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BUSINESS WITH PERSONALITY

COVENT Gardens arcade has been decorated with Union Jack bunting this week to mark Londonscelebration of Queen Elizabeth IIs Diamond Jubilee. Other festivities this weekend will include afestival of boats on the Thames and the lighting of more than 2,000 beacons around the country.

CITY leaders yesterday welcomed thegovernments decision to scrap theproposed charity tax, a policy that phi-lanthropists say would have under-mined giving at a time when charitiesare in desperate need of new funds.Announcing the Treasurys third

budget U-turn of the past week, chan-cellor George Osborne said the debateover capping tax relief from charitabledonations had become a distraction.

Frankly, at a time like this the gov-ernment is going to focus on the bigissues like the worsening Eurozone cri-sis and Britains deficit, and not get dis-tracted with unnecessary arguments.

Osbornes decision came the dayafter leading venture capitalist JonMoulton said that he would stopdonating to the Conservative party

www.cityam.com FREE

after becoming disillusioned over thecharity tax, and other economic issues.

Last night Moulton told City A.M. thathe absolutely supported the decisionto drop the policy but the govern-ment should have done it earlier.

[The cap would have] discouragedlarge gifts to charity and they can sub-stitute for government cuts. I regardmyself as insensitive but this is well offthe scale of what Id normally do.

Heather Self, tax specialist at lawfirm Pinsent Masons said: The govern-ment appears to have conceded that itwas wrong to draw charities into a catand mouse game of tax avoidance.This was a poorly thought throughproposal which would have harmed

charities without being well-targetedon abuse.Despite the U-turn the government

will push ahead with plans to cap other

FTSE 100 5,306.95 +9.67 DOW t12,393.45 -26.41 NASDAQt2,827.34 -10.02 /$ t1.54 -0.01 / t1.25 unc /$ 1.24 unc

ISSUE 1,645 FRIDAY 1 JUNE 2012

LONDON READY FORTHE JUBILEE

ALLISTER HEATH: Page 2

Certified Distribution

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

BY JAMES WATERSON

CITY CHEERSU-TURN ON

CHARITY TAXforms of tax relief at 50,000 a year, or25 per cent of an individuals income.Critics say going ahead with this pol-icy will affect reliefs that are designedto encourage entrepreneurship, suchas relief for trading losses and interestrelief for borrowing.

While the desire to stop the abuse ofthese allowances by the minority isunderstandable, the restriction ofthese reliefs for all high earners risksdiscouraging entrepreneurial activity,said Carolyn Steppler of Ernst & Young.

Gareth Thomas, shadow charitiesminister, said the policy has alreadydone considerable damage.

Sir Stuart Etherington of theNational Council for Voluntary

Organisations praised the decision:This is a victory for common sense.This is a great day for philanthropy.

COVENT GARDEN CELEBRATES

See Page 2, Punter Page 28-29, Sport Page 31See Page 2, Diary 14-15,Forum 22, Lifestyle 24-25

A RIGHT ROYAL WEEKENDINVESTEC DERBYSPECIAL SATURDAY EDITION

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IN BRIEFJPMs Dimon to explain $2bn lossn JP Morgan Chase chief executiveJamie Dimon will testify before the USSenate Banking Committee on 13 Juneto discuss the banks recent tradinglosses, the committee said yesterday.Earlier this month, JP Morgan said ithad suffered at least $2bn in lossesfrom a set of trades that were meantto hedge risk. Regulators are probingthe losses before making a decisionabout whether the bank and othersneed to scale back their risk.

[email protected]

Follow me on Twitter: @allisterheath

CITY A.M.INVESTEC DERBYSPECIAL EDITION

Davis to get 30m but noraise for Xstrata investorsXSTRATAS top staff will share a173m reward for sticking with thefirm during its mega-merger withGlencore, documents revealed yes-terday.As Xstrata shareholders learned

that Glencore has refused to budgeon its offer of 2.8 new shares for eachXstrata share, the circular showedthat a group of around 70 managersand senior employees will be handeda slice of the huge payout as areward for their loyalty.

Mick Davis, who will be chief exec-utive of the enlarged group, standsto make almost 30m on top of hissalary and long-term bonuses if hestays with the firm for the next threeyears.

Investors including Standard Lifeand Schroders have already voicedconcerns that top staff are beingrewarded handsomely whileinvestors stand to win a premium ofjust 11 per cent for their stock.

But the mining giant warnedshareholders against a protest voteagainst the payouts, pointing outthat the deal will collapse if a sepa-rate management incentivearrangements resolution fails.

Glencore shareholders will vote onthe merger on 11 July, followed byXstratas investors the following day.The firms expect the merger to close

Osborne sues to deter E U overreachGeorge Osborne is taking legal action in abid to stop the EU from overreaching itspowers by giving a pan-Europeansupervisor the right to ban short selling offinancial products. The chancellorsdecision to sue reflects his determinationto prevent EU institutions oversteppingtheir mandate, rather than any oppositionto short selling regulation reforms, whichhe strongly supports.

Potanin may cancel Norilsk stockVladimir Potanin, the biggest shareholder

in Norilsk Nickel, said the Russian minermay cancel up to 10 per cent of thecompanys stock held via subsidiaries, amove that could ease a corporategovernance conflict over the business. Theboard could make a decision before theend of the year.

Potential bid for American AirlinesPrivate equity group TPG and US Airwaysare in talks over a joint bid for AMR Corp,the parent company of American Airlines,according to people familiar with thesituation. American, the third-largest UScarrier, filed for bankruptcy protection inNovember citing untenable labour costs.

Bankers are proud of FacebookMorgan Stanleys boss has defended hisbanks role in the Facebook IPO, claimingthat there was no nefarious activityinvolved. James Gorman told staff theyshould be proud of their work and thelisting should be judged over time.

Taxman to scour Covent GardenTraders at Londons markets, includingCovent Garden and Petticoat Lane, are setto be blitzed by tax inspectors over thenext few months as pressure intensifieson firms that are not paying their dues.

Mirror bosses wanted to buy firmThe editors of the Daily Mirror and theSunday Mirror were secretly planning totake over the company before they weresacked. Richard Wallace and Tina Weaverwere ousted on Wednesday. It has nowemerged that Mr Wallace and Ms Weaverwere plotting to take over the company.

Walmart faces revolt over bribesWalmart is braced for an AGM protest inthe wake of allegations that up to $24m(15.6m) was paid to Mexican officials tohelp speed up the firms expansion.

Auto maker pulls back in BrazilAnother luxury auto maker is pulling backon plans to invest in Brazil. Jaguar LandRover, the luxury-car unit of Indias TataMotors, yesterday followed GermanysBMW AG in suspending plans to build anew plant in Brazil.

Russian ruble at crisis levelsThe Russian ruble plummeted to itslowest level in more than three yearsagainst the dollar yesterday, bruised byfalling oil prices and a fresh round ofEuropean sovereign debt worries.

WHAT THE OTHER PAPERS SAY THIS MORNING

SPORTSWEAR giant Nike isputting its Cole Haan and Umbrolabels up for sale to focus on its

biggest-selling core brands.The US company said yesterday

it is starting the process straightaway and hopes to complete thesale by May next year.

It is now time to seek a buyerfor Umbro and Cole Haan tofurther focus ... on driving growthin the Nike brand, Jordan,Converse and Hurley, stated Nike,

which has forecast1.5bn sales offootball-related products this year.

Nike gives tick

to brands sale

Mick Davis, the Xstrata chief who will earn a 30m bonus for running the merged group

2 NEWS

BY JENNY FORSYTH

BY MARION DAKERS

To contact the newsdesk email [email protected]

FOR charities and their donors,including many in the City,George Osbornes latest andmost spectacular u-turn comes

as a perfect Jubilee weekend present.The Chancellor had announced inthe Budget a limit of 50,000 or 25per cent of income, whichever was

higher, on the amount individualscould donate in a tax-deductiblefashion; the idea wasunceremoniously dumped yesterdayafter pressure from philanthropists,furious at being portrayed as taxavoiders by a government which hadpreviously encouraged charitablework and the Big Society. It is a majorhumiliation for the Chancellor, whohas also partly u-turned on his pastyand caravan tax plans. Pressuregroups will feel emboldened to tryand derail all measures in futureBudgets. These will be seen as starting

EDITORSLETTER

ALLISTER HEATH

George Osbornes latest tax U-turn is a great Jubilee present

FRIDAY 1 JUNE 2012

points, working papers even, ratherthan final pronouncements onfinancial matters.

But even though this was by someaccounts the governments thirtiethU-turn, more are needed. Other, dam-aging tax hikes masquerading asreforms have not been scrapped.Osborne is pressing ahead with a capon other income tax reliefs, includingfor trading losses and interest relieffor borrowing (this applies to individ-uals who take out loans in their own

name to help their business).Astonishingly, these actually target

those setting up and running unquot-ed businesses and are bound to throt-tle expansion and job-creation plans.There is an overwhelming argu-

ment to stop promoting debt in thetax system, and to make its treatment

similar to equity, even thoughOsborne is constantly dreaming upnew ways to subsidise loans. But itmakes no sense to eliminate interestrelief on loans to companies whilesimultaneously complaining aboutthe lack of finance for small start-ups.Once again, this is the very oppositeof joined up government.The real scandal, however, is the cur-

tailing of loss relief: this makes nosense on any measure. Any abuse ofthese allowances by a minorityshould be stopped but the principleof paying income tax on actual, posi-

ous Budgets policies. Either he does-nt fully understand what he is doing or economic policy in this countrytruly is a contradictory muddle.

HAPPY DIAMOND JUBILEEIn an era where duty has gone out offashion, the Queen stands out as an

extraordinary example of selfless ded-ication. A public servant like no other,through good as well as bad times,she is a remarkable symbol ofBritains continuity, stability andunity in an ever-changing world. Shedeserves all of our heartfelt thanks.For those of you attending theInvestec Derby, we hope you enjoy ourspecial Saturday edition and wewish all our readers a great Jubileeweekend.

tive income, not losses, is a basic tenetof the tax system. A self-employedworker who sets herself up in yearone, incurring 60,000 in net start uplosses, and then earns 60,000 in yeartwo, would currently not pay anyincome tax over that period as shewould have earned nothing overall.

Under Osbornes plans, however, shewill pay tax on zero net income.This is as outrageous as it is stupid.

Osborne has also previouslyincreased income tax relief forEnterprise Investment Schemes (EIS),especially for those financing angelstart-ups yet his assault on loss reliefwill cancel out much of this help andreduce the flow of EIS investments.Im no fan of these sorts of fiddlyschemes as I want a drastically lowerand simpler tax system but Osborneloves them. Yet this Budget is stealth-ily reversing the effects of his previ-

in the third quarter of the year.But the firms need 75 per cent

approval to pass the tie-in, leavingpower to block the deal in the hands ofa relatively small group of disgruntledinstitutions.The firms advisers will make up to

$200m if the deal goes ahead.Glencores bankers, includingCitigroup, Credit Suisse and MorganStanley, will share a pot of up to $50mfor financial and corporate brokingadvices. Xstratas team of Deutsche

Bank, JP Morgan, Goldman Sachs andNomura will split as much as $80m.

Xstratas PR team will scoop up to2.8m for the duration of the merger,while lawyers for the two firms are setfor a 25m payday.The firm expects to make earnings

before tax, interest, depreciation andamortisation of $500m for first fullpost-merger year. Xstratas independ-ent directors said yesterday the biggestfirm is best positioned to succeed in achanging industry landscape.

The new jobs website for London professionalsCITYAMCAREERS.com

n Waterloo Station

n Victoria Station

nEpsom Stationn Tattenham Corner Station

n Epsom Downs Race Course

City A.M., the officialnewspaper of the InvestecDerby, will be publishing itsspecial Saturday edition forracegoers tomorrow.Readers can pick up theircopies at these stations,among others, from 9am:

CRUDE oil futures plunged morethan one per cent yesterday to endMay with their biggest monthlydecline in more than three years.

In London, ICE Brent crudefutures for July delivery settled at$101.87, down $1.60, the lowestfinish for front-month Brent since4 October. Front-month Brent fell14.7 per cent for the month, its

biggest monthly decline sinceDecember 2008.

Brent has fallen more than 21per cent from its 2012 high of$128.40 hit in March.

Oils May loss isworst in 3 years

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LOGICA shares soared by 69 per centyesterday after CGI Group Holdingsoffered to pay 1.7bn in cash to buythe computer services company.

CGI, a Canadian IT company, saidthe 105p per share offer representeda 59.8 per cent premium to Logicasclosing share price on Wednesday.The deal has garnered unanimous

support from Logicas directors andirrevocable undertakings fromSchroder and Artemis, the Britishcompanys biggest shareholders whocollectively own an 18 per cent stake.

Both funds reserved the right towithdraw their support if an offerhigher by 10 per cent comes along an outcome which some analystshave pegged as likely, particularlysince Logicas shares jumped toalmost 6p above CGIs offer price.

George OConnor at PanmureGordon said, Logica is one of thecheapest IT service companies, andeven at acquisition multiples it isattractive enough to flush out anoth-er buyer. The potential buyers arenumerous (start at IBM, or Accentureand just walk down the list).

But Paul Morland at Peel Hunt dis-

agreed, saying: The bid looks oppor-tunistic but has been agreed and is

BY LAUREN DAVIDSON unlikely to be countered in our view.Logica is the third British tech com-

pany to be bought by an Americancompany in the last year.

HP bought Autonomy last Octoberfor 6.2bn, and private equity firmVista offered 1.27bn for Misys earlierthis year.

OConnor said CGIs bid may wellmark the beginning of the end of afraught road for Logica shareholders,who have seen value destroyed overthe past years.

In the past 12 months, Logica shareshave lost more than half of theirvalue following two profit warnings.

CGI said it has received debt fund-ing from Canadian Imperial Bank ofCommerce, National Bank of Canadaand The Toronto-Dominion Bankfinanced the acquisition.

Logica was advised by a bumper team com-prising Rothschild, Deutsche Bank and Bank ofAmerica Merrill Lynch.Heading the Rothschild group was WarnerMandel, global head of media and technology,who advised BT on the sale of Yell and TrinityMirror on the sale of Racing Post.Mandel was joined by TMT director JeremyMillard, who was involved in the 4bndemerger of Cable & Wireless, and Nick Ivey,

who worked on the 1.3bn takeover offer of

Alliance and Leicester by Banco Santander.Logicas advisory team at Deutsche Bankcomprised Richard Sheppard, the banks headof UK M&A, Charles Wilkinson, co-head of UKcorporate broking and Charles Bryant, head ofEMEA technology. Logica hired SimonGorringe, Guy Hayward-Cole and AndrewTusa at BoA Merrill Lynch.On the CGI Group side, the Goldman Sachsteam which also advised Vista on its Misysacquisition included Gregg Lemkau, head ofM&A for Europe and Asia, and Nicholas vanden Arend, a fairly new MD at the firm aftermoving on from being a business develop-ment manager at Misys. The two were joinedby Nick Harper, an MD who has worked onseveral high profile deals including Guocostakeover of Rank Group and Boots merger

with Alliance UniChem. by Anaam Raza

ADVISERS ROTHSCHILD

WARNER MANDELGLOBAL HEAD OF MEDIA

US joins global slowdown withanother rise in jobless claimsTHE US outlook took a blowyesterday as unexpectedly high

unemployment figures, weakbusiness data, and a downwardrevision to GDP growth all castdoubt on the strength of the globalleaders recovery.

Official data recorded 383,000new claimants for unemploymentbenefits last week, up 10,000 on theweek before and the fourthconsecutive rise reversing the slowdecline seen over earlier months.

Similarly, figures from private

BY TIM WALLACEpayrolls processor ADP showedprivate employers created 133,000jobs in May, below the expected148,000.

The Chicago business barometerslowed to its lowest level sinceSeptember 2009 last month, withthe production index falling from57.1 in April to a seasonally adjusted50 in May showing production flaton the month.

Meanwhile the CommerceDepartment revised its first quarterGDP estimate to show annualisedgrowth of 1.9 per cent, not the 2.2per cent first thought, in part

because consumer and governmentspending was lower than firstthought.

That represents a slowdown from

the three per cent GDP growth seenin the final quarter of 2011, in partbecause corporate profits expandedby $11.4bn (7.4bn), slower than the$16.8bn rise in the previous quarter.

The economy is growing at ananaemic pace and the job market isshowing some signs of hesitation inthe pace of hiring, warnedeconomist Paul Edelstein from IHSGlobal Insight.

There is a lot to worry about.

FORMULA ONE PUTS BRAKES ON ITS FLOAT

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CGI swoops inwith 1.7bn bidfor UKs Logica

FORMULA Ones chief Bernie Ecclestone last night signalled that its IPO could be pushed backby several months due to the current market turmoil. F1 is planning to float in Singapore, withpremarketing for the $3bn (1.95bn) IPO already under way. Ecclestone had said he hadhoped to complete the IPO by the end of June but now is waiting until the right time.

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Depositors rush toleave Spains banks

Bankia SA

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4 NEWS

SHARES in bankrupt Spanishlender Bankia were suspendedfrom trading yesterday as theEuropean Commission toldMadrid that it must enduncertainty over its bailoutplans.

EU commissioner AmadeuAltafaj sa id: What we need f irstof all is for the Spanishgovernment to tell us itsrestructuring plans for Bankia,what options it is consider ing...The sooner uncerta inties ar eremoved the better.

Spain has caused confusion byfirst floating a plan to recapitaliseBankia by handing over 19bn(15.2bn) of government bondsand then getting the lender toswap them for cash at theEuropean Central Bank.

BY JULIET SAMUELThat plan was reportedly

rejected by the ECB, but withSpains borrowing costs soaring,it is not clear if the governmentis prepared to issue new debt torescue its banks.

Bankias share price has morethan halved since the start ofMay.

TENS of billions of euros left Spainsrisky banks last month, central

bank data showed yesterday, asdepositors took cash to saferlocations abroad at the fastest ratesince records began in 1990.

A net total of66.2bn (53bn) wassent abroad, up from 5.4bn in thesame month last year and showingan acceleration after97bn waspulled out of the country in thefirst quarter of the year. The datashows this capital flight came evenbefore Bankias recent troubles andlikely19bn (15.2bn) bailout, aswell as calls for several smallerbanks to be givenaid.

The figurescame as ratingsagency Fitchdowngradedeight profligateSpanish regions,warning that

considerableadditional efforts areneeded if theautonomous

communities are to tackle theirstructural fiscal deficits and beginto bring down borrowing costs.

Falling tax revenue and a lack ofwide-ranging structural reforms topublic services are both causes forconcern in the regions, includingAndalucia and the Canary Islands,while risks lie ahead as a largeproportion of debt falls due in thesecond half of the year.

Furthermore, Fitch warned thatsome of the regions ratings rely onthe backing of the centralgovernment Mariano Rajoy sawthe budget deficit rise in the firstfour months of this year thanks tohandouts to regional governments and so any weakening of this

support would result in furthernegative rating actions.

IMF managing directorChristine Lagarde yesterdaydenied reports that the IMF

was considering contingencyplans for a Spanish bailout.

BY TIM WALLACE

Brussels urges Spain to clarifyits plans for Bankia bailout

The IMFs head ChristineLagarde denied plansfor a Spanish bailout

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GREECES biggest banks have lostover a fifth of their deposits overthe last year, it emerged yesterday,as Eurobank EFG and Alpha Bankreported losses for the first quarter

of 2012 and a worsening in thequality of their loanbooks.Adding their data on customer

deposits to that of Piraeus Bankand National Bank of Greece,shows that total deposits for thefour banks have shrunk from174bn in March last year to138bn in March this year.

In the first quarter of this year,they shrank by 3.3 per cent inaggregate, but most banks notedthat while deposits had beenimproving this year, they started todecline following the inconclusiveelection results in early March. It isnot yet clear how much money hasleft the banks since the end ofMarch, because the results only goup to 31 March.

And the figures also disguise thetrue extent of how much moneyhas left Greece, because they

include overseas subsidiaries, butnonetheless paint a grim picture ofdeclining customer confidence.

Greek depositsshrink by 21pc

BY JULIET SAMUEL

THE EUROZONES governments willneed to give more powers to Brusselsand cooperate far more closely ontaxes, spending and financial regula-tion, European Central Bank (ECB)boss Mario Draghi said yesterday, urg-ing leaders to act quickly to stamp outdoubts over the unions future.

Can the ECB fill the vacuum of lackof action by national governments onfiscal growth? The answer is no,Draghi told the European Parliament.

Instead, he argued, it is down tonational governments to answer thequestions troubling investors and

leading to chaos in Europes markets.How is the euro going to look like a

certain number of years from now?The sooner this is specified, the betterit is, Draghi said.

In his role as chair of the EuropeanSystemic Risk Board (ESRB), Draghicalled for greater centralisation offinancial controls, saying national andEuropean financial regulators mustact in unison, with speed and a totalcommitment to financial stability.

ECBs Draghi inpush to unify

banking powerBY TIM WALLACE Draghi believes a three pillared

banking union as ECB policymakershave called it, would carry an impor-tant message that the bloc was unitedin support of its lenders, regardless ofwhich country they are in, and that itwould represent a symbolic first steptowards closer fiscal ties.

His demands for a solution to the cri-sis, and for controls to prevent a simi-lar situation arising again, came ascredit ratings agency Fitch issued areport detailing the possible conse-quences of a Eurozone break-up.The widespread redenomination of

debut would cause defaults on privateand sovereign euro-denominated obli-

gations, imposition of capital con-trols and severe economic andfinancial dislocation, Fitch said.

New currencies would plummet, thereport warned Greeces to 57 percent of its current value againstGermany, for example.These events would have major

knock-on effects, said Fitch, includingrecession, inflation, lack of credit,bank deposit restrictions and poten-tial social and political instability.The ECBs Mario Draghi says centralisation can end the sovereign debt crisis

IRISH voters cast their ballots on theEurozones latest fiscal pactyesterday, though yes campaignersworried that the wet weather woulddiscourage supporters from going tothe polling stations.

The result of the referendum isnot expected until this afternoon,though opinion polls before the votehad put Ireland on course tocomfortably back the treaty.

Ireland is the only Eurozonenation to have given its voters a sayon the austerity pact.

Ireland casts its vote on theEurozone austerity agreement

BY MARION DAKERSMajor political parties Fine Gael

and Fianna Fail lobbied hard for ayes vote, warning that Irelandcould be cut off from the newEuropean Stability Mechanismbailout fund if it votes against it.

Ireland has given the thumbsdown to two recent Eurozonereferenda, though voters latersupported the measures whenpoliticians called a second poll. Onoccasions when the no vote haswon, turnout has been low.

Taoiseach Enda Kenny urged theIrish to back the treaty when he casthis vote yesterday morning.

FRIDAY 1 JUNE 20125NEWS

QWhat, theres another referendum inIreland?AYes, Ireland is once again the onlyEuropean country to give itspopulation a direct say on a f inancialdeal for the Eurozone.

QAnd what are they voting on this time?

AThe same deal that DavidCameron kindly saved Britainfrom voting on last year, by vetoing itfor us. The accord for the rest ofEurope puts in place a permanentbailout fund the European StabilityMechanism plus commitments tostick to austerity plans and work onfurther fiscal integration.

QWhat happens ifIreland votes no?AIf the yes campaignersare to be believed, Europeanauthorities could block Irelandsaccess to the bailout fund.

QAnd should we believe them?

AThe no campaign said not, andwant Ireland to chance its arm reject the austerity plans, safe in theknowledge that the rest of theEurozone would relent and bail itout anyway, if needed. But Irishpoliticians, most of whom support ayes, are unlikely to relish a game ofbrinkmanship with Angela Merkel.

QAandIrelands referendum

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cityam.com

EUROZONE inflation eased furtherthan expected to its lowest level inmore than a year in May, officialdata showed yesterday, giving theEuropean Central Bank (ECB) alittle more room to lower interestrates amid fears of deep recessionacross the continent.

Consumer price inflation in the17 nations sharing the euro fell to2.4 per cent year-on-year in Mayfrom 2.6 per cent in April, the EU'sstatistics office Eurostat revealed.

Meanwhile official data showedGerman retail sales rose 0.6 percent in April, down from 1.6 percent in March but still strongerthan the drops recorded in otherparts of the Eurozone.

German unemploymentdropped slightly to 6.7 per cent,again underlining the economysresilience.

Fall in Europesinflation rate


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3i Group PLC


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Jeremy Hunt wasin regular contactwith News Corp

GOLDMAN Sachs chief executiveofficer Lloyd Blankfein (pictured)

will testify at the insider-tradingtrial of the investment banksformer director Rajat Gupta, a US

prosecutor said in court yesterday.Assistant US attorneyReed Brodsky saidyesterday that

Blankfein could bepreceded by sevenother government

witnesses, making itlikely hewould take

the standnext week.

Goldman chiefis set to testify


PLUS Markets was caught by surpriseyesterday when Gulf Merchant Bankreturned with a revised offer for itsstock exchange unit.

The embattled firm, whichyesterday called a meeting toapprove ICAPs takeover, had noprior warning of GMBs improvedbid for an undisclosed sum.

GMB said in a statement that it

has remained in close contact withthe FSA throughout this process.

Plus surprisedby GMB offer

Greenhill hiresfor Europe push

BY MARION DAKERS

GREENHILL & CO said yesterday itwill add three managing directorsin Europe, including ex-GoldmanSachs banker Luca Ferrari, as the

boutique advisory firm builds itsbusiness across the continent.

Ferrarri will co-head the Europecorporate advisory business, whileDeutsches Anthony Parsons will bea senior member of its UK advisory

team and Mats Bremberg will joinits Stockholm office.


BANKS are open for business, anofficial government taskforceheaded by Professor Russel Griggshas concluded, with just two percent of small firms whose lending

application was rejected havingappealed the decision.Of those that did appeal, 40 per

cent ended up being able get someform of credit. With only 14 percent of total SME applicationshaving been rejected in the firstplace, the figures mean that just 0.2per cent of credit-hungry firms

were rejected both by banks initiallending decision and thesubsequent appeals process.

Banks deemedopen to lending

BY JULIET SAMUEL

THE new chief executive of 3i hasbought nearly 7m of shares in theinvestments group in a show of faithin his new strategy.

Simon Borrows has spent around6.9m on 4m shares spread overthree days this week.The veteran banker and former

chief investment officer, who tookover from Michael Queen in mid-May, is thought to see now as a verygood time to buy 3i stock. It takes hisstake in the business to around 5.6mshares or just over 0.5 per cent.

Borrows was previously chairmanof investment bank Greenhill & Co.And he has been close to 3i for twodecades and worked on its flotationin 1994. Last night 3is shares closedup 3.01 per cent at 174.7p

It comes as more signs emerge ofits efforts to diversify away from tra-

ditional private equitydeals. 3i has signedagreements to buyseven European col-lateralised loan obli-gation management

Borrows digs in

at 3i with 6.9mshare purchaseBY PETER EDWARDS contracts from Invesco, adding 2bn

in assets to its debt management armIt takes total debt assets under man-agement to 6bn.

It is Borrows first major deal sincetaking the top job at 3i. He wants togrow the debt management businessproportionately faster than the pri-vate equity division in the belief thatit provides more constant returns.Jeremy Ghose, head of 3i Debt

Management, said it continues tolook for a US deal in line with ourstrategy of playing a leading part inthe consolidation of the debt marketand creating a global credit platformof size.

Last year 3i bought the debt man-agement unit of Mizuho CorporateBank for 18.3m and subsequentlymerged it with its own debt manage-ment activities.


Simon Borrows want to cutcosts and diversify at 3i

Culture secretary Jeremy Hunt toldhe will not face ministerial code probeDAVID Cameron said yesterday hewill not order an inquiry intowhether Jeremy Hunt broke the

ministerial code during NewsCorps controversial 8bn bid forBSkyB.

The announcement came afterthe culture secretarys appearanceat the Leveson inquiry yesterday, inwhich he admitted he wassympathetic to the BSkyB bid andsaid he considered resigning afterthe correspondence with FredMichel was published.

Hunt said that he had worked

very closely with his former specialadviser Adam Smith, who knewhis views on the BSkyB bid, butsaid this did not mean Smithspoke for him.

Hunts appearance atLeveson also revealed that hesent James Murdocha message ofsupport for thetakeover bid onthe day he wasput in chargeofadjudicatingon the bid.

Great

and congrats on Brussels, just Ofcomto go! Hunt texted to Murdoch,

referring to a decision by EUregulators in Brussels toapprove the BSkyB takeover.

Hunt was trying to reassurea furious Murdoch after theminister originally overseeing

the takeover, VinceCable, was removedfrom adjudicating onthe bid.

BY LAUREN DAVIDSON

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IN an ideal world, ahead of the

Jubilee weekend, we would nowbe looking forward to the listingof Graff Diamonds shares in

London.Graff's history is London through

and through. Founder LaurenceGraff started as a jewellery appren-

tice here in 1950 and then 12 yearslater opened his first two stores inthe capital.

But the Mayfair-based jewellerschose instead to go to Hong Kong totry to raise $1bn. Sadly onWednesday evening we learnt thatits efforts had failed.

So why didnt the company andits advisers Rothschild choose tofloat in London and would it havemade any difference to the outcome

if it had?The most obvious reason is that

the London IPO market is virtuallydead. There have been barely anydecent-sized IPOs in London sinceGlencore last year, with theEurozone crisis overshadowing amarket in which both buyers(institutional and retail investors)and sellers (private equity groups

and entrepreneurs) massivelydistrust each other.

There have been far too manyunderperforming new issues, fromcompanies such as Ocado toDebenhams, to make would-beinvestors comfortable.

The reason often given for UK

luxury companies listing in Asia isthat they are better understoodthere. To many bankers, this isshort-hand for saying that the Asianmarkets will be sympathetic tohigher multiples and (some alsothink) they will be less suspiciousthan their peers in either Europe orNew York of the reasons for listing.

Graffs failure to list shows thatthe Asian investors are not quite soeasily pleased.

46 intended IPOs have alreadyfailed in Asia ex Japan already thisyear, 33 per cent up on last year. Inthe case of Graff investors wereunnerved by the fact that 44 percent of the companys revenuescame from 20 clients; that Graff'swife was selling some shares in the

float and that founder Graff stoodto gain from the sale of inventory ifthe share issue went ahead.

In other words the Asian investorbase was no more convinced than aEuropean one would have been thatthe company had a real plan thatwould benefit from a listing andthat it was not all happeningmainly for the interests of thefounder and his family.

Graffs IPO plans would have been

torn apart in London just as theywere in New York.

But it is possible to float inEurope, or at least it was until a fewweeks ago, if you have the rightstrategy. Bruno Cucinelli, theexpensive menswear group,recently floated on the Milan stock

exchange and it has seen its sharesperform well since. It was in manyways a model flotation.

Investors around the world needless greedy sellers with morethought through plans.

Runing away to Hong Kong orSingapore as an act in itself withoutthe other factors being put in placewill prove to be no solution.

[email protected] me on Twitter @hellierd

BOTTOMLINE

DAVID HELLIER

Lord Blackwell (left) and

Carolyn Fairbairn

FRIDAY 1 JUNE 20128 NEWS cityam.com

CONTINGENT capital bonds riskincreasing volatility in financial mar-kets and undermining banks safety,rather than enhancing it as planned,a Bank of England report warned yes-terday.

Cocos, as they are commonlyknown, act as debt but convert intoequity when a bank looks like it isgetting in trouble usually when theshare price falls below a set triggerlevel.This is intended to shore up the

banks position by increasing its loss-absorbing potential, but the reportwarned that shareholders and cocoinvestors face different and compet-ing sets of incentives.

These could lead to market manip-ulation and increased volatility, dam-aging the stability of the financialsystem as a whole, the Bank said.

With a trigger metric based on abanks equity price, there would be arisk that investors may short-sell abanks equity to drive the equityprice down, said the report, writtenby Gareth Murphy, Mark Walsh andMatthew Willison.That would trigger a conversion of

the cocos despite no deterioration inthe underlying value of the banks

Experts at Bank

of England sayno no to cocosassets actually taking place, givingcoco-holders a windfall gain.

Furthermore, investors mightinterpret the fall as a signal about thesolvency position of other banks. Thiscould also raise the borrowing costsof other banks in wholesale markets,damaging the system as a whole, thereport warned.Alternatively, incumbent sharehold-

ers could conspire to keep the shareprice artificially high, preventing cocosfrom converting and so stopping theirshareholdings being diluted, it said.When deciding on the structure

and makeup of capital rules, policy-makers should consider the risk thatit would be possible for holders ofprecautionary contingent capital torun before a conversion occurs, thepaper concluded.Alternative types of coco with differ-

ent trigger points were also dis-cussed, some of which may reduceincentives to manipulate a banksshare price. For example, those with asystemic trigger could convert debt toequity when the aggregate state ofthe banking system deteriorates, per-haps triggered by moves in a widerequity index. As a result, the hope isthat cocos could act to shore up theposition of the system as a whole,rather than undermine it.

LLOYDS has appointed two ex-McKinsey partners as non-executivedirectors, including a former boardmember of the FSA.

Carolyn Fairbairn will join theboard today, having been anon-exec director of theFSA from 2008-2011. She

was also an executive atITV and has worked atthe BBC, the WorldBank and as a partner atMcKinsey.

Lord Blackwell,another former

Lloyds bank brings two formerMcKinsey partners on board

BY JULIET SAMUEL

BY TIM WALLACE

McKinsey partner, will also join thebanks board. He is a non-executiveof Ofcom, the media regulator,chairman of infrastructure servicesfirm Interserve and until earlierthis year was a director at StandardLife, a major Lloyds shareholder. Inaddition to Sara Weller, who joined

the board in February,they replace outgoingdirectors Glen Moreno,Lord Leach and JulianHorn-Smith.

Graff Diamonds Hong Kong adventure ends in disaster

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STRICKEN tour operator Thomas

Cook insisted it was on the path torecovery yesterday after it revealedwidening losses in the first half ofthe year, sending shares tumblingseven per cent.

The debt-laden company posted anunderlying pre-tax loss of 328.3mfor the six months to the end ofMarch, some 40 per cent wider thanthe loss it reported in the sameperiod a year ago. Its revenues rose2.4 per cent to 3.51bn.

Interim chief executive SamWeihagen, who will be succeeded byHarriet Green in July, said thegroups turnaround plans weremaking good progress and thatbookings had picked up in recentmonths, with year-on-year UKbookings up five per cent over thelast four weeks.

He played down the impact of aGreek exit from the Eurozone, and

said he expected to see a surge inbooking to Greece if it were tohappen as holidays to theMediterranean nation wouldbecome better value for hard-pressedtravellers.

The company has made a series ofdisposals in recent months to reduceits 890m debt. Earlier this weekshareholders overwhelminglybacked the disposal of five Spanishhotels and the sale and leaseback ofpart of its aircraft fleet.

Thomas Cookreports widerfirst half losses

BY KASMIRA JEFFORD

GETTY

INVESTORS bought into the idea ofIntercontinental Hotels Group (IHG)as a takeover target yesterday, follow-ing news that prominent activistinvestor Nelson Peltz has a 4.27 percent stake in the firm.

Shares in IHG jumped 6.1 per centafter US hedge fund impresario Peltzdeclared his stake through TrianFund Management.

In recent months, billionaireinvestor Peltz has revealed stakes incompanies ranging from PepsiCo toHeinz and Ingersoll Rand in an effortto push for changes. In some cases,

Trian has sold its investment soonafter, as happened with Pepsi.There has been growing talk recent-

ly that IHG could eventually be takenover, intensified by the emergence ofthe noted activist investor.Wyn Ellis at Numis said earlier in

the week that consolidation isinevitable at some stage for the hotelindustry.

He told City A.M. yesterday:Obviously I do not know what Peltzsmotivation for acquiring a stake in

Intercontinentalsoars as activist

declares stakeBY MARION DAKERS IHG is, but he has a track record as an

activist investor. On fundamentals,IHG is an extremely attractive stock.

If and when consolidation happensin the hotel sector, it will be a perfecttarget for a number of potential bid-ders with Marriott the first amongthem.

Panmure Gordon analyst SimonFrench said: The companys strategyhas been pretty successfully executed,and the shares are close to an all-timehigh.

Its hard to see what the obviousmove is, besides industry consolida-tion, though even that is not necessar-ily sensible at this stage in the cycle.

THE mere mention of Nelson Peltzsname is enough to send a shiver down aboardrooms collective spine. The hard-hitting hedgie can claim responsibilityfor the break-up of Cadbury Schweppes,a big restructuring at Legg Mason andfor shaking out the waste within StateStreet.Once he builds a stake in a firm big

enough to declare, he tends to movequickly to push for change.As yesterdays announcement showed,traders pile into the targeted firm in thehope he will whip a firm into shape even if, as in IHGs case, his intentionsare not obvious.The news of his $150m stake in PepsiColast November caused its shares to jerkup three per cent in the hopes of anoverhaul, only for Peltz to dispose of hisstake just three days a fterward.

But when he does stick around, the NewYork natives aggressive tactics havegenerated handsome profits forinvestors in his Trian Partners fund,which returned a reported 7.02 per centnet of fees last year.He is known to use a strategy ofoperational activism, gettinginvolved in the day-to-day running of

the firms in order to knock them intoshape.He sold his first firm, TriangleIndustries, for $4.2bn in 1988, and wenton to agitate for change at a string offast food groups including Wendys andSnapple.The married father of 10 is worth $1.1bn,according to Forbes magazine. Hedropped out of Wharton businessschool at the University of Pennsylvaniain the 1960s. by Marion Dakers

PROFILE: NELSON PELTZ

InterContinental Hotels Group PLC

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Nelson Peltz disclosed a stake in IHG yesterday


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TOP insurers face curbs within five

years on risky non-traditionalactivities, global regulators saidyesterday as they seek to avoid arepeat of AIGs huge taxpayer bailoutin the financial crisis.

Leaders of the worlds top 20economies (G20) have asked theindustrys regulators to designtighter supervision for big insurersthat pose risks to the wider financialsystem. Generali, AIG, Axa,Prudential and Allianz are seen ascandidates for inclusion on a list ofsystemic insurers that the G20sregulatory task force, the FinancialStability Board (FSB), will publishnext year. Forty-eight big insurerswill be examined to see if theyshould be on the FSB list.

Selection will be based on fivefactors: size, global activity,interconnectedness, non-traditionalactivities, and substitutability, or

whether a firm has a big part of themarket that cannot be filled easily byanother company.The G20 initiative is part of a globalresponse to the financial crisis.

Top insurers tosee curb onrisky activities


THE car insuranceindustry is set to beinvestigated by the competitionwatchdog after it used the cost ofrepairs and replacement vehicles tojack up premiums by 225m a year.

Insurers compete in a dysfunction-al manner, said the Office of FairTrading, as it referred the sector to theCompetition Commission.The OFT said insurers of no-fault

drivers involved in accidents are earn-ing fees from referrals to car hirefirms that provide vehicles at highrates and for longer than necessary,raising thebill paid by at-fault drivers

insurers.The focus that insurers have on

gaining the competitive edge throughraising their rivals costs means thatdrivers pay more than they need to

Car insurers setto face inquiry

over chargesBY PETER EDWARDS for their motor insurance policies,

said chief executive John Fingleton ashe made theprovisional referral.

Nick Starling, director of generalinsurance at the ABI, said: For toolong insurers have faced inflated ratesfor credit hire cars and excessive hireperiods which have led to higherinsurance premiums for customers.Analysts said an inquiry would make

a ban on insurers earning referral feesmore likely, potentially denting profitat Admiral, which is more dependenton such sourcesof income than rivals.

Eammon Flanagan at Shore Capitalsaid the probe wouldcreate uncertain-ty which would hang over Admirals

stock for months to come.Shares in Admiral fell on Wednesday

after Kevin Ryan at Investec warnedthe firm is worth only around half itscurrent market value.

Pru buys Swiss ResUS arm for 400mBRITISH insurance giant Prudentialyesterday announced the purchase ofSwiss Res US life insurance businessfor $621m (401m) in cash.

The deal will be made throughPrudentials American subsidiaryJackson National Life and will seethe firm acquire approximately1.5m policies and assets wortharound 6.7bn.

This bolt-on acquisition is in-linewith our strategy and is a greatopportunity to increase the scale ofour life business. It is a capital eff i-cient transaction that will producean attractive internal rate of returnand payback period commensuratewith what we achieve organically onwriting new business, said JacksonNational chief executive Mike Wells.

Swiss Re said it sees attractivegrowth potential in the UK andContinental Europe and will usethe proceeds from this deal to investin more profitable businesses.

The transaction, which is due tocomplete at the end of September, isexpected to contribute 100m to

BY JAMES WATERSONJackson Nationals pre-tax earningsin the f irst year.

Pru estimates the embedded valueof the acquisition will be 865m atthe end of June, before cost savingsare taken into account.

Barrie Cornes, an analyst atPanmure Gordon, called the pur-chase a very attractive acquisitionwhich will provide further synergybenefits and fits the Prudentialsoverall strategy.

This is Prudentials first takeoversince the firms attempt to buy Asianinsurer AIA collapsed in 2010, leav-ing it with a 377m bill for costs.

Shares in the firm closed up 0.8per cent in London.

HMV confirmed yesterday the 32m sale of the Hammersmith Apollo to Stage-C, acompany jointly owned by 02 owner AEG and Munich-based CTS Eventim. The musicchain said that once the deal is sealed, the group will see 220m in bank loa ns extendedto September 2014. The iconic art deco venue has hosted gigs from Oasis to Elton John.

HMV OFFLOADS HAMMERSMITH APOLLO

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DEUTSCHE Bank CEO JosefAckermann stepped down after adecade running Germanysbiggest lender yesterday,telling shareholders the bankis in outstanding shape.

Ackermann is credited withsteering Deutsche throughthe financial crisis,

though, like rivals, it isnow suffering from the

Ackermann says goodbye toDeutsche Bank after 10 years

BY JULIET SAMUEL


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fall-out of the euro crisis. Ackermanntook a shot at more prof ligateEurozone countries in his speech:The economic conditions, debt

levels and the lack of will to carryout reform in a few countries ofthe Eurozone continue to giverise to concern, he said. He is

being replaced by co-CEOs AnshuJain and Jrgen Fitschen.

Outgoing Deutsche bossJosef Ackermann

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14

EVERYWHERE you turnedyesterday there seemed to berows and rows of festive flagsof red, white and blue

appearing in place for QueenElizabeths Diamond Jubileecelebrations.

People strolling along OxfordStreet could hardly fail to notice theabundance of bunting, crowns andtoken corgis on display as retailersclamour to lure customers in withroyally British merchandise.There were union jacks hanging

from windows of council blocks inOld Street, on the fringes of the City,and the front of the fashionableSouth Kensington nightclub Boujis

was adorned by a giant Union Jack(see picture lower right). LeadenhallMarket (pictured upper right) wasalso displaying two large flags.

Britons are expected to spend823m celebrating Elizabeth IIs 60years on the throne, nearly doublewhat they spent on last years royalwedding, with 32 per cent planningto buy snacks, drinks and decora-tions to mark the occasion accord-ing to research by onlinecomparison website moneysuper-

cityam.com

cityam.com/the-capitalis

Im going to be away in Hong Kong to attend somebusiness meetings so Ill miss the celebrations, and I

dont think Im going to be able to watch it on the televisioneither because theres a massive time difference. If I wasntgoing away then I probably would have gone to the street partythat my parents are arranging in their local community.

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

ROBERT BARRIEKAIZEN FINANCE

Im going to watch it on the river and Im going toFlorence with my girlfriend as its her birthday and mine

is coming up soon too; other than that some DIY and a barbecuemay be on the cards. I know a friend who is going skydiving overthe weekend but Im not sure if that has anything to do with theJubilee. I think the Jubilee is a good celebration of the monarchyand I quite like the Queen. She does a pretty decent job!

TOM VAN DEN DRIESSCHEKATHERINE THOMAS

My family is coming down to London from Birminghamand Ill probably take the kids to a funfair that is taking

place in my local area in Hounslow high street. I remember when itwas the Golden Jubilee and everybody was excited and happy likethey are now. But apart from these single special days everybodykeeps questioning and complaining about the purpose of the Royalfamily.

AAYUSH GOLSTATE BANK OF INDIA

WHAT ARE YOU DOING TO CELEBRATE THEDIAMOND JUBILEE WEEKEND?

Interviews by Anaam Raza

CITYVIEWS

The pageantryof the occasiowas nowheremore on showthan on RegenStreet

London isThe bunting is out as the cap

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LAURALEAN/CITYA.M.

market.com.After a battering from bad weather

and household finances squeezed bylow wage growth and high inflation,retailers are looking for a much-need-ed boost, said British RetailConsortium economist Richard Lim.Tesco, the worlds third-largest

retailer, has already sold 93,000

paper crowns and tiaras, 1,5000 milesof bunting and 400,000 Jubilee mugs.And thousands of schoolchildrenwill be finishing up for half-termtoday, having made flags, cakes andother paraphenalia in preparationfor the four-day celebration.

Have a good extra-long weekendand see you next Wednesday. The royal flags are flying high all over the country.

Got A Story? [email protected]

Follow The Capitaliston Twitter: @citycapitalistTHECAPITALIST

FRIDAY 1 JUNE 2012

INVESTMENT managementfirm Brewin Dolphin is giv-

ing away twenty tickets to City A.M.readers for a special event withsporting heroes and cocktails aspart of its fundraising push for theLondon-Paris 2012 cycle challenge.At the event, the winners of

Brewins online auction will beannounced, with fantastic sport-ing prizes up for grabs includingthe opportunity to cycle inMajorca with the legendary cyclistStephen Roche, or play golf in TheGroves championship course withthe rugby player Zinzan Brooke.

Other prizes on offer include atour of Emirates Stadium with

Arsenal star Lee Dixon, and thechance to have your next pressrelease written by former Number10 comms boss Alastair Campbell.Theres something for everyone atwww.brewin.co.uk/auction.

To be in with a chance of attend-ing the charity cocktail reception,donate over 25 online or buy a25 raffle ticket at www.justgiv-ing.com/250years, and email proofof donation to [email protected].

Brewin offers

cocktails andcycling prizes

15

eady to partyepares to celebrate the Diamond Jubilee

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IN BRIEFNine-year low in Indian growth Indias economic growth slumpedto its lowest level in nine years in thefirst three months of 2012, datashowed yesterday, marking a dramaticslide in the fortunes of a countrywhose economy was boasting nearlydouble-digit growth before the globalrecession. GDP grew 5.3 per cent inthe last quarter from a year earlier, asharp slowdown from 9.2 per centgrowth in the last quarter of theprevious year, government datashowed.

Output pace slows down in Japan Japans industrial output rose 0.2per cent in April, increasing for the sec-ond straight month, as exports hold upand government subsidies supportdemand for low-emission cars, officialdata showed yesterday. The rise wassmaller than a median market forecastof a 0.5 per cent increase, figures fromthe Ministry of Economy, Trade andIndustry revealed. Manufacturers sur-veyed by the ministry expect output tofall 3.2 per cent in May and increase 2.4per cent in June, the data showed.

OECD: Hope lies in new markets

G20 governments should preventfurther deterioration in their collectivetrade and investment policy stance andfocus on promoting open markets tore-boot growth in the world economy,the OECD urged yesterday. We knowclosing markets stifles growth andmakes it harder to tackle unemploy-ment. Countries must resist the temp-tation to implement inward-lookingpolicies, said OECD boss Angel Gurra.

HOUSE prices are stuck at a high leveldespite a lack of demand because of alow rate of building, Nationwide saidyesterday, arguing that allowingmore construction will reduce thepressure of housing costs on house-holds.The building societys data showed

prices rose 0.3 per cent in May, butdropped 0.7 per cent on the year, withthe average house now costing166,022.

London remains the least affordableregion with rents taking up 40 percent of earnings and average houseprices more than six times earnings.

This provides further evidence thathousing more generally is in shortsupply, reinforcing the view that anyefforts to reinvigorate the housingmarket should focus on the demandand the supply side of the market,said Nationwide chief economistRobert Gardner.

However, although prices remainhigh, low interest rates are increasinghome affordability repayments on atypical mortgage are now equal toaround 31 per cent of take-home pay,

Home shortagedrives prices up,

says NationwideBY TIM WALLACE the lowest level for a decade.But despite low interest rates, econo-mists believe the overall weak eco-nomic outlook will weigh on prices.

Housing market activity remainvery low compared to long-termnorms, and the fundamentals are cur-rently problematic overall for the mar-ket with unemployment high,earnings growth muted, and the eco-nomic outlook both difficult anduncertain, said Howard Archer fromIHS Global Insight.

On top of this, some mortgage rateshave risen recently due to lendershigher borrowing costs in wholesalemarkets.

House prices are stagnant

1952 1962 1972 1982 1992 2002 2012

3,0004,0005,000

01,0002,000

6,0007,0008,0009,00010,000 House

Prices

RetailPrices(RPI)

THE ECONOMY will barely growthis year if the government doesnot cut regulation and invest in

infrastructure, the BritishChambers of Commerce (BCC)

warns today.Growth will come in at just 0.1

per cent this year, the businessgroup declared, down from the 0.6per cent it predicted in its previousquarterly forecast.

Weak domestic and exportdemand as well as public sector jobcuts will push unemployment upto 2.9m in the third quarter of the

year, the BCC believes, while low

Red tape hindering economicgrowth, warns business group

BY TIM WALLACE growth will leave the budgetdeficit at 98bn for 2012-13, 6bnabove the official forecast from theOBR.

Without the government

working together with business,the economy will continue to

bump along the bottom for longerthan wed all like, said BCC boss

John Longworth.We want to see measures like

the creation of a business bank,which would provide capital tonew and growing companies, andreal domestic deregulation.

These measures can be achievedwhile sticking to the aims ofdeficit reduction, he added.


BCC boss John Longworth wants the government to take economic growth seriously

REX

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KINGFISHER, Europes biggest homeimprovements chain, yesterdayblamed miserable weather in Apriland a weakening euro, for a steep fallin first quarter profits.

We anticipated the first quarterwould be challenging, comparedwith last years strong growth whichwas boosted by favourable springweather and public holidays, chiefexecutive Ian Cheshire said.

But an extremely wet April thisyear in the UK and France com-pounded the difficulty, adverselyimpacting sales of outdoor and sea-sonal categories.The company, which owns about

950 stores across eight countries inEurope and Asia, said overall retailprofits fell 8.6 per cent to 160m onlike-for-like sales down five per centto 2.6bn.

Britain & Ireland proved particular-ly weak, with like-for-like sales atB&Q tumbling 10.4 per cent in thethree months to 28 April as the poorweather hit sales of seasonal goods

April showers

dampen profitsfor KingfisherBY KASMIRA JEFFORD like barbecues by 30 per cent.

Kingfisher, which also ownsScrewfix in the UK, said a one-off5m construction cost at B&Qdragged profits down by 10 per centin the quarter.The DIY groups Castorama and

Brico Depot chains in France per-formed better with like-for-like salesup 0.7 per cent but slowing on theprevious quarter.

Shares closed up 1.85 per cent yes-terday as analysts shrugged off theweather and remained confidentover the groups long term strategy.

Tate & Lyle finds the right mixof ingredients as sales surgeSTRONG growth of zero-caloriesweetener Splenda and otherspeciality food ingredients helpedboost Tate & Lyles full-year profit23 per cent to 323m, as the groupbenefited from consumers optingfor healthier foods.

The London-based sweetenersand starches group reopened asecond plant in March in the US tomeet demand for its sucraloseSplenda while high sugar pricesbenefited its competing bulksweeteners and it gained from

growth in emerging markets.Chief executive Javed Ahmed has

BY A CITY A.M REPORTER been shifting the focus of thegroup away from being a bulkcommodity player to a specialityfood ingredients business.

He said the group saw steadygrowth across a number of itsmarkets in the year, including Asiaand Latin America. Despiteeconomic uncertainty and a stepup in investment he said heexpected further growth this year.

We expect to see progress onprofits, and continue to see top linegrowth from our speciality foodingredient this year, he said.

Ahmed saw little sign of

improvement in the US economywhere Tate makes around 70 per

cent of its sales, withunemployment steady at aroundeight per cent.

The group has very little businessin troubled Eurozone nations suchas Greece and Spain.

Overall group sales rose 14 percent to 3.1bn with operatingprofit up eight per cent at 348m.

Analyst Dirk Van Vlaanderen atTate & Lyles house broker Jefferiessaid earnings were slightly ahead offorecasts due to more favourablefinancing costs, and expects littlechange to current forecasts whichlook for a two per cent rise in

earnings to 57.6 pence for the yearto March 2013.

Kingfisher PLC

29 May30 May31 May25 May28 May

285.00

282.50

280.00

277.50

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p 282.0031 May

ANALYST VIEWSDID THE STATEMENTDAMPEN YOUR FORECASTSFOR THE YEAR?Interviews by Kasmira Jefford

Tim Ingram hasjoined the board

of RSM Tenon

CITY law firm Taylor Wessing sawits UK revenues rise more thanseven per cent in 2011-12, helpingthe firm lift its UK profits to 31m.

UK turnover at Taylor Wessinghit 101m, up 10 per cent from theprevious year, and profits perequity partner also grew up 12per cent to 601,000.

The firm said its strongperformance was largely down toits litigation, IP and private wealthpractices.

Taylor Wessingrevenues rise

BY ELIZABETH FOURNIER

PUB group Fuller, Smith andTurner yesterday posted a fiveper cent full year revenue rise to253m and said that its pre-taxprofits grew three per cent to30.3m.

The company said like-for-likesales in accommodation, foodand drinks were up by 7.4, 4.5and four per cent respectively.

While the new year has seenthe most volatile start, Fullersexpects its fortunes to changeduring the Jubilee this weekend.

Fullers faith inLondon pride

BY LAUREN DAVIDSON


Ian Cheshire, CEO, said Kingfisher has the key summer season to look forward to

HALFORDS said campers andcyclists taking a raincheck afterone of the UKs wettest Aprils onrecord has taken its toll on recenttrading, as it reported a 27 per centfall in full-year profits.

The leisure and car parts retailersaw its share price slide by 12.65per cent yesterday after what chiefexecutive Andrew Wilde describedas a very disappointing start tothe year.

However, he sought to reassureinvestors and said that while the

group had not seen the usual sea-sonal demand for cycling and out-door leisure products, some of those

sales were deferred rather than can-celled, and it expected a stronger

BY KASMIRA JEFFORD performance as the year progresses.Underlying profit for the year

ended March 2012 was 92.2m,which, while down, was slightlyahead of already downgraded fore-casts. Retail sales fell 2.3 per cent to752.3m.

The 1.4bn a year cycle market isone of Halfords key targeted

growth areas including fitting serv-ices and autocentres. It saidrelaunched bike ranges helped growsales in the division by 9.7 per cent.

This was offset by a 4.5 per centdecline in like-for-like sales of its carmaintenance products as hard-upmotorists drove fewer miles.

Analysts yesterday cut their full-year forecasts for the group by five

per cent and now expect profits of78-80m.

FRENCH drugmaker Sanofi hasreceived planning permission torevitalise its once-celebrated EastLondon manufacturing plant, setto close in 2013. The site in

Dagenham currently employs 450staff. The new plans, backed by theMayor of Londons office, hope tocreate 2,500 new jobs.

The plant opened in 1934 anddeveloped a national reputationfor pharmaceutical innovation.The site won the Queens Award forIndustry three times and carries aChemical Landmark plaque, one ofonly 37 in the UK. Its

breakthroughs include drugs thatsaved thousands of lives in World

Sanofis Dagenham plant seeksto revive its innovation heritage

MARC SIDWELLWar II. However, it ceased researchand development work in 2000.

The new plans are intended torestore some of Dagenhamsresearch heritage to life. One ofthe regeneration experts workingon the project, Tim Metson of

SOG, says there are thousands ofsquare feet of specialistmanufacturing and laboratoryfacilities on the Dagenham sitethat would cost millions of poundsto recreate at todays prices. Headded Our plan is to offer themto other scientific businesses

where they can be adapted for amultitude of R&D projects.

The planning proposal alsoincludes a dental school, hotel,supermarket and 54 acre park.

Ex-Collins Stewart chair to leadboard of accountant RSM TenonTIM INGRAM, the former chiefexecutive of Collins Stewart

Hawkpoint, was yesterdayannounced as the new chairmanof accountant RSM Tenon.

Ingram will replace outgoingAdrian Martin, who said lastmonth he would step down afterjust three months in the role.

The appointment follows atroubled few months for thefirm, which in January ousted itsformer chief executive andchairman, and told investors itwould have to restate i ts accountsfor the previous year.

BY ELIZABETH FOURNIER It also brought in turnaroundspecialists to negotiate with itslenders and plan cost cutting tohelp it return to profitability.

Yesterday, chief executive ChrisMerry told investors: Wecontinue to makegood progress withour cost reductionprogramme and thedevelopment of ourstrategic plan.

Ingram waschairman of CollinsStewart Hawpointfrom 2010 until it wassold to CanaccordGenuity in March.

Prior to that he was the chiefexecutive of CaledoniaInvestments, and chairman of FirstNational Bank from 1996 to 2002.

Tim has very relevantexperience and a strong trackrecord of delivering shareholdervalue.

I am confident he is the rightperson to take the chair at thisimportant stage in thedevelopment of the business,Martin said yesterday.

Halfords knocked as cyclists

and campers take a raincheck

As expected, Kingfishers profits were down, given the weather and thetough comparables. We remain buyers because the long-term opportunityis not affected and we see growth from the Creating The Leader programme.

PHILIP DORGAN PANMURE GORDON

Kingfisher has held up the weather as a reason for this damp and drearyupdate...the fact that the share price remained virtually static in early tradeis a testament to investors confidence in the stock, despite poor numbers.

RICHARD HUNTER HARGREAVES LANSDOWNE

On an underlying basis we still believe that the business is trading well,

and the newsflow should now get notably better through the rest of theyear. We maintain our Buy recommendation and 380p target price.

SIMON IRWIN LIBERUM CAPITAL

7/31/2019 Cityam 2012-06-01

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CHIME Communications yesterdayannounced a management buyout ofits Bell Pottinger businesses for19.6m in cash and shares.

Chairman Lord Bell and deputychairman Piers Pottinger will pay14.9m in cash and step down fromChime to run the new company, BPPCommunications.

Chime will hold a 25 per centstake in BPP and a seat on its board.

The deal needs majority investorapproval but Chimes biggestshareholder WPP, which holds a 20per cent stake, is unimpressed.

WPP chairman Sir Martin Sorrell

INTEL will next week enter thesmartphone market with the launch

of the San Diego, availableexclusively on Orange from 6 June.The Android smartphone is the

first to feature an Intel chip as thecomputer processing giant attemptsto invade ARMs territory.

The handset, available for 200 onpay as you go, boasts high-definitionvideo on its four-inch screen and aneight mega-pixel camera.

Vodafone also unveiled a newsmartphone yesterday, aimed at theother end of the market.

Dubbed the Smart II, the 70phone features a touchscreendisplay, high-speed 3G and wificonnectivity, GPS and a 3.2megapixel camera.

Vodafone said theSmart II will introducenon smartphoneconsumers to a newworld of content and

services.

Orange unveilsfirst Intel-chipsmartphone

BY LAUREN DAVIDSON

ONLINE payments pioneer PayPal yes-terday launched an app that takes in-store mobile payment to the nextlevel.Valid in 230 stores across the UK,

including high street favouritesCoast, Oasis, Warehouse and KarenMillen, the app generates a uniquebar code that charges your PayPalaccount when it is scanned by acashier.

PayPal inStore claims to work evenwhere there is no mobile network orwifi coverage.

The step into mobile payments will

not come as a surprise. After PayPalsformer boss Scott Thompson movedto Yahoo earlier this year, the eBaysubsidiary appointed David Marcusits new chief executive.

PayPal unveilsapp to pay via

phone in shopsBY LAUREN DAVIDSON Marcus founded Zong the mobilepayments company eBay acquired lastsummer when Zong became PayPalsvice president of mobile.

PayPal inStore is the latest in a stringof offerings in the mobile paymentsmarket and the company claims it isbetter than the rival wave and payservice currently offered on certaincredit cards and select Orange hand-sets, which only process transactionsup to 20.

But critics have panned the app forbeing more complicated and timeconsuming than paying via cash orchip and pin.

Cameron McLean, managing direc-tor of PayPal UK, said the app marks

the start of a quiet revolution in theway we shop on the high street. Wevecreated a simple, secure way to use amobile phone to pay in your favouritestores.

Chime sells off BellPottinger business

BY LAUREN DAVIDSON

Intels first smartphone,the San Diego, will beavailable next week.

SHEFFIELD firm WANdiscowill begin trading on theAIM market this morning,in a float that will raisearound 15m.

The firm providescollaboration tools to thesoftware industry and is thefirst IPO in London of a

Yorkshire-based firm since2010

City A.M. understandsthat the placing was morethan three timesoversubscribed.

Panmure Gordons FredWalsh and Giles Stewartacted as advisers.

WANdisco setfor 15m float

BY JAMES WATERSON


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PayPal inStoreCurrently valid in Oasis, Coast, KarenMillen and Warehouse, your smartphoneapp will generate a unique barcode to bescanned by the shop assistant.

Orange Quick TapTap your Samsung Tocco or SamsungWave phone on a contactless payment

terminal in shops to spend up to 15.

O2 WalletThis service does not yet support in-storepayment, but allows the customer to"text" up to 500 a day to other users,among other services.

Barclaycard PayTagStick the tag one third the size o anormal credit card on the back o yourhandset and you're ready to tap and goor payments up to 20.

HSBC Merchant ServicesBy the end o this year, customers withMasterCard Paypass or Visa PayWave cards will beable to spend up to 20 via contactless paymentin all 11,000 Post Ofce branches in the UK.

Across the pondCustomers in the US can pay in store on their mobile phones using Google Wallet, or transfer money between

handheld devices by swiping a credit card through a Square reader.

MOBILE PAYMENTS

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Lord Bell will runthe new firm, BPPCommunications

has criticised the companys 19.6mvaluation, which is an eight-foldincrease on the Bell Pottingerbusinesses 2011 pre-tax profits.

Sir Martin questioned why thecompany was not valuedin terms of revenues,and said it sets aterrible precedent forChime to keep a 25 percent stake.

Chimes sharesclimbed 8.7 percent to 163p.

LONDON 2012 IMAGE OF THE WEEK

SIR Chris Bonington, the Everest mountaineer, this week carried theOlympic Torch to the summit of Mount Snowdon. Visibly emotional,he started his climbing career on the mountain in 1951. The Torch ison day 14 of its 70-day trip across the UK, and today is travellingfrom Bolton to Liverpool. It will be carried by 8,000 people in total.

Between now and the start of the Olympics, City A.M.is publishing its Olymp ic Image of the Week. If youhave a shot you think our readers will l ike, pleaseemail [email protected] with IOW2012 in thesubject line. Full details: cityam.com/london-2012

7/31/2019 Cityam 2012-06-01

19/31

$",)%4%2)6)%27))2-1-7)(3*-235-)632(32,%6%440-)(737,)-7

7/31/2019 Cityam 2012-06-01

20/31

FRIDAY 1 JUNE 201220

LONDON REPORT

Brooks Macdonald FundsThe fund management firm hasappointed Christine Tacon aschairman of UK Farming, its newasset-backed UK farmingbusiness. Tacon was managingdirector of Co-operative Farmsfrom 2000 to December 2011,and an executive board memberof Co-operative Food Retail. UKFarming targets investment inexisting arable farmland.

Kleinwort BensonValentina Tacchino has been appointed head of privatewealth management international at the private bank. Shewill arrive in September 2012. Tacchino joins from ClaridenLeu, where she was head of its UK resident non-domiciledteam. She has also worked at Schroders Private Banking,where she rose to become director in its international team.

BNP Paribas Real EstatePaul Abrey and James Russell have been appointed to theUK investment team of the banks property division. Abreyjoins as executive director from the commercial division ofChesterton Humberts. He previously spent 20 years at DTZ.Russell joins as director from Accrue Capital. He waspreviously a member of Jones Lang LaSalles Europeancapital markets team.

Simmons & SimmonsThe law firm has appointed two litigation partners. TimBoyce and Ed Crosse, both partners at Osborne Clark, willjoin Simmons & Simmons in the autumn. Boyce focuses onregulatory investigations, commercial lending disputes andfraud claims. Crosses focus is on handling financial andregulatory disputes for wholesale investment banks.

TowryThe wealth advice business has made two senior

appointments to its advice policy team. Kate Turner willhead up the team. She joins from Coutts, where she spent14 years in various roles, including head of private banking.

John Richardson, currently head of advice policy at Towry,will become head of retirement planning.

Tower ResourcesThe Aim-listed exploration company has appointed GraemeThompson as chief executive. Thompson is co-founder ofSterling Energy, the upstream oil and gas firm, and spentnine years as its financial director, company secretary andultimately its chief executive. He also previously served asfinance director and company secretary at Dragon Oil.

BarclaysBarclays Bank has appointed Rickie Chan as market head,Hong. He will join on 16 August and report to the bankshead of wealth management, north Asia. Chan joins fromGoldman Sachs, where he was most recently executivedirector, managing Hong Kong ultra high net worth clients.

WHOS SWITCHING JOBS Edited by Tom Welsh

+44 (0)20 7092 0053

morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

US stocks fallas investorsfret over debt

US stocks fell modestly yesterdayto close out the worst monthsince September as investorsentiment sank on Europes

deepening credit problems.The broad S&P 500 index fell 6.3 per

cent in May, its largest percentage dropsince September. The Dows 6.2 percent drop and Nasdaqs 7.2 per centloss are their largest monthly declines

in two years.Spain was at the centre of the latest

European developments as marketsjudged Madrids government wouldsooner or later have to ask for outsidehelp for its banks. A report, laterdenied, of possible plans to assist Spainwith its troubled banks helped WallStreet nearly erase losses of 1 per centin the afternoon.

Market participants cited month-endrebalancing as also supporting stocksdue to money managers buying moreshares to make up for the decliningvalue of equities during May.

However, the continuing worry overEurope and a batch of disappointingUS economic figures weighed on themarket. Jobless claims rose for the sev-enth week in eight, putting investorson edge before Fridays US monthlypayrolls report.

Europe is the main issue, no ques-tion about it, but you have a support-ing cast from the US data, said PaulZemsky, head of asset allocation at INGInvestment Management in New York.The Dow Jones industrial average

dropped 26.41 points, or 0.21 per cent,to 12,393.45. The S&P 500 Index fell2.99 points, or 0.23 per cent, to1,310.33. The Nasdaq Composite lost10.02 points, or 0.35 per cent, to2,827.34.

Shares ofUS Steel dropped 5.1 percent to $20.30 and Cliffs NaturalResources fell 6.1 per cent to $47.78 asenergy and materials company sharesled declines on the S&P 500.

Commodity prices fell with the euroat 23-month lows against the US dol-lar. The greenback weakened sharplyversus the yen, a sign that investorswere moving money into perceivedsafe havens.

Private payroll growth acceleratedonly slightly last month and claims forjobless benefits rose last week, suggest-ing the labor market recovery wasstalling.A disappointing number in todays

report would further dampen marketsentiment, but it could also bring backtalk of further stimulus by the USFederal Reserve.

Shares ofTJX Cos rose 2.7 per cent to$42.46 after the low-price retailer wasamong those to report sales at storesopen at least a year that beat WallStreet forecasts.

Ciena climbed 14.1 per cent to $13.55after the network equipment companyposted a surprise second-quarteradjusted profit.Joy Global slumped 5.1 per cent to

$55.86 after the mining equipmentmaker cut forecasts.

Facebook shares hit a fresh intraday

low of $26.83 before bouncing back toclose up 5 per cent at $29.60.

BRITAINS top share index sufferedits worst month in more than threeyears in May after data suggestingthe US economy is struggling

triggered a late sell-off yesterday, andmay be vulnerable to further declines asEurozone worries persist.The FTSE 100 index gave up most of the

strong gains it had recorded earlier in theday in late trading as a raft of US numbersraised concerns the pace of economicrecovery in the worlds largest economywas faltering.

The index was negative just before theclose, but managed to end 9.67 points, or0.18 per cent, higher at 5,306.95 points. Itfinished the month 7.5 per cent weaker, athird straight month of losses and theworst performance since February 2009.

US figures indicate that the ISM num-bers tomorrow will be quite poor and thenonfarm payroll data is going to be weak,indicating in many ways that the second-quarter US growth rate will be very lacklus-tre, said Gerard Lane, equity strategist atShore Capital.

There is some realisation that high oilprices in the first quarter caused the econ-

omy to slow. We have also got a deepeningcrisis in Europe. Until we see some policyresolution from the Europeans, I cant seethe market making a sustained progress.The index turned after data painted a

gloomy picture. The pace of business activ-ity in the US Midwest slowed in May, ADPprivate payroll growth rose only slightlylast month, jobless benefit claims rose lastweek and economic growth in the firstquarter came in lower than initially esti-mated.

US Chicago PMI was rumoured to be abad number and as soon as that was con-firmed, we started to see investors immedi-ately scale down their short term tradingpositions. ADP Employment numbersmissed forecasts too, Citi Index strategistJoshua Raymond said.

According to earlier surveys, todaysclosely watched employment report forMay is expected to show that nonfarm pay-rolls increased 150,000, up from a paltry

115,000 in April. However, investors werebracing for some disappointment after yes-

terdays private payroll numbers, analystssaid.

Sectors linked to growth were among theworst decliners, with the UK mining indexfalling 0.9 per cent.

Lane said UK consumer discretionarycompanies such as Next and Mitchells &Butlers were doing relatively well andwere expected to continue outperformingin an otherwise poor equity market.

Utilities in general are also a good placeto go as they offer the right type of expo-sure when earnings risk elsewhere is ris-ing.

Short-term players were more active inthe market and were betting on volatilityin cyclical stocks, traders said, adding thestrategy was to quickly move in and out ofthe market to take advantage of suddenprice moves based on news headlines.That strategy was reflected by Anglo-

Dutch IT services companyLogica, whichsurged 69 per cent after the companyagreed to be bought by Canadas CGIGroup for 1.7bn.

Harris said a popular stock was Diageo,which had got both cyclical and defensivequalities. Over the past months, it has

shown a strong uptrend and had not suf-fered too much even during a broader mar-ket correction the past weeks.

Diageo shares outperformed and ended1.3 per cent higher.Among individual movers,

InterContinental Hotels Group rose 5.6per cent after US activist investor NelsonPeltz said his Trian Fund Management hadpicked up a stake of 4.27 per cent in theworlds biggest hotelier.

FTSE suffers worst month in threeyears on credit woes and US data

BESTof the BROKERS

Premier Oil PLC

28 May 29 May 30 May 31 May25 May

p355350

345

340

335

330

340.5031 May

PREMIER OILUBS has upgraded the independent oil company from hold to buy buthas dropped its 12-month target-price from 430p to 410p. The brokerbelieves that Premier has been hit hard in the recent sell-off,underperforming the exploration and production sector by 28 per cent inthe last three months. However, UBS thinks its two key projects have afavourable chance of starting on time, which will help to remove theshare price overhang.

FTSE

5,420

5,400

5,380

5,360

5,320

5,300

5,280

5,340

25 May 28 May 29 May 30 May 31 May

5,306.9531 May

DASHBOARDCITYCITY MOVES

To appear in CITYMOVES please email your career updates and pictures to [email protected]

NEW YORKREPORT

in association with

YOUR ONE-STOP SHOP FOR JOB MOVES,BROKER VIEWS AND MARKET REPORTS

cityam.com

Berkeley Group Holdings PLC


p1,275

1,250

1,225

1,200

1,248.0031 May

BERKELEY GROUPDeutsche Bank has upgraded the housebuilder from hold to buy,increasing its target price by 1.67 to 15.61. The broker believes thatBerkeley will reap rewards from its land acquisition strategy as volumespick up, driven by student accommodation and increases in London

selling prices. Deutsche Bank has raised its 2014 pre-tax profit forecastsby 20 per cent and is now well above consensus estimates. It says that anydip resulting from an investor sell-off should be used as an entry point forthe shares.

ITV PLC


p8280

78

76

74

72

72.9031 May

ITVLiberum rates the TV group a buy with a target price of 77p. It isexpecting that July and August will be difficult months as advertisers

scrap planned campaigns across the sector. But Liberum believes ITV cankeep its head above the rest of the market, which it reckons will lose 10per cent of advertising revenue in July. The broker still likes ITV despitethe short term volatility, because of its longer-term fundamentals, therestructuring story and the possibility of cash returns that its net cashposition allows.

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SOMETHING importanthappened in Spain this week,and not just the continuingrevelations of the depths of itseconomic crisis. Volvo

announced that on a motorway justoutside Barcelona a convoy of fourdriverless cars drove 123 miles on apublic road, among other roadusers, perfectly safely.

The vehicles travelled at 53 milesan hour, demonstrating atechnology that could be incommercial use in less than adecade. This first public test was acollaboration between Volvo andBritish technology firm Ricardo UK,with funding from the EuropeanCommission, not always an obvious

bastion of innovation but here

THE Queen famously asked agroup of economists, at theheight of the 2008 financialcrisis, Why did nobody see itcoming?

Of course, most mainstream econo-mists didnt predict it. However greattheir expertise, orthodoxies prevailed.And the same is true of pundits inother areas.Take the monarchy itself: fifteen

years ago it appeared dead in thewater. And yet, here we are, on the eve

of one of the biggest public celebra-tions Britain has seen in decades.The 10,000 Diamond Jubilee street

parties across the country representthe tip of the iceberg one estimateput the number of celebrations, in alltheir forms, at three times thatamount. And one recent poll showedthat support for the monarchy wasstanding at a record 80 per cent, withthe woman at the centre of the ins

cityam 2012-06-01

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