quadrupledits profit, the firm said today.
Caledonia, which is joint-listed inLondon and Toronto, said itproduced 35,826 ounces of goldduring 2011, up 102 per cent on ayear ago, while gross profit jumpedfrom C$6.3m to C$29.1m (3.9m to18.2m).
Net profit was C$12.1m, andwould have been higher but thefirm struggled to renew itsprospecting rights in South Africa,it said.
Caledonia signed a deal inFebruary to sell 51 per cent of itsBlanket mine to the Zimbabweangovernment, following a disputeover ownership that saw its mininglicence suspended. It said today themine is strategically well-positioned to progress.
Caledonia liftsgold outputdespite delays
BY MARION DAKERS
COMPUTERS
SMARTPHONES
TABLETS
UK EUROZONE
1in
3Mobile searchqueries havelocal intent
AUSTRALIA JAPANShare of clicks
Share of clicks
CTR
CPC
Share of clicks
Share of clicks
2.80% 4.31% 4.69%
$0.48 $0.26 $0.35
CTR
CPC
2.52% 2.42% 3.01%
$0.35 $0.25 $0.35
CTR
CPC
3.58% 4.43% 4.97%
$0.84 $0.52 $0.70
CTR
CPC
1.43% 2.28% 2.13%
$0.86 $0.48 $0.69
25%of US paid search
clicks by Dec 2012
will come from
smart moblie
devices
1BillionNumber of
smart mobile
devices in use
globally by
June 2013
CTR: click-through rateHow many mobile users click the advert they see
CPC: cost per clickHow much the advertiser pays per user click
Source: Marin Software
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MONDAY 2 APRIL 201221
WALL STREETWEEK AHEAD
Essar Energy
The India-focusedintegrated energy companyhas announced that it hasappointed Steve Lucas as itsfifth non-executive directorwith immediate effect.Lucas was finance directorat the power andtransmission networkoperator National Grid from2002 to 2010 and has significant experience in theinternational energy sector. Prior to his position atNational Grid, Lucas worked for 11 years at Royal DutchShell and six years at BG Group, latterly as grouptreasurer. He is also currently non-executive director
of Transocean, the offshore oil and gas drillingcompany.
Quindell PortfolioThe brand extension company, and leading provider ofconsultancy, software and outsourcing, hasannounced that Robert Thomson has been appointedgroup chief revenue officer, with effect from 1November. Thomson started his career with IBM,advancing to the position of global sales director forthe IBM-Huon alliance. He became UK managingdirector of the Innovation Group in June 2010.
Jupiter
Jupiter Fund Management has announced that
Maarten Slenderbroek will be joining its board as anexecutive director responsible for distribution andstrategy. This is a new role, and Slenderbroek will
report to group chief executive Edward BonhamCarter. He is expected to join the fund managementfirm in the second half of 2012. Slenderbroek iscurrently head of BlackRocks international retailbusiness and a member of its global operatingcommittee. He has worked for BlackRock since 1994.
Forex Club
The leading online brokerage company has announcedthe appointment of Michael Klena as chief executive ofits US business. Effective immediately, hisappointment reaffirms the companys committment toglobal network growth and development. Before
joining the company, Klena held several seniormanagement positions at Etrade Financial, the UnitedStates third largest online brokerage firm, including
head of risk and operations for the companysbrokerage business Etrade Clearing. Previous to this,Klena spent nearly ten years at TD Waterhouse.
Norton Rose
The international legal practice has announced theappointment of Jing Wang as a corporate partner. Hejoins the firm from Allen & Overy, where he was servedas counsel in its Beijing office. Wangs expertise is inadvising major Chinese and global companies onstrategic mergers and acquisitions activity. He hasparticular expertise in the biotech, and food andbeverages sectors.
WHOS SWITCHING JOBS Edited by Tom Welsh
+44 (0)20 7092 0053morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
AFTER the best first quarter in 14years, the S&P 500 may be poisedfor a pullback as investors look toa slew of economic data for insight
on the strength of the domesticeconomy. The Dow and the S&P 500 closed out
their best first quarter since 1998 and theNasdaq had its best first-quarter perform-ance since 1991, largely on the back ofimproving domestic economic data.
Economic indicators this week includedata on manufacturing and services fromthe Institute for Supply Management, con-struction spending, factory orders anddomestic car sales as well as several reportson the labour market, culminating inFridays payrolls number.The benchmark S&P 500 index could be
vulnerable to a retreat if the data shows asoftening of the economy, a possibilitymany investors have been cautiously eye-ing with the index up nearly 30 per centfrom its October low.
The remarkable part of the first quarteris you really didnt have any major piece ofeconomic data in the US that disappointedthe market, said Dean Junkans, chiefinvestment officer of Wells Fargo Advisorsand Wells Fargo Private Bank inMinneapolis.
It was really a no drama, no surprisequarter and the market may not be fullyappreciating that we could have some sur-prises here in some of the data coming
up.
Equity markets will be closed at the endof the week for the Good Friday holiday, which could create lighter volume andincrease volatility. The holiday also con-flicts with the release of the March payrollsreport, which could leave investorsreticent to make big bets before the data.
Economists polled by Reuters are lookingfor an addition of 201,000 jobs in March,compared with Februarys 227,000. Theyexpect the US unemployment rate toremain steady at 8.3 per cent.
People are looking for a little more outof the data, but it ultimately depends onhow the numbers come in relative toexpectations its all about beating ormissing expectations, said Joseph Tanious, market strategist at JP MorganFunds in New York.
That will likely dictate the market thefollowing Monday after Good Friday." Along with dealing with a short week
and a glut of economic data, investors willhave to grapple with tomorrows release ofthe minutes from the most recent FederalOpen Market Committee meeting and aninterest-rate decision on Wednesday by theEuropean Central Bank after its meeting.
The underlying issue in Europe thesovereigns themselves being solvent hasnot been resolved, Tanious said. I wouldsuspect you will continue to see some flare-ups in Europe that will rattle markets herein the US. The ECB is expected to keepinterest rates unchanged with no major
announcements on other policy decisions.
There may yet be surprises in storeafter US markets winning quarter
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GDF SUEZUBS rates the energy group buy andhas a 12-month price target of 23. Thebroker thinks GDFs bid for theremainder of London-listed peerInternational Power has come earlierthan expected, although the offer itselfis hardly surprising. UBS reckons theoffer price of 390p per share is likely torise, and is assuming a final price of420p, coupled with around 3bn inadditional asset sales.
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