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59%

ANDREW MOSSAviva, CEO

40%

ANDREW SUKAWATYInmarsat, chairman

BUSINESS WITH PERSONALITY

SHAREHOLDERS yesterday unleashed theirwrath on leading blue chip businesses with anunprecedented wave of rebellion against exec-utive pay deals.

Businesses including Aviva, UBS andInmarsat suffered substantial rebellionsagainst remuneration packages at AGMs held

yesterday. And last night Trinity Mirror boss SlyBailey unexpectedly handed in her notice asleading shareholders prepared to mount acampaign against her 1.7m pay package.The largest revolt was at insurance giant

Aviva, where 59 per cent of shareholders failedto back proposed remuneration levels, protest-ing that executive pay at the insurer has con-tinued to climb despite a persistently weakshare price. Some called for directors includ-ing chief executive Andrew Moss to quit.

The figures are evidence enough to con-demn your abject performance without reser-

vation, said private investor PhilipMeadowcroft, who estimated Avivas total

boardroom pay has risen 90 per cent in the lastfour years as its shares fell 62 per cent.

The vote is advisory only and cannot blockthe insurers pay plans but it was enough toforce Avivas outgoing chairman, ColinSharman, to issue an apology to investors and

pledge that in future the board will listenmore closely to shareholder concerns.

It was only the fourth time that a FTSE 100firm has seen investors reject a remunerationreport since advisory votes began in 2003.

Shareholders are registering their displeas-ure with companies that have raised levels ofcompensation dramatically during the good

years and failed to reduce them following thedownturn, said Adrian Hoggarth of law f irmProlegal.

Swiss bank UBS was also embarrassed whenmore than one third of its shareholders reject-ed its remuneration plans, including those forincoming chairman Axel Weber and invest-ment bank co-head Andrea Orcel. Rebellions bylarge shareholder groups are a rarity inSwitzerland but sub-par profits and a $2bnrogue trading scandal energised a usuallydocile investor base.

British satellite company Inmarsat also saw37 per cent of shareholders reject a pay deal forchairman Andrew Sukawaty who remains on614,000 despite handing over the chief execu-tive role to Rupert Pearce. A spokesman saidlast night that this was a transition phase

and that the shareholders who voted againstit are US proxy managers who do not under-stand the unique situation.

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FTSE 100 5,766.55 +8.44 DOW 13,206.59 -61.98 NASDAQ3,024.30 -35.55 /$ 1.62 unc / 1.23 unc /$ 1.32 unc

ISSUE 1,626 FRIDAY 4 MAY 2012

MORE: Page 2, Page 6, Page 12Certified Distribution

27.02.2012 till 01.04.2012 is 99,462

BY JAMES WATERSON

40%

AXEL WEBERUBS, incoming chairman

*

* percentage of investors that did not vote in favour of pay plansQUIT

SLY BAILEYTrinity Mirror, CEO

SeePage 3

REVOLUTIONIN THE CITY

LONDON ON A KNIFE EDGE

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[email protected]

Follow me on Twitter: @allisterheath

IN BRIEFUS jobless numbers fall sharplyn The number of Americans filing new

claims for jobless aid dropped by themost in a year last week, easing fearsthe labour market recovery wasstalling, official data showedyesterday. But separate figures on thevast US services sector was lessupbeat, with the rate of growthslowing more than expected and agauge of employment falling to itslowest level in four months. Initialclaims dropped 27,000 to a seasonallyadjusted 365,000, the LaborDepartment said yesterday thelargest fall since May last year.However, the Institute for SupplyManagement said its services indexfell to 53.5 last month from 56 inMarch, missing economists' forecastsfor a modest decline to 55.5, but stillabove the 50 no change mark.

Spains borrowing costs up againn Spain saw yields jump at a bondauction yesterday, the first after itsrecent downgrade to triple-B by creditratings agency Standard and Poors.However, demand remained solid,largely from domestic banks. Thegovernment raised 2.5bn (2.03bn)as planned, paying 4.96 per cent onfive-year debt, compared with 3.696per cent at the last similar auction,and 4.03 per cent on three-yearbonds, up from 2.617 per cent. Othermarkets remained stable, with yieldson 10-year bonds down 0.068percentage points over the day andstocks on the IBEX 35 up 0.29 percent. But analysts worried the risingyields showed the impact of centralbank liquidity boosts is wearing off.

GETTY

Britain on course to losevote on EU banking rulesBRITAIN is on course to be outvot-ed for the first time ever on amajor piece of EU financial regula-tion, after EU officials said theyhad a majority in favour of propos-als that Osborne said would makehim look like an idiot.

Following 16 hours of negotia-tions on a set of new EU bankingrules that broke up at 2am onThursday, Britain was still far fromsecuring the concessions it wants.

If it cannot get enough supportbetween now and the next meet-ing of EU finance ministers in twoweeks, the UK faces the prospect oflosing control over its bank regula-tions despite being home toEuropes biggest financial centre.

Denmark, which holds the EUsrotating presidency, said: There isa supporting qualified majoritybut we would like to widen t hissupport even further. I hope thatwe can reach an agreement.

EU commissioner Michel Barnierechoed the sentiments, but hoursearlier he had threatened chancel-lor George Osborne with being out-voted if Britain would not give in.He said he hoped the vote wouldbe unanimous, but cited a verylarge consensus in favour of thecurrent version of the bankingrules, which aim to make the EUs

ROYAL Bank of Scotland (RBS) isset to announce today that it willfinish repaying 163bn inemergency loans it owes to the UKand US governments.

RBS, which is 82 per cent ownedby the British government, willunveil the plan when it publishesits first quarter results today

which are expected to show aslight decline in retail profits forthe first quarter but a smaller lossacross the whole group.

The repayments cover 75bnthat RBS received from the credit

guarantee programme, which wasa key plank of the governments

bailout of banks in October 2008at the height of the financialcrisis.

It also includes repayment ofthe 36.6bn it received throughemergency liquidity assistancefrom the Bank of England and$84.5bn (52bn) loaned by the USFederal Reserve.

RBS is still borrowing from theEuropean Central Banks long-term refinancing operation but itis thought that the 10bn (8.1bn)of loans from this source is seen asa way of raising cheap funding.

Separately Lloyds bank says thatit will have finished paying backits debt to the UK government bythe end of this year. Lloyds debtspeaked at 157bn.

RBS to repay

163bn of loansto government

Chancellor George Osborne had testy exchanges with EU commissioner Michel Barnier

2 NEWS

BY JAMES WATERSON

BY JULIET SAMUEL

To contact the newsdesk email [email protected]

OFF with their heads: themessage from shareholders isbecoming louder and angrierby the day. Listen to us, they

are rightly telling company boards,you work for us. We pay you. Stopbehaving as if you own the place.And thats exactly the point: CEOs are

merely shareholders paid hands. Thereal capitalists are the buy-sidefinancial institutions long onlyfunds, hedge funds, pension funds,insurance companies and otherpooled investment vehicles. They arethe shareholders and therefore theowners of corporate Britain. The factthat they have belatedly rememberedtheir responsibilities is the best newsin the City for ages.

In recent days, institutionalinvestors have begun reassertingthemselves they too had comeunder fire, rightly in some cases, for

EDITORSLETTER

ALLISTER HEATH

City pay revolt: Long live this most capitalist of revolutions

FRIDAY 4 MAY 2012

failing to act as proper stewards ofindividuals savings and pocketingtoo many fees for insufficient returns.Absentee landlords are never a goodthing. Capitalism requires engagedproprietors and custodians who mon-itor and assess the performance andbehaviour of their executives toensure that capital is allocated to itsmost productive use. Paradoxically,two of the major firms to have suc-cumbed to a shareholder rebellion onpay insurance giant Aviva yesterday

and hedgie firm Man Group a fewdays ago are themselves large insti-tutional investors. But corporate capi-talism has an astonishing ability toreinvent itself. The fact that its allkicking off in the City is a great signthat the system is beginning to worksensibly again.

Checks and balances are built into aproperly functioning market econo-my: if institutional shareholdersaccept poor returns, their owninvestors moan and threaten to with-draw their funds. When the equitymarkets are weak, as they are at themoment, the pressure eventuallyreaches breaking point. That is wherewe are at today, and it helps to explainthe mounting anger. Booming mar-kets are bad for corporate governance:only the worst excesses get stoppedand everybody turns a blind eye torent-seeking and bad behaviour.

hikes while share prices plummetand returns on capital wither arerightly no longer being tolerated.The City is also finally cracking

down on rewards for failure, long ablight on the financial landscape. SlyBailey, who yesterday quit as boss ofTrinity Mirror, the newspaper group,

presided over years of decline. Themood has also turned against bosseswho demand special dispensationbecause their firms share price hasbeen hit by circumstances beyondtheir control, such as the Eurozonecrisis or new regulations forcingbanks and insurance companies tohold more capital. The message fromshareholders is loud and clear: if wesuffer, or if we gain, then so shouldour CEOs. Long live the revolution.

It is vital to understand what thegrowing revolt against inappropriateboardroom pay deals is about andwhat it isnt. This is not a socialistrevolt against inequality. It is a capi-talist revolt to boost returns to capitaland prevent boards from divertingresources to themselves. This is not

about the public defeating the City it is about one part of the City hold-ing another part to account. The rowsare not even really a protest againsthigh pay in general: remember, fundmanagers are not exactly badly paidthemselves. They are merely opposedto the wrong sort of high pay, thekind which isnt related to perform-ance and which implies a dangerouslooseness with other peoples money.Golden hellos to compensate execs forleaving their previous job now clearlyfall into that category. High pay forgreat results remains fine; but pay

lenders safer.The key issues at stake are Britains

ability to implement its new macro-prudential regulatory regime, whichit says is not possible under the cur-rent draft, and a series of loopholesinserted into the text by France andGermany that Osborne wants takenout. The rules are based on the inter-national Basel III regulations, butthe UK says they are watered down.

Britain has won some concessions,however, and a Treasury source saidit is too soon to judge the final out-come. The rules will now allow

London to tack on an additionalthree per cent in capital require-ments to the EU minimum and usetighter criteria defining what capitalcounts although not as tight as theUK wants.

But many in the City have raiseddoubts over the effectiveness of theBasel regime. Basel III is not a finalpanacea of banking regulations,said BDO partner Charles Ilako.Others argue the regulations willproduce huge distortions withunknown consequences.

BASEL RULES TIGHTEN: Page 8

Banks look to farm out SME lendingSeveral large European banks areweighing the idea of outsourcing a portionof their core small business lending to anew crop of loan funds, in a further sign ofthe growth of the shadow bankingindustry in Europe. A number of banksincluding UBS and Royal Bank of Scotlandhow banks might give those funds accessto their corporate client bases.

New threat to prop tradingBank trading desks face a new threat totheir profitability after global regulators

unveiled proposals yesterday to forcethem to hold more capital against the riskof heavy losses when markets freeze. TheBasel Committee on Banking Supervisionsfundamental review of the trading bookaims to close loopholes that have allowedbanks to cut capital requirements byparking assets in their trading books.

Third Nespresso factory to openNespresso, the fast-growing premiumcoffee brand owned by SwitzerlandsNestl, yesterday brushed off fears ofrising competition for high-margincapsules with plans for a third factory toboost output to meet surging globaldemand.

Beijing to back nuclear BritainAmericas largest nuclear generator hasbeen approached by a consortiumbankrolled by the Chinese government torescue Britains flagging reactor buildingprogramme. Exelon would operate up tosix new reactors on two sites in Angleseyand Gloucestershire if the estimated15bn cost of building them can be found.

Yahoo chief accused of fake CVAn activist hedge fund calling for a shake-up of Yahoo! has accused the CEO ofembellishing his CV to make himselfappear more qualified for the job.

Former MG Rover workers to receive3 compensationFormer employees of MG Rover are set toreceive compensation of just 3 perworker despite a seven-year campaign toretrieve funds from the collapsed carmaker. 6,500 workers will share 22,000.

Young Italians flock to be shepherdsAs Italys unemployment rate topped 10per cent this week, it emerged that youngpeople are flocking to become shepherds.The profession has recently attracted3,000 young Italians.

EU vs Russia in Serbian electionSerbia's national elections are turninginto a referendum on the country's future,with voters asked to choose between astrategy of ever-deeper ties with the EUor a policy of forging closer relations withRussia.

Pepsi brings back King of PopPepsi is resurrecting Michael Jackson totry to pump life into its flagship cola,three years after the singer's death andover 25 years after his sponsorship deal tobecome the brands voice.

WHAT THE OTHER PAPERS SAY THIS MORNING

The new jobs website for London professionalsCITYAMCAREERS.com

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LONDONERS yesterday went to the

polls and selected their mayor forthe next four years but the resultwill not be known until late thisevening.

A final YouGov poll issuedyesterday morning suggested thatBoris Johnson was on track for a 53-47 victory over Ken Livingstone oncesecond preference votes are takeninto account.

Automated counting of ballotpapers will only begin at eightoclock this morning.

All recent polls have pointed to anarrow lead for the incumbentmayor despite the unpopularity ofhis Conservative party at present.

Both sides were reportedlyconcerned by low turnout levels ona damp and overcast day.

A victory for Johnson would be aboost for Prime Minister DavidCameron in the face of poor poll

ratings, especially since theConservatives are expected to losehundreds of seats in yesterdayslocal council elections held outsidethe capital.

Polls predictclose finish inmayoral race

BY JAMES WATERSON

EPA

FACEBOOK last night valued itself atup to $96bn as it set out the pricingrange for its hotly anticipated IPO.

In a new regulatory filing, the socialnetwork said it would seek to sell337.4m shares at between $28 and $35a share, raising up to $13.6bn in total,and netting founder Mark Zuckerberg,who plans to offload 30.3m of hisshares in the IPO, a potential $1bn if itprices at the top of the range.

Even with the sale, whichZuckerberg plans to use topay off a tax bill, he willstill remain easily the

largest shareholder inthe company with hisquarter share enablinghim to control approxi-mately 57.3 per cent ofthe voting power of out-standing capital stock follow-ing the offering.

Facebook IPOpricing values

firm at $96bnBY KATIE HOPE Despite the hefty valuation which

puts Facebook almost on a par withAmazon in terms of market capitalisa-tion the valuation is lower than the$100bn anticipated and the $44 pershare price Facebook shares sold forrecently on private company exchangeSharesPost. Analysts said the conserva-tive target could be tactical.

The (price range) will be a relief tosome people who are concerned thatthey may try to take the highest possi-ble price because of highdemand.They will likely walk therange up, said Sam Schwerin ofMillennium Technology ValuePartners.

Facebooks pricing could increase ifdemand proves high when the firmsinvestment bankers, MorganStanley, JP Morgan and GoldmanSachs, start pitching the deal to

investors in roadshows set to start onMonday. Facebook said the lock-up

period, during whichemployees cannot sell

shares after theIPO, would rangefrom 151 days to181 days.

FRIDAY 4 MAY 20123NEWScityam.com

For BT residential customers, calls will cost no more than 4.5p per minute, plus 13.1p call set-up fee (current at March 2012). The price on non-BT phone lines maybe different. Calls may be monitored or recorded for security and training purposes. Over 14billion of new lending includes all credit made available to SMEbusinesses, with a turnover of up to 25million, between 1st January 2011 31st December 2011. Barclays Business provides services to firms with a turnover of upto 5million. Loans are subject to application and status. Excludes online applications and automatic overdraft renewals. Terms, conditions and exclusions apply.

Barclays Bank PLC is authorised and regulated by the Financial Services Authority (FSA). Registered No 1026167. Registered Office: 1 Churchill Place, London E14 5HP.

Business Banking

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All our 1,700 Business Managers spend time getting to knowyour business to help you make the right lending choices

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We could even help you reduce the cost of borrowingwith the Barclays Cashback Finance Scheme, part of theGovernments National Loan Guarantee Scheme

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Backed by Barclays, Britain means business.

To see how we can help your business, talk to our BusinessBanking team on 0845 301 6306 or visit barclays.co.uk/lendingkit

Top: Boris Johnson reads City A.M. after voting, as Ken Livingstone heads to his polling station.

READ OUR LIVE ELECTION BLOGFOR RESULTS FROM 11AM:

www.cityam.comMark Zuckerbergcould net $1bnfrom the IPO

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A CONTROLLING stake in historicbreakfast cereal firm Weetabix hasbeen sold to China in a 1.2bn deal inthe latest swoop for British assets.

State-owned Bright Foods, based inShanghai, has taken a 60 per centstake in the Weetabix Food Companyin the largest foreign acquisition by aChinese food group.Weetabix, which also makes Alpen

and Ready Brek, is Britains second-largest cereals group and turned over422m in 2010. It exports to 80 coun-tries and the remaining 40 per cent isowned by buyout firm Lion Capitaland the management.

Bright Foods is expected to lead afurther growth push in Asia andsources close to the firm said they arenot looking to make immediate jobcuts in Britain.

Chairman Zongnan Wang said:With Bright Foods strong resourcesand our expertise in both the Chineseand broader international markets,we are excellently placed to develop

BY PETER EDWARDS the Weetabix business.The deal, which is subject to regula-

tory and government approval inChina, values the Kettering-based firmat 1.2bn including debt.

Bright Food executives have said thatthey are targeting overseas wine, sugarand dairy assets but it has a mixedrecord in bids.The firm, which turned over $12.2bn

last year, has invested in AustraliasManassen and New Zealand milk pro-ducer Synlait in the last two years butlost out in bids for United Biscuits,,French yoghurt-maker Yoplait andCSRs sugar business.Weetabix, set up 80 years ago, was

sold by the George family for 642m in2004 to US private equity firm HicksMuse Tate & Furst, which later restruc-tured and spun out its European buy-out arm to form Lion Capital.The Bright Foods deal comes three

weeks after UK tailor Gieves & Hawkeswas sold to its Hong Kong licenseeTrinity. Chinas sovereign wealth fundbought a minority stake in ThamesWater in January.

BRIGHT Foods was advised byRothschild and Linklaters teams inBritain and China.Rothschilds team here was made up ofAkeel Sachak, global head of consumer,Robert Plowman, Jessica Gretton andAbhishek Wahi. In China the deal wasled by Jennifer Yu, Rothschilds head ofGreater China, and Ting-Jie Zhang. Lastyear Sachak led the team advisingLabelux when it bought Jimmy Choo his third involvement in a deal for theshoe brand. Sachak was also an adviserin the 110m sale of the luxury label byPhoenix Equity Partners to Lion Capitalin 2004 and the 180m sale by Lion toTowerbrook Capital Partners.Two years ago Yu helped lead the dealwhen carmaker Zhejiang Geely boughtVolvo Cars from Ford for $1.8bn, after

months of painstaking negotiationsover the future of the Swedish maker ofrobust sedans.The Linklaters team was led bycorporate senior consultant Richard Guand corporate partner Teresa Ma inShanghai and corporate partnerClodagh Hayes and corporatemanaging associate Tom Matthews inLondon.Law firm Mills & Reeve advised theWeetabix Food Company and Weil,Gotshal & Manges acted for LionCapital. PETER EDWARDS

ADVISERS ROTHSCHILD

JENNIFER YUHEAD OF GREATER

CHINA

New figures reveal full extent ofHeathrow passport control chaosTHE FULL extent of the bordercrisis at Heathrow was laid bare

yesterday in new figures thatshowed passengers wait up tothree hours to clear immigration.

Airport owner BAA showedthat the UK Border Force failed tohit time targets at Heathrow onmost days in April and one infour passengers from outsideEurope are waiting longer thanthe governments 45 minute goal.

At Terminal 5, the target wasmissed on 23 out of 30 days. At

BY MARION DAKERSTerminals 3 and 4, the BorderForce failed on 21 days.

Immigration minister DamianGreen assured parliament on

Monday that passengers neverwait more than 90 minutes, butBAA found instances on 30 Aprilof passengers queuing for threehours at terminal four.

And delays could get even worsenext week, when immigration staff

walk out as part of a nationalstrike over public sector pensions.

Green and home secretaryTheresa May met with airlines

yesterday to thrash out

contingency plans.Simon Buck of airline group

BATA said the meetings wereconstructive but that there wont

be improvements overnight.Following the meeting, theBorder Force said that a further400 immigration staff will bedrafted in at Heathrow to helpdeal with the huge influx oftourists around the Olympics.

In the longer term ourmanagement and rosteringchanges will address the issue ofqueues, a spokesperson said

yesterday.

FRIDAY 4 MAY 20124 NEWS cityam.com

RSA moves away from motoringwith growth in newer marketsINSURANCE group RSA said it wasoff to a good start to the year asnewer markets offset a slump at itscar insurance business, More Than.

Net written premiums rose fiveper cent to 2.2bn in the firstquarter of the year, thanks to a ratehike coupled with a one per centuptick in volumes.

Emerging markets deliveredmuch of this growth, with netwritten premiums rising 20 per centto 281m. This was enough to offsetmixed results closer to home, with a

17 per cent drop in car insurancepremiums by value, following an

BY MARION DAKERSeight per cent rise in rates, and a twoper cent dip in personal coverage inthe UK.

Overall UK premiums rose fourper cent to 725m. RSAs commercialarm posted an 11 per cent jump inwritten premiums to 395m, andthere was good progress in itsexpanding pet insurance division.

RSAs investment portfolio shrankslightly to total 14.4bn at the end ofMarch, which was due to a 33mforeign exchange hit and othermovements causing a 47m dent.

The firm has not changed its full-year outlook and expects goodpremium growth and around 500m

of investment income for the year.Analysts at Credit Suisse said in a

note that the update was solidthough lacking in anything that islikely to shift existing perceptions.Revenue growth fell slightly short ofexpectations due to a lack of M&Agains in the year so far, they added.

FRENCH lender Socit Gnrale(SocGen) yesterday reported a drop inprofits after it cut lending in itsinvestment bank, despite a rise intrading.

The banks net profits were down20 per cent to 732m in the firstthree months of 2012 compared tothe same period last year, although,stripping out the effect of anaccounting loss, that rises to 851m.

But increasingly stringent capitalrequirements are forcing SocGen tocontinue with speedy deleveraging.The bank ditched 6.4bn ofinvestment banking assets duringthe first quarter of this year, but it

managed to contain the losses onthem to a relatively light 226m.

Soc Gen sees profits drop as it

scales back its investment armBY JULIET SAMUEL

The disposals were needed toboost its core tier one capital ratio by25 basis points under Basel IIIstandards, which will be phased infrom January next year.

SocGen said it intends to add 70basis points to its capital base by theend of this year, implying thatbillions more in deleveraging isahead and raising the prospect offurther losses. But despite shrinkingits balance sheet, the corporate andinvestment bank booked a rise inrevenues from 65m at the end oflast year to 1.9bn this year. The bankalso managed to pare down its loan-to-deposit ratio to 118 per cent.

SocGens Frederic Oudea said thebanks strong start to the year gave

him confidence in the future despitea morose economic outlook.

LIFE insurance group Legal &General posted flat overall sales

yesterday, as customers boughtmore general insurance coverage

but shied away from saving or

investing their cash.The 176-year old insurer wrote434m of new business in the firstthree months of the year,compared to 433m a year ago.

Gross premiums for generalinsurance rose 17 per cent to 83min the quarter, helped by growth inthe States, the Netherlands andnew ventures in emerging markets.

But savings fell six per cent onlast year to 300m on an annual

Legal & General sales flat asnervous Brits save less cash

BY MARION DAKERSpremium equivalent basis, and thedivision saw 489m net outflows inthe quarter as nervous customerscashed out their savings.

But the firms institutionalinvestment business LGIMdelivered net inflows of 2.6bn, up

29 per cent on a year ago, takingassets under management up threeper cent to 383bn. LGIM isattracting more internationalfunds, with business coming fromthe US and Asia. Despite thechallenging economic backdrop wehave strong positions in our chosenmarkets, outgoing chief executiveTim Breedon said.

L&G shares closed 3.1 per centdown at 118p.

RSA Insurance Group PLC

2 May 3 May27 Apr 30 Apr 1 May

103

104

105

106

107 p 105.103 May

July 2010 - trumped by Singaporean palm oilproducer Wilmar International, which acquires Sydney-based CSRs sugar business.

November 2010 - talks collapse over sale of UnitedBiscuits, maker of McVities and Hula Hoops.

March 2011 - loses out to General Mills, which buyscontrolling stake in French yoghurt brand Yoplait.

And the ones that got away...

MAY2012Agrees to buy 60%stake in Weetabix

AUGUST 2011

Buys 51% stake in the milk processingarm of the New Zealands Synlait

JULY2010

Took 75% stake inAustralian food firmManassen, which produces JellyBelly

BRIGHT FOODS SHOPPING LISTChina chews up

Weetabix in1.2bn buyout

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I AMTHE MERCHANT.

I ENTERTAIN MANYGUESTS, BUT NONEAS ESTEEMED AS

MY DELICIOUSGUEST ALES.

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Source:Manifest

BEFORE yesterday only three FTSE100 firms had seen their remunera-tion reports rejected in the nineyears since shareholders gained theright to vote on such matters.

But the rebellion by Aviva share-holders shows the growing tendencyfor major institutional investors totake an interest in executive pay.The identity of voters was secret,

yet it is believed that a vast majorityof UK shareholders voted against thepackage. Across all shareholders,over half either voted against orabstained.

Individual investors werethe most vocal at yesterdaysAGM but major shareholdergroups such as Pensions &Investment ResearchConsultants had already recom-mended its members voteagainst excessive pay.

The difference this time is

BY JAMES WATERSONthat more people are becoming asengaged and as vociferous and asactive on this issue as we have been,Tim Breedon, CEO of Legal & GeneralGroup, the biggest investor in the UKstock market, said yesterday. The col-lective leverage is far greater. Thatsgot to be a good thing.

Sly Bailey has led Trinity Mirror foreight years but has seen mountinganger over her 1.7m pay packetdespite the falling share price.Investors such as Standard Life,Schroders, Legal & General and AvivaInvestors were expected to voteagainst her package at next weeksAGM had she not stepped down.

The rebellion at UBS was led by ISS,an American advisory service thatprovides guidance to more than

1,300 firms and Ethos, a Swissfoundation that ownsshares in the bank andadvises other clients.

They were joined byF&C asset managementand fund managerHermes.

Trinity Mirror plc

20122004 2006 2008 2010

32.00

32.50

33.00

33.50

34.00

34.50

35.00

p

32.253 May

Aviva PLC

2011 2012

300

350

400

450p

311.303 May

UBS

20122007 2008 2009 2010 2011

10

20

30

40

50

60

70

80CHF

11.443 May

Inmarsat PLC

Jan 2010 Jan 2011 Jan 2012

800

700

600

500

400

p 457.803 May

L&Gs Tim Breedon said heexpected activisim to grow

TRINITY Mirror chief executive SlyBailey handed in her resignationlast night after shareholders tookissue with her large pay package inthe midst of falling profits andsales.

Bailey received almost 1.8m incash and share awards last year,

while the companys operatingprofit fell 15 per cent to 104m,despite cost cuts that includedaxing jobs and freezing salaries.

The group owns The DailyMirror and the Daily Record butshares have plummeted from 719pto 32p under her tenure.

I feel the time has come tohand over to someone else to takeup the challenge and for me toseek new challenges andopportunities elsewhere, saidBailey.

Non-executive chairman IanGibson said in a statement: Thecompany and the board are

grateful to Sly for her immensecontribution and leadership overan extended period and wish her

well for the future.Bailey will step down at the end

of the year, by which time she willhave been CEO for almost a decade.

She was criticised earlier thisyear for being on holiday when thefirm announced plans to sack afurther 75 journalists.

Rise & fall ofTrinity Mirror

BY JAMES WATERSON

n Shares have plunged more than 90 percent in the 10 years since Sly Bailey tookcharge of the company.

n The group owns the Daily Mirror plusmore than 100 regional newspapers buthas a market cap of just 82m.

TRINITY MIRROR

FRIDAY 4 MAY 20126 NEWS REVOLT IN THE CITY cityam.com

DAVID

JONES

TIM

GUINNESS

ALLISTER

HEATH

RICHARD

FARLEIGH

LEX

VAN DAM

cityamactivetrader.com

0203 201 8900

See the full programme & buy tickets today at

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DAVID CROW

Shareholder revolts dont get much worse than this

ridiculous pension. The secondoccurred in 2003, when 63 per centvoted against the 23m severancepackage of GlaxoSmithKlines con-troversial boss Jean-Pierre Garnier.

Now say what you like aboutAvivas Andrew Moss, but he obvi-ously doesnt evoke anything likethe kind of strong feelings that wereinspired by Goodwin and Garnier.

This a different kind of revolt.Proxy season has barely started

and it is already clear there will beno more Mr Nice Guy from the buyside. Yesterday, UBS and Inmarsatwere victims of sizeable protestvotes, while Barclays boss BobDiamond was also under the cosh

last week. Last night, Trinity Mirrorboss Sly Bailey decided to walk theplank rather than face investorsnext Thursday. You will struggle tofind anyone who will mourn herdeparture.

Shareholder activism has been onthe increase for some years now. Anaverage 10.5 per cent of FTSE 100shareholders voted against remu-neration reports in 2010-11, nothing

compared to the 16 per cent or so in2002-3, but much higher than thesix to eight per cent that was thenorm between 2004 and the crisis.

Heres hoping this flurry of bloodynoses is a sign of things to come.

[email protected]

Follow me on Twitter: @davidcrow83

IT DOESNT get much bigger thanthis. Fifty-nine per cent ofshareholders refused to backAvivas remuneration report

yesterday, either by voting againstit (50 per cent) or abstaining (nineper cent). Of those who cast aballot, 54 per cent voted against.

To illustrate how bad this is forAviva, we need to put it into somecontext. There have been just twooccasions in the last decade wheretotal dissent votes cast againstplus abstentions was greater, saysproxy voting agency Manifest.The first was a whopping 91 per

cent revolt against the RBS report in2009, hardly surprising consideringthe outcry over Fred Goodwins

FTSE 100 Average Yearly Remuneration Dissent

2002-03 2005-06 2008-09 2011

2

4

6

10

8

12

14

1618 %

All resolutions

LTIP resolutions

RemunerationReport

Biggest shareholder dissentsin last 10 years

GlaxoSmithKline

(May 2003) 63.16%

Royal Bank of Scotland Group(May 2009) 91.51%

AMEC

(May 2009) 53.14%

British Land

(July 2009) 51.54%

Dissent (Abstentions + Against)

n Investors are angry because the insurersshares have fallen 58 per cent since CEOAndrew Moss took over in 2007.

n The companys chairman Colin Sharmanhas apologised to investors and pledged tolisten more closely to concerns in future.

AVIVA

n The Swiss bank was hit by huge subprimewrite-offs during the crisis, and lost $2bn ina rogue trading scandal last year.

n Shareholders have also criticised agolden hello for Andrea Orcel, who will joinfrom Bank of America Merrill Lynch in July.

UBSn Thirty-seven per cent of investorsvoted against the pay report, which payschairman Andrew Sukawaty the sameamount as when he was also the CEO.

n Shares in the company have beenfalling steadily since the start of 2010.

INMARSAT

SHARE PRICE FALLS THAT GOT INVESTORS WORRIED

Who are the

REBELS?

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REUTERS

MORE monetary easing is firmly offthe agenda as European CentralBank (ECB) boss Mario Draghi yester-day said he sets policy for the wholeEurozone including countrieswith strong growth and low unem-ployment not just those which arestruggling.The euro rose 0.21 per cent against

the yen and moved off a two-weeklow against the dollar on the sur-prisingly hawkish announcement,while the ECB held the base interestrate at one per cent.The ECB now believes inflation

will stay above its two per cent tar-get for the whole of 2012,before falling closer to tar-get next year againreducing the room forany further interest ratecuts.

Draghi congratulatedthe Italian and Spanishgovernments for theirsignificant efforts inpushing through spendingcuts and market reformsin a very shortspace of time.

However,he saido t h e r

Hopes for rate

cut dealt blowby hawk DraghiBY TIM WALLACE

governments needed to step up theirefforts, while all states should try tofocus spending cuts on current,rather than capital, spending andminimising tax rises.

It is understandable that underextreme urgency, governments takethe easiest road, raising taxes andreducing capital expenditure, hesaid.

It is more difficult and complex toreduce current expenditure, but inthe medium term this should be cor-rected.The ECBs Draghi also yesterday

stressed the continued need for mar-ket reforms, arguing that fosteringprivate sector growth and entrepre-

neurship represents the best wayto create jobs and sustainable

economic growth in themedium term.

There is no contradictionbetween growth and the fis-cal compact, he said.

Growth is sustainable if itis based on several pillars,one of which is fiscal stabili-

ty, Draghi added.

Calls mount for probe into theBank of Englands role in crisisINFLUENTIAL MP Andrew Tyriecalled for an inquiry into the Bank

of Englands actions in the financialcrisis yesterday, after Mervyn Kingclaimed he saw bank problemsbuilding but was powerless to act.

After years of refusing to hold aninquiry, Bank governor Kingyesterday suggested he would drophis opposition if one was proposed.

Meanwhile some economistsrejected the governors narrow andpartial analysis of the crisis,claiming his explanation ignored

BY TIM WALLACEmuch of the problem and that hisplanned solution would notcorrectly reform the sector.

An investigation into what went

wrong at the Bank of England is stillimportant, said Treasury SelectCommittee chairman Tyrie, butcomes too late to impact on theBanks new regulatory structure.

As the governor himself said, it isimportant for us all to learn fromthe mistakes that have been made,Tyrie said yesterday. The Bank istaking on considerable new powersin the Financial Services Bill,currently before parliament. Yet we

still do not have firm and agreedconclusions about the mistakes thatwere made and which the legislationis, presumably, seeking to address.

Citi economist Michael Saundersalso hit out at Kings claim that thiswas a bust without a boom, as wellas his suggested solutions. Hisexplanation of the causes of thecrisis and hence of the lessons to belearnt is too narrow and partial,said Saunders, who believes therewas a credit boom. King said that hehad seen the crisis coming, but thathis warnings went unheeded.

Sir Mervyn King claims he foresaw the financial crisis, but was powerless to stop it

GOVERNMENTS must end the toobig to fail banking model with acredible resolution mechanism forfailed banks or face higher

borrowing costs, a top Bank ofEngland official said yesterday.

States must ensure marketsnever again view banks as

guaranteed, said deputy governorPaul Tucker, which means creatinga system which successfullycontains disorder when a bank

collapses, doing as little damage aspossible to retail customers, the

Tucker urges regulators to endtoo big to fail banking model

BY TIM WALLACE sector or the government.This can lead to a much better

financial system, with strongermarket discipline and so lessstability-threatening imprudence,Tucker said but he warned, thereis no silver bullet.

We need resolution tools thatwork in different contexts fordifferent types of bank/dealer,reflecting the complexity and

variety of firms in the industry.In particular Tucker argued in

favour of bail in bonds, where

debt becomes equity to recapitalisestruggling banks.

THE FORUM DEBATE: Page 33

FRIDAY 4 MAY 20127NEWScityam.com

ECB presidentMario Draghi saysmarket reformmust continue

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INTERNATIONAL regulators aretightening the screw on banks byrevising the rules that govern howthey estimate balance sheet risks.

The Basel Committee, a group ofcentral bankers and regulators, haskicked off a consultation on how

banks should model risks and whatrules should govern what they put intheir trading books versus their

banking books.The distinction is important

because trading books, which largelycomprise wholesale operations, andmore retail-focused banking booksuse different accounting and risksystems. And the Basel Committeesays that lenders are engaging inregulatory arbitrage by movingassets between the two.

Among its proposals are tightercriteria for where an asset sits and agreater use of standardised riskmodels alongside banks ownmodelling. They even suggest thatusing regulators models should bemandatory and incur a surcharge.

Bankers have privately criticisedthe proposals for not allowing forradically different balance sheetsand business models and for using1980s mathematics.

PricewaterhouseCoopers PatrickFell said: This is a turn of the screw...

Whether this will lead banks into aback to basics move to traditional

banking, as some regulators wouldprefer, is an open question.

Basel tightensscrew on banks

BY JULIET SAMUEL

BRITAINS all-important servicessector expanded solidly lastmonth, according to data pub-lished yesterday, although the paceof growth was slower than inMarch.

Economists said slowing demandmay renew calls for more quantita-tive easing (QE) from the Bank ofEngland, as Markits purchasingmanagers index for the sectorcame in at 53.3, down from 55.3 inMarch.

Nonetheless, the index remainedabove the no change level of 50for the 16th consecutive month.

Business sentiment continued toimprove, with increasing numbersof orders translating into a furtherrise in staffing levels.

From what we are hearing frompanellists, this certainly does notsound like an economy in reces-sion, said Markit economist Chris

Williamson.However, there were factors drag-

Slowing service

sector boostschance of QE3

BY TIM WALLACE ging down growth, as higher fuelprices hit the sector, squeezingmargins, and demand growthslowed.As a result, some economists now

expect the Bank of England to tryto stimulate demand still further

with more monetar y looseningnext week.

The level of activity now report-ed appears to be consistent withmore QE under its post-crisis reac-tion function, said NomurasPhilip Rush. So we still expect dis-appointment at demand growth toprompt a final 25bn of QE in May.

Small financiers scramble to fillgap left by FSA-regulated lendersSMALL-TIME finance companies areseeing explosive growth as banksare priced out of the market forhelping small businesses to exporttheir goods.

Trade Finance Partners (TFP),which extends credit to smallexporters that includes firmssupplying Pepsi, Argos and a

Tanzanian hydro-electic project, hasbooked a profit in its first year oftrading on a turnover of 12m.

Like other firms targeting smallbusiness financing such as

Bluehone Secured Assets,MarketInvoice and Funding Circle,

BY JULIET SAMUEL TFP is tapping into pent-up demanddue to a large gap in the market left

by deleveraging banks, which havebeen hit by tightening capital rules.

Its commercial director, WilliamTebbit son of the former cabinetminister Norman Tebbit andpreviously a banker at SeymourPierce and WestLB told City A.M.that all 18 of the firms currentclients had been refused thefinancing they needed by banks.

These small businesses are thelifeblood of the economy and theyare being starved of cash, he said.He calls his model that of an old-

fashioned merchant bank thatextends credit to a small firm to get

its goods made, and then sells themthe goods for selling on to a largecustomer such as Argos or Pepsi.

Tebbit is critical of governmentinitiatives like credit easing that tryto make large banks lend morecheaply because they will still lendat the same terms and conditionsand have no effect on the newregulations hitting lending.

By contrast, TFP is not FSA-regulated. We seem to have anumber of people in government

who believe that if you say it isgetting better they think that is all

you have to do. It probably stems

from never having had a job or run abusiness, he said.

LAURALEAN/CITYAM

ENVIRONMENTAL and anti-cuts protestors targeted a summit of power firms taking placein the City yesterday, gathering outside the Grange Hotel close to St Pauls Cathedral. TheClimate Justice Collective said more than 300 protestors had turned up to disrupt theconference, which was attended by bosses of the Big Six energy companies.

PROTESTERS TARGET ENERGY CONFERENCE

THE Renault-Nissan allianceyesterday signed a long-awaiteddeal to take control of Russiaslargest car maker, AvtoVAZ, as itseeks growth in fast-growingmarkets outside sluggish WesternEurope.

The car group would hold 67 percent of a joint venture with statecorporation Russian Technologiesto own 74.5 per cent of AvtoVAZ.The non-binding preliminaryagreement would give the Franco-

Japanese alliance 50.01 per cent ofthe maker of the Lada.

The alliance plans to investabout $750m in the deal, including

about $300m from Renault andthe remainder from Nissan.

Renault-Nissan signs deal to

take control of Russian carmakerBY CITY A.M. REPORTER Todays memorandum is the

latest step in an expandingcollaboration that helpsmodernize the leader of Russia'sauto industry, said Renault-Nissan

Alliance chairman and CEO CarlosGhosn in a statement.

Russian Technologies has agreedto restructure its outstandingloans with AvtoVAZ to give it astrong balance sheet with noliquidity constraints, while thealliance would acceleratetechnology transfer to AvtoVAZ.

The companies hope to sign adefinitive deal by the end of this

year, with the transaction expectedto be completed by 2014, by whichtime the venture will buy Russian

investment company TroikaDialogs entire stake in AvtoVAZ.

FRIDAY 4 MAY 20128 NEWS

cityam.com

LinkedIn shares jump after thebell on high profit and growthLINKEDIN reported better-than-expected revenue and profit last

night, after it racked up stronggrowth from its services that helpcompanies find and hireemployees and it revised upwardits 2012 outlook.

The professional networkingsite also announced that it hadacquired content sharingcompany SlideShare for $118.75m(73.4m) in a mix of cash andstock.

First quarter revenue atLinkedIn rose 101 per cent to

BY CITY AM REPORTER$188.5m, besting analysts averageforecast of $178.58m, according to

Thomson Reuters.Shares of LinkedIn were up nine

per cent in after-hours trading to$120.50 from their $109.41 closein regular trading.

The Mountai n View, California-based company was one of t hefirst prominent US socialnetworking sites to make its debutin an initial public offering a yearago, whetting the appetites ofthose eagerly awaiting Facebooksimpending IPO.

LinkedIn describes itself as theworlds largest professional

internet network, boasting of161m members across the planet.

The company rev ised its 2012outlook, expecting revenue in the

range of $880m to $900m from aprior range of $840m to $860m.Excluding special items, its first-

quarter earnings per share of 15cents was well above analystsexpectations of nine cents pershare.

Net income rose to $5m from$2.1m in the same quarter a yearago. Adjusted earnings beforeinterest, tax, depreciation andamortisation (Ebitda) for the firstquarter were $38.1m.

THE OWNERS of One PlantationPlace yesterday confirmed the saleof the giant City office block toone of Brazils richest men forclose to 500m, bringing an end to

a drawn-out battle to solve its debtproblems.An investment vehicle

controlled by Brazilian bankingmogul Moise Safra has agreed to

buy the 550,000 square feetdevelopment, while JamieRitblatts Delancey will managethe building on its behalf.

Plantation Place, which is hometo tenants including insurance

giant Royal Sun Alliance, wasdeveloped by Ritblatts father Sir

Brazilian banking mogul buysCity office landmark for 500m

BY KASMIRA JEFFORDJohn Ritblat, when he was chiefexecutive of British Land in 2004.

A consortium including InvistaFoundation Property Trust andStobart Group then bought the

building for 525m in 2006.It has since been at the centre of

several bids and proposals torestructure its 435m debt.Delancey was close to takingcontrol of the building last year

but this fell through after monthsof negotiation.

Schroder Real Estate InvestmentTrust, which acquired a 28.9 percent stake via its takeover ofInvistas mandates, said it willpocket 11.73m from the sale

while fellow shareholder Stobartmade a 8.1m profit.

UK services activity kept growing in April

PMIServicesActivityIndex

Jan12Jan11Jan10Jan09Jan08Jan07Jan06Jan0538

42

46

50

54

58

62

66

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DIAGEO, the worlds biggest distilleddrinks company, yesterday reporteda third quarter of sales growthdespite disappointing trading inEurope.

The group posted a six per centsales rise, excluding acquisitions,which it put down to a three percent growth in the volume of drinkssold as well as price increases and atrend of customers buying moreexpensive products.

Diageo, whose brands includeSmirnoff, Captain Morgan, Baileysand Guinness, also raised its glass toemerging markets where it sawcontinued rapid growth.

In the nine months to 31 March,sales in Latin America and theCaribbean climbed 18 per cent, whileAfrica and Asia Pacific grew 12 and10 per cent respectively. NorthAmerican sales gained an extra fiveper cent.

But sales fell by one per cent inEurope, dragged down by economicconditions in Spain and Greecedespite a strong performance inGermany.

Diageo boss Paul Walsh said: Ouryear to date performance continuesto demonstrate that Diageo is wellpositioned with our balance ofbusinesses across categories.

Shares rose 1.5 per cent to 16.15.

Diageo toastsnew markets

as sales growBY LAUREN DAVIDSON

GETTY

WM MORRISONS chief executive saidyesterday the supermarket would notsuccumb to offering more vouchersafter aggressive discounting by rivalslike Tesco hurt its first quarter sales.

Dalton Philips warned that, as eco-nomic conditions remained uncer-tain, squeezed consumers wouldcontinue to seek out even more pro-motions.

But he brushed off concerns thatthe grocer was losing market share torivals offering more discounts, sayingthe firm wanted to sit back fromthis activity rather than pursue mar-ket share gain at any cost.

We believe in profitable growth there are times to be in this marketand there are times when to with-draw, he added.

Sales at stores open over a year fellone per cent excluding fuel in the 13weeks to 29 April.

Philips attributed the fall the firstin seven years to tough comparativeswith the same quarter of last year

Morrison rules

out any furtherdiscount plans

BY KASMIRA JEFFORD when Easter and the royal weddingtook place. Excluding these events,sales were flat in the quarter, he said.Total sales for the period, which take

store expansions and openings intoaccount, rose by 1.5 per cent, exclud-ing fuel.The group also said it had increased

the number of products in its M Saversvalue range by 43 per cent to 500 sinceit launched at the start of the year andthat it is making good progress withthe roll-out of its M Local conveniencestores, with 300 planned by 2014.

American ice-cream chain todouble its number of UK storesBASKIN-ROBBINS, the worlds largestchain of ice cream parlours, said itplans to double its stores in the UK,hiring 400 new staff.

The 65-year old Americancompany is best-known for itswacky flavours such as bombshellblondie maple and sponge cakeice-cream and Lunar Cheesecakein celebration of the 1960s Nasaspace missions.

In a statement yesterday, thegroup said it will launch 80 restau-rants over the next three years, withthe first three opening today in

London, Middlesex andHertfordshire.

BY KASMIRA JEFFORDIt already has around 100

franchises in the UK, includingrestaurants and concessions inother shops and cinemas.

The new stores will be kitted outwith larger topping stations andhigh-tech interactive menus on lcdscreens, with walls reminiscent ofwaffle cones the group said.

Baskin-Robbins was founded byIrvine Robbins and his brother-in-law, Burton Baskin in 1940s, whoconcocted flavours such as Jamocaalmond fudge and others namedafter events happening in Americanculture at the time such as Cocoa aGo-Go, when go-go dancers were

popular. It is now part of DunkinBrands and owned by a consortium

of buy-out groups Bain Capital,Thomas Lee Partners and theCarlyle Group. The ice-cream makernow has more than 6,700 franchisesin almost 50 countries around theworld.

Baskin-Robbins takes pride indelighting guests the world overwith its rich library of ice creamflavours and wide array of frozentreats, said Nigel Travis, chiefexecutive officer of Dunkin Brands.

Baskin-Robbins further growthin the UK provides an excellentopportunity for those looking todevelop a franchise business. It alsomeans hundreds of new jobs, which

we are particularly pleased to besupporting, he added.Baskin-Robbins is famous for its extravagant flavours

IN BRIEF

BMI Baby to close in September

n Budget airline BMI Baby is to closeafter previous owner Lufthansa failed tofind a buyer. Loss-making BMI, whichwas taken over by IAG in April, said itwould consult on plans to shutter thedivision in September, with some flightsceasing as soon as next month. The firmstill has hope that a buyer will be foundfor BMI Regional. The firm said it will

offer refunds or alternative flights fordisappointed holidaymakers.

Conrad Black to leave prison

n Former media tycoon Conrad Black is

due to be released from a prison in Floridatoday, marking the end of a sentence forfraud and obstruction of justice. Themogul, who o nce owned the Telegraph,was jailed in 2007 but released fromprison in July 2010 while he appealed. He

returned to prison last September to servehis shortened sentence.

Sales melt away at Thorntons

n Chocolate shop chain Thorntons said

yesterday its third quarter sales had fall-en nearly three per cent to 62.4m, asongoing store closures and a tough con-sumer environment bit into turnover.Excluding store closures as part of an

ongoing restructuring, total sales werebroadly flat, the company said.

Deutsche star moves to Morgan Stan

n Eric Heaton, a veteran investment

banker with a track record in M&A deals,has left Deutsche Bank to join MorganStanley, according to people familiarwith his plans. Heaton, head ofDeutsche's North American financialinstitutions group, resigned on Monday.

WM Morrison Supermarkets PLC


278

280

282

276

284

286p

276.503 May

This is a disappointing update from Morrison, even if it is against itstoughest comparatives for the year. There is no doubt about that to our mindsand the performance recorded underscores our concerns about the per-

formance of the group in recent weeks.

ANALYST VIEWS

First quarter sales are at the bottom end of expectations, albeit by around0.5 per cent... That said, it has a lot to do in order to achieve its 2016 vision...In themeantime, it has a number of self help levers which should sustain profitgrowth, but our Hold recommendation reflects the relative risk.

Like-for-like sales numbers were lower, coming in against strong com-

paratives from last year. In addition, Morrisons market share has been inching inthe wrong direction according to the latest industry surveys, with its per-ceived value offerings coming under pressure from discount rivals.

DID MORRISONS FIRSTQUARTER FIGURES MEETEXPECTATIONS?Interviews by Kasmira Jefford

CLIVE BLACK SHORE CAPITAL

PHILIP DORGAN PANMURE GORDON

RICHARD HUNTER HARGREAVES LANSDOWNE


CEO Dalton Philips said that market share should not be sought for any cost

Hermes gets Asian lift yet warnsover drag from European crisisHERMES first-quarter sales have

grown strongly as Chinese buyersflock to stores in both Europe andAsia, yet the French luxury goodsfirm yesterday warned that theweak European economy could dragdown growth in 2012.

The slowdown was not yetevident in the April figures, chiefexecutive Patrick Thomas said,noting that the month was broadlyin line with the beginning of theyear, but the turmoil of Europe

CITY A.M REPORTERwould continue to be a threat.

It is going to be a very difficultyear, he said. The beginning waseasy ... but the trend is not good.

Hermes sales for the quarter grew17.6 per cent, excluding currencyfluctuations. Yet Hermes kept acautious target of roughly 11 percent growth for 2012 and noted thatoperating margins might be hit bycommodity prices.

European sales for the quarterwere strong, up some 27 per cent inorganic terms, excluding Francewhere growth was weaker due tosupply problems. Thomas attributed

European growth to brand loyaltyand Asian tourism.

The Asia Pacific region also drovegrowth, with sales up 22 per cent,

excluding Japan. Thomas said hesaw no slowdown in demand forgoods in China, a market which isclosely tied to the health of theluxury goods industry.

Shares in rival luxury companyLVMH, which owns a 22 per centstake in Hermes, fell slightly inApril when it intimated thatdemand in China was weakeningfor items like Louis Vuitton bagsand Dior perfumes.

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Hedgie Hendry

forecasts Asianeconomic crashHEDGE fund boss Hugh Hendry haswarned the next phase of the eco-nomic crisis will hit Asia as Chinafeels the impact of a property bubbleand falling demand for exports.The Scot (below), who runs Eclectica

Asset Management, which hasaround $700m in assets, is known forhis gloomy view of China but he saidin his latest investor letter he wasmore pessimistic on Chinese growththan ever.

This makes us bearish on mostAsian stocks, bearish on industrialcommodity prices, interested in someUS stocks, a seller of high varianceequities and deeply concerned thatJapan could become the focal point ofthe next global leg down, Hendrysaid in the April-dated letter

He cited Japanese group Hitachi astoo expensive while buying five-yearcredit default swaps on Toshiba.

Hendry, who set up the Bayswater-based fund after leaving his job atOdey Asset Management, said someJapanese companies are corporatezombies which will sooner ratherthan later fall prey to over exposure toChinese exports, high leverage and

BY PETER EDWARDS

opaque and bloated balance sheets.It is hard to escape the impression

that Japans blue-chip companies areteetering on the brink of extinction,he wrote. Hendry has repeatedlywarned that China has inflated a prop-erty bubble while allowing govern-ment debts to rise excessively. Threeyears ago he posted a video onYouTube showing empty skyscrapersin the city of Wuhan.

China will also struggle to maintainits export-supporting currency pegwith the US dollar just as a slowdownin European growth hits demand forits goods, he said.

It has long seemed to us to be thecase that this economic crisis wouldstart in the US and make its way toEurope. That has happened. However,we also think it will end in Asia.

In his latest letter Hendry also saidhe was more bullish than most about

US growth prospects,believing price

restructuring indebt and labourmarkets as well as

huge advancesin shale oilextraction will

maintain theeconomys posi-

tion as thew o r l d s

largest.

ARE YOU PLEASED TO SEE A RETURNIN SHAREHOLDER ACTIVISM?Interviews by Lauren Davidson

No, I think businesses should be left to runthemselves. Thats what executives get paid

for. If investors dont approve of the way the company isbeing run, they can get rid of their shares.

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

KEVIN POWELLXL INSURANCE

Yes if companies want to be on the stockexchange they have to be accountable.

Shareholders should have their voices heard and compa-nies ignore this at their peril.

ANDY SWANJARDINE LLOYD THOMPSON

I think its a good thing. The incentives ofmanagement are not always the same as

those of investors, and its the responsibility of share-holders to get to the issues of the company.

FILIPE MARTINSLONDON BUSINESS SCHOOL

Fuel costs send Lufthansa furtherinto the red and prompt job cutsGERMANYS biggest airlineyesterday announced plans to cut

3,500 office jobs in an attempt tostem widening operating losses.Lufthansa reported an operating

loss of381m (309m) for the firstthree months of the year, morethan double its losses a year ago, ashigh fuel and tax costs along withfierce competition across Europebattered its bottom line.

The loss came despite a 5.6 percent rise in revenues to a record6.6bn and higher traffic figures.

BY MARION DAKERSWe can only safeguard jobs for

the long term and create newopenings if we reorganise theadministrative functions and

accept job losses now, chiefexecutive Christoph Franz said in astatement.

The firm aims to cutadministrative costs by 25 per centand slim down other operations toimprove Lufthansas annualoperating profits by at least 1.5bnby the end of 2014.

Lufthansa said that despite theeconomic turbulence that hasweighed on its sales, the mood has

lightened overall recently, and ithas kept its full year operatingprofit forecast of a figure in themid-hundreds of millions of euros.

The German carriers move cameas Scandinavian airline SAS blamedhigh fuel prices for a quarterly lossthat was more than twice as largeas analysts had forecast.

Irish carrier Aer Lingusyesterday upgraded its 2012operating profit forecast, saying itexpected to match last years 49mas higher revenue per passengermile compensated for growingcosts.

CITYVIEWS

Hugh Hendry says China

faces a property bubble

BAILED-OUT insurer AmericanInternational Group (AIG) said quarter-ly profit more than doubled from ayear earlier, exceeding expectations

with the help of investment gains.The company yesterday reportedfirst-quarter earnings of $1.65 ashare on an operating basis, beatingthe $1.12 estimated on average byanalysts.

AIGs net income for the quarterwas $3.2bn, or $1.71 per share. Thatcompared with year-earlier netincome of $1.3bn, or 31 cents pershare. In the corresponding quarterlast year, AIG racked up substantial

Bailed-out AIG trumps forecastsas its profits more than double

BY CITY A.M. REPORTERcatastrophe losses arising from theearthquake in Japan. The year-earlierearnings also included a charge forthe termination of AIGs creditfacility with the US Federal Reserve.

AIGs global property insurance

unit, Chartis, earned $1bn,compared with a loss of $424m ayear earlier when the Japaneseearthquake affected results. Thecompany said its loss ratio improveddue to a shift to higher valuebusinesses, pricing improvementsand risk selection.

SunAmerica, AIGs US life insurer,reported a profit of $1.3bn in thequarter, up from $1.2bn, helped byreinvestment of cash during 2011.

FRIDAY 4 MAY 201212 NEWS

cityam.com

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IN BRIEFKesa sells stake in Darty Telecom

nElectrical group Kesa has sold amajority stake in its French telecomsbusiness to Bouygues Telecom, lifting

shares 1.7 per cent yesterday. Underthe agreement, Kesa will sell a 99.9per cent stake in Darty Telecom for40m (32m) and will receive a shareof future revenues based on theexisting and future subscribernumbers.

BMW posts record sales in China

n BMW, the world's largest luxurycarmaker, posted its strongest-ever firstquarter yesterday, overcoming weaknessin Europe with surging sales in China,which leapfrogged the United States tobecome its single-biggest market.Earnings before interest and taxes rosenearly 19 per cent to 2.13bn (1.73bn).Profits were driven by a sharp rise insales of high-margin vehicles, includingits family of SUVs and more importantlythe 7 Series flagship limousine. Sales in

China, which eclipsed the US as BMWslargest market during the quarter,jumped 37 per cent.

Metro swings to a surprise loss

n Germanys Metro, the worlds

fourth largest retailer, said yesterdaythat it would focus on fixing problemsin its existing business before enteringnew markets such as Indonesia as itreported a surprise operating loss inthe first quarter. The Duesseldorf,Germany-based group reported anoperating loss of 9m (7.2m) for thefirst quarter, blaming investments atits Media-Saturn chain of electricalgoods stores.

REGUS, the flexible office spaceprovider, yesterday posted strongsales growth despite taking a hitfrom its rapid expansion plan.Turnover in the first quarter grew

by 8.8 per cent to 299.3m, boostedby a 26 increase in revenue peroccupied workstation to 1,883.

Regus said its mature business comprising the centres openedbefore the end of 2010, accountingfor over 85 per cent of the compa-nys global portfolio grew rev-enues 4.4 per cent to 282.2m.

This like-for-like increase buildsfurther on the strong performancein 2011, reflecting continuedhealthy levels of occupancy, thecompany said in a statement.

Regus accelerated pace of expan-sion, which has seen 37 new centresopened in the last three monthscompared to 12 in the same periodlast year, took its toll on profitability.

But the company said it is on trackto open the planned 200 new cen-tres before the end of 2012, assuringthat it expects the financial drag

Sales rise but

expansion hitsRegus profits

BY LAUREN DAVIDSON from new centres to diminishthrough the remainder of the year.

Headquartered in Luxembourg,Regus provides flexible workingspace such as offices, meetingrooms, business lounges and recep-tion facilities.While the majority of its revenues

come from the Americas, it hasstrong exposure to emerging mar-kets where there is a heavy relianceon virtual offices.

Founded in Brussels in 1989, Regusnow counts Google, Disney, Starbucksand BP among its clients.

Its shares fell one per cent to 108.5pyesterday.

Can maker Rexam says tradingis in line but its shares fizzle outPACKAGING group Rexam paredback early gains yesterday to close

flat, after reporting that its saleswere in line with expectations.Rexam, which manufactures

products from drinks cans tocosmetics packaging, reported goodvolumes in its European business.

The firm said that its NorthAmerican arm, which makes cansfor Pepsi, Jim Beam and Starbucks,was clawing back gains that werelost in the last year, while SouthAmerica was also showing growth.

However, Rexams healthcarebusiness is trading slightly below

BY MARION DAKERSlevels seen last year as profits comeoff patent and fewer people than lastyear suffer from flu.

Efforts to sell off Rexams personal

care business are going to plan, itadded in an interim managementstatement ahead of its annualshareholder meeting.

All motions at the meeting werepassed with at least 92 per centapproval.

Graham Chipchase, Rexam chiefexecutive, said in a statement: Theglobal economic outlook remainsuncertain but, at this stage, wecontinue to expect 2012 to beanother year of progress as wemaintain our focus on cash, costs,

and return on capital employed.Analysts at Singer Capital Markets

said the shares now lack fizz aftera good run in the wake of Rexams

asset disposal plans.

GETTY

Regus PLC


107

108

109

106

105

110

111p 108.50

3 May

GENERAL MOTORS yesterdayoffered investors a disappointingoutlook for the upcoming sixmonths in North America, raisingquestions about the US economysrecovery.

While the worlds largestcarmaker posted a first-quarterprofit that surpassed forecasts, theoutlook for its core market fellshort of expectations.

Were clearly seeing someimprovement in the economy,finance chief Dan Ammann said.

Excluding one-time items mostly

General Motors disappoints with

outlook as Opel losses improveBY CITY A.M. REPORTER related to pension accounting inEurope, GM reported a profit of 93cents per share. Net income fell to$1bn, or 60 cents a share, from$3.1bn, or $1.77 a share, in thesame quarter a year earlier. Last

years quarter included a one-timegain of $1.5bn from the sale ofstakes in Delphi and Ally.

Europe, which has struggled toreturn to profit, saw a $256m loss.But that was an improvement onthe previous quarters $562m loss.

CEO Dan Akerson said he hopesto provide details of a turnaroundplan for GMs Opel unit in the nextfew months.

ARTIFICIAL hip and knee makerSmith & Nephew (S&N) said

yesterday the early fruits of arestructuring programme and astrong performance in knee

implants delivered a better-than-expected five per cent rise infirst-quarter trading profit.

The group, which also makeswound therapy products,reported trading profit of $252m(155m), $10m better thananalysts expected, on revenuethree per cent higher at $1.08bn.

S&N said that its kneefranchise grew six per cent,outperforming a market that

grew at three per cent.The groups hips business

Smith & Nephew climbs afterrestructuring starts to pay off

continued to lag however, withsales down two per cent.

S&N was the highest climberon the FTSE 100 yesterday asinvestors reacted well to theupdate, sending its share priceup almost four per cent to

629.50p.The market for reconstructivesurgery has been in thedoldrums for a couple of years aspatients postpone surgery

because of the costs and time offwork required.

S&Ns chief executive OlivierBohuon said it was too soon totalk about a recovery in the US.

Its still a very challengingenvironment, still unstable,however its better than onecould have expected, he said.


General Motors will announce its turnaround plan for Opel in the next few months

BY CITY A.M. REPORTER

Rexam PLC


425

430

435

440

445p 432.60

3 May

House prices fall again in Aprilas recession crushes consumersHOUSE prices fell again in April,Nationwide revealed yesterday, aseconomists warned the newrecession will keep the market veryweak.

Prices fell 0.2 per cent last monthto an average of 164,134, followinga one per cent fall in March.

That brings prices down 0.9 percent on the year, in part becausethe rush to buy houses before thestamp duty holiday expired in

March has now dried up.This provided a temporary boost

BY TIM WALLACE to house prices in early 2012 asbuyers brought forward purchasesthat would otherwise have takenplace later in the year, saidNationwides Robert Gardner.

This effect should fade in themonths ahead, and measures suchas the governments NewBuyscheme should provide somesupport to buyer demand. However,the challenging economic backdropsuggests that a significantacceleration in prices or activity isunlikely in the near term.

Other analysts went further.Howard Archer from IHS Global

Insight forecasts a three per centfall this year, arguing consumersare under sustained pressure.

THE ECONOMY will stagnate in2012, recording no growth, aleading think-tank predicted

yesterday, contrasting starkly withofficial forecasts for an economicexpansion and raising calls for ashort-term fiscal boost.

The fall in GDP in the firstquarter of the year, which tookBritain back into recession, hasdragged down the NationalInstitute for Economic and SocialResearchs (NIESR) outlook toforecast no growth for the year,compared with the Office for

Budget Responsibilitys (OBR) 0.8per cent prediction.

Top think-tank predicts Britainwill see zero growth this yearBut NIESR expects a strong

acceleration to two per cent growthin 2013, matching the OBRsoutlook.

The think-tank argues for ashort-term fiscal stimulus as theUK suffers from a lack of demand,

which it believes would help theeconomy but not damage long-termdeficit reduction targets.

The weak state of the economy isin part influenced by the ongoingEurozone crisis NIESR expects ashallow recession followed by adelayed but successful resolutionto the crisis.

Meanwhile it forecasts global

GDP growth of 3.7 per cent in 2012rising to four per cent in 2013.

BY TIM WALLACE

House prices fell in the year to April

Annualchangeinhouseprices

Apr 9 Apr 10 Apr 11 Apr 12-20%

-15%

-10%

-5%

0%

5%

10%

15%

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FRIDAY 4 MAY 201215NEWS

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THE CHIEF executive of Schrodersyesterday warned of the impact ofmore Eurozone turmoil as the assetmanager posted an eight per centdrop in first quarter profits.

Michael Dobson said he was waryof events in Europe despite a recenteasing in market swings.

You can trace investor demandpretty closely to whats happening inthe Eurozone and, below, reflectedin equity markets. There are signs ofa slowdown. The impact of marketuncertainty is seen most immediate-ly in the retail sector, but it also

impacts institutional clients.The blue-chip money manager post-

ed an eight per cent fall in pre-taxprofits to 95.5m due to lower vol-umes in the three months to 31March. Net inflows of 1.6bn werenearly 50 per cent lower than in thefirst quarter of last year. Private bank-ing saw outflows of 100m.Total funds under management

rose 6.6 per cent from the end of lastyear to 199.6bn.

Schroders also said it had bought a

Schroders saysEurozone woes

hitting demandBY PETER EDWARDS 25 per cent stake in Axis AMC, the

asset management subsidiary of AxisBank, the third largest private sectorbank in India, as it aims to tap intothe growing middle class in Asiasthird-largest economy.

I think its a very exciting long-term market, and I would emphasiselong term, Dobson said.The update capped a mixed week

for the industry. Aberdeen AssetManagement said assets rose nine percent after strong fund performanceoutweighed net outflows in its first-half but Henderson posted a net out-flow of 857m in the first quarter.

Schroders PLC


1,430

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1,470 p

1,412.003 May

LAURALEAN/CITYAM

EDVARD Munchs masterpiece The Scream, one of the worlds most recognisableworks of art, sold for $120m (74m) at Sothebys on Wednesday night, setting a newrecord as the most expensive piece of art ever sold at auction. A so-far anonymoustelephone bidder secured the vibrant painting after a near 15-minute bidding war.

THE SCREAM SELLS FOR $120M AT AUCTION

ST JAMESS Place yesterday overcame

lingering fears over the Eurozone topost a record level of funds undermanagement.

The wealth manager, 60 per centowned by Lloyds Banking Group,said assets rose nine per cent to31bn during the first quarter of thisyear, due in part to the performanceof its existing funds.

Chief executive David Bellamy saidretail clients were still relativelycautious in their taste forinvestment as total new business onan annual premium equivalent (APE)basis fell 2.6 per cent to 152.6mfrom the same period last year.

Its been a good f irst quarter withthe one caveat being the markets area little challenging and volatile andthat makes investors a little bitnervous and it just takes a bitlonger, Bellamy said.

Strong retention of existing client

funds and 1.26bn of newinvestments led to a net inflow of700m to its funds, though this wasslower than the 770m in the sameperiod last year, the company said.

James Pearce at UBS said: Fallingsales make tough reading for acompany on a premium rating,particularly with Lloyds 60 per centshareholding... However, in our viewSJP has the most sustainablebusiness model in the UK.

Assets jump torecord 31bnat St Jamess

BY PETER EDWARDS

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THERE was a time when the

rights agency group Merlindubbed itself the virtual fifthmajor in the music world,

fancying itself as rubbing shoulderswith major record labels Universal,Sony BMG, EMI and Warner.The description gave the group,

which represents a series of inde-pendent labels producing musicfrom artists including Adele, ArcticMonkeys and Belle & Sebastian, asense of importance in the musicworld.

But The Capitalist has learnt thatMerlin seems to have lost its star-splattered wizards hat somewherenear the outskirts of Brussels.The indie group is vigorously

opposing Universals 1.2bn takeoverof EMIs record label business, argu-ing that the merger would damage

competition in the market-place to

the detriment of consumers andindependent music producersand rights agencies.The deal, announced in

November, is currentlybeing considered by theEuropean Commissionand Merlin has not shiedaway from voicing itsopinion.And while the fifth

major claim used toappear proudly inMerlins public state-ments, in recent

Adele is signed toindependent label XLRecordings, a member ofMerlin

RBC, the Canadian bank that is busy grow-ing its London presence, has been namedas the title sponsor for the Great OrmondStreet Hospital Childrens Charity annual5km family fun run on Sunday 24 June.Last years race (also sponsored by RBC)raised over 400,000 towards the redevel-opment of the hospital, with LinfordChristie joining in the fun. To sign up, goto raceforthekids.co.uk.

Got A Story? [email protected]

Follow The Capitaliston Twitter: @citycapitalist

16cityam.com

cityam.com/the-capitalistTHECAPITALIST

So it was farewell to NormanAskew this week as Finsburys

Roland Rudd hosted an evening for theformer chief executive of BritishNuclear Fuels and East MidlandsElectricity. Rudd made sure the retiringAskews preferred wines were on themenu at the dinner which was attendedby former colleagues includingVodafones Andy Halford and bankingadviser Richard Broadbent.

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Between now and the start of theOlympics, City A.M. is publishing itsOlympic Image of the Week. If youhave a shot you think our readers willlike, please email [email protected] IOW2012 in the subject line. Fulldetails: cityam.com/london-2012

LONDON 2012 is joining up with British Airwaysto create Park Live, an outdoor venue set in thenewly-created 250 acres of Olympic parklands.A giant double-sided screen, sitting in the RiverLea, will broadcast live Olympic coverage forthose without tickets for sporting events. Otherentertainment will include visits from athletes.

LONDON 2012 IMAGE OF THE WEEKmonths there has been no sign of the

epithet in press releases or in thegroups lobbying at Brussels.A spokesperson for Merlintold The Capitalist: Its a falla-

cious argument that weare the fifth major,because were not arecord label. You would-

nt compare a newsagentto a department store

just because theyboth stock news-

papers.We have

never calledourselves the

fifth major.Probably a good

idea to take theclaim off your website

then, Merlin.

Merlin goes from major to minor

Christielast year RBC backs Race for Kids

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IN BRIEFAntofagasta copper output hit

n First-quarter copper production atChilean miner Antofagasta fell 13 percent on the previous three monthsamidst rising development costs, the

London-listed firm said yesterday.Esperanza, a flagship growth projectthat hit troubles in its productionbuild-up last year, saw damage to akey conveyor belt in the quarter whichheld up throughout February andMarch. It warned the mines full-yearproduction would be at the lower endof forecast ranges. The problem alsoweighed on the miners total outputfor the quarter, down 12.9 per cent onthe last three months of 2011.

Avocet boosted by gold prices

n Gold miner Avocet Mining said yes-terday that its quarterly pre-tax profitrose on higher gold prices, but lowerproduction resulted in higher cash costper ounce produced. Profit before taxand exceptionals from continuing oper-ations rose to $20.8m (12.8m) from

$12.6m a year ago. Avocet, whichentered the FTSE 250 Index in March,maintained its production forecast of160,000 ounces for the year at a cashcost of $800-$850 per ounce.

Mondi reports weaker quarter

n South African papermaker Mondiyesterday posted a drop in first-quarterunderlying operating profit due tolower prices and volumes, but saiddemand for its products was pickingup. Mondi, also listed in London, saidfirst-quarter underlying operating prof-it fell to 120m, (97.5m) comparedwith 179m last year.

Maple Group edges closer to2bn takeover of Canadas TMX

GETTY

GAS and oil producer BG Group saidyesterday it had agreed to sell itsBrazil gas distribution businessComgas to Cosan for $1.8bn (1.1bn)as it unveiled soaring first quarterprofits on the back of higher oilprices and production.

BG is selling its 60 per cent stake inComgas as part of a $5bn disposalprogramme to channel resourcesfrom downstream distribution andpower generation assets into morelucrative upstream oil and gas pro-duction projects.The cash raised will ease fears

about BGs ability to meet the cost ofbringing big fields in Brazil andAustralia onstream.

The announcement of deal talkslast month hit Cosan shares asinvestors questioned what synergiesBrazils largest sugar and ethanolproducer could achieve from a deal,and its impact on Cosans efforts toimprove its debt rating.The sale price implies a premium of

around 11 per cent to Comgass clos-ing share price on Wednesday. Royal

BG Group sells

Comgas stakein a 1bn deal

BY HARRY BANKSDutch Shell owns another 18.1 percent.

Comgas is the largest distributor ofpiped natural gas in Brazil with 4,000kilometres of pipelines that delivergas to customers in 57 cities.

Meanwhile BG Group reported a 55per cent rise in underlying net profitsto $1.27bn in its first trading quarter,br

cityam 2012-05-04

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