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G E T T Y

BUSINESS WITH PERSONALITY

SPAIN confirmed yesterday that ithad slipped back into a technicalrecession during the first threemonths of the year, kicking off a

gloomy start to the week as a slewof downbeat data renewed fearsover the single currency area.

Eurozone woes werecompounded by figures from crisis-struck Greece, which showed retailsales are plummeting at anincreasing rate. Greek retail sales

by volume fell 13 per cent year-on-year in February, with the pace ofthe decline picking up after arevised 10.6 per cent drop in

January.Greece has been joined in

recession by the Spanish economy,

which shrank by 0.3 per cent in thefirst three months of the yearaccording to official estimates.

Lending to companies and

individuals in the Eurozone alsogrew less than hoped in March, itwas revealed yesterday.

The wheels are very clearlycoming off, Jefferies economistDavid Owen said, predicting a verysignificant decline in the next twoquarters. Its still reasonably easy toenvisage GDP to be down about 1.5per cent this year, Owen warned.

At the end of last year theEuropean Central Bank pumped 1trillion of cheap three-year cashinto the banking sector in a bid tostave off another credit crunch inthe Eurozone. Yet loans to theprivate sector were up by an annual0.6 per cent in March, lower thanexpected suggesting that theECBs measures have not trickleddown. Overall money growth

accelerated, however, providingsome hope for the recovery.

Recession has struck Spain, where protests against austerity have broken out

LONDONS increasingly embattledlegal sector suffered a further blowyesterday, as magic circle stalwartSlaughter and May froze associatesalaries and Herbert Smithannounced 51 redundancies in itsCity office.

Only second-year associates atSlaughters will see their pay packetsrise, though by less than one per cent,while salary bands for the firmsother qualified lawyers remain static.The pay freezes at Slaughters come

on the heels of minimal rises at fellowmagic circle firm Allen & Overy,which set the scene for an anaemicround of pay hikes earlier this monthwhen it announced associate salaryincreases of less than one per cent well below the average across the pri-vate sector.

Adding to the misery was HerbertSmith, which said yesterday it wouldcut just over three per cent of its

London staff, with the bulk of lay-offsfalling in the firms corporate team.The global firm employs 700 lawyersin London, including 164 partners.

The firms management put thecuts down to a stagnant deal market,but outside sources told City A.M. thatgiven that the firm had already seenseveral departures from its corporatepractice in recent months, the redun-dancies were surprising.

We have waited in the hope thatconditions in transactional marketswould improve but against a back-drop of continuing uncertainties inthese markets, we believe now is theright time to address the issue, saidmanaging partner David Willis.Though the numbers being cut are

still a long way off the widespreadredundancies seen across the sectorduring 2008-09, there are also omi-nous-sounding partner restructuresunderway at magic circle firmsClifford Chance, Allen & Overy andLinklaters, and industry analystsexpect more to come.A study last month by RBSs legal

services team predicted that 3,000lawyers will leave the UK legal sector

this year, with a further five per centof overall headcount needing to becut in order for margins to return topre-crisis levels. The survey of 60 sen-

ior legal executives also found most tobe bearish on the outlook for the restof the year, predicting flat or fallingrevenues for their firms.

Fee income at the UKs top 100 lawfirms increased by 7.2 per cent year-on-year in the three months to theend of January according to Deloitte but this was down on the 9.8 per centgrowth seen in the previous quarter,and law firms bosses have made nosecret that theyre expecting a toughsecond half of 2012.

Im not surprised by the payfreezes, said Guy Adams at legalrecruiter Laurence Simons. Lawfirms are very cautious due to down-beat economic data, as well as pres-sure from clients who are becomingmuch more savvy about pricing.

New York firm Dewey & LeBoeuf which has 140 lawyers in London isalso proving that the US legal sector isfar from unscathed. Around 20 part-ners left the firm yesterday after aweekend that saw its chairman step

down and merger talks withGreenberg Traurig end. The firm waslast night racing to extend a deadlineon more than $75m of its debts.

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HIT BY FRESHDOWNTURN

ISSUE 1,623 TUESDAY 1 MAY 2012

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MORE EUROZONE: Page 9ALLISTER HEATH: Page 2

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27.02.2012 till 01.04.2012 is 99,462

BY ELIZABETH FOURNIER

BORISv KEN

Eurozone crisis erupts

as recession spreads

Redundancies and pay freezes return to the sector as deals dry up

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[email protected]

Follow me on Twitter: @allisterheath

IN BRIEFWorld Trade Center tops NYCn One World Trade Center, being

built on the site of the fallen twintowers, surpassed the Empire StateBuilding yesterday as the tallestskyscraper in New York. Constructionstarted six years ago on the newWorld Trade Center and now theskyscraper, formerly called theFreedom Tower, surpasses the topfloor of the Empire State Building.One World Trade Center will stand at1,776 feet to the tip of its antennawhen it is completed, possibly by late2013. The Empire State Building, builtin 1931, was the citys tallest at aheight of 1,545 feet to the tip of itsbroadcast antenna until 1972, when itwas overtaken by the original WorldTrade Center towers. It then regainedthe title after the September 11, 2001,attacks, which destroyed thecomplex.

Delta buys refinery to cut fuel billn Delta Air Lines has agreed to buy aUS oil refinery from ConocoPhillips foraround $150m (92m), in the mostaudacious move yet by an airline totackle escalating fuel costs. Delta saidthe first ever purchase of a refinery byan airline would allow it to knocksome $300m off its annual jet fuelbill, which reached an eye-watering$12bn last year. The move marks adeparture in an industry which hastypically used methods such ashedging to lock in prices and reduceexposure to volatile fuel prices. Deltasaid production at the refinery alongwith other agreements would provide80 per cent of its fuel needs in the US.

Regulator faces backlashon expensive new officesTHE BANK of England is spendingmillions of pounds extra to housethe Prudential Regulation Authority(PRA) a few hundred yards away inMoorgate, instead of keeping it ashort DLR journey away in CanaryWharf, it was announced yesterday.

However, financial services groupsand MPs denounced the move aslavish at a time when financialservices firms who pay for the regu-lators are tightening their belts.The former Cazenove building

brings staff in the newly merged reg-ulator closer together, which theBank of England says is important inbuilding links between the arms ofthe organisation.

Under the new lease, signed yester-day, the regulators costs will rise byup to 15m over the next 15 yearscompared with the cost of stayingput in Canary Wharf.

However, the Bank of Englandinsists that the benefits of sharingstaff in HR, legal and IT, as well asrationalising the regulatory regime,will outweigh the additional costs.

The Banks firm intention contin-ues to be that prudential regulationwill operate in the future at a lowerreal cost than it does now as part ofthe Financial Services Authority(FSA), it announced in a statement.

However, shadow Treasury minis-

Airline levy could aid UK borderchaosAirlines using Londons Heathrow airportwould pay higher landing fees to help sortout Britains border chaos under a planbacked by David Cameron. BAA,Heathrows owner, is studying theproposal, which foresees airlines fundingextra Border Force staff through thecharges they pay the airport operator.

Judge blocks channels to Pirate BayRecord labels and other content owners

have claimed a victory after the HighCourt ruled that five of Britains largestbroadband providers must block access toThe Pirate Bay. The ruling against thesource of illegal file-sharing used theprecedent of last years Newzbin case.

Critical drug trials boost ActelionActelion shares leapt as investorscelebrated positive results from a crucialdrug trial, removing uncertainties aboutthe future of Europes biggest biotechgroup by sales. Basel-based Actelion saida late-stage clinical test of Macitentan,the potential successor to its blockbusterTracleer treatment, had met expectations.

Fighting back against Somali piratesPlans for a private fleet of armed patrolboats to protect ships negotiating thepirate-infested waters off Somalia havereceived a huge boost after a prominentinsurance figure, Martin Reith, agreed toprovide financial support.

Australian billionaire to build amodern-day Titanic IIClive Palmer, a colourful Australianmining magnate, has announced plans toenter the cruise ship business by buildinga fleet of world class luxury liners.

Sirius Minerals to develop 3.6bnpotash mine in North YorkshirePlans for a massive $6bn (3.6bn)investment programme to develop apotash mining venture in North Yorkshireand create up to 1,100 jobs have beenannounced.

Distressed companies on overdraftbrinkNearly one in three companies say theyare regularly reaching their overdraftlimit, says insolvency trade body R3.

BP expects to spend $4bn a year inGulfAfter self-examination following the April2010 Deepwater Horizon oil spill, BPdecided not to leave the Gulf of Mexicoand opted instead to increase investment.

Lehman takes ownership ofCalifornia land portfolioLehman Brothers Holdings said yesterdayit took ownership of a valuable Californialand portfolio from developer SunCal Cos.

WHAT THE OTHER PAPERS SAY THIS MORNING

LENDING between banks appearsto be drying up again as data out

yesterday showed that bondissuance by British banks hasfallen to its lowest level since 2008.

Despite a rush to sell debt inJanuary that saw volumes surgebriefly to their highest level in sixmonths, overall bond issuance byBritish banks so far in 2012 isdown 39 per cent on last year.

The data is a worrying sign forEuropes economy, especially as itcomes despite the EuropeanCentral Banks unprecedented 1trillion offering of three-year loansfor EU banks. The radical action,started in December last year, wassparked by a collapse in interbankdebt markets.

UK lenders went to the marketsfor $33.7bn (20.1bn) in the firstfour months of this year,according to Dealogic. The lasttime volumes were lower over thesame period was in 2008, when

banks raised $33bn.And of the debt sold so far this

year, $4.7bn has been government-guaranteed as part of theTreasurys credit easingprogramme.

But although UK volumes are atlow levels, they still account forthe largest share 20 per cent ofEuropean bank debt issuance inthe year to date.

Interbank debt

markets dryingup once again

Renting 20 Moorgate will cost up to 1m per year more than staying in Canary Wharf

2 NEWS

BY JULIET SAMUEL

BY TIM WALLACE

To contact the newsdesk email [email protected]

SOME of the stories coming outof the Eurozone are heart-breaking. Greeces retail salesare down 13 per cent over the

past year, a tragic and all too painfulcollapse for millions of families.Economists sometimes compare theUKs recession with the great

depression: while technically true invarious narrow, statistical ways, sucha parallel is facile given how wealthywe remain overall. But it is anaccurate analogy when analysingwhat is happening in Greece, whereunemployment is now 21 per centand where bank accounts areemptying out, as anybody with anysense moves their money out of thecountry or into non-financial assets.

Spain is back in recession; 23.6 percent of its workforce is unemployed,rising to a horrendous 50.5 per centfor young people (in Greece, its an

EDITORSLETTER

ALLISTER HEATH

Its time for supporters of the single currency to apologise

TUESDAY 1 MAY 2012

equally atrocious 50.4 per cent).Spains GDP will shrink substantiallythis year and next; the recession isbecoming never-ending, inevitablymeaning an even larger budgetdeficit, despite the latest attempts atausterity. If they had any self-respectand integrity, supporters of the euro who thought the discipline of a singlecurrency could coexist with social-democracy and ultra-regulated labourmarkets should apologise to thepeople whose lives they have blighted.

Needless to say, the euro-elites andthe establishment economists whoprovided them with intellectual ratio-nalisations for their grandiose politi-cal dreams and grubby power-grab are blaming everybody but them-selves, and are still desperately fight-ing to save the unsavable.

But the story that truly captures theimagination comes courtesy of NewYork Universitys DevelopmentResearch Institute. It highlights theinflux of Portuguese immigrants toAngola an economy that has beengrowing by over 10 per cent a yearsince peace broke out in 2002 andMozambique, in a dramatic reversalof roles between erstwhile colony andex-imperial power. There was a timewhen poor Africans flocked to south-ern Europe to better their lives; theopposite is now happening. Five hun-dred years after Vasco de Gama first

er; instead, it has catastrophicallyimpoverished tens of millions of ordi-nary folk. It is time for an apology.

HOUSING WOESMy fact of the day is the collapse inthe US homeownership rate, now ata 16-year low of 65.4 per cent. It

peaked at 69.4 per cent in mid-2004.Sub-prime lending was a deliberatepolicy dreamt up in Washington byDemocrats and endorsed byRepublicans. Too many people whocouldnt afford to buy were pushedinto mortgages; at first, thehomeownership rate shot up butnow all of the gains have beenreversed. A property owningdemocracy is great but only if it isnot artificially inflated by politicians.

landed in Mozambique, impoverishedPortuguese are turning up in droves,begging for work permits. Six yearsago, Angola issued 156 visas toPortuguese migrants. In the mostrecent year for which data is avail-able, that number had exploded to23,787; 100,000 Portuguese have

moved to Angola, four times morethan the traffic in the opposite direc-tion. Other studies have shown abrain drain of Portuguese to Braziland of Spanish youngsters especiallyskilled graduates to Latin America.

Portuguese workers in Angola nowsend home more cash to their fami-lies than Portuguese workers based inLondon. For millions of young people,Europe appears in terminal decline,while parts of Africa have emerged asa new Eldorado. The Eurozealotsthought the single currency wouldturn old Europe into a new superpow-

ter Chris Leslie rejected the need for amove.

They could still do that whereverthey are Canary Wharf is literally 15minutes away, it is not a long journey,he told City A.M.

This will be paid for by financialservices firms and their customers the PRA is out of touch with the needfor efficiency and to care for themoney that is paid by others. This islavish and unnecessary.

PwC warned the whole operation ishappening at a bad time consideringthe Banks other tasks.

There is clear operational risk here the Bank of England is adding around50 per cent to its workforce, while itstill has a lot going on with theEurozone crisis and the state of the UKeconomy, said partner David Kenmir.

Indeed, the whole breakup of the FSAneeds to be managed carefully, accord-ing to the Association of BritishInsurers, whose members will be regu-lated by the PRA, and will foot the bill.

We would urge that the costs to theindustry of moving to twin peaks regu-lation are kept as low as possible, saiddirector Hugh Savill.

The new jobs website for London professionalsCITYAMCAREERS.com

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MICROSOFT yesterday took its firststep into the e-reader game, takingon digital giants Amazon and Appleby joining forces with Barnes &Noble and its e-reader Nook.The news sent shares of the US

book retailer rocketing by a stagger-ing 90 per cent in early trading.

Microsoft will invest $300m(184.6m) in return for 17.6 per centof the digital subsidiary.This values the unnamed new com-

pany at $1.7bn more than doublethe $823.5m market cap of Barnes &Noble when markets closed onFriday and still considerably morethan its $1.3bn valuation after thestock soared yesterday.The US-based book store, which

announced in January that it wasconsidering the strategic separationof its digital business, will own theremaining 82.4 per cent.

Dubbed Newco until a permanentname has been decided, the digitalbusiness first port of call will be aNook application for the next versionof Microsoft Windows, which willprovide one of the worlds largestdigital catalogues of e-books, maga-zines and newspapers to hundreds ofmillions of Windows customers.

Microsoft takes

on Kindle withe-reader stakeBY LAUREN DAVIDSON

Barnes & Noble boss William Lynchsaid the move is an important partof our strategy to capitalise on therapid growth of the Nook businessand to solidify our position as aleader in the exploding market fordigital content.

Newco also includes the book retail-ers digital education business,including its study software.The deal draws a line under an

ongoing patent battle betweenMicrosoft and Barnes & Noble. Thesoftware giant sued the book storelast March because the Nook runs ona Google Android operating system,which Microsoft claimed infringes itspatents.

Barnes & Nobles shares closed up51.7 per cent at $20.75.

David Cameron cancelled a local election campaign trip to fight Hunts corner

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PRIVATE EQUITY firm Lion Capitalsaid yesterday it is close toclinching a deal to buy rivalBridgepoints majority stake in

Alain Afflelou, the French eyewearretailer.

The UK-based buyout group hasentered exclusive talks withBridgepoint and minorityshareholders Apax Partners and

Altamir Amboise and expects tofinalise the deal in June, it said.

No price was given although Lion

is said to have offered around800m (653m). Banking sources in

Lion Capital set to buy Frenchglasses retailer Alain Afflelou

BY KASMIRA JEFFORD March said that the sale wasexpected to be backed by around300m of debt.

Alain Afflelou, founded in 1972,runs 1,100 stores across Europe and

Africa mainly through franchises.Last year the company made salesof almost 800m.

London-based Bridgepointbought a majority stake in thecompany in 2006 for around500m. Last year it said it wasconsidering either listing thecompany or selling its stake.

Lion Capital is advised by Lazard

and SJ Berwin while Bridgepoint isbeing advised by Rothschild.

Cameron hauled back to defendJeremy Hunt over BSkyB probeDAVID Cameron was forced toreturn to parliament yesterday to

defend his culture secretary JeremyHunt and his handling of NewsCorps bid for the rest of BSkyB.

Cameron pulled out of a localelection campaign trip toBuckinghamshire so he could fieldan urgent question from the Labourparty on Hunt, who has alreadyfaced calls for his resignation.

The prime minister said hewould not start a parallel probeinto Hunts behaviour. He said

BY MARION DAKERSlooking at the evidence given to theongoing Leveson inquiry remainsthe best way to find out whetherHunt broke the ministerial code.

But MPs, including publicaccounts committee chair MargaretHodge, urged the Tories to act faster.

Labour leader Ed Milibandclaimed Hunt broke rules bywithholding details of his contactwith News Corp from parliament, bygiving lobbyist Fred Michel access toa speech before it was made to theHouse, and via the actions of hisformer special adviser Adam Smith.

Cameron hit back, complaining of

the self-serving double standardsemployed by the Labour party. Imnot waiting for Leveson to completehis investigation. If at any time

evidence comes out showing [Hunt]breached the code I will act, headded.

The PMs defence of Hunt, who satnext to him in parliament duringthe rowdy 50-minute grilling, cameas the culture select committeeprepared to criticise News Corp staffin its own report into phonehacking at the firms UKnewspapers, due to be publishedtoday.G

ETTY

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ACTIVIST shareholders yesterdayclaimed victory after the boss ofBritains second biggest insurer wasforced into a humiliating climbdownon the size of his pay packet.Andrew Moss, chief executive of

Aviva, decided to waive his 2012salary increase as part of a review ofthe firms executive pay policy,launched in response to pressurefrom investors.

Moss had been due to receive a 4.8per cent increase to his 960,000basic pay worth around 46,000 despite his company underperform-ing throughout 2011. Last year histotal renumeration package hit2.7m, in addition to around 2.5mas part of a long-term incentive plan.

But City A.M. understands that themain source of investor anger is notMoss pay but the 2.5m goldenhello given to Trevor Matthews, theformer Standard Life boss who hasbeen appointed as Avivas head ofdevelopment markets.

Shareholders have reacted badly tothe pay of executive directors whichhas been linked to operating profit

rather than bottom line profit which includes the impact of the tur-

BY JAMES WATERSON moil in Europe, said Barrie Cornes,an analyst at Panmure Gordon.

Aviva will rightly come under firefor failing to address the winds ofchange impacting director remunera-tion over the least 12 months.

Investor group Pirc has encouragedshareholders to vote against the pack-

age at Avivas AGM on Thursday.We take the views of our share-holders very seriously, said ScottWheway, chairman of Avivas remu-neration committee. A number ofshareholders have indicated that theywould like to see an even closer corre-lation between our pay packages andshareholder returns.

Shares closed down 2.7 per cent at308p, having already lost 29 per centof their value since July 2011.

Aviva PLC


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TUESDAY 1 MAY 20124 NEWS cityam.com

Executives beware the winds of shareholder activism

BARELY a day goes by withoutanother incidence ofshareholder activism.Investors in blue chip firms

ranging from hedge funds topharmaceuticals have been flexingtheir muscles with remarkablefrequency recently, expressing their

displeasure on executive pay andstrategic direction.It is debatable how much of this

is to do with policy changes. In theUK, investors are several steps aheadof the government, which has justfinished a consultation onexecutive remuneration andshareholder rights, although theestablishments newfound interestin pay and performance must have

had some effect.In the US, where investors were

first given the right to a non-binding vote on pay last year, thehand of policymakers is clearer. Thesay on pay rule, part of the Dodd-Frank reforms, has made anoticeable difference. Earlier thismonth, Citi became the first Wall

Street bank to lose a vote on pay,with 55 per cent of shareholdersrefusing to back packages given totop executives.

Yet those policymakers who wantto see pay falling across the boardcould end up being disappointed. Inan analysis of the first 100 Fortune500 companies to file proxies this

year, compensation consultancyClearBridge found that all thosefirms that produced a positive totalshareholder return received at least95 per cent of votes in favour oftheir pay packages.

In the case of Citi, shareholderswere protesting at years of negativereturns that simply werentreflected in Vikram Pandits pay. Themain gripe for Barclays investors

was a 5.75m tax equalisation forchief Bob Diamond, which hadabsolutely no link to performance.Yesterday, holders of Aviva stockforced the company to change tackdue to a raft of golden hellos fornew executives; self-evidently, a cashpayment for an employee who hasjust started cannot be linked to

shareholder return.A good banker or insuranceexecutive will ultimately be worththe same money, but they will haveto earn it in different ways. The daysof negotiating upfront cashpayments before signing on thecontractual dotted line are over, tobe replaced by more generous long-term incentive schemes.

This isnt just about pay, however.

Shareholders in AstraZeneca forcedchief David Brennan to depart lastweek because they felt the firm hadbecome directionless under hisleadership. Similarly, Man Groupboss Peter Clarke is lookingvulnerable after a period ofsustained underperformance at thehedge fund group.

Todays results are unlikely tooffer him any relief, although hewill likely survive the annualmeeting.

Whatever the reason for theflurry of shareholder activism, no-one can deny the winds havechanged. How refreshing.

BOTTOMLINE

DAVID CROW

[email protected]

Follow me on Twitter: @davidcrow83

Yesterday AvivaChief executive Andrew Mosswaived a 46,000 pay rise aftercriticism from investors

27 April Barclays26.9 per cent of votersopposed the companys exec-utive pay, including 17.7m forCEO Bob Diamond

26 April AstraZenecaThe pharma groups boss DavidBrennan quit after pressurefrom investors

17 April CitigroupAround 55 per cent of share-holders rejected the banksplan to pay chief executiveVikram Pandit $15m (9.4m)

12 April Smith & Nephew30 per cent of investors rejected itsremuneration plan, which includeda 1.4m golden hello for newchief executive Olivier Bohuon

Today Man GroupMan Group chief executive Peter Clarke will face pressure from investors at thehedge fund's AGM to improve performance or step down. The firms share pricehas fallen by almost 60 per cent since September last year.

27 April Credit SuisseAlmost a third (32.4 percent) of shareholdersrefused to back the bankspay plans

SHAREHOLDERS STEP UP THE PRESSURE

Investors forceAviva boss toreject pay rise

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PRIVATE equity firm Palamon hascompleted the refinancing of itsEnglish language school groupCambridge Education, the first timein more than a year that a privateequity house has effectively tappedBritish banks to pay itself a dividendon an investment.

Palamon Capital Partners dealwith Royal Bank of Scotland for anew 23m debt package will see itrecoup 1.5 times the equity it hasinvested in the business, and leavesfinances for continued expansion ofthe group, which provides Englishlanguage training and universityfoundation courses for overseasstudents at its schools in London andaround England.

At the peak of the buyouts bubble,so-called dividend recapitalisationswere all the rage as private equityfirms took advantage of red hot debtmarkets to refinance theirbusinesses and pay themselvesdividends in the process. But theyhave all but vanished in Britain andEurope as banks rein in lending andbecome far more cautious aboutfinancing private equity-backedfirms in particular.

Palamons new financing packageis the first sterling loan taken out topay a private equity owner adividend since 3i Group put in placea 73m package for testings businessEnvironmental Scientifics Group inSeptember 2010.

Palamon getsset for payoutwith debt deal

BY CITY A.M. REPORTER

ABERDEEN Asset Management wasone of the biggest risers on the FTSE100 yesterday after it posted a 14 percent jump in profit and raised its div-idend by a sixth.The stock closed up 3.47 per cent at

283.5p after Aberdeen signalledinvestors had rediscovered theirappetite for risk as global economicfears ease.The fund manager said pre-tax prof-

it rose to 162.2m in the six monthsto 31 March, driven by a 3.4 basispoint rise in its average fee margin to43.9 basis points as demand grew forhigher margin investments, such asemerging markets products.

Chief executive Martin Gilbert saidsome parts of corporate Britain, par-ticularly certain consumer brandswith a strong presence online or inemerging markets, are doing reallywell despite gloomy economic data.

They are cashed up and have takenout costs and have big Far Easternoperations, he told City A.M. Fundmanagers should spend the majorityof their time looking at the health ofcompanies rather than wider eco-nomic data, he added.

Aberdeen risesafter investors

seek out riskBY PETER EDWARDS Aberdeen said assets under manage-

ment rose nine per cent to 184.7bnafter strong fund performance out-weighed net outflows of 400m.

The equities business attracted4.9bn of net inflows but fixedincome and multi-manager fundsshrank by 2.3bn and 1.8bn respec-tively.

Revenue rose seven per cent to413.1m and Aberdeen said it is rais-ing the dividend 16 per cent to 4.4pper share.Aberdeen also said it has raised

$242m for an Asia Pacific propertyfund of funds and been appointed fortwo new mandates, which should addaround $200m for assets in comingmonths.

RBS to spin off M&A advisoryto create an independent firmRBS is planning to spin off itsM&A advisory unit into astandalone business to be run byits current staff.

Simon Penney, head of RBSsinvestment bank in the MiddleEast and Africa, told Reuters: TheM&A bankers plan to form aboutique business... Its not clearas to which regions would join inbut thats the plan.

The new firm will be led byJohn McIntyre, currently thebanks head of corporate financein Europe, the Middle East and

Africa, and will also continue toemploy around 45 to 50 bankers

BY JULIET SAMUELwho run the unit at RBS.

But for now, they are staying putas they finish advising on apipeline of mandates won duringtheir time at RBS but which havenot yet completed. The workmeans that the timeline for theirdeparture is not yet clear but oncethe unit has become independent,the new firm could seek outadditional financing.

The news follows RBSsannouncement in January that itwas looking for ways to get rid ofits equities and M&A businesses.

Since then, it has sold off HoareGovett, the City brokerage, for thenominal fee of 1 to US investment

bank Jefferies, and exploredoptions for its cash equities

business.Chancellor George Osborne said

he wanted to see RBS shrink itsinvestment bank dramatically.Chief executive Stephen Hesteragreed it is not economical tocontinue with all of its activities.

Aberdeen Asset Management PLC


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285.0 p 283.5030 Apr

Royal Bank of Scotland Group PLC


23.0

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25.0 p 24.2730 Apr

The 4.4p interim dividend is better than consensus 4.1p, but behind our5.2p estimate. However, we still expect to maintain our 11p total dividend fore-cast for this year (i.e. a higher final compensating for the lower interim)given the strong earnings momentum... Aberdeen remains a top pick.

ANALYST VIEWS

We raise our price target to 290p on the back of good first half results. Wepredict steady sailing for Aberdeen with good fund performance directing inflowsinto higher margin equity funds. Equity market levels will continue to bethe bigger determinant of average asset under management levels.

Interim results were in line with expectations and demonstrate the pos-

itive impact of the business mix shift to higher margin areas. In addition, thebalance sheet continues to strengthen. After a good run, we see reducedupside and therefore our recommendation moves to Hold from Buy.

HOW DO YOU RATESHARES IN ABERDEENASSET MANAGEMENT?by Peter Edwards

DAVID MCCANN NUMIS

ARUN MELMANE INVESTEC

STUART DUNCAN PEEL HUNT

A TOP Barclays shareholder hashanded one of the banks privateequity units $250m (154m) toset up a new joint venture.

Qatars biggest sovereignwealth fund, the QatarInvestment Authority, and theQatar Financial Centre (QFC)

Authority, a government agencyaimed at boosting the countrysfinancial services, are hopingthe investment will help topromote Doha as a financialcentre.

As part of the deal, BarclaysNatural Resources Investments(BNRI) will open up a new officein Doha under the auspices ofthe Qatar Financial Centre.

QFC managing directorAbdulrahman Ahmad Al-Shaibi

Qatar hands Barclays $250m to

promote Doha as financial hubBY JULIET SAMUEL called the agreement animportant milestone in Qatarsstrategy of developing an assetmanagement hub and promotingthe expansion of Qatarsfinancial services industry.

The $250m in new capitalinvested with Barclays willmostly be ploughed into BNRIslarger $2.1bn pool of assetsunder management, which areinvested in energy and resourcescompanies across variousregions including the MiddleEast, Eastern Europe and Africa.

The Qatar InvestmentAuthority has been amongBarclays biggest shareholderssince the depths of the financialcrisis, when the bank made anurgent appeal for capital that

was met by Middle Easternsovereign wealth funds.


Aberdeen, led by Martin Gilbert, won fund managers prize at the 2011 City A.M. awards

THE owner of Yorkshire andClydesdale banks has blamed itsdecision to cut 1,400 jobs on a Britishrecovery that is longer and slowerthan the period after the Depression.

National Australia Bank said itwould take charges of $740m(474m) after the shake-up, whichfollows the Eurozone slump,Britains flagging economy and adouble dip in the commercialproperty market.

NAB said it would concentrate on

NAB: British recovery is worsethan years after the Depression

BY PETER EDWARDSretail operations and lending tosmall and medium-sized enterprisesin the northern England andScotland after its British bankingarm posted a cash loss of 25m forthe six months of 31 March,compared to a 77m profit in the

same period last year.NAB chief executive CameronClyne said the bank never received aformal offer for Yorkshire andClydesdale. Overall the group saidfirst half cash earnings were seen atA$2.82bn up 5.7 per cent on-year, inline with analysts expectations.

FSA seeks 100m for investorswho lost out in Arch cru freezeTHOUSANDS of investors who weremis-sold Arch cru funds are in line

for an extra 100m compensation.The Financial Services Authorityhas used new powers to set up thescheme after investors seeking low-risk products ended up withhigh-risk assets such as shippingand venture capital. Arch crushareholders were locked into

BY PETER EDWARDSlosses when the funds weresuspended in 2009 due to morewithdrawals than they could meet.

The regulator has launched a

three-month consultation onsetting up the redress scheme for anestimated 15,000 investors whowere mis-sold the CF Arch cruInvestment and Diversified funds byseveral hundred high streetfinancial advisers.

Firms would have to contact their

customers within four weeks of thescheme coming into force.

The firms would have to workout, using an FSA calculator, how

much money each investor shouldreceive within a few months, takinginto account any money alreadyawarded last year, when threegroups involved in administering thefunds Capita Group, Bank of NewYork Mellon and HSBC agreed tocontribute 54m in compensation.

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THURSDAYS mayoral election is set

to go to the wire, with Boris Johnsonhaving a narrow advantage as thecampaign enters its final days.

Yesterdays YouGov poll gives theConservative candidate a 5248 leadover Labours Ken Livingstone oncesecond preference votes are takeninto account. This is a slight increaseof two points on the companysprevious poll and could still beovercome.

Commenting on the findings aspokesman for Ken Livingstone said:The election is neck and neck andgoing all the way to the final votecast on Thursday.

On first preference votes Johnsonhas a narrow lead of 44 to 41, withLiberal Democrat Brian Paddick onsix per cent.

But when Paddicks votes arereallocated more than 70 per cent goto Johnson, pushing him close to

victory.In an election dominated by

candidates personalities perhaps themost telling finding was that over athird of voters would like to go for adrink with Johnson but 16 per centwant to have a pint with Livingstone.

However, polling can be an inexactscience: a survey by Populus lastnight put Johnson a whopping 12points ahead of Livingstone,forecasting him to win 56 per cent ofthe final vote.

Election neckand neck with48 hours to go

BY JAMES WATERSON

REUTERS

MAYOR Boris Johnson has expressedserious concern about long immi-gration queues at Heathrow airportand demanded to know how the UKBorder Force will ensure that delaysare kept to a minimum during theOlympics.

In a letter to home secretaryTheresa May the mayor said the cur-rent situation at Heathrow gives a

terrible impression of the UK to newarrivals.

Passengers have complained ofqueues lasting up to three hours atEuropes busiest airport, a result of astricter passport checks and reducedstaffing levels.

It is extremely unfortunate that,in a time of economic difficulties,when I as Mayor and the governmentare working so hard to attractinward investment to London andthe UK, that our main port of entry is

Boris demandsHeathrow ends

customs chaosgaining such a poor reputation,Johnson wrote.

He goes on to say that 80 per cent ofvisitors to this summers Olympicsare expected to arrive through theairport, pushing the number of pas-sengers up by 45 per cent from 95,000to 138,000.

The government is attempting toreduce the number of Border Forcestaff by around a fifth from 2010 to2015 but unions suggest that this hasaffected the organisations ability tomeet expected levels of service.

Leaked emails, released at the week-end, show Border Force officialsdemanding that airport operatorBAA cease distributing leaflets that

apologised for the delay and suggest-ed they complain to the Home Office.

Neil Carberry of the CBI said thedelays could affect Britains ability toattract investment: Heathrow is thefirst impression that nearly 70m busi-ness people and tourists have of theUK. An efficient Heathrow is essentialto the UKs reputation as an attractiveplace to do business.

Heathrow handled 15.7m passen-gers in the first three months of 2012,up 4.4 per cent year-on-year.

KEN Livingstone yesterdaylaunched his final push to beelected Mayor of London under

the slogan Dont let the Tories getaway with it.

Narrowly behind in the polls,his campaign now hinges on hisability to woo back traditionalLabour voters who are intendingto back Boris Johnson.

Tory fare hikes, Tory recession,Tory police cuts, Tory scandal overphone-hacking all mean we needLabour values and a Labouradministration in London,Livingstone said, attempting to pin

Ken pins his hopes on anti-Torysentiment ahead of polling day

BY JAMES WATERSON the Conservatives national woeson its mayoral candidate.

Livingstone was speaking at thelaunch of a poster portrayingBoris Johnson and David Cameron

as aliens from a different planet,intended to suggest that theConservatives are out-of-touch

with ordinary Londoners.But when City A.M. showed

Boris Johnson the poster he said:Ken Livingstone had a derangedplan to spend tens of millions on aLondon Space Agency which I hadto cut to save taxpayers money. Soif anybody represents the party ofextra-terrestrial life its KenLivingstone.


Livingstone yesterday unveiled a poster entitled The Tories are on a different planet

BY JAMESWATERSON

MAYORALELECTION

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SIR Martin Sorrell, the chief executiveof advertising giant WPP, saw his over-all pay package jump a whopping 60per cent to 6.77m last year.

Sir Martins base salary rose 30 percent to 1.3m, and he also pocketed a2m cash bonus, up from 1.9m lastyear.

His deferred share bonus more thantripled to 3m and he was awarded459,000 in other benefits.

More than four in ten shareholdersvoted against WPPs pay plans at lastyears shareholder meeting, and themedia group could be on course for afresh investor bust-up at its 2012 AGMnext month with this fresh hike.Jeffrey Rosen, chairman of WPPs

compensation committee, highlight-ed in the companys annual reportthat this is only the second time SirMartins salary has been increased inthe last ten years.

The committee recognises that thesubject of executive compensation isparticularly contentious in the cur-rent political and governance envi-

ronment, Rosen said.Pre-tax profits at the advertising

Martin Sorrellpockets 60 percent rise in pay

BY LAUREN DAVIDSON group soared past 1bn for the firsttime last year, increasing by 18 percent as revenues grew 7.4 per cent toan unprecedented 10bn.

Sir Martin, who turned basket firmWire and Plastic Products into media

behemoth WPP over years of acquisi-tions, also received 585,000 for hispension pot.The chief executives maximum pos-

sible bonus was increased from 300per cent to 500 per cent of his salary.The report noted that WPP is now aconsiderably larger and more complexorganisation than in 2007, when SirMartins salary was last reviewed.WPPs shares dropped by 1.2 per

cent, or 10p, to 833.5p.

Sir Martin Sorrell, the chief executive of WPP, was paid a base salary of 1.3m last year

WPP PLC


840

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again on the retail banking operationwhere the tendency for huge bonusesis far less.

On the investment banking sideBarclays has always been strong infixed income, currencies and com-modities trading (FICC); it is on theequities side, where there is moremedia focus, that it is trying to catchup with its rivals.To this end it bought Lehman in the

US after the crash and in Europe hasbeen recruiting heavily, most recentlypoaching the Bank of America MerrillLynch head of corporate broking inthe UK, Mark Astaire.

In its first quarter resultsannounced last week, income fromthe investment banking business rosethree per cent, on strength in the

perennial favourites: debt, currencyand commodities trading. The equi-ties business fared less well, withsome services such as equity under-writing continuing to face pressurefrom the economic troubles inEurope. Barclays has massivelyincreased its presence in M&A adviso-ry, rising to fourth in global and thirdin Europe, Middle East and Africa(EMEA), according to ThomsonReuters, but in a quiet market that

doesnt always translate into profits.If the market for corporate activity

does fester, with the feared renewal ofEurozone troubles, Barclays will con-tinue to be saddled with high head-count costs during a period of slackbusiness. But it will be shelteredsomewhat by the fact that mostremuneration packages will be flexi-

ble and therefore lower if businessdoesnt take off.Whatever the concerns, as long as

Diamond is involved, my view is thatBarclays will not be deflected frompushing on with its investment bankambitions.

Like the captain of the team he sup-ports, John Terry at Chelsea,Diamond is known for fighting everharder when he is most under pres-sure. He is not one for turning.

OIL PLOT THICKENSIN the past few weeks a number offinancial advisers have beenpresenting the case for the chance toadvise Ruspetro, the Russian oilgroup that floated in London at thebeginning of the year.

Since the January IPO, the shareshave risen 57 per cent and the compa-

ny, which might need some financialrestructuring in the near future, isseen as one with growth potential.

Bank of America Merrill Lynch,which advised on the float, is fightinghard to get a broking mandate. But itis facing tough competition fromRBC, Barclays, Credit Suisse, JefferiesHoare Govett and Mirabaud.

INSIDETRACK

DAVID HELLIER

Barclays wont let pay row deflect it from broader goal

[email protected] me on Twitter: @hellierd

BARCLAYS Banks objective tohave an investment bankingoperation as successful inequities and advisory as

Deutsche Bank or any of the otherbulge bracket firms is constantlybeing questioned, both by rivals andby analysts and shareholders.

Some say the bank will bottle it as

costs get out of control; others saythat franchises have already beenbuilt up so solidly by rivals that it isvirtually impossible to break in.

So last week, as the bank facedmounting controversy over the payawards to some of its top executives,but most notably CEO Bob Diamond,some shareholders questioned thebanks strategy, asking whether itwould not be prudent to retreat a lit-tle in the grand design to focus once

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THE parent company of the Hong

Kong Stock Exchange yesterdayconfirmed that it is considering abid for the London Metal Exchange(LME), which is estimated to beworth between 500m and 1.5bn.

The board confirms HKExcontinues to participate in thatprocess and understands it is one ofa number of interested partiesstudying this opportunity, HongKong Exchanges and Clearing said.

LME, which handles around 80per cent of global futures trading inindustrial metals, is a top target forHKEx after it declared an ambitionto increase its involvement incommodities trading.

The 135-year old LME has set a 7May deadline to submit secondround bids and CME Group, NYSEEuronext and the InterContinentalExchange are all though to beinterested.

LME currently has annualrevenues of just 50m and wasrecently forced into a partial climb-down on a new trading fee it hadplanned to charge users.

HKEx considersbid for LondonMetal Exchange

BY JAMES WATERSON

GETTY

SPECIALIST recruiter Harvey Nashreported a surprise increase in rev-enues from its financial servicesbusiness yesterday, boosting the firmto an overall 26 per cent revenue risefor 2011.Total turnover at the firm, which

focuses on technology and IT servicesroles, rose to 533m from 422m lastyear, lifting operating profits by 41per cent to 9m.

Chief executive Albert Ellis put thefirms success particularly in thestruggling financial services sector down to its new City offices, which itopened last year having traditionallyoperated from a West End base.

Our proximity has allowed growthdespite banks margins beingincreasingly under pressure, Ellistold City A.M. But he admitted the hir-

ing that Harvey Nash was seeing wasnot in the traditional investmentbanking roles, but in temporary

Nash bucks recruitmentwoe with revenue jump

BY ELIZABETH FOURNIER roles on short-term projects, and con-tinual hiring across regulatory riskand compliance.

In the year to 31 January, the groupwon market share across its Nordicbusinesses and in the UK, leading to arevenue increase of 19 per cent in itsdomestic market.

In a trading update in February,Harvey Nash cautioned that its expec-tation for the coming year had beenrevised as its clients shied away fromhiring permanent staff in the face ofongoing Eurozone turmoil.

Ellis said yesterday that he expectedmarkets to remain flat over the nextsix months, with some companiesincreasingly squeezed as credit linedry up.

But he was more bullish on thebanking sector going into the fourthquarter of this year, expecting areturn to growth as concerns over the

Eurozone stabilise.Though banks are reducingabsolute headcount, theyre also

reshaping the chape of their work-force, he said.

Internet banking and technologyare cannibalising branch staff, but asa result more and more firms areinvesting in technical staff.As a result of several European com-

panies relocating their emergingmarkets practices to Asia, the firm islooking to continue expansion there,with office openings planned in bothHong Kong and Sydney in the comingmonths.

Harvey Nash Group PLC


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RSM Tenon loses new chairmanBY ELIZABETH FOURNIER

TROUBLED accountant RSMTenon lost its second chairmansince the start of the year

yesterday, after Adrian Martintold the board he would stepdown as soon as a successor wasfound.

Martins deputy, MichaelFindlay, will also leave the boardat the end May to rejoin Bank of

America Merrill Lynch.RSM Tenons previous chairman

Bob Morton stepped down inJanuary, along with its chief

executive Andy Raynor, after thefirm issued a profit warning andit has since had to restate itsaccounts to reduce its pre-taxprofit for the previous year, dueto "significant errors and changein accounting policy.

Yesterday RSM Tenon said in astatement: Having established anew management team, this is anopportune moment for a newchairman to take the companyforward over the long term.

The company appointed Chris

Merry as its new chief executivein February.

GUY Hands private equity house hassealed a long-awaited deal to buyFour Seasons Health Care in a dealworth 825m.

Terra Firma will take a largemajority stake in the market leadingcare home operator, which hasaround 24,000 beds.

Four Seasons had been tradingprofitably but needed to refinanceits 780m of debt before aSeptember deadline. Yesterdays dealis expected to close by 16 July, atwhich point all Four Seasonsliabilities will be repaid in full. TerraFirma is backingits deal with anew, smallerdebt package,

being arrangedby GoldmanSachs andBarclays.

Royal Bank of

Scotlands 40 per cent stake, whichit has held since a debt-for-equityswap in 2009, will be cut to betweentwo and four per cent, it isunderstood.

Hands, the chairman of TerraFirma, pictured, said the deal hadbrought stability to Four Seasonsand quality of care was the numberone priority.

Unions spoke of their concern,however, about private equity. JustinBowden, GMB national officer,demanded meetings withgovernment and Terra Firma.

Residents, their families and staffwill want to know how the financialnumbers stack up and how the debtsget refinanced for a stable future.

Failed care home operatorSouthern Cross was owned by

Blackstone for three years to 2007although the buyout firm hasfiercely defended its role.

DOUGHTY Hanson will create one ofSpains largest private healthcarefirms after agreeing to buy 40 percent of Grupo Hospitalario Quirnfrom the Cordon Muro family. It didnot disclose the value of the deal,which comes two months after itagreed to spend 355m on USPHospitales. Doughty will bring the

two firms into one group, in which itwill have around 60 per cent stake.

Doughty doesSpanish deal

BY PETER EDWARDS


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Hands: we have brought stability

Hands promises notto rock the boat at

825m Four SeasonsBY PETER EDWARDS

HOME-OWNERS will this morningbe hit by a wave of hiked interestrates from some of the countrysleading lenders, despite the Bank ofEnglands loose monetary policy.

Standard variable rates (SVRs)will shoot up for over a millionmortgage holders, tightening the

squeeze on incomes even further.Yorkshire Bank and Clydesdale

Bank will increase their SVRs from4.59 per cent to 4.95 cent, while theCo-operative Bank and Britannia

BY JULIAN HARRIS will lift theirs from 4.24 per cent to4.74 per cent.

The Halifaxs SVR will rise from3.50 per cent to 3.99 per cent.

And it is not just SVR mortgagesthat are climbing. The average two-

year tracker rate has edged up to3.62 per cent so far this year,according to the Moneyfacts

website, from 3.39 per cent in the

final month of 2011.The average fixed two year rate

has also jumped, measuring 4.6 percent in April, up from 4.24 per centin December.

Standard variable rates at many lenders will jump today

Mortgage costs on the rise evenwith Bank rate anchored down

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RETAIL sales plummeted again inGreece in February, official figuresrevealed yesterday, but increased inGermany, underlining the growingdivergence between the core andperipheral Eurozone economies.

Greek sales fell 13 per cent in theyear to February, the fifthconsecutive fall and an even sharperdrop than the 10.6 per cent seen theprevious month, according toELSTAT.

The country is now in its fifth yearof recession, with GDP expected toshrink by at least four per centthrough 2012.

Meanwhile German retail salesrose 2.3 per cent in the year toMarch, and 0.8 per cent in themonth a weak rise by its standardsbut far outshining the sharp falls inGreece.

The year-on-year comparison rateis steadily rising, said BerenbergBank economist Christian Schulz.

However, against the backgroundof unemployment at its lowest sincereunification, falling headlineinflation rates and a pick-up in wagegrowth, German consumptionremains relatively weak, reflecting awidespread lack of confidence.

Greeces retailsales down as

Germanys riseBY TIM WALLACE

GETTY

THE SPANISH economy shrank againin the first quarter of this year,according to official estimates pub-lished yesterday, making it the eighthEurozone member to fall into reces-sion.

Meanwhile ratings agency Standardand Poors downgraded 11 Spanishbanks, following its downgrade of thestate last week from A to BBB+.

GDP fell 0.3 per cent in the firstquarter, repeating the decline seen inthe final quarter of 2011 and takingthe country into its second recessionin just over two years.

This behaviour was due to the neg-ative contribution by domesticdemand, partly compensated by thepositive contribution of foreigndemand, said statistics agency INE.The economy is now 0.4 per cent

smaller than it was in the first threemonths of 2011, and the government

Spain back in

recession as itsausterity bites

BY TIM WALLACEforecasts it will contract by a total of1.7 per cent this year, before returningto growth of 0.2 per cent in 2013.

Economists believe the countryshousing boom and bust will continueto drag down GDP, as will the fiscalconsolidation programme which ledto further protests over the weekend.

The recession will almost certainlydeepen in the coming quarters, push-ing unemployment to even more dra-matic highs, said ING analyst Martinvan Vliet.

Standard and Poors also fears thebanking system is weak and lacking insupport, downgrading the ratings of11 banks including Santander yester-day and putting another four on nega-tive ratings watch as the governmentis less able to bail them out.The government told banks to keep

an extra 54bn (44bn) to cover badloans, and is thought to be mullingthe establishment of a bad bank totake toxic loans off banks hands.

Lending to governments surgesbut private firms left in the coldGOVERNMENTS could be crowdingout the private sector in the

competition for credit, the latestofficial Eurozone statistics suggest.Data released by the European

Central Bank (ECB) show that whilelending to governments is surgingon the continent, lending to privateentities is either shrinking orstagnant.

The numbers seem to confirmthat the ECBs massive 1 trillionliquidity injection served mainly asa way of bringing downgovernment borrowing costs,rather than stimulating economic

BY JULIET SAMUELgrowth more broadly.

They show that credit extended togeneral government grew 7.3 percent in March, an acceleration

compared to January and February,when it grew 4.3 per cent and 5.6 percent respectively.

By contrast, credit extended toevery other Eurozone inhabitant hasbeen sluggish: it grew 0.5 per cent inMarch, following 0.7 per cent and 0.4per cent growth in January andFebruary. For loans specifically, thepicture is bleaker: loans to non-financial corporations shrank by 0.4per cent in March.

Howard Archer, an economist atIHS Global Insight, said that the

dataset fuels concern that the 1trillion loaned to European banks bythe ECB... is not feeding through toboost lending to the private sector

at least for now.By contrast, some of the moneysupply data accompanying thelending figures was cause forglimmers of hope, according toHendersons Simon Ward.

It showed broad money currency and overnight deposits increasing by 1.3 per cent in March.Ward said money supply isimproving at the margin,suggesting that the new recessionacross the continent might be overby the end of the year.

FRENCH President Nicolas Sarkozy has narrowed the gap between him and Socialistrival Francois Hollande with a week to go in the elections, according to the latest poll byIpsos-Logica. Sarkozy trails with 47 per cent o f the vote compared to Hollandes 53 percent, but has gained one percentage point since the last poll.

IN BRIEF

Survey points to slower US growth

n US government debt prices roseyesterday as anxiety over economicweakness in Europe and slowinggrowth in the United States ledinvestors to favour lower-riskinvestments over stocks and otherrisky assets. A weaker-than-expectedprivate report on business activities inthe Chicago region in April fuelled

jitters that the world s biggesteconomy is experiencing a springdeceleration for a third straight year.The Institute for Supply Management-Chicago said its index on upperMidwest business activity fell to 56.2 inApril, the lowest since November2009.

Swiss National Bank posts a loss

n The Swiss National Bank posted a

first-quarter loss yesterday due in part to

a stronger Swiss franc, underscoring thechallenge it faces in curbing the gains ofa currency which is attracting investorsseeking a safe haven amid the Eurozonedebt crisis. The central bank said it madea consolidated loss of 1.7bn Swiss francs(1.15bn) in the first three months of2012. The franc climbed 9.6 per cent ver-sus the yen and 3.8 per cent against theUS dollar over the period, eroding thevalue of the SNBs foreign exchange

holdings.

Stubborn inflation hits Eurozone

n Price pressures stayed high in the

Eurozone in April in the face of a likelyrecession, official figures showed yes-terday, keeping interest rate cuts off theagenda for an ECB seeking ways ofreviving economic growth within itsinflation mandate. Consumer pricesmoderated to 2.6 per cent from 2.7 percent in March.

SARKOZY NARROWING GAP ON HOLLANDE

TUESDAY 1 MAY 20129NEWS

cityam.com

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ACCOUNTANT KPMG has beenforced into an embarrassing apolo-gy to staff after the company failedto pay its staff on time.

In an ironic twist, KPMG whichis accustomed to dishing outadvice to firms on how to managetheir own accounting systems has been caught out itself after anadministrative blunder left stafffuming.The company, one of the UKs so-

called Big Four accountants, paysits 10,000 staff on the 29th of eachmonth but if that falls on theweekend then the money is paidthe Friday before.

However, this month that did nothappen after human error left

some workers facing unpaid directdebits and other financialheadaches.

One London staff member toldThe Capitalist: We are supposed tobe an accountancy firm giving outadvice to people. This does not lookgood.

People have mortgages to payand direct debits come out of theiraccounts, which has caused prob-lems for some people. We are nothappy about this.The official KPMG apology issued

on Friday said: As you may alreadybe aware by now employees havenot been paid as expected today(Friday). An error has been madeand the transaction has been sub-

mitted today and will reach indi-vidual accounts by Monday.

A KPMG spokesman told theCapitalist that any employee facingdifficulty because of the errorshould contact the firms financedepartment.

He added: We have apologisedand this was down to humanerror.The company says in a promo-

tional blurb on its website: Ourinnovative spirit inspires what wedo and how we do it, providingvaluable benefits for clients,employees and stakeholders.

Perhaps staff would settle for lessinnovation and more being paidon time instead.

Red-faced KPMG says sorry

for internal payments error

Greg Secker, the foreign exchange trader and coach, is taking to the skies again to raise money for childrens charities. Seckeris holding six more Flying Trader days (hes already had one) with a view to raising around 250,000. Secker flies aboveLondon while trading and passing on tips to an audience of traders, with all commissions donated to charity.

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cityam.com/the-capitalistTHECAPITALISTOdds have shortened dramatically onGoldman Sachs Jim ONeill (pictured)

becoming the next governor of the Bank ofEngland, according to bookmakers PaddyPower.ONeill, who is known for giving the

acronym BRICS to the emergingcountries, including Brazil, Russia andChina, was at 20/1 before a weekendnewspaper report led to a flurry ofbets being put on him. PaddyPower has since slashed theodds to 5/1.The favourite remains thecurrent Bank deputy

governor Paul Tucker, whose odds are 3/1.Former Barclays chief executive John Varley issecond favourite at 7/2, followed by FSAchairman Adair Turner.

Standard Chartered chief executive PeterSands is steady at 20/1, even though he

ruled himself out of the running to CityA.M. The thinking must be that if he wonthe race, he would ultimately find it a job

too tempting to turn down.Harry Redknapp, who appears tohave failed to land the Englandmanagers job is at 500/1. Fred

Goodwin, meanwhile, is at300/1.

TUESDAY 1 MAY 2012

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THE ROLLOUT of superfast mobilebroadband will boost the UKs econ-omy and stimulate a chain of invest-ment, according to CapitalEconomics.

Research commissioned by tele-coms giant Everything Everywhere,the UK hybrid of Orange and T-Mobile, suggests that the latest gen-eration of mobile network called4G will necessitate a 5.5bndirect private sector investment inthe UK over the next few years.This compares with the 7.2bn

total budget of the Olympic DeliveryAgency, responsible for buildingvenues for the Games, as a sizeableprivate investment in UK infrastruc-ture.

Given the recent slump whichhas seen investment by the privatesector drop quite dramatically, thisis quite a significant amount of cap-ital expenditure report authorMark Pragnell told City A.M.The UK rollout of 4G is also expect-

ed to save UK workers 37m hours ayear as a result of increased down-load speeds and a greater penetra-

4G set to boost

economy andUK investmentsBY LAUREN DAVIDSON tion of mobile devices.

The time cutbacks are estimated toamount to a saving of 75bn over thenext decade.

Capital Economics also claims thesuperfast mobile network will createor safeguard 125,000 jobs in the UK.

Pragnell said: The introduction of4G mobile broadband will createsubstantial long-term benefits forthe economy and consumers. It willkick start a new cycle of investmentand innovation.

4G is the next generation of mobileconnection. It will deliver signifi-cantly faster download speeds,enhancing mobile internet useincluding email services, high defi-nition video streaming and onlinegaming.

Ofcom will be auctioning 4G-readyspectrum later in the year, butEverything Everywhere could rollout the superfast network beforethen if the communications watch-dog approves the use of the telcoscurrent 1800MHz spectrum for 4G.

Everything Everywhere is pushingfor an imminent rollout of 4G tobring the UK up to speed with the USand several European countries.

IN BRIEF

Adidas outperforms rivals in China

n Shares in Adidas jumped to a recordhigh yesterday after the sports brandraised its 2012 profit forecast as itoutperformed rivals Nike and Puma inthe key Chinese market. Adidas saidsales in China increased 26 per cent inthe first quarter, sending shares up fiveper cent to 63 (51.30) as investorsshrugged off the companys warningthat commercial irregularities at itsReebok unit in India could cost it almost200m.

Deadline for Goals bid extended

n Goals Soccer Centres, which runs five-a-side football centres across the UK,said yesterday it had extended the dead-line for Ontario Teachers' Pension Plan tomake an offer for the company. Goals

confirmed at the start of April that it hadbeen approached by the Canadian pen-sion fund, which also owns Camelot, theNational Lottery operator. UnderTakeover Panel rules, a deadline of 30April was set for the fund to make a bidor walk away but this has been extendedto 14 May. Goals reported an 11 per centincrease in underlying profits in 2011 to13.8m and is currently valued at around62m.

Energy Transfer to buy Sunoco

n Pipeline operator Energy TransferPartners has agreed to buy Sunoco for$5.35bn (3.30bn) to get into the morelucrative crude oil transportation busi-ness. Energy Transfer Partners is paying a22.5 per cent premium over Friday's clos-ing share price.

A HIKE IN the cost of stamps cameinto force yesterday, as the RoyalMail attempts to offset decliningmail volumes and stem its losses.

The cost of a first class stamp

has increased by almost a third to60p, while the price of a secondclass stamp has jumped 14p to50p almost double what thestamps would have cost in 2000.

Royal Mail, which announced theprice rise last month, defended themove, saying it was necessary tokeep its six-day universal postalservice and cover fuel costs.

We know how hard it is forhouseholds and businesses when

Royal Mail defends stamp pricehike as rises come into full force

BY KASMIRA JEFFORD our economy is as tough as it isnow. No-one likes to raise prices inthe current economic climate but,regretfully, we have no option,chief executive Moya Greene saidat the time of the announcement.

The company has lost 1bn over

the last four years, including a120m loss in its letters businesslast year, due to a 25 per centdecline in mail volumes since 2006thanks to the popularity of emailsand texts.

Meanwhile the number ofdelivery addresses has risen from27m in 2003 to 29m today,meaning postal workers areposting less mail to morelocations.


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ECONOMIC AND SOCIAL BENEFITS OF 4G IN THE UK

The next generation ofmobile network called 4Gwill deliver significantlyfaster download speedsfor an enhanced mobileinternet exprience.

37MILLIONwork hours will be saved

each year

Source: Capital Economics

125,000jobs will be created

or safeguarded10 million people

who cant acccess

fixed line superfast

broadband will be

served by 4G

5.5 billiondirect private

sector investment

by mobile

network operators

Benefits from time

savings will amount

to an extra 75bn

of national output

over the next ten years

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NYSE Euronext admitted yesterdaythat its profits fell by almost a thirdin the first quarter due to aslowdown in trading and costs fromits failed merger with DeutscheBoerse.

The New York exchange saidprofits were down 32 per cent to$121m (74.6m) as revenue fell 17per cent to $952m in the first threemonths of the year.

Our first quarter results reflectthe challenging operatingenvironment which carried overinto 2012 and will continue toresult in near-term headwinds, saidchief executive Duncan Niederauer.

The exchanges derivativestrading unit was hardest hit, withtrading activity at its London-basedexchange Liffe down 28 per cent forthe period, as derivatives revenuefor the group fell a quarter to$176m.

Share trading and listings weredown seven per cent to $304mwhile NYSEs smaller technologyand data business was up four percent to $121m for the quarter.

The New York bourse also said itincurred $31m of merger and exitcosts, including $16m from itsfailed merger with Deutsche Boerse.

NYSE canned the $7.4bn mergerin early February after the deal wasrejected by European antitrustauthorities.

The exchange has since refocusedits attention on new market

opportunities and pledged to createits own clearing house for futurestransactions, moving away from itscurrent provider LCH.Clearnet.

NYSE Euronextpays price forfailed merger


GETTY

ANHEUSER-BUSCH Inbev, the worldslargest beer maker, just missed first-quarter earnings expectations as thecost of expansion in Brazil offset itsfirst increase in US beer sales inthree years.

The maker of Budweiser, StellaArtois and Becks said yesterdayeconomic trends were improving inthe United States, the worlds mostprofitable beer market, withunemployment falling andconsumer confidence rising.

But it said a one per cent rise involumes there was largely theresult of mild winter weather, andpredicted softer US shipments inthe second quarter.

They are saying Dont getcarried away. I reckon that flat [USvolumes] for the full year would bea good result, said AndrewHolland, beverage analyst at SocitGnrale.

Core profit rose 7.4 per cent to$3.55bn (2.19bn) in the quarter,compared with analyst forecasts of$3.58bn. Revenues increased 3.7 percent to $9.33bn.

AB InBev, which makes around

90 per cent of its profit in theAmericas, is relying on the fast-growing Brazilian market and apolicy of price hikes and trading up

AB Inbev sees

US sales rise asBrazil costs bite

BY HARRY BANKS to premium brands in the UnitedStates, where revenues have riseneven while volumes have fallenagainst a tough economic backdrop.

We see improved trends andmarket share trends for the brandsof our portfolio... We see a market[with] improving overallconditions, chief financial officerFelipe Dutra told a conference call,referring to AB InBevs USoperations.

The group said a rise indistribution costs in Brazil as itexpands, notably in the northeast ofthe country, pressured profitmargins there, along with largerthan normal state VAT increases.

AB InBev has almost 50 per centof the beer market in the UnitedStates, the worlds second biggestafter China, and nearly 70 per centin Brazil.

SHOULD BORIS BE GIVEN POWER TORUN THE COMMUTER TRAINS?Interviews by Lauren Davidson

I dont think the Mayor of London should beextended that kind of power. Hes already gotplenty to sort out with Transport for Londons

current services. Then again, he could be a good independ-ent counterbalance to the current operating companies.

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

NICK CUMMINSMIKI TRAVEL

Yes, hes done a good job with the Boris Bikes.

An integrated transport system is a more effi-cient way to run things it might mean trains

will be able to run later, or if theres a problem it will beabsorbed more easily by a bigger operating group.

NICHOLAS SCANLON

SUMITOMO MITSUI BANKINGCORPORATION EUROPE

Yes. Boris has already done very good things,like extending the Oyster Cards reach to beused on Overground trains. A holistic service is

more efficient there are already many shared stations and the economy of scale means it will bring down costs.

ROBIN STRONGFIDESSA

Stagecoach signs alliance withNetwork Rail to improve serviceSTAGECOACH yesterday announced

a tie-up with Network Rail aimed atimproving its services into Waterloo.The alliance will create a single

team responsible for track andtrains on its Wessex route with theaim of keeping costs down andimproving punctuality.

It is the first time that NetworkRail which ordinarily looks afterthe railway infrastructure hassigned such a deal with a trainoperator.

Stagecoach South Western Trains(SSWT) runs services from Waterloothrough Surrey and on to counties

BY JOHN DUNNE including Devon.A main advantage of the deal will

be that works on the line can be

scheduled to cause the minimuminconvenience to passengers,according to the two organisations.

Sir Brian Souter, chief executiveof Stagecoach, said: This newmodel is a real opportunity todeliver change that will benefitboth passengers and taxpayers andsupport our objective of growingthe railway. We can deliver a morecustomer-focused and moreefficient railway for the long-term.

Employees of the two companieswill continue to be contracted totheir parent firms.

The managing director of thenew operation will be TimShoveller, who currently runs SSWT,

the UKs biggest commuter railfranchise.

CITYVIEWS

Anheuser Busch Inbev SA


54.5

54.0

55.0

55.5

56.0

56.5

54.4530 Apr

A TRADE union has lashed out atgovernment plans to liberaliseSunday trading laws during theOlympics, saying that shop staff

would be forced into workinglonger and less sociable hours anargument dismissed by retailers.

The Usdaw union has said plansto allow wider Sunday trading foreight weeks, starting from 22 July,are being rushed.

The vast majority of shop-workers dont want to work extrahours on a Sunday and they quiterightly blame their increasinglydifficult struggle to maintain a

semblance of normal family life onthe twin demands for moreflexibility and unsocial workinghours, Usdaw said.

Union aims fire at relaxation ofopening hours for the Olympics

BY JULIAN HARRIS Yet the British Retail Consortium(BRC) denied the allegations,arguing that the Sunday tradingliberalisation in 1994 providedextra work opportunities,particularly for part-timeemployees. The notion thatSunday trading means thatemployees are forced to worklonger is not borne out by thefacts, a spokesman said yesterday.

Retailers are divided over plansfor further relaxation of tradingrestrictions, but some analysts

want the coalition to go evenfurther. Politicians should not beasking whether the restrictionsshould be relaxed for the Olympics,

but whether they should be doneaway with altogether, commentedProfessor Len Shackleton from theInstitute of Economic Affairs.

INDUSTRIAL production slowedsharply in South Korea in March,official data showed yesterday, asthe weak global economy hit thecountrys exporters.

Output growth slowed to just0.3 per cent on the year to March,far below the 2.2 per cent forecast

by economists.Production fell 0.3 per cent in

South Korean exporters hit bythe sluggish global economy

BY TIM WALLACE the month to March, comparedwith 0.6 per cent growth in themonth to February.

Falling demand from the EU wasa major shock at the end of 2011,and analysts believe exports toChina may help shore up thesector through 2012.

However, that is far from certainto come about, and so the central

bank may ease further to boostgrowth.

TAIWANS economy edgedout of recession in the firstquarter, but in a sign thatAsias exporters are notquite out of the woods yet,the government cut its full-year forecast for a fourthtime and flagged an

increased inflation risk.After two quarters of

contraction, the economygrew 0.26 per cent in thefirst quarter, markingwhat is likely the bottomfor the current businesscycle.

But the governmenttrimmed its growthforecast for 2012 to 3.38per cent from 3.85 per

cent, showing thatrecovery will be uneven.

Taiwan slowly pullsout of short recession



Shops could be allowed to open for longer on Sundays during the Olympic Games

Stagecoach Group PLC


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IN BRIEFHunting sells Canadian air arm

n Energy services company Huntingyesterday reported that it hadoffloaded its Canadian airportbusiness in a 7.5m deal.A consortium of investors has boughtthe unit, which also includes FieldAviation. The Amavco consortium ismade up of managers already in thebusiness and amounts to amanagement buyout. London-listedHunting has agreed to defer 1.9m ofthe payment until 2018 at an interestrate of eight per cent a year.

Fidessa pumps in research funds

n Software provider to the financialservices industry Fidessa yesterdaysaid trading conditions remainedtough despite reporting growth in thefirst quarter of 2012. The company

said it was pumping money intoresearch and development. It said inthe update covering the three monthsfrom January: Fidessa continues tohave a strong balance sheet withstrong reserves, no debt, strong cashgeneration and substantial levels ofrecurring revenue.

Creston back on track after cuts

nMarketing firm Creston said yester-day it had bounced back after issuing aprofit warning in January. It hasreduced operating costs in a move toget back on track. Pre-tax profitsbefore exceptionals in the year toMarch 2012 should hit forecasts whilerevenues were around 75m 11 percent up on the previous year. The com-pany said its acquisition of the CorkeryGroup was paying off.

AMERICAN oil explorer Anadarkosaid last night it earned a larger-

than-expected quarterly profit as itincreased output of crude oil andother liquid hydrocarbons.

Anadarkos first-quarter profitsurged to $2.16bn (1.33bn) from$216m a year earlier, thanks tohigher production coupled with one-off items including a favourable taxruling. Revenue grew six per cent to$3.45bn, which also came in higherthan analysts forecasts.

First-quarter oil-equivalent salesvolumes rose by 14,000 barrels perday on the year-ago quarter to704,000 bpd. This was driven by anincrease in its liquids volumes to301,000 bpd.

Anadarkobeats profitexpectations


MINER Aquarius Platinum yesterdayposted a net loss for the third quar-ter, hit by weaker prices and a dropin production on the back of poorground conditions, continuing safe-ty stoppages and worse than usualabsenteeism after the Christmas hol-idays.The company, which has been hit

along with the rest of the sector by adramatic increase in Section 54temporary mine closures on safetygrounds, posted a net loss of $9.4m(5.7m) for the quarter to the end ofMarch, a drop of $34.7m comparedto the same period last year.The firms shares dropped ten per

cent on the disappointing figures.Safety-related stoppages cost the

South African platinum sector300,000 ounces last year in lost out-put -- about five per cent of globalproduction.

But the department of mineralresources has said the industry needsa shake-up to cut deaths in the coun-trys mines, the worlds deepest andamong its most dangerous.

Aquarius said production for the

Aquarius postsa loss as pricesand output fall

BY HARRY BANKSthree months dropped by almost afifth year-on-year to 97,802 PGMounces from 118,887 ounces, hit notonly by stoppages but by poor groundconditions and labour go slows.

These unnecessary operational andregulatory headwinds are occurringagainst a backdrop of a pricing envi-ronment that remains relentlesslytough, with unabated on-mine costinflation, little fundamental demandrecovery and continuing volatility infinancial markets, Stuart Murray,chief executive of Aquarius, said in astatement.

He also added, however, that therehas been a recent decline in numberand length of Section 54 stoppages.

Cobham wins 24mUS military contractBRITISH defence contractorCobham said yesterday it had

sealed a $39m (24m) contract tosupply antennae to the US military.The US Navy and Marine Corps

will use the high techcommunications equipment intheir EA-6B and EA-18G aircraft.

A total of 90 devices have beenordered under the contract.

The deal win reflects theimproving picture in the aerospaceindustry, following a number of UKcompanies that have recentlysecured lucrative contracts.

Cobhams Low BandTransmitter has a legacy ofreliability and operationalexcellence, said Jill Kale, vice

BY JOHN DUNNE president of Cobham SensorSystems. Activating this option tothe fixed price contract is alignedwith the Navys acquisition

strategy, and capitalises on ourexpertise.The technology is used on

combat planes to disrupt enemyradar and communications.

Cobham last month renewed a270m bid for Danish rival Thrane& Thrane.

It dropped a bid but wasencouraged to make a new swoopafter a management shake-up atThrane. It already owns 22.74 percent of the company.

Cobham also said last monththat 2011 pre-tax profit rose sevenper cent to 328m on sales threeper cent lower at 1.85bn.

Aquarius Platinum Ltd


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OIL explorer Gulf Keystoneyesterday offered yet more datasuggesting that its Shaikan wellsin the Iraqi region of Kurdistancould deliver commercially

viable amounts of oil .It said that its Shaikan-6

appraisal well had been drilledand that oil had beenencountered at its deepest pointto date. Meanwhile the Shaikan-5 site has also been found tohave oil. The companys sharesrose by 4.7 per cent to 237.75pafter the exploration update.

Chief operating officer John

Gulf Keystone gains as Shaikanwells look set for oil productionBY JOHN DUNNE Gerstenlauer said: In addition

to the outstanding 24,000 bopd[barrels of oil per day] resultsachieved with the Shaikan-4appraisal well, Shaikan-6 hascored oil 150 metres below what

we previously assumed to beJurassic oi l/water contact levelfor Shaikan.

Both Shaikan-5 and Shaikan-6continue to appraise thismassive structure down theflanks and we plan to test andevaluate its deeper oilpotential.

He added that an explorationwell on the Sheikh Adi b lock wil l

be drilled in June.

SHARES in energy drinks makerMonster Beverage leapt by asmuch as 26 per cent yesterday onspeculation that Coca-Cola wasin talks to buy the company.

An acquisi tion of Monster,which had a market value ofmore than $11bn, would be thelargest brand acquisition forCoca-Cola, and would give the

worlds biggest soft -drink makergreater exposure to the growingenergy drink market.

However, Coca-Cola deniedbeing in talks to buy the compa-ny, saying it has a distributionrelationship with Monster in sev-eral markets and are frequentlyin contact with the company overcommercial arrangements.

At this time, we are not in dis-cussions to acquire the Monster

Coca-Cola denies it is in talksto acquire Monster Beverage

BY CITY A.M. REPORTERBeverage Corporation, it said ina statement.

Monster Beverage, earlierknown as Hansen Natural, initial-ly sold juices and fizzy drinks

before introducing the firstMonster Energy products in 2002.

It was taken public by currentCEO Rodney Sacks in 1992. Sacksstill has a 7.3 per cent stake inthe company.

Speculation about whetherCoca-Cola would buy Monsterhas surfaced in the past, due toMonsters high growth and thefact that Coca-Cola distributesMonsters energy drinks.

The companys shares, whichhave nearly doubled over the past

year even before yesterdaysjump, closed down 0.58 per centto $64.60 last night after doubtsover the bid set in. Coca-Colaclosed down 31 cents at $76.32.


The company is hopeful that the wells will provide a commercially viable supply of oil

Photography: Simon ProcterMillinery: Stephen JonesAttire: Antonio Berardi

royalascothospitality.co.uk

0844 411 5081

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