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BUSINESS WITH PERSONALITY

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Follow me on Twitter: @allisterheath

IN BRIEFSEC goes after Harbingers Falconen US securities regulators could file

an enforcement action against hedgefund manager Philip Falcone as soonas this week, according to reports. TheUS Securities and ExchangeCommission recently authorised thefiling of a lawsuit against Falcone, whonotified investors in his HarbingerCapital Partners fund about a year agothat he was being investigated byregulators, Bloomberg reported. SECofficials did not comment. Falconecould not be reached for comment.Matthew Dontzin, an attorney forFalcone, issued a statement saying themanager would fight any lawsuit.

Pamplona buys UniCredit staken Private equity fund Pamplona hasbought five per cent of Italy's biggestbank, UniCredit, becoming its second-largest shareholder, in a vote of

confidence on the banks future in theface of a deepening Eurozone crisis.The stake is worth about 750m atcurrent market prices and is one of thelargest investments by a foreignoperator in a listed Italian group thisyear.

Best Buy founder mulls buyoutn Best Buy founder Richard Schulze isworking with banks including CreditSuisse to explore a private takeover ofthe worlds largest consumerelectronics retailer, according tosources close to the matter. Schulze,who set up the firm in 1966 and is itslargest shareholder with a 20.1 percent stake, is in the early stages ofdetermining what steps to take.

National debt goes up asincome tax takings dropTHE UKS public finances took ahammering last month, accordingto data released yesterday by theOffice for National Statistics (ONS).A budget deficit of 17.9bn for May

pushed the net national debt to1.013 trillion, hitting 65 per cent ofGDP. Just one year ago, net debtstood at the comparatively low fig-ure of 921.3bn, representing 61.3per cent of GDP.These headline figures ignore the

cost of bailing out the banks, andother off balance sheet items theexchequer is liable for, such as proj-ects under the private finance initia-tive and pensions payments.A spokesman for HM Treasury

argued that it is too early in thefinancial year to draw conclusions,especially as todays data include anumber of one-off factors and tem-porary distortions. The Treasurypoints to the possibility of revisions,especially since this month marksthe transition from COINS toOSCAR, a new public spending sys-tem.

Early tax credit payments due tothe extra bank holiday, and an earlypayment of the Department ofHealths social grant are also givenas explanations. As a result, theTreasury expects this jump in Mayto be largely balanced out by lower-

Global role for Citis Asia consumerheadCitigroup has underlined Asias growingimportance to the bank by naming itsconsumer banking head in Hong Kong asglobal head of retail banking, accordingto an internal email seen by the FinancialTimes. Jonathan Larsen has been giventhe task of bringing all of Citis retailbusinesses into the digital age.

YouView limps to Olympic launchYouView, the long delayed internet TV

service being backed by several of theUKs largest broadcasters and broadbandproviders, will finally be revealed nextweek ahead of the Olympic Games, butboxes are not expected to be widelyavailable until later this year as the mainsuppliers continue with testing.

City fear over Camerons EUdemandsThe City of London has raised deepconcerns over David Camerons strategyin Europe, warning that the primeministers wishlist of safeguards inDecember could actually have damagedits standing as Europes financial centre.

Car insurers fail to reverse years oflossesBritains motor insurers will rack up lossesover the next two years as premiums risemore slowly, says Ernst & Young. Thecontinued failure of price rises to keeppace with the costs of claims means thatthe industry will fall into the red.

John Lewis: collect from our rivalsJohn Lewis customers will from next yearbe able to pick up goods ordered onlineat other shops or businesses, itsmanaging director said.

Goodwin: We werent at fault in RBSfailureFormer directors of Royal Bank ofScotland, including the lendersdisgraced chief executive, Fred Goodwin,have denied claims they did anythingwrong before the banks collapse. Theresponse was to an RBS shareholderslawsuit.

BP safety back in spotlightBP faces fresh scrutiny over its safetyrecord after an explosion at a gas plant inAmerica killed one worker and injured two.

Arrests made in huge online stingFederal authorities have arrested 24people in the US and a dozen othercountries in what they say is the largest-ever undercover operation targeting stolencredit-card numbers. The FBI set up a fakeonline forum two years ago to attractthieves who steal personal info.

Delta Air sees fuel-hedging hitDelta Air Lines said yesterday it expects asecond-quarter operating loss after thesharp slide in oil prices left it nursing a bighit on its fuel hedges.

WHAT THE OTHER PAPERS SAY THIS MORNING

ECONOMIC recovery in the UK isat least five years away, Sir MervynKing told MPs at the TreasurySelect Committee yesterday.

The governor of the Bank ofEngland reiterated his backing for50bn of further quantitativeeasing, and even kept open thepossibility of an interest rate cut.

The Banks monetary policycommittee voted unanimouslyagainst a rate cut in its lastmeeting, but narrowly declined toincrease asset purchases, withKing among the dissenters.

He said he was struck by howmuch had changed since the Mayinflation report, and declaredhimself pessimistic about theEurozone outlook, especiallysince the problem is beingpushed down the road.

King was also downbeat aboutAsian prospects, explaining thathis vote for more easing policy

was based on, the worsening inthe position in Asia and otheremerging markets.

Other members of the MPC,including Martin Weale, havesuggested that further QE mayhave little effect as banks arefocusing on rebuilding their

balance sheets. Weale suggestsbanks will use the extra funds todeleverage, rather than extendextra credit to consumers.

Sir Mervyn King

paints gloomypicture of UK

The new data throws doubt on the possibility of achieving George Osbornes Plan A

2 NEWS

BY BEN SOUTHWOOD

BY BEN SOUTHWOOD

To contact the newsdesk email [email protected]

SOMETHING very worrying ishappening to the UKs publicfinances. Income tax and capitalgains tax receipts fell by 7.3 per

cent in May compared with a yearago, according to official figures.Over the first two months of thefiscal year, they are down by 0.5 per

cent. This is merely the confirmationof a hugely important but largelyoverlooked trend: income and capitalgains tax (CGT) receipts were stagnantin 2011-12, edging up by just 414mto 151.7bn, from 151.3bn, a rise ofunder 0.3 per cent. By contrast,overall tax receipts rose 3.9 per cent.

Revenues from income and capitalgains tax had previously fallensharply in both 2008-09 and 2009-10,before recovering somewhat in 2010-11. They remain below their 2007-08boom time peak.

There are of course some good rea-

EDITORSLETTER

ALLISTER HEATH

Falling tax receipts show that weve forgotten Laffers lesson

WEDNESDAY 27 JUNE 2012

sons for this sluggishness in receipts.The personal allowance has gone up.Pay isnt rising quickly. Bonuses aredown. Unemployment is elevated.Asset markets are sluggish. But thesefactors are insufficient to explain thescale of the problem. Total employ-ment and the economy wide-wage billare still creeping up. And overall taxeson labour and capital have beenhiked: the 50p tax was introducedfrom April 2010 (and will fall to a stillhigh 45p in April 2013), those earning

above 150,000 have lost their person-al allowance, CGT has risen to 28 percent, many workers have beendragged into higher tax thresholds,and so on.

In theory, if one were to believe thetraditional static model of tax,beloved of establishment economists,

this should have meant higherreceipts, not lower revenues. It is alsononsense to claim, as some did yester-day, that the May drop in income andCGT tax receipts was to be expectedgiven the double-dip recession aneconomy that is shrinking by a fewtenths of a percentage point doesntrespond in such a drastic manner.

It was apposite, therefore, thatArthur Laffer was in London yester-day. He is the economist who popu-larised (via a famous curve) the notionthat there is a revenue-maximisingrate of tax and that if you set rates

is now clearly counter-productive.These taxes are maxed out; they havebeen pushed beyond their ability toraise revenues. George Osbornes deci-sion to suspend the August fuel dutyhike is welcome, as far as it goes. Theproblem is that spending is too high central government current expendi-

ture is up by 3.7 per cent year on yearin April-May not that taxes are toolow. The result is that the April-Maybudget deficit reached 30.7bn, some6.2bn higher than a year ago. But thechancellor will have to make a muchmore dramatic U-turn if he wishes tosalvage what is left of his crumblingfiscal plans: he needs to accept thatonly lower taxes on income and capi-tal can boost growth and, eventually,nurse his finances back to health.

too high, you raise less because peoplework less, find ways of avoiding tax orquit the country. The world isnt stat-ic, it is dynamic; people respond totax rates, just as they respond to otherprices. Laffer told a gathering at theInstitute of Economic Affairs that thisis definitely true in the UK today

and the struggling tax take revealedin the official numbers suggest thathe is right. Tax rates and levels are sohigh as to be counterproductive:slashing capital gains tax wouldundoubtedly increase its yield, forexample. Many self-employed workersare delaying incomes as much as pos-sible until the new, lower top rate oftax kicks in.

Of course, higher VAT is also damag-ing growth, though it is still yieldingmore. Some taxes can still raise more but try doing that with income tax,CGT or corporation tax and the result

LAURALEAN/CITYA.M

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than-expected increases in June.Current expenditure rose to roughly

55bn in May, which represents ajump of 7.9 per cent on the year.However the growth is a more modest3.7 per cent considering the changefor April and May together.Tax takings rose, at a rate of 1.6 per

cent, to 38.6bn from just over 38bnlast year. A fall in receipts fromincome and capital gains taxes by 7.3

per cent was partly compensated byan increase of 4.9 per cent in VATreceipts, as well as gains elsewhere.

Nida Ali at Ernst & Young describedthe figures as very discouraging,especially the rapid increase in gov-ernment spending, and warned thatthe government needs to findaround 11bn of savings over the nextten months if it is to hit the Office forBudget Responsibility (OBR) forecast.

The new jobs website for London professionalsCITYAMCAREERS.com

Net debt as a percentage of GDP excludingfinancial interventions

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INVESTORS applauded News Corp yes-terday, sending its shares up morethan eight per cent, after the mediagiant confirmed it is mulling theprospect of splitting its empire in two.

News Corp... is considering arestructuring to separate its businessinto two distinct publicly traded com-panies, the firm said in a statement.The potential move, understood to

entail the separation of News Corpsentertainment and publishing arms,pleased shareholders who have longcalled for Rupert Murdoch to chuckhis less profitable newspaper unit.

News Corps publishing assets

including the Times, the Sun, theWall Street Journal andHarperCollins brought in revenuesof $8.8bn (5.6bn) last year.The significantly more lucrative

entertainment arm which includes

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THE Skys the limit once againfor News Corporation. It tookthe first step in what looks likea bold new strategy to acquire

the remaining 61 per cent of BSkyByesterday. The media giantconfirmed that it is considering arestructuring to separate its businessinto two distinct publicly tradedcompanies understood to meanthe separation of publishing from itsfilm and television arms. Althoughthe Murdochs are likely to retaincontrol of both companies, the splitwould help to protect theentertainment arm from Ofcomsinvestigation into whether thephone hacking scandal means NewsCorp is not fit and proper to ownbroadcast licences. Better yet, withits controversial newspapers at armslength, the new entertainment firmcould find BSkyB an easier buy.

A BSkyB purchase, or even amerger, would revive the companysplan to unify its European broadcastassets under the Sky umbrella, along-term strategy frustrated by therecent scandals. But the bump to the

global content providers share priceyesterday was also an admission ofthe declining importance ofpublishing to Rupert Murdochsnewspaper-founded empire.

The division would not be an equalone. In recent years, publishing hasaccounted for only about 25 per centof News Corporations revenues and just 18 per cent of operatingincome in 2011. Back in 2001, it was33 per cent of revenues and 50 percent of operating income. Theheadings in Rupert Murdochs 2011letter to stockholders tell their ownstory: Strong Television Performance;Fast Growing Cable Channels;Growth on Pay-TV Platforms;Headwinds in Publishing. As theannual report spells out: Thecompany believes that competitionfrom new media formats andsources and shifting consumer

preferences will continue to posechallenges for the publishing

BOTTOMLINE

MARC SIDWELLsegments businesses. The rapidgrowth that investors want to see isall in film and TV, makingpublishing effectively a drag on themedia groups performance.

Still, the overall numbers forpublishing dont look catastrophic.As a segment of News Corp it made$865m (554.5m) in 2011 offrevenues of $8.826bn. Higheradvertising and circulation revenuesat The Wall Street Journal wereapparently a significant contributor.In 2011, News Corps print anddigital circulation revenues rose 12per cent year-on-year, and its printand digital advertising revenues rose11 per cent. Its book publishingdivision HarperCollins has also donewell from ebooks and bestsellers like

Wolf Hall.But not all parts of News Corpspublishing segment are equal,especially in Britain. The Times andSunday Times havent made moneyfor years. Times Newspaper Limitedhas been shrinking its annual lossrecently, but it still stood at 11.6mfor the year to July 2011. If the Timesis cut loose from its entertainmentsugar daddy, it will be interesting tosee how long it survives in its currentform. News Corps Australiannewspaper arm, News Limited, lastweek announced a restructuringthat could cost over 1,000 jobs, witheast coast operations slashed from 19to five. News Corp shares may beheading skyward, but the publishingcast-off it leaves behind may need totake a very unsentimental approachto some of the worlds oldestnewspapers.

Marc Sidwell is City A.M.s managingeditor.

Rupert Murdoch has reportedly had a change of heart after so far refusing to separate his newspaper and entertainment assets

BSkyB, 20th Century Fox and the FoxTV networks generated $23.5bn.

The move could be an attempt toshield BSkyB from the phone hackingscandal which has plagued NewsCorps UK publishing unit since lastsummer, and has been pegged bysome analysts as an attempt by themedia behemoth to resuscitate itsfailed bid for the 61 per cent of BSkyBit does not already own.

Shares in the British satellite busi-ness gained 2.7 per cent yesterday afterNews Corps confirmation.

News Corp president Chase Careyhinted earlier this year that the boardwas considering the possibility of sell-ing the groups newspaper unit.

But it is understood the Murdochswould retain control of both compa-nies if the division were to occur.An official announcement could

come as soon as tomorrow, accordingto reports.

Murdochs plan to divideseen as a path to conquer

Investors cheerNews Corp idea

to split up firmBY LAUREN DAVIDSON

British Sky Broadcasting Group PLC

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IN BRIEFFrance increases minimum wage

nFrances new government announceda cosmetic two per cent increase in theminimum wage yesterday as it seeks tosoften the blow from tax hikes andspending freezes to the struggling

economy. President Francois HollandesSocialist government has pledged to cutthe public deficit to 4.5 per cent of grossdomestic product this year from 5.2 percent in 2011, mainly through a series oftax increases.

Egan-Jones cuts German outlook

n Credit ratings agency Egan-Jones lastnight cut Germanys rating to A-pluswith a negative outlook from AA-minus,saying that whether or not Greece orother Eurozone members exit themonetary union, Germany will be leftwith massive additional, uncollectiblereceivables. The downgrade came asGfK said German consumer confidence isholding up, with its householdconfidence index forecast to rise to 5.8points in July from 5.7 points for June.

Italy offers state support to MPSn Italy yesterday offered up to 2bn(1.6bn) to plug a capital gap in thebank Monte dei Paschi di Siena, thesecond time in three years the state hashad to bail out the worlds oldest bank.Rome said it was ready to underwritespecial bonds issued by the bank to pluga capital shortfall estimated at 1.3bn to1.7bn, higher than the 1bn thatinvestors had expected.

GETTY

EUROPEAN leaders remain on a colli-sion course ahead of crunch talks thatcommence tomorrow in Brussels,with little sign of compromisebetween struggling Eurozone statesand countries that may have to footthe bill for more bailouts.

German Chancellor Angela Merkelwas yesterday quoted as havingassured her coalition partners thatshared debt liability in the Eurozonewould not happen as long as I live.

Earlier in the day reports in Italysaid that Prime Minister Mario Montiwould threaten to resign unlesseurobonds one form of debt sharing were introduced.

Several means of easing the debtburden on troubled Eurozone statessuch as Spain and Italy will be on thetable when leaders meet for the twoday summit, but Merkel has beenstubborn in her resistance this week insisting there are no easy solutions

Europes heads

clash ahead ofcrucial summitBY JULIAN HARRIS to the crisis.

Yet Germany, the EUs biggest econo-my and paymaster, appeared ready tobudge on using the Eurozones rescuefunds more flexibly to help banks andreassure investors spooked by anincreased risk of facing write-downson government bonds.The parties in Merkels centre-right

coalition have proposed allowing anew permanent rescue fund calledthe European Stability Mechanism(ESM) to funnel aid directly to nation-al bank rescue fundsAnd a leading ally of Merkel told a

closed-door meeting of her conserva-tives that Eurozone governments werediscussing removing the preferredcreditor status of the blocs new per-manent rescue fund.

Neither Merkel nor finance ministerWolfgang Schaeuble spoke out infavour of such a move at the meeting,sources said, leaving it unclearwhether the idea had the firm back-ing of the German government.

Debt sharing comes with stringsattached, Brussels report statesEUROPEAN Council chief HermanVan Rompuy yesterday released a

fresh plan for closer integration,involving eurobonds as the finalstage of a fiscal union.

In a medium-term perspective,the issuance of common debt couldbe explored as an element of such afiscal union and subject to progresson fiscal integration, the reportsaid, warning that debt sharingmeasures must be conditional onmoves towards a closer union.

Steps towards the introduction

BY CITY A.M. REPORTERof joint and several sovereignliabilities could be considered, aslong as a robust framework forbudgetary discipline and

competitiveness is inplace to avoid moralhazard and fosterresponsibility andcompliance, it said.

The report was alsoprepared byEuropeanCommissionpresident JoseManuelBarroso,

European Central Bank presidentMario Draghi and president of theEurogroup, Jean-Claude Juncker.

The report recommends that the

Eurozone should push ahead with abanking union, a budgetary union,joint economic policy frameworkand to ensure all this hasdemocratic support. To make jointdebt issuance possible, Brussels

should be able to set annualdeficit and limits forindividual members, it said.

Herman Van Rompuy wantscloser European integration

GREECE yesterday named liberaleconomist Yannis Stournaras as itsnew finance minister, replacing

Vassilis Rapanos who quit onMonday after less than a week inthe job.

Stournaras, an economicsprofessor at the University of

Athens and the head of theinfluential IOBE think-tank, hasthe nickname Mr Euro in Greecefor his role in negotiating thecountrys entry into the single

Greece chooses euro championStournaras as finance minister

BY CITY A.M. REPORTER currency back in 2001.Described by colleagues as

affable, he is considered an ardentsupporter of structural reforms tomake the economy morecompetitive ideas that are likelyto win him favour withinternational lenders exasperated

with the slow pace of reform.Rapanos quit earlier this week

on the advice of doctors afterspending four days in hospital withdizziness and abdominal pains.Deputy shipping minister George

Vernikos also resigned yesterday.

THE EURO fell against the dollarand Spanish borrowing costs

jumped yesterday, on doubts aboutthe outcome of the Europeansummit starting tomorrow in a bid

to mitigate the debt crisis.Yields on Spanish three-monthsecurities hit 2.36 per cent, soaringfrom 0.85 per cent at the last suchauction. Spain auctioned off3.08bn worth of the bills, but the

yield reflected fears over thestruggling countrys prospects.

And nearby Italy also saw yieldsrise at a bond auction, but to a lesssevere extent. The yield on Italiantwo year notes came in at 4.71 per

Cynicism towards crisis meetingtakes toll on yields and currency

BY CITY A.M. REPORTERcent, up from the 4.04 per centpaid last time around.

In the currency market, the eurofell 0.3 per cent against the dollarat $1.2463 after touching $1.2440,its lowest level in more than two

weeks although the greenback

also strengthened against othercurrencies.The FTSEurofirst 300 index of

Europes top shares was essentiallyunchanged at 986.34 points, wipingout an earlier 0.4 per cent rise.MSCIs world equity index dipped0.12 per cent to 1,186.81, adding tothree straight days of losses.Investors pared their safe-havenholdings in gold as well as US andGerman government debt.

WEDNESDAY 27 JUNE 20124 NEWS cityam.com

Yannis Stournaras was chief executive of Emporiki Bank, which was sold to Credit Agricole

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G E T T Y

SIR MERVYN King yesterday demand-ed that a formal investigation belaunched into the RBS and NatWesttechnical glitch, adding to pressureon the bank and its chief executiveStephen Hester.

Once the difficulties are over, wewill need the FSA to carry out a verydetailed investigation, King argued,with the focus on first of all, whatwent wrong, and then why it took solong to recover.A spokesman for the financial

ombudsman service yesterday alsoadvised account holders to make a

note of conversations they have, diffi-culties they are facing, and knock-oneffects, warning that the situationmay drag on for an extended period.

Details of the technical failure havebegun to emerge, with reports sayingthe problems started when RBSattempted last Tuesday to update abatch processing tool called CA-7.

According to a former employee, afailed update should not have beenfatal, as the process is usually trivialfor experienced programmers.

King demandsfull inquiry into

NatWest fiascoBY BEN SOUTHWOOD RBS declined to comment on reports

that it is considering legal actionagainst software provider CATechnologies.

Despite chief executive StephenHesters claims to the contrary, RBShas been dogged by allegations thatoutsourcing and cost-cutting exacer-bated or helped cause the problem.

An advertisement for CA-7 trainedconsultants on the Indian recruitmentwebsite Quickr, which listed RBS as theclient, fuelled these assertions.As part of its attempt to shore up its

image, RBS was yesterday forced tocancel all corporate hospitality at thisyears Wimbledon tournament.

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WHETHER NatWests recentcomputer problems areover remains to be seen,but what is already

obvious is the damage that isbeing done to perception of the

brand.YouGov SoMA (Social MediaAnalysis tool) looks at the impactthat campaigns or crises have onsocial media.While an average day generates

tweets about NatWest that are seenby just 0-2 per cent of the Twitterpopulation, since the crisis beganthat has risen significantly to reacha high of 23 per cent last Friday.

Over five days, 37 per cent of theUKs Twitter population wasexposed to tweets about NatWest,and the storys durability is shownby a 21 per cent reach score onMonday, five days after the initialproblem was reported.

RBS ESCAPES THE TWITTER IMPACTInterestingly, the social mediaimpact of the story has largely beenconfined to NatWest.

Parent company RBS has seen aslight rise in social media reach butmuch of that is due to its down-grading by Moodys last week, andthe much bigger story last Tuesdaywhen it announced job losses(resulting in 26 per cent reach).

BrandIndex, which measures over-all brand perception, reveals thatNatWest is suffering in the realworld as well.

The brands buzz score (thosehearing positive news minus those

BRANDINDEX

STEPHAN SHAKESPEARE

Twitter effect hits brands as the impacton consumer perception becomes clear

hearing negative news) is downfrom the usual level of around zeroto -63 on Monday, and its Index (acomposite score of six key percep-tion measures) has plummetedfrom +3 to -20.

RBS has also been hit here, withbuzz down from a normal -10 level,to -37, and Index falling from analready low -10 to -22.

So a difficult time for NatWest,and its clear that this problem hashad an immediately obviousimpact on brand perception.

It will be important for the bankto repair this damaged image ifthey are going to re-convince cus-tomers that it is a brand that can betrusted.

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INTERNATIONAL regulators saidyesterday that banks must revealall the components of their capi-tal from 30 June next year, as theirprogress in building up buffers ismonitored by authorities.The Basel Committee on Banking

Supervision which consists of reg-ulators from 27 countries includ-ing the UK, Germany, China andthe US wants to ensure thatlenders are falling in line with newBasel III rules.

Regulators are attempting toenforce a strict template on banks,claiming that reports over capitallevels have previously beenobscured by a lack of a clear and

uniform system.During the financial crisis, mar-ket participants and supervisorswere hampered in their efforts toundertake detailed assessments ofbanks capital positions and make

New reportingtemplate to hit

banks next yearBY JULIAN HARRIS comparisons across jurisdictions,the committee said. Adding tothese difficulties were insufficient-ly detailed disclosure by banks anda lack of consistency in reportingacross banks and jurisdictions.The report claims that the uncer-

tainty may have made regulatorsjobs tougher during the financialcrisis and masked how far bankswere relying on forms of capitalthat were insufficiently loss-absorbant.The decision to go ahead with the

plans is likely to provoke dissentfrom banks, who have previouslycomplained over the burden of thenew requirements. We find thatthe level of detail called for in theconsultative document is clearly

excessive, the Association ofGerman Banks said earlier this year,arguing that the amount and com-plexity of the data required will infact make it even more difficult tocomprehend.

POLLY Peck tycoon Asil Nadir yesterday told the Old Bailey he was a broken man withno chance of a fair trial when he left the UK in 1993. The 71-year-old Cypriot has deniedstealing nearly 150m from Polly Peck and said the company was never insolvent.

ASIL NADIR DENIES POLLY PECK THEFT

n A disclosure template that the banks

must use from 1 January 2018 has beenset out. This is the date from which theBasel III requirements will be set in stone,and when the banks permitted period oftransition comes to an end.

n Until then, there is a modified version

of the template that banks must use.

n Up to 2018, banks are allowed to make

a number of deductions as they near fullcompliance. But in financial statementsthey file from 30 June 2013, they will have

to lay out deductions according to thenew template, as well a s revealing other

elements of their capital positions asrequired by Basel III.

n Banks reporting under the new systemwill not be limited to annual updates.Whenever their capital position changesin a way that affects its compliance withthe regulations.

n Banks must provide a full reconciliationof all regulatory capital elements back tothe published financial statements.

n In a bid to boost transparency, banksmust publish on their websites the full

terms and conditions of regulatory capitalinstruments.

HOW WILL THE NEW SYSTEM WORK?

8 NEWScityam.com

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Directors of collapsed Kaupthingbank banned from senior jobsDIRECTORS of the British arm of

collapsed Icelandic bankKaupthing yesterday agreed notto hold senior banking positionsin the UK during the nexteighteen months, escaping a fineor further punishment.

Following a three-and-a-halfyear investigat ion intoKaupthing Singer andFriedlander Limited (KSFL), theFinancial Services Authority(FSA) concluded that former

BY JAMES WATERSONchief executive ArmannThorvaldsson, for mer non-executive chairman Sigurdur

Einarsson and former non-executive director Hreidar MarSigurdsson cannot hold top rolesat authorised British institutionsfor five years.

But the punishment has beenbackdated to October 2008,meaning that their ban willexpire at the end of next year.

The FSAs investigation focusedon KSFLs failure during the earlydays of the financial crisis to

properly challenge the reliabilityof a 1bn finance agreement ithad with its Icelandic parent

bank.KSFL failed to considerpromptly and properly whetherliquidity stresses in Icelandwould have a detrime ntal ef fecton its own liquidity position, thefinancial watchdog said in itsstatement.

The FSA said it would haveimposed a significant financialpenalty on KSFL if the firm wasnot already in administration.

INSURANCE giant Aviva yesterdayannounced a five-year deal withsupermarket firm Tesco that willenable it to sell life protection to UKretail customers.The deal gives Aviva the exclusive

rights to sell three simplified prod-ucts through the Edinburgh-basedTesco Bank business life insurance,over 50s life insurance and life insur-ance with critical illness cover.

Products will be promoted inTescos 2,900 stores but can only bepurchased over the phone or online.

David Barral, CEO of Aviva UK andIreland Life Insurance, said: This isa fantastic opportunity for twohousehold names to deliver a realbenefit for millions of people acrossthe UK who have no family protec-tion in place. We can provide Tescoscustomers with peace of mind, offer-ing a quick and easy way to pur-chase a range of protectionproducts.

Barrie Cornes, insurance analyst atPanmure Gordon, told City A.M. thatforthcoming changes to the wayfinancial products can be sold known as the retail distribution

Aviva signs life

insurance dealwith Tesco Bank

BY JAMES WATERSONreview (RDR) will have influencedthe deal.

In our view the move to RDR which kicks in at the year end willlead to more tie-ups between distrib-utors and manufacturers of life prod-ucts, such as the deal with Tesco.

Aviva manufactures the product,gives it to Tesco Bank and as long asAviva receive a certain value for thatproduct then they will be happy.Tescos distribution makes it seemlike a good deal for Aviva.Aviva has had a troubled year, with

a fall in its share price culminatingin the resignation of chief executiveAndrew Moss amid a row over hispay deal.

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SOUTH African bank Absa, whichis majority owned by Barclays,

yesterday issued a profit warningthat blamed an increase inmortgage-related bad debts,sending its shares tumbling.

The bank warned its first-halfearnings could fall as much as 10per cent below last years 4.6bnrand (347m), causing its stock tofall by seven per cent.

Credit impairments haveincreased due to higher coverrequired on our mortgage legal

book, as property prices and

distressed customers remainunder pressure, the firm said.

BY JAMES WATERSONAbsa also said that revenue

growth was sluggish, raising fearsthat the South African bankingrecovery may be faltering.

They are saying it is just on theimpairments on their mortgage

book, said Charles Russell, ananalyst at Macquarie First SouthSecurities.

I cannot imagine that is theonly thing that has gone wrong.The fact that they are not growingany revenue, that is more of apervasive thing than just relatingto their mortgage portfolio.

Shares in Absa closed yesterdaydown 8.3 per cent at 14,350 rand

on the Johannesburg StockExchange.

Hreidar Mar Sigurdsson was one of three directors named in the FSA investigation

Barclays South African armAbsa issues a profit warning

7/31/2019 Cityam 2012-06-27

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BRITISH firms have failed to free up125bn over the last five years due toinefficient working capitalmanagement, according to researchreleased today by accountants PwC.

PwC found that if all the UKcompanies currently considered tohave bad working capitalmanagement achieved the samestandards as good performers theycould have potentially generatedcash to the tune of 125bn.

Working capital performance is a

UK firms lose 125bn from poorworking capital management

BY JAMES WATERSON

CANADIAN stock exchangeoperator TMX yesterday signalledits interest in further European

expansion, despite the failure oflast years attempted merger withthe London Stock Exchange.

Chief executive Tom Kloet lastnight told an audience at CanadaHouse in Trafalgar Square:Europe presents excitingopportunities for all parts of our

business. Our London officeprovides us with an importantpresence that helps us explore

BY JAMES WATERSON these opportunities.Earlier Kloethad talked of

capitalising on new businessopportunities in the capital andhinted that he might consider

moving listings staff to the city.The Toronto-based firm opened

its London office in 2011 andboosted its presence by purchasingtechnology firm Atrium Network.

TMX is currently the subject of aC$3.8bn (2.4bn) takeover bid froma group of Canadian banks knownas the Maple Group. The deal isexpected to complete next month.

TMX chief executive Tom Kloet was in London to speak at the Trade Canada conference

Torontos TMX stock exchangeeyes European opportunities

measure of efficiency that comparesa firms assets to its liabilities.

Successful companies move awayfrom short term year-end window-dressing towards more sustainablelevels of good performance, whereevery day key decisions are madewith cash in mind, said SimonBoehme, PwCs senior manager forworking capital management. Putsimply, those organisations with anembedded cash culture fare better.

The survey studied Europeslargest 4,000 companies with aturnover of more than 150m.

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In these days of cutbacks and(relative) austerity among the

worlds investment banks, its goodto see that the Swiss-basedUBS is trying to muster up acelebratory mood.UBS is celebrating its 150thanniversary this year, andin so doing has giveneach of its 65,000employees worldwide aSwatch watch.

The gesture has gonedown reasonably

well in London,where bankers are atleast relieved thatthe Swatch, even if itisnt an Omega or aRolex, is wearable.

They compare it with agift the bank gave themaround ten years ago,

which featured a cow likethe one pictured.

However, some of the women atUBS are disappointed that the

UBS celebrates with watches

THE good folk at BP can beforgiven for being a bit miffed

with the bankers at CitigroupGlobal Markets. Citis analysts

Alastair Syme and Michael Alsfordhave issued a research note thatquestions BPs hopes of realising

between $25-30bn for itsstake in its Russiansubsidiary TNK-BP.The note, entitled

Russian value-releaseremains a complexissue, includes thesuggestion that BPfaces a damages claim

from AAR, mounting toseveral billion dollars.Fridman, one ofthe billion-a i r e s

Citis analysts pour oilon BPs troubled waters

behind AAR, is considered the mostlikely buyer of the BP-TNK stake.

Surprisingly for a research note, it isbased mainly on conversations withAAR, which is in conflict with BP andit does not reflect BPs view. A source

close to BP yesterday said thenote appeared a little

unfair. Although thenote refers to our dis-

Mikhail Fridman (left)and the Citi researchnote that has irkedsome at BP

Got A Story? Email

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14cityam.com

cityam.com/the-capitalistTHECAPITALIST

WEDNESDAY 27 JUNE 2012

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City workers have raised 25,000 for charity by testing parts of the officialOlympic Road on their bikes. Teams from City firms, including Ashurst,

Centrica, Deloitte, Moneycorp and UBS, have raised the funds for the developmentagency CARE to support some of the poorest people in the world. To take part eachparticipant had to raise a minimum of 150.The race, which was sponsored by City A.M, led the bikers out from the centre ofLondon to Dorking and back. The next cycling challenge to come is a bike tour fromLondon to Brighton, which will also raise funds for CARE.

watch they have been given is aunisex one, since they feel it is

perhaps more like a mans than awomans.All in all, though, the troopsat the UBS headquarters inBroadgate have taken the

gesture well and aregetting in the spirit of thecelebrations, which havebeen given an

additional lift from alunchtime orchestra.This must contrastwith the mood ofthose who work for

Swiss-owned rivalCredit Suisse, where

employees are bracedfor some fairly hefty

job cuts by all accounts.UBS is also awaiting the

arrival of the stylishbanker Andrea Orcel, who

is bound to bring some colour to

the place. But will he arrive in timeto get his Swatch?

Alert: Russianvalue-releaseremainsa complexissueTheissueofvaluation hangs overall

these proposalsand, within that, theissueofdamagesthatAARclaimsareowned forBPsattemptedtie-upwith Rosneftin early2011(theclaimisthis deal breachedthe AAR-BPshareholderagreement that placedTNK-BPas thesolevehicleforbothcompanies in Russia). Webelievethedamageclaims thatAARwillseekamounttoseveral billiondollars.

cussions with AAR management, itomits to mention that Citi, a big part-ner of BPs, also took Fridman to meeta broad selection of UK shareholdersto brief them on his thoughts on BP'sinvestment in Russia.Alsford, one of the research analysts

named on the note, said he had notmet with AAR and referred TheCapitalist to the Citi press office.

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Shares in Wolfson ended 5.26per cent higher yesterday at 200p.

IN BRIEFProfits fall at Domino Printing

n Barcode-printer maker DominoPrinting Sciences reported a nine percent fall in first-half profit, as thefallout from the debt crisis in Europeprompted customers to delay orders,and the company said sales for theyear would be similar to thoseachieved last year. For the six monthsended 30 April, Domino Printingreported an underlying pre-tax profitof 24.7m, down from 27.1m last year.

BAA says charges dent earnings

n Airport operator BAA yesterdaytrimmed its earnings forecasts for theyear by 1.2 per cent as parkingcharges temporarily dent its bottomline. The owner of Heathrow andStansted said it would recoup thelevies in 2014, and expects to make1.268bn in earnings before interest,tax, depreciation and amortisationduring 2012.

Francisco set to win Kewill fight

n Francisco Partners looks set totake over Kewill, after rival bidderSymphony said yesterday it will notraise its bid for the softwarecompany. Fransisco, who swooped in

to top Symphonys offer last week,will formally win the bidding warwith its 102.7m approach as early asthis week.

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HBOs Game ofThrones, starring

Sean Penn, is one ofthe webs mostpirated shows

US DATA centre firm Digital RealtyTrust said yesterday it was buyingthree properties near London for atotal of 715.6m.

The worlds biggest provider ofreal estate for data centres islooking to the European marketfor growth with the 761,000square feet investment acrossthree data centres located in

Woking, Watford and Croydon.Chief executive Michael Foust

said London was a highlystrategic global data centremarket, and that the new sites

Digital Realty invests 715m inLondon data centre properties

BY HARRY BANKS would allow it to serve a widevariety of customers seekinginstitutional quality data centrespace.

The Sentrum portfolio, as it isknown, is already 80 per cent let

to 21 tenants, but Digital Realtysaid yesterday it saw significantvalue-add opportunity to lease thebalance of the portfolios availablespace.

Digital Realty owns 20m squarefeet of data centre space aroundthe world at 105 properties. Itsshares have risen almost 10 percent this year as it seeks toincrease its portfolio offering.

Wolfson soars on deal to supply Samsung partsBY HARRY BANKS

Chief executive Michael Foust founded Digital Realty in 2001

MORNING UPDATE

Sign up toour 10:30amnewsletter at

cityam.com


BT VISIONS surprising captureof the rights to 38 livePremier League matchesfrom the beginning of the

season after next is described asthe largest thing we have done intelevision to date by the groupschief executive Marc Watson.

The problem for BT Vision is thatit could also be one of the mostexpensive things it has done intelevision to date, with analysts atEspirito Santo saying it could loseas much as 240m on its PremierLeague investment.

The big question for BT Vision isto what extent will its PremierLeague gamble help the platformtakes subscribers away from itslarger rivals BSkyB and Virgin

Media?Building a pay television

platform in the UK, as others havefound, is a hopeless task without anoffering of top quality live football.

Whereas films and generalentertainment, such as BSkyBs SkyAtlantic channel, enhance and helpto maintain a subscriber base, thebiggest driver of pay television hasalways been live sport and football inparticular, which partly explains theprice inflation of the recent rightsdeal.

BSkyB has always been thedominant force in sportsprogramming and others have onlybeen able to chip away at the fringes.ITV Digitals foray into live sportsrights was a disaster, as wasSetantas.

The Irish television operator endedup paying too high a price for therights and in the end could not fulfilthe deal. ESPN, which has held the

two small packages of football forthe life of the current contract hasmade a better fist of it but has in noway threatened BSkyBs place in themarketplace.

MEDIAMATTERS

DAVID HELLIER

BT Vision gamble might be costly

Ofcom takes new stepsto crack down on piracy

BY LAUREN DAVIDSON

ILLEGAL downloaders could bereported to copyright ownersunder a new system unveiled

yesterday by communicationsregulator Ofcom.

The draft code still subjectto a consultation period,European approval and the

governmental green light requires the major internetservice providers (ISPs)to notify theircustomers ofallegations that theirinternet connectionhas been used toinfringe copyright.

Customers whoreceive threeletters ormore withina year could have

anonymousdetails of theirpiracy sent to the

copyright owners, who will then beable to seek a court order to obtaininformation about the usersidentity.

These measures are designed tofoster investment and innovation inthe UKs creative industries,

Ofcoms Claudio Pollack said.The new rules will initially

affect the countrys biggestISPs BT, Virgin Media,

TalkTalk, Sky,Everything

Everywhere andO2 whichtogether cover

more than 93 percent of the retailbroadband market.

The policy hasbeen on the

watchdogs to-do list since theDigital Economy Act was passed in2010, but was repeatedly delayed by

block attempts by BT and TalkTalk.The final hurdle was removed in

March when the telcos lost theirlegal appeal against the legislation.

But two companies weresuccessful in persuading judgesthat the ISPs should not have tofoot the bill of enforcing the rules.

Ofcom yesterday said the rightsholders will shoulder most of thecosts. However, the price structureimplies the more infringementreports the content owners send tothe ISPs, the cheaper it will be percomplaint.

Internet users who wish toappeal allegations that they haveillegally downloaded content willhave to fork out 20, which will berefunded if successful.

Customers have almost two years

to mend their ways; Ofcom said itexpects the policy to take practicaleffect in early 2014.

SHARES in chipmaking firmWolfson Microelectronics rose byalmost seven per cent yesterdayafter it announced a deal toprovide audio technology toSamsungs next Galaxysmartphone.

The Edinburgh-based companysultra low power HD audio hub,known as the WM8994, will beused in Samsungs Galaxy S3handset, which was launched last

month and is expected to sell more

than 10m units in the next month.A previous version of the

Wolfson technology is alreadyused in Samsungs Galaxy S and

Wave phones.Our continued success with

Samsung, particularly within itsrange of smartphones and tablets,is testament to the unrivalledquality of our HD Audio Hubs, andthe unique features in ourproducts that allow manufacturersto create differentiated audioexperiences, said Wolfson chief

executive Mike Hickey yesterday.

Groups football move mustwin customers from BSkyB

In many ways, BT Vision, which isa platform operator as well as arights holder, poses more of acompetitive threat to BSkyB.

The big three platform operators,BSkyB, Virgin Media and BT Vision,are all after the holy grail of tripleplay which means television,broadband and telephone calls. Bankof America Merrill Lynch brokers toBSkyB, by the way reckons thatthe combination of fibre plus BTVision 2.0 (the new style BT Vision)plus YouView plus extras sportsrights makes BT a very crediblealternative for most families.

BT Vision is already gainingsubscribers at a faster rate than itsrivals, perhaps attracted by its veryreasonable pricing (4 a month) at

the bottom end of its televisionpackages. We offer the cheapestway of getting into next generationtelevision, says Watson.

The football rights victory now

gives BT Vision additional flexibilitybut this flexibility is restricted.

It would be to BTs advantage, forexample, to withhold the 38matches from its rivals.

But in reality this would prove tooexpensive, since it paid out 738m

for the rights and would nowherenear be able to recoup that cost justfrom its own subscribers even if theydid go up substantially.

In any case, Ofcom would almostcertainly not allow it.

BT does have flexibility on its ownpricing and here it depends howboldly it treads in the hope of takingsubscribers away from its two largerrivals.

One option might be to offer ayears free trial which, coupled withaccess to a subset of the nationsgames, might be enough to unhookSky or Virgin and to migratecustomers to BT Vision, says MikeKennedy, partner at RestorationPartners.

Many doubt BT Vision, part of BT,will be allowed to be as bold as itneeds to be to really progress itscustomer base.

But at least it now has a firmerbase on which to build.

A version of this article first appearedon the MediaTel.co.uk website

[email protected]

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BRITISH healthcare consultancy

Double Helix has been sold to anAmerican advertising group for upto 50m, it was announcedyesterday, leading to a windfall forfounder Wayne Phillips.

Phillips, the doctor andpharmaceutical exec who set upDouble Helix in 1995, will remainin charge when Interpublic Grouptakes over the firm.

Although the companies did notdisclose financial terms, sourcesfamiliar with the situation saidMcCann Health, a division ofInterpublic, would pay 35mupfront, with up to a further15m dependent on futurerevenue.

Cavendish Corporate Financeadvised Double Helix during thesale.

Double Helix has more than 90staff and offices in London,

Singapore and the United States.Cavendish healthcare

partner GordonHamilton said the twofirms were a good fitdue to Double Helixsexposure to fast-

growing marketssuch as Asia

Pacific.

Payday for bossas Double Helixis sold for 50m

BY MARION DAKERS

GETTY

STAGECOACH, one of the UKsbiggest bus and coach operators,said yesterday it was confidentabout the coming 12 months,despite a 1.5 per cent dip in pre-taxprofits to 202.5m.Revenues rose eight per cent to2.6bn, helped by a strong financialperformance at its London bus serv-ices.

But its East Midlands rail fran-chise suffered a first-half loss, andrevenue was below the level fore-cast when the contract was award-ed, the company said.

Since November 2011, East

Midlands Trains has received staterevenue support payments.The group is predicting further

positive growth for its budget coachbrand Megabus in the next year, fol-lowing the launch of its newEuropean routes, and overall trad-ing in line with expectations.

Chief executive Sir Brian Soutersaid: As well as testing the marketin Europe, we are expanding to newlocations in North America wherethe response to the product from

Upbeat outlookas Stagecoach

grows revenueBY LISA MORAVEC consumers has been particularly

strong.During the Olympics and

Paralympics the public transportgroup will be providing 300,000additional seats by operating largertrains.

Stagecoach also has a contractwith Locog to transport the athletesand members of the media aroundLondon during the Games.

In London, our turnaround planis progressing well and we have wonnew contracts on more acceptableprofit margins, said Souter.

Stagecoach also said its dividendwould increase by 10 per cent to5.4p.

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Wayne Phillipsfounded the firm

GRAHAM MACKAY, the chiefexecutive of the worlds secondlargest brewer SAB Miller, was

paid 5.9m last year, putting himamong the 20 best paid bosses inthe FTSE 100.

SABs annual report publishedyesterday shows that his paypackage, which includes basesalary, bonuses and benefits, butexcludes stock options, increasedfive per cent from last year.

This includes a short termbonus of 1.69m, a pensionpayment of 373,400 and 111,000of extra benefits.

SAB Miller boss Graham Mackaygets rise to 5.9m for last year

BY KASMIRA JEFFORD Mackay, who has run thecompany for the last 13 years, willalso see his base salary increase byfour per cent over the next year to1.295m, which SAB said was in

line with the increase for otherUK-based employees.

The London-listed South Africangroup increased earnings by 12per cent to $5.63bn last year,

boosted by emerging markets.In April the brewer announced a

shake-up of its board, with Mackayto become chairman in July,controversially combining boththis role along with being chiefexecutive for a year. He will then

become chairman in 2013.


Graham Mackay, SABs chief executive since 1999, is one of the FTSE best paid bosses

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IN BRIEFFalklands partners with French

nFalkland Oil & Gas yesterday broughtin Italian utility Edison as its new partner,bringing in a large, non-British companyto help it look for oil in the UK-governedFalkland Islands, where exploration hasangered Argentina. The British companysaid Edison, owned by Frances EDF,would pay around $50m for costsalready encountered in exploration workand 2012 drilling costs for a 25 per centinterest in its northern licences and a 12.5per cent in its southern licences. Edisonwill also make a separate cashcontribution of $40m to the firm.

Adecco plans share buyback

n Adecco will buy back up to 400m(319.5m) of shares from mid-July, theworlds largest staffing company saidyesterday. Adecco, which has a marketcapitalisation of about 4.6bn, said itwould fund the share buyback in thedebt capital market and was planning toissue bonds in the near future, subject tomarket conditions. The Swiss company

last month posted forecast-beating firstquarter profit.

Porvair raises profit forecasts

n Filtration and environmentaltechnology firm Porvair yesterday raisedits earnings expectations as profits shotup by 48 per cent in the first half of theyear. Pre-tax profits at the firm were2.4m in the six months to 31 May.Porvair expects the coming six monthsto be helped by a strong order book andreturns from acquisitions.

GETTY

BP said yesterday it had agreed to sellits minority stakes in two North Seafields to Japanese trading companyMitsui for $280m (179m), as part of aplan to focus its portfolio in theregion on larger scale projects.The oil major announced that

Mitsui would buy a 13.3 per centstake in the Alba field and an 8.97 percent stake in the Britannia operationin a cash deal.

BP regional president for the NorthSea, Trevor Garlick, said: The divest-ments are part of our strategy todevelop a more focused business inthe UK and Norway.The FTSE 100 firm, which also sold

$400m of gas fields in the North Seaearlier this year, is selling smallerassets to concentrate on six majorprojects in the Norwegian and Britishsections of the North Sea.The deal is part of BPs $38bn asset

disposal programme, which is raisingfunds to help pay for the ongoing costof cleaning up the 2010 Gulf of

BP to sell two

stakes in NorthSea for 179m

BY JOHN DUNNE Mexico oil spill.The company sold $1bn worth of US

gas assets to Linn Energy on Monday,and in a deal that could be worth asmuch as $25bn if it succeeds, BP saidearlier in June it could sell its 50 percent stake in Russian oil joint ventureTNK-BP. The venture has been plaguedby controversy, with both parties seek-ing an exit.

BP chief executive Bob Dudley saidof yesterdays deal: We are pleased tohave reached this agreement, contin-uing our global relationship withMitsui.

Investment bank Jefferies is advising BP onits deal with Mitsui.The team was led by Neil Schroeder, whohas headed up the companys oil and gasteam since 2005. He is also advising Sojitzand Bridge Energy on UK North Sea divest-ments, and recently advised Endeavour onits acquisition of upstream interests in theNorth Sea.Cambridge-educated Schroeder previouslyworked at ABN Amro.

Jefferies operations focus on the US,Europe and Asia and it has advised on astring of high profile deals in recent months.

In the technology sector it is advisingParadigm on its $1bn sale to Apax Partners.while in healthcare it is steering through a$170m deal to sell IntegraMed to SagardCapital Partners.Also in that sector the company is advisingNovartis on its $1.5bn purchase of Fougera.In energy, it is advising Williams Partners onits $2.5bn acquisition of Caiman EasternMidstream.Jefferies has been in business for nearly 50years and operates in 30 cities around theworld. As well as M&A it works on corporaterestructuring, private placements and highyield, convertible debt and equity place-ment.

ADVISERS JEFFERIES

NEIL SCHROEDERMD OIL AND GASINVESTMENT BANKING

Serco warns that sluggish salesin US will lead to a revenue dipOUTSOURCER Serco yesterday gave adownbeat trading update in whichit said the US market was sluggish.

The company, whose contractsinclude running prisons and theDocklands light railway, said itexpected revenues to dip in thefirst half before picking up.

It said the UK was provingresilient compared with itsbusiness across the Atlantic.

The FTSE 100 company said in astatement: In our regionalfrontline operations we have seen

further strong growth, animproving outlook in the UK, but

BY JOHN DUNNE conditions in the US federal marketremain very tough for our Americasdivision. Accordingly, for the firsthalf of the year, we expect a smallreduction in the groups organicrevenue.

Robin Speakman, an analyst atShore Capital, said: We believeearnings per share is set to declineby up to 20 per cent on the first half but we expect a strong secondhalf performance to follow, led by alower cost base and the notedcontractual success.

Serco, which will release its halfyear results on 29 August, added:

Our financial performance (includ-ing revenue growth, margin progres-

sion and free cash generation) will beweighted to the second half of theyear when we expect a strong finan-cial result.

This reflects excellent perform-ance over the last few months insecuring new contract awards thatwill flow through to organic revenuegrowth; the successful conclusion ofour change programme; and thebenefit of recent acquisitions.

Analyst David Brockton at Espiritosaid: While we expect to make nomaterial change to our forecasts, thebalance of risk would appear toremain to the downside.

Shares in Serco fell 1.9 per cent to529.5p yesterday.

Coca-Cola chairman and chief executive Muhtar Kent

BPs Bob Dudley is making progress on the oil firms plans to sell off assets

BP PLC


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COCA-COLA announced a further$3bn (1.92bn) in investment inIndia over the next eight years

yesterday as the worlds biggestsoft drinks maker seeks to expand

in a country where its flagshipbrand trails rival Pepsi.The investment by Coca-Cola

and its bottlers, on top of a $2bnfive-year plan announced inNovember, will hearten Indianofficials who are trying to restoreinvestor confidence after growthfell to a nine-year low in the firstquarter. The announcementcomes days after Swedish retailerIKEA said it would invest 1.5bn inthe country.

Coke to invest$3bn in India

BY CITY A.M. REPORTER


ONCE Irelands richest man, SeanQuinn was found guilty of contemptyesterday and may go to jai l after acourt ruled that the bankruptbusinessman had blocked a statebank from seizing proper ty worth

hundreds of millions of euros.Quinn, whose 4bn (3.2bn)business empire co llapsed af ter adisastrous investment in now-nationalised Anglo Irish Bank, isbeing pursued by the bank for debtsof almost 3bn.

The Irish B anking ResolutionCorporation (IBRC), created from theremains of Anglo, asked the HighCourt to declare Quinn in contemptfor violating an order not to interferewith foreign property assets worth

an estimated 500m.I find it impossible to accept his

evidence that he had no hand inmatters after April 2011 His evidenceis not credible, Justice ElizabethDunne told a packed courtroom inone of the most keenly anticipatedjudgments of Irelands financial

crisis.The judge wil l decide onsentencing after hearing argumentsfrom both sides this coming Fridayabout what action should be takenbut said i t would be dif ficult topersuade her that there should notbe a custodia l element in t hepenalty.

If he is jailed, Quinn, 65, wouldbecome the f irst major player inIrelands economic collapse to beimprisoned.

BY CITY A.M. REPORTER

Sean Quinn faces jail

BRITISH oil services companyPetrofac said yesterday contracts

worth $1.1bn (705m) were in itspipeline and would soon besigned, giving it confidence on itsprofit targets for this year and inthe longer term.

Petrofac, which designs andbuilds oil and gas infrastructureand also invests with producers inoil fields, said that its backlog oforders was $9.1bn but that anextra $1.1bn of awards would beadded when a number of deals

were formally signed. Analysts atJP Morgan called Petrofac'sstatement reassuring after a

period of concern about thecompany's backlog.

Petrofac sunny

about profitsBY CITY A.M. REPORTER

CORYTON refinery, which wasformerly run by now insolventPetroplus, will be turned into afuel import terminal afteradministrator PwC agreed to sellthe site to the joint venture of

Vopak, Shell and Greenergy.PwC said the new owners will

now start significantreconfiguration of the existingsite in Essex.

Energy minister Chris Hendrysaid that while it was very sadnews for the workers at Corytonthat it was not possible to keepthe site running as a ref inery, theinvestment pledged by the new

owners will keep the site viablefor many years.

Coryton site

sold to ShellBY CITY A.M. REPORTER

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LOWER rates of home ownership areset to cost the government an extra8bn a year in housing benefit, athink-tank said this morning.

Once todays generation of rentersretire, there will be 3.45m pension-ers claiming housing benefit by2060, the Strategic Society Centre(SSC) has calculated.

In todays prices, these claimantswill cost the state 13.45bn a year around two and a half times the sizeof the current 5.32bn bill for hous-ing benefit.

In the debate on generation rent,what everyone forgets is that mostpensioners who rent rely on statesupport, said SSC director JamesLloyd. So, in future, when there willbe far more pensioners than today, ifmore pensioners are renting, thecost of housing benefit to the state isgoing to explode.

Elevated house prices have forcedprospective buyers to remain in therental market, driving up leasingcosts, particularly in London.

People who want to buy, cant

UK heading for

time bomb overhousing benefit

BY JULIAN HARRIS and this pushes up rent, which raisesthe housing benefit bill, addedJonathan Portes of the NationalInstitute for Economic and SocialResearch (NIESR), a separate think-tank based in Westminster.

We are in a very weak recoverywith low interest rates and manyunemployed people now is the idealtime for a house building boom, likethe kind which dragged us out of the1930s recession, Portes argued.

Matt Griffiths of the campaigngroup Priced Out complained thatthe government seems happy to let ageneration of young people becomerenters, as house-building numbersstagnate and private landlords buyup greater levels of the existing hous-ing stock.

THE MIDDLE fifth of householdsexperienced the sharpest drop inaverage incomes according to arecent years data published

yesterday by the Office for

National Statistics (ONS).Disposable incomes flopped byan average of 4.3 per cent for theso called squeezed middle between2009-10 and 2010-11 a fall of1,100 per household.

Across all the measureddemographics, annual incomes

were down by 200 in real terms,the ONS said.

The figures, which also measurethe effect of taxes and benefits on

Squeezed middle most affectedby falling incomes, figures show

BY JULIAN HARRIS household incomes, showed thatthe wealthiest quintile paid 24 percent of their gross income (19,700)in direct taxes such as income taxand National Insurance.

The poorest fifth paid just 10 percent of gross household income

(1,300) in direct taxes, yetproportionally were hit harder byindirect taxes, largely due to thehike in VAT.

Higher levels of state benefitsare claimed by the second poorestquintile, not the poorest largely

because the second poorest groupincludes more pensioners.

The stats also demonstrate thedegree to which taxes and benefitsslash income inequality (see right).

US HOUSE prices rose again inApril, while consumer confidencedipped further, according to datapublished yesterday.

The S&P/Case-Shiller house priceindex rose 0.7 per cent in April,marking the third consecutivemonth of gains.

Prices are still down 1.9 per centon the year, but this beats the 2.6per cent fall in the year to March.

Consumer confidence for Juneslumped to a five-month low of 62on the conference boardssentiment index, from a revised64.4 in May. This low f igure reflects

worries about unemployment and

could point to worsening houseprices as confidence drops.

Third month of

US home rises...BY BEN SOUTHWOOD

THE LONG spells many Americansare spending without work riskleaving a lasting scar of higherunemployment on the US economy,the OECD warned yesterday.

In its biennial report on the USeconomy, the OECD said theunemployment rate which theeconomy could sustain withoutgenerating inflation was 6.1 percent, up from 5.7 per cent in 2007.In May, the rate stood at 8.2 percent.It left its 2012 growth forecast of2.4 per cent intact, but the OECDcalled on the US to prepare for thefiscal cliff at the end of the year,

when numerous spending cuts aredue to kick in.

...as OECD calls

for work planBY HARRY BANKS


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19WEDNESDAY 27 JUNE 2012

LONDON REPORT

Mayer Brown

Andrew Block has been

appointed as a partner in thepensions group of the law firm.He was previously a partner atTravers Smith, and started hislegal career at Linklaters. Blockacts in occupational pensionscheme matters. He will be basedin Mayer Browns London office.

Manches

The law firm has announced that Jon Bartley will join itsLondon office as a partner in early July. He arrives fromShoosmiths, where he has been a commercial partner since2008, and co-manager of its commercial team. Bartley alsospent eight years in Baker & McKenzies London commercialteam, and one year at its San Francisco office. He specialisesin data protection compliance.

BDO

The accountancy firm has promoted six of its tax and audit

experts to the partnership. Of the four London-basedappointments, Ian Clayden joined BDO in 1995 and servesas head of professional sports. Ed Goodworth joined in2001 and is an audit director. Andy Goodman joined in2003 and is a tax director. Richard Montague joined in2000 and is also a tax director.

Capco

Chintu Ramchandran has been appointed as chief executivefor the business consultancys offshore operations. He joinsfrom Accenture, where he has spent 15 years of his career,most recently in leadership positions in the UK andGermany. Ramchandran will focus on growing Capcosoffshore offering from Bangalore.

Energetix

The alternative energy product developer has appointed

Peter Richardson as group chief executive officer. He joinsfrom Dyson, where he is currently chief operating officer.Richardson joined Dyson in 1997 as UK sales director, andhe previously served in management roles at CadburySchweppes, Coca-Cola and Colgate-Palmolive.

A2e Venture Catalysts

Richard Higginson has joined the board of investmentcompany, which specialises in small to medium-sizedenterprises. He was most recently managing director atWarburtons, and previously spent 15 years at Shell,including as managing director of Shell Direct.

APS

The marketing solutions provider has appointed SimonTaylor as client services director for London and the South.He has held client management and operation roles at APSfor eight years, and will relocate from the groupsManchester headquarters.

WHOS SWITCHING JOBS Edited by Tom Welsh

+44 (0)20 7092 0053morganmckinley.comSPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

US stocks riseafter upbeatproperty data

MAJOR US stock indexesbounced back yesterday, buttrading was light with theoutlook clouded by doubts

before yet another summit to tacklethe European debt crisis.

US stocks partly recovered from loss-es of more than one per cent onMonday, led by housing shares afterstronger-than-expected data on home

prices.The consumer discretionary sector

was the top gainer on the S&P 500, fol-lowed by energy shares, which wereboosted by a 2.3 per cent jump in Brentcrude prices.Traders remained cautious as

Spanish short-term borrowing costsnearly tripled and US consumer confi-dence fell in June to its lowest level infive months.

Certainly in the United States stocksare nicely priced, and for a long-terminvestor it is an attractive entry point,but then what about these macro riskshovering around the market? I thinkits having a dampening effect, saidJohn De Clue, global market strategistat US Banks wealth managementgroup in Minneapolis.

Spanish 10-year bond yields rose afterdemand at a shorter-term bill sale felldespite significantly higher yields.Hopes faded that the European Unionsummit later this week would producegame-changing measures to ease thedebt crisis.

Madrid has formally asked for fundsto bail out its banks in a move somesee as a prelude for a full-blownbailout of the Eurozones fourth-largest economy.

Rupert Murdochs News Corp said itwas considering splitting into two pub-licly traded companies, and sourcessaid publishing would be separatedfrom entertainment. Shares jumped8.3 per cent to $21.76 on volume of73.1m shares, making it the Nasdaqsmost actively traded stock.The Dow Jones industrial average

rose 32.01 points, or 0.26 per cent, to12,534.67. The S&P 500 Index gained6.27 points, or 0.48 per cent, to1,319.99. The Nasdaq Composite Index

gained 17.90 points, or 0.63 per cent, to2,854.06.About 5.9bn shares changed hands

on the New York Stock Exchange, theNasdaq and NYSE Amex, below thedaily average of 6.82bn so far this year.JPMorgan Chase & Coshares rose 1.1

per cent to $35.71 after GoldmanSachs added the bank to its convictionbuy list. Morgan Stanley, cut to neu-tral by Goldman, added 0.2 per cent.The PHLX housing index jumped 2.6

per cent after S&P/Case Shiller datashowed home prices in 20 US metro-politan areas gained 0.7 per cent on aseasonally adjusted basis, toppingeconomists expectations for a 0.4 percent gain.

Facebook shares rose 3.2 per cent to$33.10 a day before the underwriters ofits recent IPO are expected to releaseresearch on the company.Advancing issues beat decliners on

the New York Stock exchange by aboutnine to five.

BRITAINS top shares dipped intonegative territory in a lacklustresession yesterday, hampered bybanking stocks, with market

movements likely to remain muted aheadof a summit of European leaders later inthe week.While a two-day summit in Brussels on

28-29 June was very much the marketfocus, traders pointed to an element ofinvestor fatigue given it is the 20th time EUleaders have met to try to resolve the debtcrisis since it began in Greece in early 2010.

Scepticism that it would result in a posi-tive outcome was also fuelled byGermanys resistance to the idea of com-mon Eurozone bonds that mutualise debtacross the region, perceived by some as thebest solution to putting an end to crisis.

German Chancellor Angela Merkel hasbeen quoted as telling a meeting of one ofthe parties in her coalition that Europewould not have shared total debt liabilityas long as I live.

Expectations have probably beenstretched beyond what is reasonable andachievable if markets are expecting eurozone leaders to agree on debt mutualisa-

tion in euro bonds, Mike Lenhoff, chiefstrategist at Brewin Dolphin, said.Two things will be of interest the

approach to banking integration of somesort and fiscal integration... If put forwardin a manner that indicates that these areserious intentions and theres a timelineassociated with it being addressed, then Ithink the markets could respond well.The FTSE 100 ended down 3.69 points, or

0.1 per cent, at 5,446.96, steadying after athree-day sell-off which saw it shed aroundthree per cent, having vacillated betweenpositive and negative territory in a tight 40-point range yesterday.

UK banking stocks came under somepressure, with investor risk appetite sub-dued, while defensive pharmaceutical andtobacco stocks posted modest gains.The crisis escalated on Monday when

credit rating agency Moodys downgradedthe ratings of 28 Spanish banks after a cutto Spains sovereign rating to just above

junk status earlier this month.Weve certainly been more cautious

about where markets are likely to go on avery short-term view, Henk Potts, marketstrategist at Barclays, said.

On a three- to six-month view, wevebeen telling our clients: Hold more cashthen you normally would, be less aggres-sive in terms of your stance to equity mar-kets, and have a good weighting in termsof government bonds.The anxious mood was made worse by

UK public borrowing which came in high-er than expected in May as income taxreceipts fell and spending rose, in a signthe government may face a struggle tomeet its debt reduction target as the econ-omy weakens.

Royal Bank of Scotland, also under pres-sure to rectify an IT glitch that paralysed itsonline banking operations last week, fell3.8 per cent to become the FTSE 100sbiggest faller.

Drugmaker Shire rose to the top of theblue-chip leader board, ahead 3.2 per cent,as a raft of brokers upgraded their ratingson the stock following a sharp sell-off inthe previous session.

Shire sank 11.3 per cent on Monday afterthe unexpected US approval of a new

generic version of its Adderall XR attentiondeficit hyper disorder treatment, producedby Actavis.

Societe Generale and Berenberg both lift-ed their ratings for Shire to buy, whilstPanmure Gordon raised its recommenda-tion to hold.

BSkyB was the second biggest riser, up2.7 per cent, on news that parent companyNews Corp is considering splitting itself intwo.

FTSE slides on banking shares andscepticism over EU leaders summit

BESTof the BROKERS

Croda International PLC

2,240

2,220

2,200

2,180

2,160

2,140

p


2,183.0026 Jun

CRODAJP Morgan has upgraded the speciality chemicals group from neutral tooverweight and increases its target price to 2,600p, saying that the

firms main characteristic in the last downturn was resilience, and saysthat this is unlikely to change.

FTSE

5,600

5,625

5,475

5,450

5,500

5,550

5,575

5,525


5,446.9626 Jun

DASHBOARDCITYCITY MOVES

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NEW YORKREPORT

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

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Mediterranean Oil & Gas PLC

8.75

8.50

8.25

8.00

7.75

7.50

7.25

7.00

p


8.7526 Jun

MEDITERRANEAN OIL & GASLiberum Capital has initiated coverage of the UK oil and gas group with abuy rating and a target price o f 13.9p, saying that the company is nowback on its feet and looks ready to embark on a growth path. The brokersays the current share price is close to its valuation of just the firmsItalian fields that are already producing, and ignores its prospectiveresources in Italy, Malta and France. It expects an ambitious path from thecompany to drive growth outside of the Italian operations.

Shire PLC

2,000

1,950

1,900

1,850

1,800

1,750

p


1,798.0026 Jun

SHIRESociete Generale has upgraded the pharmaceutical giant from hold tobuy with a reduced target price of 2,192p from the previous 2,310p. Despitethe US regulator approving a generic competitor for the companys AdderallXR drug last week, the broker does not expect multiple generics to beapproved from here, so continues to see growth in revenues and profits fromthe franchise. However, Soc Gen has cut its forecasts aggressively, leading to adrop in group revenue estimates for 2012-15 of up to three per cent.

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Extreme tech: Atos sees Olympicsexposure as a real-time showcase

Patrick Adiba saysthe IT firms Olympicpartnership has astrong business case

QWhats your brands primaryreason for being involved withthe Games?

A

Weve been involved sinceBarcelona in 1992. We becamea worldwide IT partner in 2001,and were committed through

to Rio in 2016. Theres two reasonswhy it works. I think theInternational Olympic Committee(IOC) decided to partner with Atosbecause we share the same values:fair value, teamwork, cleancompetition. When the IOC had aworldwide tender in 1999 to find itsnew worldwide IT partner, I think wewon because of this match. Ourpartnership is pretty unique becauseyou have to work together on a long-term basis, and technology changes.Its not a commercial contract, itsvery intensive in people andtechnology. You must be prepared totake risks, to anticipate trends and toshare the same ambition.At the same time as using the

Olympic brand, we help to make it

stronger its a give-and-take game.And its a fantastic showcase for Atos.For the Olympics, we use nearly allthe services that exist in the ITindustry, but in an extreme way. Ifyou can do anything for theOlympics, you can do it for any othercustomer. If you can secure theGames, or deploy for something ofthis magnitude, you can do it for abank or a telco or a manufacturingcompany. Its a live showcase ofeverything we can do in a verymission critical environment.

QHow have you structured your

business to maximise theopportunities?

A

We have a group of businessunits doing the Olympics andother major events. Weve done

technology for about 60 eventssince the groups creation in 1989

30 DAYS TO GO

COUNTDOWNTO THE LONDON2012OLYMPICGAMES

OLYMPICBUSINESS22

WEDNESDAY 27 JUNE 2012 cityam.com

all kinds of events, from the soccerWorld Cup to the Pan-AmericanGames, and non-sporting events too.We try to limit our sponsorship to

the Olympics, because its not justabout sport but values. Sometimesthat means were not visible. We didthe IT for the Fifa World Cup in2006, but nobody knows thisbecause there was another sponsor.Weve a specialised business unitand we maintain the knowledge in agiven centre, with the same team about 30 per cent were in Barcelonain 1992.We transfer experience between

events. We also transfer expertise fromthe Olympics to other businesses.Everything we do for the Olympics canbe adapted. If you want to do the ITsecurity of a bank, its very similar towhat we do here. We can transposemany things, including people. Lots ofAtos employees work on the Games toacquire experience. We also use theOlympics to attract talent at universi-ties. We are launching an IT challenge,

asking universities to compete on agiven technology challenge. It allows

us to explain to students what Atosdoes. Its important because

cityam 2012-06-27

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