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BUSINESS WITH PERSONALITY

Meet London Business School

Speak informally with a London Business School representative about our portfolio of

top-ranked Masters degree programmes and receive advice on the right programme for you.

Monday 28 May 2012: Novotel London Tower Bridge, 10 Pepys Street, London EC3N 2NR

Tuesday 29 May 2012: Hilton Canary Wharf, South Quay, Marsh Wall, London E14 9SH

Please join us at any time between 11.00 and 15.00

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Email: [email protected] or call: 020 7000 7500

Deficit rowas IMF callsfor growthTHE IMF heaped praise on GeorgeOsbornes deficit reduction plans yes-terday, but warned that the coalitionmight have to change tack if theeconomy worsens much further.

IMF boss Christine Lagardeexpressed delight at the austeritymeasures, saying when I think backto May 2010, when the UK deficit wasat 11 per cent and I try to imaginewhat the situation would be liketoday if no fiscal consolidation pro-gramme had been decided, I shiver.

But the IMFs report said Osborneshould spend less on public sectorwages and more on infrastructure ifhe wants to boost growth and jobs.The chancellor welcomed the

report, hitting out at opponents whohave called for the government toborrow and spend its way out of adebt crisis, arguing fiscal responsi-bility is an essential part of our roadto recovery, in part because itenables interest rates to stay low.

But Lagarde told Osborne he mustbe prepared to be flexible if theEurozone crisis worsens and theeconomy slides further, suggesting atemporary boost from tax cuts andspending increases could stave off adeeper recession in the short-run.

The IMF is right to call for action tostop slow growth and high unem-ployment causing long term damageto our economy, said shadow chan-cellor Ed Balls. A year ago the IMFwarned that if economic growthundershot expectations, the govern-ment should boost the economy withtemporary tax cuts and greater infra-structure spending.

Since then our economy has been

pushed into a double-dip recession.There is no case for delay and therecan be no more excuses.

Vincent Tchenguizs status as a suspect could be quashed from next month while his brother Robert will continue to fight to clear his name

ANTI-FRAUD investigators could beforced to drop a long-running probeinto property tycoon VincentTchenguiz after admitting they havemade a series of mistakes.The Serious Fraud Office said it is

urgently reviewing Tchenguizs sta-tus as a suspect after he was arrestedin an inquiry into the collapse ofIcelands Kaupthing Bank.Yesterday Tchenguizs barrister

accused the SFO of institutional fail-ure as Vincent and his brother,Robert, began a judicial review intotheir arrests in a dawn raid last year.The agency made false and mis-

conceived allegations against VincentTchenguiz, the Queens BenchDivision of the High Court was told.The brothers, two of Britains best-

known entrepreneurs, have not beencharged and have protested their inno-cence after the raids, which involved135 police officers in London andIceland. Their judicial review accusesthe SFO of unlawful entry, searchesand seizures, misleading a judge andan abuse of process.

The nature and extent of the SFOsadmitted errors in the present case areof a different order. In the interestedpartys submission they point to collec-tive institutional failure, said LordGoldsmith, for Vincent Tchenguiz, incourt filings.

Lord Macdonald, QC, said the SFOhad made inaccurate and untrueallegations against Robert Tchenguiz,who has previously branded the

www.cityam.com FREE

agencys actions as unlawful. TheSFO has cautioned that Roberts rela-tionship with Kaupthing executivesstill needed careful assessment.The hearing comes after reports the

agency considered putting undercoveragents into Mayfair nightclubAnnabels as part of its investigation.

It will only increase scrutiny on theSFO, which has been haemorrhagingstaff and is facing its first independentassessment by the Crown Prosecution

Service Inspectorate.The SFO, which also promised to

return material seized last year, willmake a decision on Vincent by 18 Juneafter David Green, its new director,said that in light of the material filedin response to the SFOs evidence, thestatus of Mr Vincent Tchenguiz as a

suspect in the SFOs investigationmust be, and will be, reviewed and asa matter of urgency.

Lord Goldsmith said the papers are

as close as I have ever seen to a prose-cuting authority saying they mightwell have to stop this investigation.

Last month a top judge criticised thesheer incompetence of the SFO. LordJustice Thomas ran out of patienceafter the SFO admitted there isnt arecord of precisely what information

or documentation was relied upon toobtain search warrants.The SFO is expected to begin the

defence of its actions today.

INVESTORS CONTINUE TO SPURN FACEBOOK FLOAT

BY TIM WALLACE

FTSE 100 5,403.28 +98.80 DOW 12,502.81 -1.67 NASDAQ2,839.08 -8.13 /$ 1.58 unc / 1.24 unc /$ 1.27 -0.01

BY PETER EDWARDS

FRAUD OFFICE SET

TO DROP KEY CASE

DEFRIENDEDISSUE 1,638 WEDNESDAY 23 MAY 2012

EURO HERODROGBA OFFSee Sport, Page 30See Page 3, Page 10

MORE: Page 8

Certified Distribution

02/04/2012 till 29/04/2012 is 100,668

REUTERS

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[email protected]

Follow me on Twitter: @allisterheath

GETTY

Higher public spendingpushes up UK borrowingGOVERNMENT borrowing jumpedin April as spending increasedunexpectedly, official figuresshowed yesterday, although thetakeover of the Royal Mail pensionfunds assets skewed the data inthe month.The Office for National Statistics

(ONS) officially recorded a budgetsurplus of 16.5bn in April, com-pared with a deficit of 16.9bn inMarch and 9.06bn in April 2011.

However, when the 28bn shift ofRoyal Mail pension assets isremoved from the calculation itreveals an 11.5bn deficit, includ-ing a 12.4bn deficit in the currentbudget.

Economists warned the gain inheadline figures disguised longer-term costs from taking on the pen-sion funds liabilities.

The current value of those liabil-ities is 10bn higher than theassets, so in any holistic assess-ment of the governmentsaccounts this can hardly bethought of as a bonus, said BNPParibas economist David Tinsley.

Perhaps more worrying, theunderlying picture this monthlooks a little soft. Given the month-ly volatility in the data there is plen-ty of time for that to come right. Butit is well to remember that the gov-

Trafigura to move to SingaporeSingapore has enticed Trafigura, one ofthe worlds biggest commodities tradinghouses, to move its legal headquartersfrom Switzerland to the Asian city state,highlighting the attractions of its low-taxregime and proximity to China.Trafiguras relocation is a big boost forSingapore as it challenges the supremacyof Switzerland as the worlds commoditiestrading hub and fends off competitionfrom other financial centres, such asShanghai, Hong Kong, and D ubai.PierreLorinet, chief financial officer, is to moveto Singapore, joining 150 traders in thecity. But the company will retain its largerteam of traders in Geneva.

BAE wins submarine contractBAE Systems and its submarine site inBarrow-in-Furness, have received a boostafter the government confirmed thecompany has been awarded a 328mcontract to design the UKs nextgeneration of submarines. The vessels areintended to replace the Vanguard class ofsubmarines, which carry the Tridentnuclear missiles. BAE employs more than5,000 people in its submarine business,primarily at Barrow. Engineering firmBabcock was also awarded a 15mcontract to design parts of the in-servicesupport, while Rolls-Royce won a reactorcontract worth 4m.

Bosses say GCSEs are not up to jobGCSEs are unfit for the 21st century,business leaders say. They argue that somuch emphasis is placed on funnellingteenagers into make-or-break exams at 16that schools are failing to produce theconfident, rounded young people thatemployers want. A CBI group isconsidering whether scrapping GCSEswould give greater freedom to provide abroader curriculum. Last week the ownerof one exam board called for a cap on thenumber of GCSEs sat by each student.

Private spacecraft lifts offThe first private spacecraft aiming to dockwith the international space stationblasted off from Florida early yesterday.NASA says private industry can developunmanned cargo vehicles faster and at

less cost than traditional programmes.

THE EUROZONE crisis remains thesingle biggest threat to the globaleconomic recovery, theOrganisation for Economic Co-operation and Development(OECD) said yesterday.

The crisis in the Eurozoneremains the single biggestdownside risk facing the globaloutlook, said OECD economistPier Carlo Padoan.

Adjustments in the euro areaare now taking place in anenvironment of slow or negative

growth and deleveraging,prompting risks of a vicious circleinvolving high and risingsovereign indebtedness, weak

banking systems, excessive fiscalconsolidation and lower growth,the report added.

The OECD urged nationalgovernments to implementstructural reforms as the short-run remedy to spur growth and

boost confidence.The Paris-based group expects

growth across its member states toslow to 1.6 per cent this year,down from 1.8 per cent in 2011.

In the Eurozone alone, theeconomy is expected to contract

by 0.1 per cent, the OECD said.And next year the

unemployment rate in the euroarea will reach an eye-watering11.1 per cent, the report predicts.

OECD warns of

Eurozone risk toworld economy

George Osborne has agreed to take on the Royal Mails deficit-laden pension fund

2 NEWS

BY JULIAN HARRIS

BY TIM WALLACE

To contact the newsdesk email [email protected]

IF you want proof that the globaleconomys woes are increasing, asa result of extreme imbalances,look no further than some

countries borrowing costs. Germanyhas set a zero per cent coupon on its2-year government bonds (or Schatz)due to be sold today in other words,

borrowers will not be paid for theprivilege of lending money to theGerman state. They will provide theirfunds for free or actually at a loss,given that inflation will eat away atthe real value of their assets.Germany is due to auction 5bn ofbonds; we will soon find out if it hasbeen successful. I suspect that it willbe. This was meant to be a regularbond with a coupon, but with marketyields at 0.06 per cent on the current2-year, the German authorities hadno choice given market issuancerules but to set a zero coupon. This is

EDITORSLETTER

ALLISTER HEATH

Free money for governments is a grave threat to investors

WEDNESDAY 23 MAY 2012

yet another sign of profound turmoiland distortions in the financialmarkets and in monetary policy.The first reason for the ultra-low

yields, of course, is the desperate needby investors to find ultra safe-haveninvestments and their flight fromrisky ones. Hence this rush into ludi-crously priced German, US and UKbonds, which are seen as safe.

But there is another consequence tothis: other investors with fewerrestrictions or greater imagination

will increasingly become disenchant-ed with all f inancial assets. With equi-ties still at extremely weak levels, andthe possibility of far worse to come ifthe Eurozone crisis intensifies, it isbecoming increasingly tough to finda good risk and reward balance forpaper assets. Of course, some

investors do manage but Facebooksdisastrous float isnt helping either.Hence why many will again be

tempted by hard, non-paper assets(land, property, gold, commodities,art and so on), fuelling fresh bubbles.Some such as Marc Ostwald ofMonument Securities believe thiscollapse in returns will deal a devas-tating blow to the very foundations ofgovernment issued paper money. Itcertainly makes the challenge ofwealth preservation even tougher and that is even before Eurogeddonkicks off in earnest.

dont buy any of it. It was also interest-ing to hear renewed calls for a cut ininterest rates, in the wake of yester-days IMF report which discussed theidea (and other) stimulus measuresin case the Eurozone worsens. Therewould clearly be a strong case toreview all monetary policy if the

Eurozone implodes that would be areal emergency. But those getting car-ried away and calling for immediaterate cuts need to stop and think: whywould cutting rates right now from0.5 per cent to 0.25 per cent or zero bethe answer to any of our problems?We need to make the UK a betterplace to work or invest in, and fix thebanking system, not obsess withmicro-managing demand at the costof ever-increasing debt.

DEFICIT WOESHere is an intriguing question forthose who believe the UK should notbe attempting to reduce its publicspending, or at least that cuts shouldbe reduced. Stripping out a one-offaccounting transfer of 28bn, thepublic finances actually worsened in

April. Borrowing went up by over2bn compared to the same time lastyear, the current budget deficitwidened by over 4bn, central govern-ment tax receipts on production,income and wealth were down 0.9 percent year-on-year while currentexpenditure rose 3.8 per cent.

How much larger do the (misguid-ed) anti-austerity folk believe that thegovernments borrowing needs to beto make a difference to growth (orat least GDP)? Another 25bn a year?50bn? Do we need a deficit of 10 percent, or 12, or what? For how long? I

ernment is still relatively only justinto a long period of austerity.

It needs to keep its eye on the ballif it is to keep delivering on spendingtargets that will become progressive-ly harder to deliver as the low-hang-ing fruit have been picked.

Current spending rose from54.15bn in April 2011 to 56.24bnlast month, made up of a 424m risein interest payments, a 790m jumpin the benefits bill and an 896mincrease in other spending.

Meanwhile current receipts onlyrose 548m on the year from

42.38bn in April 2011 to 42.93bnthis year.The ONS revised the previous

months data, showing annual bor-rowing for the financial year 2011-12was actually 1.6bn lower than ini-tially thought.

This is mainly because of anupward revision to receipts ofincome tax and national insurancecontributions and slightly lowerspending on net social benefits, par-tially offset by higher net investmentspending, explained the Institutefor Fiscal Studies.

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FACEBOOK shares tumbled again yes-terday on the third day of trading asmore investors turned their backs onthe websites inflated price.

Falling 4.3 per cent in pre-markettrading, the stock slid further in theday to close down 8.9 per cent at $31.The social networking giant has

now shed $19bn from its initial$104bn market cap since f loating onFriday.

Facebooks bankers, who stepped inon Friday to keep the share priceabove $38, now have even more toexplain after the shares closed underthe hiked IPO price range.

US regulators the SEC and FINRAadded pressure to the banks and theNasdaq stock exchange last night,saying that the issues around the IPOshould be reviewed.

I think there is a lot of reason tohave confidence in our markets andin the integrity of how they operate,but there are issues that we need tolook at specifically with respect toFacebook, said SEC chairman MarySchapiro.

Nasdaq had come under fire after aglitch delayed trading in Facebook

Facebook loses

friends as stockdrops furtherBY LAUREN DAVIDSON

shares for 30 minutes on Friday.Meanwhile Morgan Stanley, the

lead adviser in the offering, said ithad acted in compliance with allapplicable regulations after itemerged the bank had cut its revenueforecasts for Facebook in the middleof its IPO roadshow.JP Morgan and Goldman Sachs, also

main underwriters on the deal, weresaid to have done the same.

There is still scepticism over whatFacebooks underlying value is.Pricing the stock is a delicate line itwas pitched at the very top andtheres no where else to go fromthere, BDOs head of valuationsAndrew Caldwell told City A.M.

BOTTOM LINE: Page 10

WEDNESDAY 23 MAY 20123NEWScityam.com

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JUST two bids for the LondonMetal Exchange (LME) remain onthe table after an offer from USexchange group CME fell short ofexpectations.

This leaves just InterContinentalExchange (ICE) and Hong KongExchanges and Clearing (HKEx) inthe race to purchase the world'slargest metals marketplace.

Both remaining parties areunderstood to have submitted bidsof around 1.2bn.

The Board of the LME hasdecided to continue discussions

with two parties regarding theirproposals for the potential

CME knocked out of race tobuy London Metal ExchangeBY JAMES WATERSON acquisition of the LME. This

process will continue over thecoming weeks, the exchange saidin a notice issued yesterday.

Some traders have raisedconcerns that a potential salecould end many traditionsassociated with the 135-year-oldexchange.

But the LME board confirmedthat it will consider each biddersplans for the future governanceand operation of the market andthe deliverability of theirrespective proposals in additionto the value of the bid.

Both CME and ICE declined to

comment, while HKEx could notbe reached.

Investors have chance to snapup photo agency Getty ImagesPHOTO agency Getty Images could

be on the market after its ownersappointed advisers to consider apotential sale or IPO.

Hellman & Friedman, the USprivate equity fund which boughtthe business for $2.4bn (1.5bn)four years ago, is understood to beworking with Goldman Sachs andJP Morgan Chase to help it decidewhether to dispose of the business.

A source close to deal said that asale or IPO could value the

BY JAMES WATERSON company at $4bn, a healthy returngiven that the owners have alreadypaid themselves $875m in two

special dividends.Hellman & Friedman and JPMorgan declined to comment whileGoldman Sachs was notimmediately available for comment.

Investors have recently increasedtheir interest in photo agencies andlast week Gettys smaller rivalShutterstock announced itsintention to raise up to $115m in afloat on the New York StockExchange.

Seattle-based Getty Images wasfounded in 1995 by Mark Getty the British-born heir to the Getty oil

fortune and Jonathan Klein.It adopted a programme ofaggressive acquisitions in thefragmented photo agency businessand became the first company tolicense photos online.

Before being taken private Gettyrecorded net income of $125.9mfrom revenues of $858m. It alsogenerated cash of $249.3m.

Klein continues to be the firmsCEO while Getty sits as chairman. The photo agency could be floated or sold off by its private equity owners

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IN BRIEFJapan hit by credit rating cutn Fitch cut Japans sovereign creditstatus yesterday to the lowest levelamong global ratings agencies as apolitical stalemate there dims thechance that the country can curb itssnowballing debt. Fitch Ratings cutJapans long-term foreign currencyrating by two levels from AA to A+, thefifth highest investment grade. It cutthe more important local currencyrating by one notch from AA- to A+.Both were given a negative outlook.Fitch warned further downgrades werepossible unless the government takessteps to stabilise public finances.

Dutch MP tries to halt bailout fundn Dutch politician Geert Wilders, whoaims to turn a September election intoa referendum on the euro and EU mem-bership, filed a lawsuit yesterday aimedat postponing the Dutch parliamentsratification of Europe's permanentbailout fund until after the vote.Wilders' move comes amid popularresentment at European Union bailoutsfor the bloc's smaller debt-saddledeconomies.

Graduates lose interest in financen

Jobseeking graduates are less inter-ested than ever before in working infinance and accounting, according to asurvey by the Graduate ManagementAdmission Council. The sector fellbelow 100 on the studys attractivenessindex for the first time since the analy-sis was developed in 2003. Among allstudents graduating in Europe thisyear, the most popular industries forjob searches were consulting, with 65per cent searching for roles in theindustry, products and services at 44per cent, only then followed by financeand accounting with 38 per cent.

GREECES four largest commercial

banks will receive 18bn (14.5bn)recapitalisation funds by Friday, asenior banker at one of the foursaid yesterday.

We will get the money by Fridayat the latest. Maybe we will get ittomorrow, said the banker, whodid not want to be identified.

The funds are needed torecapitalise Alpha Bank, NationalBank of Greece, EFG Eurobank andPiraeus Bank.

Once they receive therecapitalisation, in the form ofEuropean Financial Stability Fund(EFSF) bonds, the banks will be ableto resume funding operations withthe European Central Bank (ECB),he said.

The ECB suspended some Greekbanks from funding operations lastweek because their capital was toolow, forcing them to obtain higher-

cost funding from an emergencyprogramme at the Bank of Greece.

Greek banks saw much of theircapital vanish this year because oflosses in an historic bond swap that

wiped out most of the value oftheir holdings of Greek

government debt.Ratings agency Fitch yesterday

warned that a range of banksacross the Eurozone will need to berecapitalised before the currentcrisis can be solved, and pointed to

banks in the UK to prove that sucha strategy can work and restore thesector to health.

Greek banks inline for 18bnrecapitalisation

BY CITY A.M. REPORTER

GETTY

FRENCH President Francois Hollandefaces his first major negotiating testat todays informal EU summit, as hewants Germany to back jointly guar-anteed eurobonds, lowering weakgovernments borrowing costs.

European Council presidentHerman van Rompuy convened thesummit to bash out a common posi-tion among leaders on plans to boostgrowth and jobs across the EU.With much of the Eurozone in

recession, Greeces ongoing politicalcrisis and worries over Spains banks,uncertainty is growing over thefuture of the euro.Yet this week a senior German offi-

cial called the bonds the wrong pre-scription at the wrong time.Although Spanish Prime Minister

Mariano Rajoy and Italian leaderMario Monti have insisted any sup-

port through German-backed bondswould not be used as an excuse torelax reforms, Berlin is unconvinced.

Chancellor Angela Merkel has longmaintained only market reforms toboost competitiveness will solve thecrisis permanently.

Hollande, backed by Italy, Spain andthe European Commission, believesjointly issued eurobonds will relievethe pressure on weak governments,cutting their borrowing costs andending the imminent threat to theiruse of the currency. He also wants torelax the fiscal compact, letting coun-tries spend more in the hope of boost-

Germany and France toclash over eurobonds

BY TIM WALLACE

ing GDP growth in the short term.Additional infrastructure spending

is also on the agenda, possibly throughthe use of project bonds and theEuropean Investment Bank funds.

Furthermore, as Greeces election

next month could see the election ofanti-bailout party Syriza, discussionsare also expected to cover theEurozones response to any slippage inthe countrys fiscal programme.

CONSUMER confidence remained very low inMay, European Commission data showedyesterday, with falling inflation expectationsgiving consumers a little extra hope.

The index rose to minus 19.4 in May fromminus 20.2 in April in the EU as a whole, and tominus 19.3 from minus 19.9 in the Eurozone.

That leaves confidence still below the seven-month high recorded in March, and firmlybelow its long-term average of minus 12.8.

The improvement in confidence may well

have been helped by reduced inflationexpectations given the recent appreciableretreat in oil prices, said Howard Archer fromIHS Global Insight, who also pointed to risingGDP figures as a fillip for the outlook.

However, with the Greek situationheightening uncertainty and with economicfundamentals largely against the consumer, itis hard to see Eurozone consumers beinganything other than cautious.

Consumer spending makes up more thanhalf of the Eurozones output, but householdsare hit by wage cuts, austerity and joblessness.

BY TIM WALLACE

Francois Hollande hopes to persuade Germany to guarantee other countries debts

Consumer confidence remains low

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Europes consumers remain cautious

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MARKS & SPENCER, Britains biggestclothing retailer, has scaled backambitious sales growth targets as itreported its first profit slide in threeyears.

The group yesterday revealed a oneper cent drop in underlying profits to705.9m for the year to 31 March,slightly ahead of analysts forecasts of694m.

Chief executive Marc Bolland con-ceded yesterday that targets set outtwo years ago to grow sales by up to2.5bn by 2013-14 had been madeunrealistic due to the deterioration

in the economic climate.M&S now expects to achieve

between 1.1bn and 1.7bn more inannual revenues by 2014, as dispos-able incomes remain squeezed andthe outlook across the Eurozone isuncertain.

Bolland said austerity had becomethe new normal: People are feelingthe squeeze but they are a little bitmore in control.Total sales grew by two per cent to

9.9bn in the year, with international

sales up 5.8 per cent.UK sales grew 1.5 per cent, driven by

a strong performance at its food divi-sion, which saw sales rise 3.9 per cent.But general merchandising fell 0.9 percent, with home down 10 per cent andclothing up just 0.2 per cent.

Bolland said efforts to revamp all ofits UK stores to make them easier tonavigate were working well, with the92 newly refurbished stores showing a2.5 per cent uplift in sales.

He said M&S was still on track tobecome an international multi-chan-nel retailer and plans to have 10 web-sites worldwide and open 100international stores by the end of year.

GETTY

HAS MARKS & SPENCER LOST ITSSPARK? Interviews by Anaam Raza

I dont think so. Its retail services are very goodso this is just due to reduced profitability in the

economy. If you compare it with Sainsbury or Tesco it is amuch higher value brand and its bakery is exceptional.

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

PORTOLEIOMATTHEWCHARTIS

No. I think this dip is just a response to the gen-eral market trend. Shoppers are switching to

other supermarkets but Ive always shopped at M&S and itreally offers value for money with excellent quality.

NATASHA RUSKINAIG GROUP

Yes, because it is not catering for the right audi-ence anymore; it just caters for old people now.

With new retail outlets such as H&M and Topman enteringthe market, it has to be more competitive on the price.

MUHITUR RAHMANINVESTEC

CITYVIEWS

Marks and Spencer Group PLC

17 May16 May 18 May 21 May 22 May

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WEDNESDAY 23 MAY 20126 NEWS cityam.com

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TESCO AND MORRISONS market

shares are still under pressure fromfierce competition, retail datashowed yesterday, as upmarket anddiscount retailers outpaced themiddle market.

Kantar Worldpanel figures for the12 weeks to 13 May 2012 revealedthat Aldi grew sales by more than25 per cent compared with thesame period last year, achieving arecord market share of 2.8 per cent.

Lidl also held onto its 2.8 per centshare, growing sales by 11.3 per centwhile high-end grocer Waitroseboosted sales by seven per cent tokeep its 4.5 per cent market share.

Tesco and Morrisons both sawtheir market share dip slightlycompared to the same three-monthperiod a year ago, from 31.1 to 30.8per cent and 21.1 to 11.9 per centrespectively.

Edward Garner, a director at

Kantar, said, rather than flocking tothe discount sector, manyconsumers are continuing to dotheir main shopping trip in theirusual store, but spending theremainder of their householdbudget on the discounters.

The market as a whole grew byjust 3.1 per cent over the period lower than the five per cent seenlast year as retailers failed to matchtheir 2011 sales, which were boostedby the Royal Wedding bank holiday.

Waitrose andbudget grocersoutpace rivals

BY KASMIRA JEFFORD

M&S cuts backgrowth targets

as profits slideBY KASMIRA JEFFORD

M&S chief executive Marc Bolland said the group performed well in a tough market

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PHILIP CLARKE, Tescos chief execu-tive, said he would forgo his372,000 annual bonus after theretailers weak UK performance lastyear prompted its first profit warn-ing in 20 years.

I decided at the beginning of theyear that I would decline my annualbonus for 2012, Clarke said in astatement yesterday.

I wasnt satisfied with the per-formance in the UK and I wont takethe bonus. Im confident that weretackling the right issues.

Clarke was paid a basic salary ofover 1m last year and was awardedshare options worth 2.7m duringhis first year on the job, according tothe companys annual report.The supermarket giant also said

yesterday its top 5,000 managerswould receive a reduced annualbonus representing 16.9 per cent oftheir maximum entitlement.Executive directors will get 13.5 per

Tescos Philip

Clarke waivesannual bonusBY KASMIRA JEFFORD

cent of the maximum.Overall, staff will share bonus pot of

more than 110m.Tesco shares have lost almost a quar-

ter of their value this year after thesupermarket group warned it neededto invest around 1bn in a bid to stemmarket share losses in Britain.

Clarkes decision comes amid awave of high profile investor revoltsover boardroom pay at companiessuch as Barclays, Aviva, Inmarsat andPrudential in the so-called sharehold-er spring.

Tescos chief executive Philip Clarke has passed up his annual 372,000 bonus

Tesco PLC


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309.0822 May

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WEDNESDAY 23 MAY 2012 cityam.com8 NEWS

INFLATION fell back into its target

bracket last month for the first timein over two years, official datashowed yesterday, saving Bank ofEngland governor Mervyn King fromwriting yet another letter ofexplanation to the chancellor.

Consumer prices rose three percent in the year to April, down from3.5 per cent in March and the lowestlevel since February 2010.

CPI inflation is now within onepercentage point of the Banks twoper cent target, while core inflationfell from 2.5 per cent to 2.1 per cent.

Transport prices rose 1.2 per centon the month, down from the 2.4per cent increase in the same periodlast year, dragging down theheadline figure.

Alcohol and tobacco jumped 2.9per cent, in part due to rising taxes,but that is also well down on therecord 5.3 per cent rise a year earlier,

also pulling down the main number.The cost of living measured on the

retail price index (RPI) fell moreslowly, from 3.6 per cent in March to3.5 per cent in April, while the taxand price index (TPI) rose by 3.1 percent, down from 3.3 per cent.

It is encouraging that the fall wasdriven by a drop in core inf lation,said Capital Economics VickyRedwood. We expect inflation to bebelow target before this year is out.

Inflation at itslowest level inover two years

BY TIM WALLACE

BRITAINS economy needs more sup-port from the Bank of England, theInternational Monetary Fund (IMF)said yesterday, arguing that fallinginflation means interest rates can belowered even further.

The economy has been flat as pri-vate demand-led growth has not fullymaterialised, IMF boss ChristineLagarde said, after first quarter GDPestimates showed a contraction.The government and consumers

are all reducing their reliance ondebt, the IMF argued, saying that thisdeleveraging will continue to hit

growth for years to come.The situation is further compound-

ed by tight credit conditions, and sothe Bank of England should cut ratesbelow its current record low of 0.5per cent, and consider expanding itsquantitative easing programme fromits current 325bn, the IMF said.

With the yield curve now essen-tially flat at the policy rate out tothree-year maturities, a rate cut islikely to reduce yields nearly one-

IMF wants Bankof England rate

cut to help GDPBY TIM WALLACE for-one well out into the curve,

increasing its stimulative impact, itsuggested.

Cutting the budget deficit is vitaland must be maintained, the IMFsaid, but the overall mix of spendingshould change to boost growth.

Fiscal space for further growth-enhancing measures could be gener-ated by property tax reform, restraintof public employee compensationgrowth, and better targeting of trans-fers to those in need, said Lagarde.

This fiscal space could be used tofund higher infrastructure spending,which has a high multiplier and rais-es potential output.

If economic momentum fails tobuild in the near future, further cred-it easing, infrastructure spendingand tax cuts should be considered astemporary measures to supportgrowth, the report said.The IMF also supported moves to

reduce systemic risk in the financialsector and called for the financial pol-icy committee to be given the powerto set loan-to-value and loan-to-income limits.

Lagarde said that infrastructure spending could boost the UKs economy

n Growth has been flat, in part because ofessential deficit reduction and householdscutting their debts, but also because of theEurozone crisis

n Unemployment is falling and remains

relatively low considering economic woes

n Growth should pick up over the secondhalf of this year, as long as the Eurozonecrisis does not worsen sharply

n Inflation should fall below target in thenext 18 months, assuming no more jumps incommodities prices

n Cutting interest rates below 0.5 per centwill help stimulate economic growth, aswould more quantitative easing

n The deficit reduction plan is on target andgoing well, but could be adjusted to boostgrowth for example, by spending more oninfrastructure and less on public sector wages

nA sustained push to ease planning restric-

tions will also help the economy by allowingthe private sector to fill the space left by thepublic sector cuts to building work

n If the economy worsens, even more couldbe spent on infrastructure, while short-termtax cuts could also help growth

n Efforts to stabilise the financial sectorshould be extended, including by grantingadditional powers to regulators to limit thesize of loans

THE IMFS UK ASSESSMENT

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MORE than a third of UK insurers

fear the industry will miss thedeadline to comply with theforthcoming Solvency II reforms,according to research carried out forDeloitte by the EconomistIntelligence Unit.

Insurers also said uncertainty overthe final draft of the EU directive which will lift capital requirements has increased costs.

Rick Lester, lead Solvency IIpartner at Deloitte, said that despitedelaying the implementation dateuntil January 2014, firms were lessconfident that it would be met.

There has been a 50 per centincrease from last year in thenumber of respondents who haveexpressed concern with theindustrys ability to meet thecompliance deadline, he said.

Lester added that the primaryconcern of insurers was the lack of

detailed information on Solvency IIrequirements since they areunlikely to be clarified untilrelatively close to the go-live date,creating additional costs.

The delays are affecting profits,with 73 per cent of respondentssaying setbacks have taken a toll onbudgets. Meanwhile 42 per cent saidSolvency II delays have increasedprogramme costs by more than fiveper cent.

Insurers fearindustry willmiss deadline

BY JAMES WATERSON

GETTY

PLANS to shake up Britains energymarket were unveiled by the govern-ment yesterday, in a sweeping over-haul that looks set to raisehousehold bills to pay for a greatermix in the countrys power supply.

Energy bills are forecast to jumpby around 100 a year by 2030under the plans, but the coalitioninsists that the long-awaitedreforms will shave four per cent ayear from the hike facing con-sumers without these changes.

Under the draft bill put before par-liament yesterday, low carbon pro-

ducers will be encouraged withguaranteed prices for green power.This will be backed up by expen-

sive taxes for fossil fuel generators,with a carbon price floor of 16 pertonne of carbon dioxide generated,rising to 70 in 2030.The government aims to attract

110bn of new investment over thenext decade to replace ageing ener-gy sources, with a focus on domesticgas, wind and wave power.

Power marketoverhaul set to

push up billsBY MARION DAKERS

The coalition has also placedimportance on reviving the coun-trys nuclear power sector, whichwas dealt a blow earlier this yearwhen E.ON and RWE pulled out of a15bn scheme to build two newplants.

Rival firm EDF yesterday said it wasworking with nuclear regulators toextend the life of eight of its UKnuclear sites, which were due fordecommissioning in 2016.

Energy secretary Ed Davey warnedthat the UK faces power cuts, soaringprices and environmental damagewithout the plans.

The reforms will also be better forthe economy, leaving us less vulnera-

ble to rising global energy prices andsupporting as many as 250,000 jobsin the energy sector, he added in astatement.

Labours shadow energy ministerTom Greatrex welcomed the empha-sis on renewables, but added: Thereis nothing to break the dominanceof the energy giants, nothing to sim-plify tariffs, and nothing to protectvulnerable customers from beingripped off.

Energy minister Ed Davey said without these changes, the UK would face power cuts


n The new draft Energy Bill, combinedwith parts of the Finance Bill 2011, is thebiggest change to the UK energy marketin decades

n It aims to secure Britains energy

supply by diversifying into green power,domestic gas and shoring up the nuclearsector

n The government reckons it can attract110bn of new energy investment twicethe level seen in the last decade

n New market mechanisms will bebrought in to encourage producers, suchas a guaranteed minimum price for greenpower

n The average household bill is forecast torise 100 a year by 2030, in part due tohigher spending on power infrastructure.But DECC believes bills will actually startto fall by the end of this period, as Britain

is better protected from the volatility ofthe energy markets

n A separate plan for Britains gas sup-plies, which continue to play a majorrole, is due to be published in September

n Plans were also set out to sell theMinistry of Defences 2,500-kilometrelong aviation fuel network, built in 1939,to help reduce public debt and encourageprivate investment

ENERGY BILL AT A GLANCE

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YELL Group, the struggling

publisher of the Yellow Pages,yesterday unveiled a new name as itposted a 1.2bn loss.

Subject to shareholder approval,the group will be renamed Hibu,pronounced high-boo, as part of itsattempt to change its fortunes.

But the re-brand, which wouldhave cost the company hundreds ofthousands in consulting fees,accompanied Yells full year resultsin which the debt-riddled companyfell to loss and reported a 14 percent revenue decline to 1.6bn.

Yell posted a loss of 1.2bn,compared to a 47m profit lastyear.

Its print directory divisioncontinued to tumble, withrevenues down 21 per cent to1.1bn, while its digital directoriesarm fell by 11 per cent to 327m.

The ailing company found a

small lifeline in its digital servicesdivision, where revenues more thandoubled to 134m, boosting totaldigital sales by seven per cent.

Yell, which is currentlyundergoing a drastic transformationdue to its enormous debt pile, said itreduced its net debt by a fifth, or by565m, to 2.2bn.

Its shares tanked by almost aquarter, closing at 2.4p a fractionof its almost 6 high five years ago.

Yell hides poorresults behindname change

BY LAUREN DAVIDSON

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WEDNESDAY 23 MAY 201210 NEWS

BOTTOMLINE

DAVID HELLIER

Facebook shares decline deflates internet banking star

H

OTSHOT Morgan Stanleybanker Michael Grimes is thetarget of some angry fingerpointing after Facebooks

share price fall since its debut onFriday.

In many ways he shouldnt be sur-prised. In the run-up to the float,Grimes was the subject of a numberof press reports extolling his promi-nence in the technology sector,detailing the way in which he stolelead position on the account fromrivals and generally outlining his all-out star banker status.

In other words, Grimes had theprofile that any other investment

banker would want and because hehad it, rather than them, he hasquickly become the butt of criticismas things have not gone absolutelyaccording to plan on the years mosttalked about flotation

For Grimes, Facebook was thelargest of a series of IPOs that have

cemented his position as the go-toman in his sector. It started withLinkedIn last May and continuedwith the IPO of internet radio groupPandora, deals site Groupon andsocial gaming firm Zynga.That the Facebook float struggled

since its launch day has givenGrimes critics plenty of ammuni-tion.Why did Morgan Stanley re-price

the issue upwards at the last minutewhen one of its own research ana-lysts was revising forecasts down-wards?

Why did it not seek more advicefrom the other banks working on

the deal, including JP Morgan,Goldman Sachs and Barclays?Bankers say it very much took thelead on this deal, making most ofthe major decisions without a lot ofinput from the rest of the bankingsyndicate.

Some are asking more straightfor-wardly whether Morgan Stanley, inits quest to be the lead banker, justgot the valuation plain wrong, over-valuing Facebook massively.

In its defence the bank argues thatthe issue got away on Friday with-out any of it landing on the laps ofthe underwriters, which is no meanfeat given an issue of such size and

given the problems of the Nasdaqmarket that saw a closedown intrading for 30 minutes.

Bankers say that Morgan Stanleywas determined not to re-live theexperience of LinkedIn, whoseshares surged 50 per cent on theirdebut, leaving many saying the issuehad been underpriced.With Facebook shares now around

18 per cent below their issue priceand with Grimes reputation builtup so high ahead of the deal, hefaces the prospect of days if notmonths of questioning about theway he has handled the deal.

[email protected]

GETTY

PRIVATE equity house CVC Capital hasmoved closer to its hotly anticipatedflotation of Formula One by selling a$1.6bn (1.01bn) stake to three majorinvestors.

CVC, which owned 63.4 per cent ofF1, has sold 21 per cent of the busi-ness, it said yesterday.Asset managers BlackRock and

Waddell & Reed alongside NorgesBank Investment Management, theasset management unit of theNorwegian central bank, took stakesin a major fillip for Bernie Ecclestone,the F1 commercial rights holder,before a planned initial public offer-ing (IPO).

The deal gives Formula One anenterprise value of about $9.1bnincluding $7.2bn of equity and $1.9bnof debt.

This is great news for Formula Oneand an important step in its develop-ment, said Donald Mackenzie, man-aging partner of CVC, which investedin 2006 and will remain the control-ling shareholder.

We have supported the companyand its management as they have

BY PETER EDWARDS grown the company with great suc-cess. The addition of these three high-ly regarded investors to our shareregister is validation of this success.

F1 begins pre-marketing the IPO thisweek after months of speculation. It ispressing on with the sale after beingencouraged by the demand for sharesin the run-up to Facebooks IPO, whichraised $16bn. The sport is seeking toraise at least $2.5bn in a Singapore list-ing, which could ultimately value F1at up to $10bn.

Goldman Sachs, UBS, and MorganStanley are lead-managing the IPO,which could be Singapores largestsince Hong Kong billionaire Li Ka-Shings Hutchison Port Holdings Trust

raised $5.5bn in early 2011.Several recent developments have

highlighted the risks from politics tosafety attached to Formula One.

Earlier this month Williams wasforced to cut short its celebrationsafter the Spanish grand prix, its firstrace victory in eight years, when 31people were injured in a fire in theteams garage. In April the visit of F1 tothe Middle East for the Bahrain GrandPrix was disrupted by civil unrest.

GOOGLE yesterday completed its$12.5bn (7.9bn) acquisition ofMotorola Mobility after receiving

the green light from the Chineseauthorities.

Long-time Googler DennisWoodside was ushered into the topspot, taking over from Sanjay Jha asMotorola Mobilitys chief executive.

In a blog post, Google boss LarryPage said: Many users comingonline today may never use adesktop machine, and the impactof that transition will beprofound as will the ability to

BY LAUREN DAVIDSON

just tap and pay with your phone.Thats why its a great time to be

in the mobile business, and whyIm confident Dennis and the teamat Motorola will be creating thenext generation of mobile devices

that will improve lives for years tocome.

The deal is a central step inGoogles continuing growth in thesmartphone and tablet market.Googles Android, on whichSamsung and HTC phones run, isthe most popular operating systemaccording to Kantar WorldpanelComTech. The acquisition isGoogles biggest to date.

Google boss Larry Page said its a great time to be in the mobile business

Investors take$1.6bn stake in

F1 as IPO loomsGoogle finally takes MotorolaMobility after China says yes

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GETTY

IN BRIEFSEC looking at JP Morgan accountsn US regulator the Securities andExchange Commission (SEC) will lookinto the appropriateness and com-pleteness of JP Morgan Chases finan-

cial reporting following the banksrecent disclosure of large trading losses,SEC chairman Mary Schapiro said yester-day. Earlier this month JP Morganannounced it had suffered at least $2bnin losses after trades that the bank sayswere intended to hedge risk went awry.

PIRCs slap on wrist for Deutschen Deutsche Bank has received areprimand from shareholder group PIRCover its succession planning.

The group also warns that the bankcould see the vote against its paypackages increase from the 42 per centseen at last years annual generalmeeting because shareholders

concerns over the remuneration systemhave not been adequately addressed.

Renminbi marketing blitz plannedn The UK, China and banks with bigoperations in both countries are plan-ning a marketing blitz to encouragefirms to take advantage of new freedomto settle trades in renminbi, Beijingscurrency. At a meeting of the LondonForum, which includes government rep-resentatives and envoys from HSBC,

Barclays and Standard Chartered amongothers, discussion focused on how busi-nesses could be encouraged to makeuse of extended trading hours and howbanks could improve infrastructure such

as indices and boost liquidity by gettingbrokers to offer more renminbi products.

Accor offloads $1.9bn hotels armn Accor is to sell its troubled US budgethotel business for $1.9bn (1.2bn) to pri-vate equity group Blackstone, in anexpected move by the French hotelgroup to focus on growth outside theUS. Accor will take a one-time non-cashhit of 600m linked to the early buyoutof fixed-lease hotels as part of the deal.

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EUROPEAN software company SAPAG plans to buy US softwaremaker Ariba in a deal valuing thecompany at $4.3bn in a bid tocompete more aggressively againstrival Oracle in the fast-growingcloud computing market.

SAP and Ariba, a darling of thefirst dotcom boom that has sincereinvented itself as a majornetworking and onlinecommerce software developer,have agreed to the acquisition at$45 a share, representing a 20 percent premium.

The purchase of Ariba, based in

Sunnyvale, California, would bethe latest in a string ofacquisitions by Germanys SAP tohelp fuel its revenue growth andkeep up with rivals.

SAPs deal values Ariba at 6.9times expected 2013 revenue,according to Roth CapitalPartners.

SAP taps software rival Ariba in $4.3bn dealBY CITY A.M. REPORTER

One in ten investorsreject Shell pay deal

Shell chief executive Peter Voser

OIL giant Royal Dutch Shell yester-day suffered an embarrassinginvestor rebellion when 9.1 percent of its shareholders votedagainst its executive pay deal, upfrom two per cent a year before.

Chief executive Peter Voser

earned 11.7m (9.5m) for 2011,double what he took home for theprevious year, despite littleimprovement in the companysshare price.

Shareholder group Pensions andInvestment Research Consultants(PIRC) said the pay deal is exces-sive and had urged investors tovote against the remunerationreport.

Although the company pegs its

salaries against its internationalcompetitors, salary levels, whichhave been frozen since 2009, arestill at the high end of its UK listedpeer group, PIRC said.

Campaigners also highlightedthe fact that Voser is set to receiveawards worth 526 per cent of hisbase salary.

Leading companies have seenrebellions against pay deals duringthe shareholder spring, withinsurance giant Aviva losing chiefexecutive Andrew Moss after amajority of investors voted againstthe firms pay deal.

Shell also announced that it hadbeaten forecasts with an 11 percent rise in fourth-quarter profit,as higher oil prices outweighed theimpact of lower US gas prices.

BY JAMES WATERSON

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IN BRIEF

ONE of the UKs top law firms is in

preliminary talks with a US peerover a tie-up that would create a900m business, it emergedyesterday.

According to The Lawyer, City firmSJ Berwin has held exploratorymerger talks with Mayer Brown aChicago-based firm that has asignificant London presence.

The news comes just a week afterMayer Brown elected a newchairman to replace HerbertKrueger, who will step down at theend of this month. Paul Theiss, acorporate partner at the firm, willtake over on 1 June.

In March, incoming SJ Berwinsenior partner Stephen Kon told City

A.M. his key focus over his three-yearterm would be integrating thefirms international practices.

The firm, which employs morethan 500 lawyers in London, has

recently been on the hunt for apotential merger, and last yearmanaging partner Rob Day said a UStie-up would be the preferred choice.

SJ Berwin has offices acrossEurope and Asia, but does notcurrently have a US presence.

According to The Lawyer, it hadrevenues of 179m in the 2010-11year, while Mayer Brown turned over$1.13bn (715m) in the year toFebruary 2012.

Both firms declined to comment.

SJ Berwin andMayer Brownin merger talks

BY ELIZABETH FOURNIER

WEDNESDAY 23 MAY 2012 cityam.com12 NEWS

GETTY

VODAFONE yesterday became theUKs highest dividend payer afterhiking its shareholder payout for theyear by 52 per cent to 13.52p.

Announcing its full year results,the telco giant said it paid out a totalof 10.2bn to shareholders in fiscal2011, including 3.6bn in a sharebuyback and 2bn from the reapingsof its 45 per cent stake in Verizon.Vodafone will need to rely on a con-

tinuing strong performance fromVerizon, which accounts for 40 percent of revenue, amid waningincome from its European opera-

tions.While full year revenue grew by 1.2

per cent to 46.4bn, it was draggeddown by poor trading in Europe,including fourth quarter declines inItaly and Spain of four per cent and9.5 per cent respectively.This was offset by growth in emerg-

ing markets. Egypt revenue was up7.2 per cent, while India grew by 21per cent.Vodafones presence in India has

been clouded by an ongoing spat

Vodafone is topdividend payer

in the FTSE 100BY LAUREN DAVIDSON with the government over tax and

regulatory issues. Vodafone chiefexecutive Vittorio Colao concededthe company is currently between arock and a hard place in India, butadded: We are a pretty hard rockourself.

He added that the continuing cutsto mobile terminations rates inEurope are hurting the industry.Vodafone, which suffered an 11 percent profit drop to 7bn, cut its rev-enue projections for the year ahead.

But Colao remained upbeat aboutthe companys growth strategy. Hesaid, My ambition is for Vodafone tobe the Amazon of telcos.

Vittorio Colao said he wants Vodafone to be the Amazon of telecoms companies

Vodafone Group PLC


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p172.0022 May

Overall, todays results were reassuring. Although the reduced guidanceon revenue for next full year is a little disappointing, we are comforted by theexpectation for stability in free cash flow, given that is the driver of theseven per cent dividend growth target.

ANALYST VIEWS

The outlook commentary is cautious. The company highlighted ongoingcompetition alongside weak consumer demand and harsh regulation as mate-rial barriers to growth. But its expectation that the ebitda margin will sta-bilise by March 2014 suggests it is confident of containing commercial costs.

The outlook is slightly disappointing, with downgrades mostly due to

adverse exchange rate movements and tough conditions in Europe. However, ina sector context, the fact that Vodafone has reiterated a growing divi-dend should provide reassurance.

DOES VODAFONESDOWNGRADED OUTLOOKDAMPEN ITS RESULTS?Interviews by Lauren Davidson

JONATHAN JACKSON KILLIK & CO

JERRY DELLIS JEFFERIES

WILL DRAPER ESPIRITO SANTO

7/31/2019 Cityam 2012-05-23

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REUTERS

Homeserve PLC


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p160.0922 May

BATS Europe is in talks withexchange rivals over a clearing dealthat will allow the share trading

platform to break into Europeanfutures and challenge incumbentsNYSE Euronext and Deutsche Boerse.

BATS Europe, which handlesabout a quarter of European sharetrading, has approached the mainexchanges about recruiting theirclearing houses to back its push intofutures, something it plans to do thisyear.

We have been talking with thevarious European clearing houses fora while now and we now know

BATS in talks over deal to breakinto European futures market

BY HARRY BANKS where the various clearing providersare, said BATS Europe chiefexecutive Mark Hemsley.

The main European derivativesclearers are LCH.Clearnet, which is

set to be bought by the London StockExchange, Deutsche Boerses EurexClearing, CME Clearing Europe, partof the CME Group and ICE ClearEurope, from theIntercontinentalExchange.

BATS Europe, part of BATS GlobalMarkets, does not operate its ownclearing house unlike most of itsrivals, and, therefore, needs topartner with another exchange tohelp it launch European futurestrading.

INTERMEDIATE Capital was thebiggest riser on the FTSE 350 indexyesterday after it posted a five percent jump in profit.

The firm, which specialises in

providing mezzanine financing,posted fund management companyprofit before tax of 37.7m. Groupprofit before tax for the year to 31March rose 31 per cent to 243.8mdespite a year dominated by theEuropean sovereign debt crisis.

Third party mezzanine assetsunder management were up sevenper cent at 3.7bn (2.99m).

Profits soar atinvestor ICG

BY PETER EDWARDS

THE OFFICE of Fair Trading (OFT) haswritten to short-term money lender

Wonga to warn it againstaggressivedebt collection practices.

The OFT said letters and emailssent from Wonga to customerssuggesting they had committedfraud were without appropriatejustification, and that if similarletters were sent again the lenderwould face a fine.

Wonga said it would appeal thedecision.

The OFT launched an investigationinto payday loans earlier this year.

Wonga hit byOFT warning

BY CITY A.M. REPORTER


BATS Europe chief executive Mark Hemsley is hoping to expand into European futures

AROUND 200m was wiped from thevalue of repairs group Homeserve yes-terday after it said the City regulatorhad launched a probe into mis-sellingclaims.The stock closed down by nearly a

third after it confirmed the FinancialServices Authority would investigatecertain historic issues.The inquiry, which Homeserve said

would take a number of months,comes after the home maintenanceand insurance provider suspended itsUK telesales and put staff on a retrain-ing programme.

The identification of the regulatory

issues in our UK business in October2011 has made this the most challeng-ing year in Homeserves history, saidchairman Barry Gibson.The reforms are extensive but are

taking longer and costing more thanoriginally planned, he added.The firm, which has now started to

phase back in its UK sales and market-ing activity, posted an eight per centrise adjusted pre-tax profit to 126mas revenue leapt 14 per cent to534.7m for the year to 31 March.

Shares plungeat Homeserve

on FSA probeBY PETER EDWARDS It wants to shrink its UK business,

however, from 2.7m customers tobetween 2.2m and 2.4m. It hopes tolimit the turnover of customers andfocus on higher value policies on coreproducts instead of discounted offers.

In the UK we are planning to createa smaller, more focused and sustain-able business from which to grow,said chief executive Richard Harpin.The number of international cus-

tomers jumped 14 per cent to 2.2m.The group also said it would cut 250

jobs, however, on top of the 200announced in February.

Shares closed down 29 per cent at160.9p.

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IN BRIEFKcom posts jump in profits Telecoms provider Kcom Groupsfull-year pre-tax profit rose 55 percent, helped by an increase in sales atits KC business and a reduction inoperating costs. Kcom, which providescommunications services forenterprise and public sectororganisations across the UK said pre-tax profit for the year ended 31 Marchrose to 51.1m from 32.9m. Revenuefell two per cent to 387.3m, reflectinga 2.7 per cent decline in thecompany's Kcom segment. Kcomincreased the full-year dividend to 4pfrom last year's 3.6p.

Destocking hits Victrex High-tech plastics firm Victrexreported a fall in its half-year profit asdestocking by customers in the firstquarter hurt sales. Victrex, whose keypolymer product is used in aircraftcomponents, car parts and surgicalinstruments, also hiked its interimdividend by 13 per cent to 9p pershare. For the first half, Victrex saidpre-tax profit fell four per cent to46.2m. Revenue dropped two percent to 105.6m.

Anglo and Codelco restart talks Anglo American and Chileancopper giant Codelco have agreed totalks in an effort to end a damagingmonths-long row over the globalminer's assets the country's south.Anglo said the miners, who had beendue to appear before a Santiago courttoday as part of conciliationproceedings, had instead asked for amonth-long suspension of the courtbattle.

COMPUTER manufacturer Dell lastnight forecast disappointing second-quarter revenue as US andEuropean corporate tech-spendingweakens and consumer personalcomputer sales continue to shrink.

Its shares dived more than nineper cent in after hours trading.

Dell, like rival Hewlett-Packard, islosing market share to mobiledevices such as Apples iPad as con-sumers choose to buy tablets ratherthan laptops.The worlds third biggest PC

maker forecast revenue growth ofbetween two and four per cent in

the next fiscal quarter equivalentto income of $14.7bn and $15bn(9.3bn and 9.5bn) well short ofWall Streets expectations.

Clearly we are seeing a bit morechallenging demand environment,Dells chief financial officer BrianGladden said. Europe, in general,was down for us.

But he added demand from US fed-eral businesses appears to beimproving slightly: We are seeing apretty good pipeline there.

Dell shares diveas it struggles

to grow incomeBY HARRY BANKS

Dells quarterly revenue fell morethan analysts had expected and salesto consumers took a big hit, withconsumer revenue slipping 12 percent to $3bn. Sales to large corpora-tions fell three per cent to $4.4bn.The firm revenue in its fiscal first

quarter declined four per cent to$14.4bn. Net income fell to $635mfrom $945m a year earlier.The firm is attempting to reinvent

itself as service provider, with 50 percent of its gross margin comingfrom its enterprise and services busi-ness.

Dells shares traded at $13.50 afterhours, down from yesterdays $15.08close on Nasdaq.

FASHION brand Ralph Lauren said yesterday it expects lower wholesale sales this fiscalyear, hurt by a slowdown in Europe and the closure o f some China wholesale operationsit will eventually replace with its own stores. Ralph Lauren said revenue rose 13.7 percent to $1.62bn, while net income was $94.4m compared with $73.2m a year earlier.

RALPH LAUREN GIVES DOWNBEAT SALES OUTLOOK

Dell Inc

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CITY investment management firmBrewin Dolphins garden at theChelsea Flower Show has won agold medal for being the

best in the show, which is greatnews for those participating inthe firms online charityauction.The auction, which will raise

funds to help the fight againstleukaemia, includes a prizethat gives the winner a privategarden consultation withBrewin Dolphins ChelseaFlower Show designer, CleveWest. His winning design hasbeen described as formal andtimeless, contemporary yet tradi-tional.

Theres also a training day withthe Olympic athlete Sonia

OSullivan for avid athletes.The auction is part of a push by

Brewin Dolphin that involves sponsor-ing fifteen riders cycling from Londonto Paris in three days to raise more than120,000.

The riders will be led by GeoffThomas, an ex-Crystal Palace and

England player who was diag-nosed with chronic myeloidleukaemia in 2003 and has nowdedicated his life to raisingmoney for the treatments.The project raises funds to help

give patients access to new treat-ments of leukaemia and lymphomaand improve their chances of sur-vival.

The auction, accessed online at

brewin.co.uk/auction, will be openuntil 6.45pm on 13 June.

Cleve said he was delighted to bepart of Brewin Dolphins 250thanniversary.

Brewins top of the

league at Chelsea

Winning garden designerCleve West

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cityam.com/the-capitalistTHECAPITALISTWEDNESDAY 23 MAY 2012

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AFTER weeks ofintense interest, Holly

Brook from Pitch PR hasbeen named as the femalechampion for this years

Aviva Trophy Lift Challenge.Ms Brook managed tohold up the trophy for animpressive one minute andseven seconds to declaredthe winner.The male champion was

Simon Smith of ICAP, whoheld the trophy up for twominutes and 31 seconds.The Aviva Premership

Trophy has visited manyLondon offices during thelast few weeks, testing thestrength of both male andfemale employees.

Competitors pitchedthemselves not just againsteach other but againstsome unnamed Premershiprugby players.The two winners will be

sharing a box at the AvivaPremiership Final atTwickenham on Saturday,where they will receive fullVIP hospitality.

Holly Brook holds the trophy aloft

7/31/2019 Cityam 2012-05-23

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IN BRIEFDigital boost not enough at Future Media agency Future said yesterdayits digital revenues climbed 37 per centin the six months to the end of March,but the boost wasnt enough to offset a33 per cent fall in profits. Operatingprofits fell to 1.2m, while revenues weredown 11 per cent on a statutory basis at61.1m and four per cent lower on anormalised basis at 59.1m.

Bramhill quits Wessex Exploration David Bramhill resigned yesterday aschairman of Aim-listed WessexExploration. Bramhill led the Bristol-based groups IPO in March last year.Shares in the company fell three percent after the announcement, whichcomes a month after French major Totaldecided not to pursue a takeover bidfor the company.


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Buzz in the UK measured onBrandIndex has shown considerableuplift for Facebook since the start ofthis month as news of the IPOcreated a positive vibe around thebrand. Buzz increased from -8 on 2May to +6 on Monday. This 10 pointincrease has meant that for the firsttime in nearly six months, Facebookis on an even keel with its socialmedia rival Twitter.

So some bright news for Facebookamidst the gloom of theinterminable share price falls thisweek.

It will be interesting to see if theincreases seen on Buzz cancontinue for the social media giantpost-IPO and the stock price slide it

has seen since then. What alsoremains to be seen is how therecent stock launch will impact onother key brand health measuresfor Facebook, such as value andsatisfaction.Stephan Shakespeare is chief executive ofYouGov

BRANDINDEX

STEPHAN SHAKESPEARE

Facebook brand image survives embarrassing float

FACEBOOK, the worlds largestsocial networking site, hasmade headlines with its IPO,which has since turned sour.

Earlier this month, founder MarkZuckerberg announced that hewould be leading a roadshow forFacebook in order to arouseinterest on its soon-to-be available

shares.On 18 May, the day of the IPOlaunch, Facebook began tradingwith a share price of $38 each.That valued the firm at $104bn(66bn), meaning the value ofFacebook was greater than that ofDisney, McDonalds and Kraft. Thiswas not only the largest debut everachieved by an internet company,but it was also the third largest USIPO in history.

Buzz

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This week we want to know what our Voiceof the City panel thinks of the Beecroftreport on employment, which hasproposed measures including scrappingexisting unfair dismissal rules and replacing

VOICE OF THE CITY

PoliticsHome.comPoliticsHome.comIn association with

Apply to join today atWWW.CITYAM.COM/PANEL

them with compensated no-fault dismissal.To have your say, apply to join the panel atcityam.com/panel.

7/31/2019 Cityam 2012-05-23

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BRITISH companies are sitting on

a 64bn cash pot built up bydelaying payments to suppliers, anew study claims.

Research by Deloitte found that,on average, suppliers were paidfour days later in 2011 than theywere two years earlier in order tohelp companies amass funding fortheir daily cash flow.

This has lead to shor t-termimprovements for UK firms but inthe long term can lead todeteriorating relations withsuppliers as they look to recouplosses by either reducing serviceor increasing prices, Deloittewarned.

Although working capit al canbe one of the cheapest and mostaccessible forms of fundingavailable to a businesses, thereport said that if companiesstopped accumulating this cash,

they could instead fund businessgrowth or help overcometemporary market downturns.

As the UK economy hastechnically entered a recession,cash and its effective use willcontinue to remain high on thecorporate agenda, said AndrewHarris, partner in Deloittesadvisory development group.

The study drew on responsesfrom UK-listed companies withannual sales greater than 60m.

Deloitte: firmsare hoarding64bn cash pile

BY ANAAM RAZA

GETTY

THE CHAIR of the FSA, Lord Turner,has assured MPs that if the watch-dog finds widespread evidencethat banks have been mis-sellingfinancial products to small firms,we will take action.

His warning came as the TreasurySelect Committee kicked off aninquiry into corporate governance,particularly in banks.

At a hearing yesterday, Lib DemJohn Thurso MP unleashed adiatribe blaming bank chiefexecutives for an immoralpractice of mis-selling interestrate swaps.

Thurso said he believes itstems from the decisionat the top to go for anunrealistic returnon equity for provid-ing what should bea basic utility forbusiness to grow,calling it a despi-cable culture.

However, theFSA and FinancialOmbudsman said

Turner vows toact if FSA finds

new mis-sellingBY JULIET SAMUEL there is as yet no clear evidence ofhow widespread the practice is.

Sir David Walker, senior adviser toMorgan Stanley, told Thurso inresponse: I basically agree withyou. The FSA is currently conduct-ing an investigation into practicessurrounding the sale of financialproducts to small businesses, someof which have ended up costingsmall firms hundreds of thousands.

MPs are also looking at diversityon boards. Andrea Leadsom, a Tory

MP, claimed male bank bosses aremore aggressive than women,saying that female executivesdisplay a more mea culpa atti-tude when things go wrong.

By contrast, she claimed themale bank executives attitude

was not our fault, dontblame us, just keep payingus.

The Financial ReportingCouncils Peter Montagnoncalled her summary dan-gerous stereotyping.

Adair Turner reassured MPsover banks mis-selling

HIGH levels of American homesales were recorded in April,

boosting hopes for the US

recovery, as a leading member ofthe Federal Reserve said thatconditions are not ripe for morequantitative easing.

Sales of already-owned homesshot up by 3.4 per cent to anannual rate of 4.62m units lastmonth, the highest since May2010, according to the National

Association of Realtors.Across the US, the median

average price for a re-sold homejumped to $177,400 in April, up

US home sales on the rise as Fedofficial says QE3 is not required

BY CITY A.M. REPORTER 10.1 per cent from a year earlier the biggest annual increase since

January 2006.Yet prices rose in large part

because a drop in foreclosures led

to fewer distressed sales, said NAReconomist Lawrence Yun.

Nonetheless the housing datawas surprisingly bullish, andseparately senior official DennisLockhart said that the Fed shouldmake it clear that the economicclimate does not warrant further

bond buying.QE3 will work under the right

circumstances, Lockhart said.But I dont believe suchcircumstances prevail at his time.


Dennis Lockhart said that the time is not right for more quantitative easing, dubbed QE3

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STORAGE giant Big Yellow

yesterday reported annual losses of35.6m triggered by writedownslinked to an impending tax rise.

The government is planning toslap VAT on self storage payments,which means that storage costscould shoot up as much as ten percent.

The companys losses in the yearto the end of March compare witha 6.9m profit for the previousyear.

Big Yellow has been forced into a51.4m writedown on its propertyportfolio as a result of the tax raid,announced in the Budget and dueto be introduced in October

But revenue for the year roseslightly to 65.7m compared with61.9m in 2011.

The company is building threemajor new storage depots at a costof 14.3m, it said in its trading

statement, and is looking for newsites.

Chairman Nicholas Vetch saidthat despite the tax setback thecompany was strong.

He said in a statement: The BigYellow Self Storage business modelhas proved to be relatively resilientduring the downturn, in line withthe experience in the moreestablished US self storage market.

Big Yellow raised its dividend by1p to 10p.

Big Yellow hitby tax raid onstorage space

BY JOHN DUNNE

SHARES in Bloomsbury jumped 6.6per cent yesterday as the Britishpublisher said its pre-tax profitsfrom continuing operations morethan doubled last year.

Continuing pre-tax profits wereup 53 per cent to 12.1m, whiletotal turnover grew 11.5 per cent to103.2m.

Bloomsbury pointed to its hugeebook growth as a source of theincome boost. Digital salesincreased by 159 per cent to 5.7m,from 2.2m the year before.

Chief executive Nigel Newtonsaid: There is a fundamental shift

happening from print to digitaland from the high street to theinternet.

The decision to digitise our back-list several years ago continues toreap benefits.The group, famous for publishing

the Harry Potter series, made2.6m (2.09m) from the sale of itsloss-making German subsidiaryand called 2011 a transformation-al year.

Its 19.2m acquisition of publish-

Profits doubleas Bloomsbury

turns to ebooksBY LAUREN DAVIDSON er Continuum during the yearboosted its academic and profes-sional publishing division, whichgenerated 17.5m during the year,an increase of 22 per cent.

Bloomsburys academic and pro-fessional arm accounts for 24 percent of continuing group sales.

Newton said: At a time when thetraditional books industry is under-going a revolution, we have built arobust and balanced business withmore predictable income streams.

Bloomsbury said it has a strongtrade list for the year ahead, includ-ing a new book from HughFearnley-Whittingstall and HowardJacobsons latest offering, Zoo Time.

Bloomsbury Publishing PLC

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BRITAIN has seen unprecedentedinterest in developing North Seaoil and gas fields, with companies

applying for a record 224 licencescovering 418 blocks in its latestexploration round, the

government said this morning.Britains 27th licensing round

was launched in February andbreaks the record forapplications set in the previousround by 37.

There remains anextraordinary level of interest inNorth Sea oil and gas, and it istremendous news for industry

North Sea oil attracts a recordnumber of licence applicants

BY HARRY BANKS and for the UK economy," energyminister Charles Hendry said.

Britains oil and gas outputpassed its peak in 1999, but the

government estimates there

could still be over 20bn barrels ofoil equivalent (boe) in UK waters,and hopes the latest licensinground will help get it out.

Enthusiasm for North Sea oilhas been lifted by a 3bn newfield allowance introduced in thelatest Budget in March, whichaimed to make up for shock taxhikes last year, which nearlydoubled some exploration profitlevies to pay for a tax cut formotorists.


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IN BRIEFGreencore earnings on the rise Anglo-Irish convenience foodcompany Greencore yesterdayreported climbing revenue and profits.The company, which is making specialJubilee themed sandwiches to bestocked in Sainsburys and Waitrose,said first-half revenue soared 49.9 percent to 567.7m. Operating profitswere up 36.7 per cent to 31.7m forthe six months to the end of March.The company has been boosted byacquisitions including its purchase ofM&S supplier Uniq.

UK Mail delivers strong revenues Logistics and parcel delivery firmUK Mail yesterday said its revenuejumped 8.4 per cent to 429m in theyear to the end of March. The groupsaid its figures were helped by a rise inparcel prices, which were introducedin May last year. But profits before taxand exceptional items fell from 16.1mto 15.1m, partly due to the loss of oneworking day. It held its dividend at18.2p per share. Chief executive GuyBuswell said: We have made progressin developing our business, investingin our highly efficient network, anddriving down cost.

Sechin takes the helm at Rosneft Russian Prime Minister DmitryMedvedev yesterday appointed IgorSechin as chief executive of state-con-trolled Rosneft, putting the man whoran energy policy in the last govern-ment in charge of Russias largest oilcompany. Sechin recently mastermind-ed three offshore deals with western oilmajors. He pledged to boost Rosneftsproduction in taking the post.

GETTY

COMMODITIES giant Glencore yester-day announced that it had taken con-trol of the Mutanda copper operationin Congo for $480m (304.4m).

Glencore had a stake in the compa-ny but is now in the driving seat.The move marks the first step in a

planned merger of the mine with itsnearby Kansuki concession.

Mutanda, in central Africas copperbelt, is one of Glencores main growthassets and a key operation in theDemocratic Republic of Congo along-side its Katanga operation, largelythanks to its high ore grades and low

expansion costs.The company said it had paid

$340m in cash to acquire both a fur-ther 24.49 per cent in SamrefOverseas, the top holding companyabove Mutanda, taking its hold in thecontrolling entity to almost 75 percent, and a further one per cent inSamref Congo, a second holding com-pany.

Glencore, hoping to accelerate devel-opment of the copper operations withyesterdays move, has also acquired

Glencore takesover Congolese

copper mineBY JOHN DUNNE

shareholder debts amounting toaround $140m.The deals take its indirect equity

interest in Mutanda Mining to 60 percent.

Meanwhile miner Xstrata, which isthe subject a bid by Glencore, raised itscopper production target.The FTSE 100 company said sluggish

copper demand in China will pick upin the second half as it makes plans toboost production of the metal by 60per cent.

Charlie Sartain, Xstratas copper divi-sion head, added that demand inEurope remains flat, but America isstarting to show signs of returningappetite.

Glencore International PLC

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DEFENCE technology groupCobham yesterday extended thedeadline for shareholders in

Thrane and Thrane to decidewhether to accept i ts 275moffer for their firm.

Thrane, a Danish satellitecommunications company, willhave until 18 June to decide onthe bid.

The delay was triggered by theamount of paperwork associated

with the deal, the f irm said.Cobham has already secured 90

per cent of the issued share capi-tal in Thrane.

Cobham extends deadline forThrane as paperwork piles up

BY JOHN DUNNE FTSE 250-listed Cobham hasoffered 435 Danish crowns(47.54) in cash for each Thraneshare, an increase of 15 crownsper share over its initial offer.

Cobham returned with arenewed bid after a board shake-up at Thra

cityam 2012-05-23

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