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FTSE 100M 5,533.87 -117.90DOWM 12,721.46 -101.11NASDAQM 2,890.15 -35.15 /$ M 1.55 -0.01 / 1.28 unc /$ 1.21 unc

BUSINESS WITH PERSONALITY

LONDON2012days to go

CHINESE FIRMS SNAP UP BRITAINS ENERGY ASSSee Page 5

BUSINESS GROUPS REACT TO JOHN KAYS REPORTSee Page 2 and The Forum, Page 19 3www.cityam.com FREEISSUE 1,680 TUESDAY 24 JULY 2012

EURO CRISIS BACK ASPAIN FEELS THE HEA

Certified Distribution

28/05/2012 till 01/07/2012 is 132,857

euro-era high, ending the day up0.231 points at 7.498 per cent. Analysts warned the country could

see its credit rating cut to junk sta-

tus. Spain is currently on Moodyslowest investment grade rating.

Last night, Moodys piled on themisery by putting the treasuredtriple-A debt ratings of theNetherlands, Luxembourg and even

Germany on a negative outlook. The agency said the revision was

based on fears that thesecountries would end up shoulderinghuge debt burdens in order to keepthe Eurozone together, especially if

Greece were to exit.New data also showed that the

THE EUROZONE crisis f lared back up yesterday as Spanish and Italiangovernment borrowing costssoared to levels not seen since thestart of the year, while Germany and other safe haven nations cameunder pressure from ratingsagency Moodys. The euro hit a two-year low against

the dollar, trading in stocks of Italian firms including UniCredit

was suspended as the countrysmain market fell, and Italy andSpain introduced short-selling bansto try to ease the burden on markets.

Data showed confidence in theeuro-area economy diving, while oilprices fell on the worsening outlook. A new crisis in Spanish regional

funding kicked off the panic, after Valencia called for a bailout fromthe central government on Friday and Murcia indicated it may follow,

with others expected to need aid too.Investors, fearing this could tip the

indebted state over the edge, sent 10- year bond yields to 7.565 per cent, a

overall debt position of theEurozone is relentlessly worsening

government debt stood at 88.2 percent of GDP in the first quarter, upfrom 86.2 per cent a year earlier.

Meanwhile the EuropeanCommissions consumer confidenceindicator plunged again from minus19.8 in June to minus 20.3 in July,and ratings agency Fitch warned thecrisis has doubled the proportion of sovereigns and financial servicesfirms with negative credit outlooks

so far this year.Economists said no respite islikely in the near term. Eurocrises have a tendency toemerge in August many deci-sion makers go on holiday,financial markets are thin

meaning that any perturbationis exaggerated, said the CEBRsDouglas McWilliams.

Stocks slumped across theEurozone, with Spains IBEX down

by around five per cent at one point,though it recovered to end down 1.1

per cent.

BY TIM WALLACE

n Spanish 10-year yieldssoar above 7.5 per cent

n Moodys puts Germanyrating on negative outlook

Spanish yields spiked above 7.5 per cent

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7.5%%Italian yields also jumped

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5.0

% 6.33700

The eurotouched atwo-yearlowagainst

the dollar

3 %Brent crudein Londonsank toaround $103a barrel

FTSE 100

2.1%

Markets slumped on the renewed crisis

n Short-selling bans fato impress rattled mark

DEB ATE: Page 19nn

a b a r r e l

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NORTH SEA TURNS RED

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allister.heath@cityam.comFollow me on Twitter: @allisterheath

TWO FORMER top executives at Anglo Irish Bank were charged with16 counts of fraud yesterday, as partof a long-running fraudinvestigation into the failed lender.

Former finance director WillieMcAteer, and former managingdirector Pat Whelan faced the sameset of charges relating to loans givento rich clients to purchase shares inthe bank.

This so-called golden circle of clients included famous property tycoons and Irelands former richestman Sean Quinn, who lost billionsof euros when Anglo Irish was

bailed out.If they are found guilty they both

face sentences of up to five years inprison, plus fines of as much as 3,000. Both executives made bailand are required to return to courton 8 October when evidence will beheard.

The investigation into fraudulentactivity at the bank, recently renamed the Irish BankingResolution Corporation, has beengoing on for over three years, led by the police and Irelands Office of the Director of CorporateEnforcement.

The state is slowly winding thefirm down, after it came into statehands in a 2008 taxpayer bailoutcosting 30bn almost half of thetotal cost of bailing out the sector.

Loan charge

for ex-bosseat Anglo IrisBY BEN SOUTHWOOD

A cautious welcome forKays stock market planBUSINESS organisations yesterday gave a cautious welcome to a govern-ment report that recommendsreducing short-termism in stock markets by cutting cash bonuses forexecutives and improving communi-cation between shareholders andcompanies.

In his report Professor John Kay also backs the creation of a new insti-tutional investors forum that wouldallow disparate shareholders to work together and address boards withone clear message.

His wide-ranging package of meas-ures aims to increase the number of long-term investors who take anactive interest in a firms progress, asopposed to trading stock on the basisof fleeting changes in a companysshare price. To this end Kay also suggests an

end to compulsory quarterly tradingupdates for listed firms, suggestingasset holders should review per-formance no more frequently than isnecessary and instead focus on long-term returns.

It is clear that the investmentchain as currently structured is not

working effectively, AlanMacDougall, managing director of shareholder group Pirc said inresponse. In almost every link in thechain there is a bias in favour of activ-

Local staff hired as G4S failsG4S has been replaced as the securitycontractor for Olympic football matches inNewcastle after games organisers realisedthat the company could not provideenough staff to safeguard the venue.

Farmers agree milk price dealDairy farmers have struck a deal inprinciple with processing companies andsupermarkets over milk prices but will notnecessarily stop protests if retailers goahead with a price cut in August. The

agreement, brokered yesterday by thefarming minister, comes after a disputethat has seen thousands of farmersblockading processors.

Alibaba shake-up gives Ma controlAlibaba, Chinas largest ecommercecompany by revenue, announced aninternal restructuring yesterday as thegroup seeks to refocus managementcontrol in the hands of founder Jack Ma.Its two online marketplaces for tradebetween businesses one Chinese andone international have beentransformed into two business groupsthat will report directly to Mr. Ma.

Chinese mega-rich not quite so richChinas richest 3,000 families are thoughtto have sustained 59bn in combinedfinancial losses after a dismal, year-longslide on the Shanghai and Shenzhen stockmarkets.

Deficit count ignores billions in bankThe governments budget deficits arebeing overstated because they excludebillions of pounds of profits fromquantitative easing, claimed Toby Nangleat Threadneedle Investments.

Peter Rice is the new Fox bossRupert Murdochs News Corp haspromoted Peter Rice to chairman and chiefexecutive of its Fox Networks Group in thefirst step of an expected executive shake-up ahead of the news-entertainment split.

US attacks Apple over e-booksThe US government has blasted Applesobjections to a legal settlement that couldreshape electronic book publishing asself-serving and against the publicinterest.

Prem Watsa bolsters RIM stakeOne of Research in Motions biggestshareholders has nearly doubled his stakein the struggling BlackBerry maker,providing a modest boost of confidenceas the company works to claw back itsrapidly dwindling market share.

New risks in Kodak patent auctiBids for patents being auctioned byEastman Kodak could become lessgenerous now that the company has lost akey intellectual-property case.

John Kay is a visiting professor of at the London School of Economics

2 NEWS

BY JAMES WATERSON

To contact the newsdesk email news@citya

THERE are many excellentsuggestions in John Kays review on the future of the UK equity markets. It makes sense for assetmanagers to be transparent abouttheir costs, for an investors forum to

be set up to coordinate collectiveaction and for there to be a push to

align incentives and create a cultureof responsibility. But Kays evidentdistaste for trading and otheractivities he perceives as grubby tainttoo many of his recommendations and even some of his good ideas havecosts, as well as benefits. Take his correct view that quarterly

reporting is too frequent, promotingshort-termism. It is ridiculous thatlisted firms are expected to meet or

beat forecasts every time. This distortspriorities and encourages manage-ment to game numbers, rather than

build value. But there is also a down-

EDITORSLETTER

ALLISTER HEATH

Short-termism is bad but so is excessive lonTUESDAY 24 JULY 2012

side to ditching such reportingrequirements. Private companieshave a longer-term horizon but theirowners (such as private equity part-ners) also see financial informationon a much more continuous basis. Idont know any owner of a privatefirm who would want to be kept inthe dark for a whole year or evenlonger, as Kay implies would be possi-

ble under his reforms to listed firms. That said, I agree with Kay that firmsand their shareholders should negoti-

ate their own reporting frequency.It would make sense for more insti-

tutional investors to act like properowners, as Kay would like. But not a llneed to act in this way for the systemto work and not all can. If individualinvestors move in and out of pooledinvestment vehicles, as they do, then

by definition funds will have to movein and out of equities. In many cases,that wont be conducive to fullinvolvement with the Plc. Other largeinvestors do keep stakes for long peri-ods, and they rightly should exercisegreater stewardship over their assets,as Kay suggests; I also like his ideathat fund managers should be invest-ed in their own funds.

Kay is wrong to hate bonuses. Hesays that many people doing respon-sible and demanding jobs cabinetministers, judges, surgeons, researchscientists do not receive bonuses,

excessively long periods of time does-nt work either. Kay wants any

bonuses [to executives] to be paid inshares to be held until significantly

beyond the executives tenure. Im infavour of some of that performanceneeds to be judged over the longterm but pushing it too far wont

work either. CEOs also need cash to buy houses and live only payingthem in shares is excessive. Short-ter-mism is a problem. But is also possi-

ble to suffer from long-termism anaffliction at least as dangerous whichimplies turning a blind eye to prob-lems, less accountability, a refusal tochange course until it is too late andpretending people want to work forthe same firm for ever. Lets adopt the

best of Kay and forget about the rest.

and would be insulted by the sugges-tion that the prospect of bonuses

would encourage them to performtheir duties more conscientiously.Maybe. But most of these fall part of the public sector. Surgeons who doprivate work get paid according tohow much they do, which is a kind of

bonus, and there is a long tradition of prizes for scientific discovery, whilepatents are a reward for inventors. The implication that it is wrong for

money to be a motivator is perni-cious. Some cabinet ministers notall, of course are power-hungry indi-

viduals who will promise anything inreturn for votes. Why is that ethicalframework superior to that of theshort-termist, cash-hungry bondssalesman? Of course, there is a sophis-ticated case for making compensationlonger-term for many jobs and align-ing incentives. But paying people over

ity, regardless of whether this can beproven to be in the interests of, eitherissuers or savers. John Longworth, director general of

the British Chambers of Commerce,added: Short-term behaviour on trad-ing floors limits the availability of cap-ital for growing companies, and forcrucial investment in the UKs infra-structure. The City is an important eco-nomic powerhouse in its own right,

but should also have as a primary roleoiling the wheels of the real economy.

Business secretary Vince Cable, whocommissioned the report, will respond

in detail later this year and consider whether any of the recommendationsshould be implemented.

But Stephen Cahill, head of execremuneration at Deloitte, said the pro-posal to pay long-term incentive plansin shares when directors leave could beproblematic: This proposal...may evenhave the unintended consequence of driving up executive pay further ascompanies compensate executives forhaving to wait longer or of encourag-ing executives to change jobs moreoften to get access to their shares.

THE FORUM: Page 19nn

The new jobs website for London profeCITYAMCAREERS.com

WHAT THE OTHER PAPERS SAY THIS MORNING

n Long-term directors incentives shouldonly be provided in the form of shares tobe held until after the executive has retiredfrom the business.n Mandatory quarterly reporting ofcompany results should be ended.n An investors forum should beestablished to allow collectiveengagement by investors in UK firms.n Companies should consult large long-term investors on major boardappointments.n The stewardship code should focus onstrategic issues as well as questions ofcorporate governance.n Company directors, asset managersand asset holders should adopt goodpractice statements that promote long-term decision making.n Regulators should apply fiduciarystandards the highest duty of care toanyone who exercises discretion over the

investments of others.n The Law Commission should review theconcept of fiduciary duty to address mis-understandings on the part of trustees andtheir advisers.n Asset managers should make fulldisclosure of all costs, including actual orestimated transaction costs, and perform-ance fees charged to the fund.n The pay of fund managers should alsobe linked to long-term performance.n There should be an independent reviewinto the financial data used in the invest-ment chain to highlight its uses andlimitations.n The government should explore themost cost effective means for individualinvestors to hold shares directly on anelectronic register.

KAYS PROPOSALS

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THE TOP two jobs at Barclays could be given to a regulatory adviser anda Whitehall insider, rather thancandidates with internal experi-ence.

Former JP Morgan banker Bill Winters is the Barclays boardsfavoured candidate to replace BobDiamond as chief executive of the

beleaguered bank, and ex-civil serv-ice boss Lord Gus ODonnell is thefrontrunner to replace Marcus

Agius as chairman, the BBC report-ed yesterday. Winters sat on the Vickers bank-

ing commission, which recom-mended implementing a ring-fenceto separate banks retail and invest-ment arms a step that could havea major impact on Barclays thanksto its large and lucrative invest-ment banking operations.

His appointment would likely slam the door on any possible oppo-sition to the proposals. Winters is also leading a Bank of

England review into the central banks framework for providing liq-uidity to the banking system.

ODonnell and Winters couldhead Barclays

BY TIM WALLACE Despite being favoured by the board, he may not want to beBarclays chief executive he isalready kept busy running Renshaw Bay, the asset management firm hefounded in 2011.

Meanwhile ODonnell has spentseveral decades as a civil servant,including time representing the UK at the International Monetary Fundand the World Bank.

But he too might not take the job,as he could be being lined up to takeover from Sir Mervyn King at theBank of England.

Barclays would not comment onthe report, as no official offer has

yet been made to any candidate.

Minister: cash in hand is TREASURY minister David Gaukedeclared yesterday that cash in handpayments are morally wrong,during an event at a Westminsterthink-tank.

In the speech to Policy Exchange,

Gauke outlined plans to toughen upoversight of tax avoidance schemes,including measures that could seethe government name and shameadvisers that help their clients whoaggressively reduce tax bills.

He also came out against thecommon practice of paying certain

workers cash in hand, arguing thatthey cost society as a whole.

Gauke brought the governmentcloser to an official definition of tax

BY BEN SOUTHWOOD avoidance, ruling out use of ISAs,gift aid, capital relief, andsanctioned tax breaks.

Both Trades Union Congress (TUC)secretary Brendan Barber and the

Taxpayers Alliance (TPA) said thatmore emphasis should be put onfilling in tax loopholes, rather than a

narrow focus on attackingindividual advisers or their clients.As well as targeting aggressive tax

avoiders, ministers must cut thismulti-billion pound problem off atsource by closing the many loopholes that the super-richexploit, Barber claimed.

It is incumbent on thegovernment to act to reduce taxavoidance by simplifying thehideously complicated tax system

and abolishing the legal loopholes inplace, echoed the TPA.

The TPA added: Contrary to MrGaukes belief that tax advisers arethe root cause of the tax avoidanceproblem, the true root cause is thetax system itself... The tax code is

broken and bursting at the seams

under the weight of over 17,000pages of rules.Part of Gaukes speech stressed the

fact that the rich pay large tax bills,contrary to many popular views the top one per cent of earnersaccount for 26 per cent of all incometax receipts, while over a tenth of allreceipts come from just the topthousandth of earners, Gauke said atthe event.

Lord Gus ODonnell and Bill Winters are popular in government and regulatory circles

Barclays PLC

23 Jul17 Jul 18 Jul 19 Jul 20 Jul

165.00

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160.00

157.50

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THE TAXPAYER-OWNED part of Northern Rock offloaded anotherhalf a billion pounds-worth of mortgage assets yesterday,accelerating the wind-down of theso-called bad bank.

Virgin Money, which boughtthe good bank at the start of this year, paid 465m for a bookof roughly 3,700 residentialmortgages, of which one-third are

buy-to-let loans.None of the loans are i n arrears

and the relatively low average

loan to value ratio keeps the ratiofor the banks mortgage book as a

Virgin Money buys more loansfrom Northern Rock bad bankBY TIM WALLACE whole at 64 per cent.

UK Asset Resolution, whichruns Northern Rock AssetManagement, insists it workedhard to get the best deal for thetaxpayer, hiring independentanalysts to confirm they were

getting a fair price for themortgage book.

The proceeds of the sale will be used directly to repay theNRAM government loan, UKAR confirmed.

The deal represents roughly one per cent of NRAMs totalassets, and adds 3.3 per cent to

Virgin Moneys existing 14bnloan book.

THE FORUM: Page 18n n

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ACCORDING to UK Trade andInvestment (UKTI), Friday will beChina Business Day. It seems thedragon is too cash-rich to wait, as

CNOOC and Sinopec moved onNexen and Talisman yesterday.China has bought a number of

North American energy assets inrecent years, bouncing back afterthe US Congress spiked CNOOCs$18.5bn bid for Unocal in 2005.CNOOC took a $1bn stake in Texanshale deposits in 2010, addingfurther US stakes for $570m in2011, and bought the bankruptOpti Canada for another $2bn in

2011. Today, the Middle Kingdomsresources empire reaches far

beyond Africa and South America,although in Canada and the US it isoften buying expertise as much asaccess to oil. But the UK is unusedto finding China in control of oil

companies so close to home. Talisman and Nexen are Canadian, but own a third of current NorthSea production.

Its food for thought as UKTIparades British business experts forthe Chinese delegation on Friday.Should we see it as a dog and pony show for the nation that will soon

be shopping for even moreEuropean assets, or is North Seaoperator licence renewal a

bargaining chip for reform? Thatsa real test of who holds the power. Marc Sidwell is City A.M.s managingeditor

Li Fanrong is chief executive of state-owned CNOOC, which agreed to buy Nexen

ROLLS-ROYCE said yesterday it will replace part of its Trent 1000engines, which power Boeingsnew 787 Dreamliner plane.

The firms pledge came after Japans All Nippon Airways grounded five of its 11-strongfleet of the new aircraft over the

weekend after tests revealed arisk of engine corrosion thoughthree of the planes are flyingagain after repairs.

Shares in Rolls-Royce closeddown 2.7 per cent, faring slightly

worse than the broader FTSE 100.Boeing, which has orders to

deliver more than 800Dreamliners to customers

worldwide, saw its shares fall 1.25per cent.

Rolls-Royce hitby engine faultBY MARION DAKERS

ADVERTISING giant WPP has boughtout marketing technology group

Acceleration, the latest in a string of acquisitions for Sir Martin Sorrellsfirm, it announced yesterday.

WPP has purchased a majority stake in Acceleration, with divisionsin Guernsey and South Africa, foran undisclosed sum. The firm hadrevenues of $16.8m (10.8m) last

year and assets of $7.1m. The buy-out follows recent

purchases of South Korean agency Alchemedia, French consultancy I&E and the 343m purchase of digital ad firm AKQA.

WPP said it is looking to makemore of its money from digital ads,

which currently account for 30 percent of revenue.

WPP buys yetanother firmBY JAMES TITCOMB

TUESDAY 24 JULY 20125NEWScityam.com

Satised

with yourbank?

Because we want to make sure were doing a good job, we may monitor and/or record calls. We hope you dont mind. Applicants must be 18or over. We reserve the right to decline to open an account. Written details, terms and conditions are available on request. Well take intoaccount your current standing orders and Direct Debits when assessing your application for an overdraft, using our usual criteria. If there is adelay or mistake in the switching process we will refund any charges or interest youve paid to us. If youre a Northern Ireland customer yourold bank will also refund any charges or interest youve paid to them and if youve used our switching service we can offer you an interest-freeoverdraft for up to three months. HSBC Bank plc 2012. rst direct , 40 Wakeeld Road, Leeds LS98 1FD. All rights reserved. AC22907.

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BOTTOM

LINEMARC SIDWELL

The Chinese quest for oilclose to home in North Se

CHINA made a grab for a large part of the North Seas oil and gas fields yes-terday, bidding to take over CanadasNexen for $15.1bn (9.7bn) and 49 percent of the UK unit of Talisman for$1.5bn.

CNOOC, Chinas state-owned oilproducer, has agreed to buy Nexen ina cash deal worth $27.50 per commonshare, representing a 61 per cent pre-mium to Nexens closing price inNew York on Friday.

Meanwhile Chinese refiner Sinopecstruck a deal to take a 49 per centstake in Talismans North Sea assetsand jointly operate the fields. According to Dealogic, CNOOCs

deal is Chinas largest-ever outbounddeal in the energy sector, and the sec-ond-biggest acquisition ever by aChinese company of a foreign one.

Neither firm put much emphasis intheir statements on the importanceof North Sea oil as a global bench-mark while offering to pay hefty pre-miums. Brent crude, produced in the

Chinas energygiants snap upBritish assets

BY HARRY BANKS region, is used to gauge global valuesof the commodity.

It is a material share of North Seaoil production, said Lindsay

Wexelstein, lead analyst at consultan-cy Wood Mackenzie. WoodMacs calculations showed

both firms would directly own 13 percent of all UK liquids production in2012 if both deals went through.

Including production, which Nexenand Talisman operate, the two firmshandle around 300,000 barrels perday, or almost a third of the dwin-dling UK North Sea oil output of roughly 1m bpd. As well as the North Sea, Nexen

owns assets in regions including Western Canada, the Gulf of Mexicoand Nigeria, encompassing conven-tional oil and gas, oil sands and shalegas.

In order to sweeten the deal forCanadian regulators, CNOOC haspromised to keep Calgary as the head-quarters of Nexens North and Central

American operations, and to keep onthe current management team.

G E T T Y

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JULIUS Baer, the Swiss private bank, yesterday revealed a five percent upswing in assets undermanagement taking its assets toa record high of SFr179bn

(116.5bn). The firm said the SFr8.5bnincrease in assets since December2011 was driven by SFr5.5bn of netnew money, mainly from growthmarkets and its local private

banking business in Germany.Chief executive Boris Collardi

said it was well on track to hit itstarget.

Asset increaat Julius Bae

BY MICHAEL BOW

SEVEN more banks will review theirsales of hedging products to smallcompanies, the Financial Services

Authority announced yesterday, joining the four major institutions which have already pledged to com-pensate customers for any mis-sell-ing. Around 28,000 interest rate hedg-

ing products were sold from 2001 todate, with the latest seven banksrepresenting around 10 per cent of those. An FSA investigation found evi-

dence of mis-selling, with bank staff pushing unsophisticated cus-tomers to buy complex products

without fully understanding therisks, driven by short-term rewardsand incentives.

Some customers were not fully aware of exit costs, inappropriately given advice, and sold products

which did not match the durationand amount of the underlying loan,the FSA believes. These latest banks sales have not

yet been examined and so no mis-

SME mis-sellingprobe spreadsto more banks

BY TIM WALLACE selling has been found by regula-tors, but the FSA says it wants toshow that customers at all banks aretreated consistently. The latest banks are: Santander

UK, the Co-op, Allied Irish Bank,Bank of Ireland, Clydesdale and

Yorkshire banks (part of theNational Australia Group), andNorthern Bank. They join Lloyds, Barclays, HSBC

and RBS, which were already takingpart in the review.

Santander has revealed it has iden-tified three non-sophisticated cus-tomers who purchased thecontroversial structured collar prod-ucts, and it has agreed to addresstheir situation. It is also reviewingthe sale of other interest rate man-agement products to around 200unsophisticated customers. The Co-op said it does not sell

structured collars, but does sell basic hedging products.

The Clydesdale and Yorkshire banks and Bank of Ireland said they are ready to cooperate fully with theFSA, while the other banks wereunavailable for comment.

TRADE minister Lord Green yesterday failed to appear in theHouse of Lords to defend himself,despite Labour successfully tablingan urgent question about hisknowledge of money launderingcontrols during his time at thehead of HSBC.

Lord Strathclyde, leader of theHouse, told peers that there wasno evidence that Green was in the

wrong and that he did not have to justify past business activities.

Strathclyde said the governmenthad every confidence in LordGreens ability to do his job.

Lord Green lambasted for hisno-show during HSBC debate

BY JAMES WATERSON But Labours Baroness Royall saidit was time for the minister to say what he knew and when.

Green was chief executive of the bank between 2003 and 2006, before taking up the role of chairman until 2010. A damning USSenate report last week presentedallegations of the bank being usedas a conduit for money launderingand dealings with rogue statesduring his period at the helm.

Lord Butler, a former non-executive director of HSBC, told theHouse there is no there is nopossible way Green could be heldresponsible for everything thathappens in a worldwide group.

SIX people were yesterday foundguilty of running an insider dealingring that netted over 700,000, afterthe longest and most complexprosecution brought by the FSA.

The six used confidential andprice-sensitive information fromthe London printers of Swiss bank UBS and UK brokerage JP MorganCazenove to place spread bets onproposed or forthcoming takeover

bids, the court heard when the trialopened in March.

They will be sentenced on Friday.

Six guilty intrading prob

BY CITY A.M. REPORTER

TUESDAY 24 JULY 20127NEWScityam.com

HSBC chairman Lord Green was not in the House of Lords for the urgent question

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DOMINOS PIZZAS chief executive said yesterday he expected the Olympics toprovide a welcome boost in sales based onits experience of previous Games, as morepeople stay at home and order in.

Dominos had a real uplift during theSydney Olympics, especially during theopening and closing ceremony when lots of

people are at home, Lance Batchelorsaid.

His comments came as the pizza chainsaid the wet spring weather and Euro2012 helped boost half-year pre-taxprofits by 13 per cent to 21.5m.

Like-for-like sales also jumped by 5.2per cent in the period.

ABERDEEN Asset Management beatexpectations yesterday to record a2.5bn increase in equity fundinflows during its latest quarter,despite a slowdown in overall new

business. The FTSE 100-listed company

posted a one per cent fall in assetsunder management, down to182.7bn.

But the drop off was eased by 2.5bn of new cash ploughed intoits Asia Pacific, global emergingmarkets and global equity funds

between March and June this year. The inflows beat analystsexpectations of between 0.9bnand 1.3bn of new equity

business.Chief executive Martin Gilbert

told City A.M.: Its a solid set of results because these are toughmarkets in asset management.Its pretty good in that respect.

Its easy for people to forget inthis banking crisis that in asset

management, unless you do agood job for clients, it tends to bereflected in how well you do.

Trading figures showed overallnet new business flows for thequarter were 300m, down from700m this time last year.

Aberdeen said it welcomed

the slowdown of flows into itsglobal emerging market funds.

Our issue was we were gettingtoo many assets in there and wecouldnt invest in quality stocks,Gilbert said.

Analysts welcomed the figures, with JP Morgan Cazenove sayingthe firm remained its favouredplay in the sector.Numis analyst David McCannadded: The update revealed moreof the same good news that has

become almost customary from Aberdeen recently. Aberdeenremains a top pick.

Aberdeen rides outhe choppy marke

BY MICHAEL BOW

No. I did not apply for tickets buthaving witnessed the weather in

recent days, Im slightly jealous of my col-leagues who are going! It would be good tomingle with foreign visitors to our great city.

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

AMIT RAWTANITURKIYE ISBANK

Yes. I got tickets for the basketbquarter nals, but didn't get thro

to attend the opening ceremony, which I will be the spectacle that most Londonerremember for generations to come.

EKOW EVANS-APPIAKNOLL INTERNATIONAL

Yes. I'm seeing the hockey, but thekids are fairly unhappy at not

getting the track events that we applied for,especially now that Yohan Blake will be givingUsain Bolt a run for his money.

TONY HANNBLACKFRIARS ASSETMANAGEMENT

ARE YOU GOING TO ANY OF THE OLYMPIC?Interviews by Keval Dhokia

CITYVIEWS

Aberdeen Asset Management PLC

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TUESDAY 24 JULY 20128 NEWS cityam.com

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MORNING UPDATE

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Aberdeen chief executive Martin Gilbert

Lance Batchelor, CEO of Dominos Pizza

BY KASMIRA JEFFORD

Dominos banks on Olympic boos

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ANGLO-FRENCH property developerHammerson said yesterday it is eyeingopportunities to invest in Europesdepressed property market afterrecently selling the bulk of its Londonoffice portfolio for 518m. The FTSE 100 company, whose port-

folio is now 97 per cent retail follow-ing the deal with US group BrookfieldOffice Properties in June, said it hadabout 1bn to spend.

The continuing difficulties in thefinance market and the challengingoccupational market is giving rise toone or two opportunities, chief exec-utive David Atkins said.

I certainly think the next 12 to 18months, with cash available, will be a

very good time to acquire. The sale of its office portfolio is part

of a wider plan by Atkins to focus thecompanys efforts on convenientretail markets and premium designeroutlets in France and the UK. The group has increased its pres-

ence in the latter market by investinga further 100m in outlet operator

Value Retail, raising its stake to 22 percent from 10 per cent.

Hammerson

keeps focus onretail ambitionBY KASMIRA JEFFORD It also confirmed that it has signed a

deal with John Lewis to anchor thefirst phase of its Eastgate Quarters inLeeds, paving the way for a potentialstart on site in early 2014.

In France, Hammerson has secureddepartment store Printemps as ananchor tenant for its Les Terrasses duPort shopping mall in Marseille, whichis due to open in 2014. The company made the announce-

ments as it reported a mixed set uphalf-year results, including a net asset

value rise of 0.9 per cent.Retail occupancy climbed by 0.5 per

cent to 97.5 per cent, despite the toughretail environment, while net rentalincome rose 2.4 per cent to 141.6m.

The Jermyn Street estate homes companies such as StanChart and Starbucks

Hammerson PLC

23 Jul17 Ju l 18 Jul 19 Ju l 20 Jul

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462.5

465.0

455.0

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467.5

470.0 p457.30

23 Jul

NAV and earnings were marginally ahead and dividend in-line. The under-lying portfolio was broadly at with UK retail parks the poorest performer. Yieldexpansion across the portfolio was offset by both rental growth from itsindex linked leases and development surpluses in its French portfolio.

ANALYST VIEWS

Todays gures are essentially little changed from the last nancial yearand are instead eclipsed by corporate decisions. These were the big realisations ofmost, long held London ofces and also Paris Rivoli retail during the period.Hammerson has potential, but this is some way off, and we retain hold.

Positive albeit marginal NAV growth in the rst half and six per centgrowth in earnings on the year represents a strong result for Hammerson, while

the pricing of lettings points to the continuing resilience of prime retailproperty in a challenging market.

WERE HAMMERSONSRESULTS IN LINE WITHEXPECTATIONS?Interviews by Kasmira Jefford

ALISON WATSONLIBERUM CAPITAL

JAMES CARSWELLPEEL HUNT

MICHAEL BURTESPIRITO SANTO

GREAT PORTLAND ESTATES yesterday announced it has boughtout Capital and Counties half share in the Jermyn Street estatein Piccadilly for 60m, giving it

control of nearly 200,000 squarefeet of property in the area.The 120m estate, held by the

two developers joint ventureGreat Capital Partnership, is madeup of five properties, including 54-56 Jermyn Street, Dudley House,Egyptian House, Empire Houseand Foxglove House.

The properties are a mixture of offices and shops and are home to62 tenants including Standard

Great Portland buys Piccadillysite from Capco joint venture

BY KASMIRA JEFFORD Chartered Bank, Wiltons,Starbucks and Kent & Curwen.

The space of the newly-acquiredproperties extends over 133,000 sqft, with frontages to bothPiccadilly and Jermyn Street.

All of the properties are held on

separate 125 year headleases fromThe Crown Estate at a combinedfixed headrent of 675,000 perannum until September 2014.

Great Portland Estates chairmanToby Courtauld said the site,together with two adjoining build-ings his company recently acquired, in the longer term offera superb development opportunity in one of the West Ends premiersub markets.

LUXURY shoe brand Jimmy Choo hasappointed Pierre Denis as chief executive, replacing JoshuaSchulman, who left the business atthe beginning of the year.

Shulmans departure followedswiftly after that of Jimmy Choos joint founder and former chief creative officer Tamara Mellon, whoquit when the brand was bought by Swiss company Labelux for around500m in May last year.

Denis joins from John Galliano, where he was until recently chief executive. He previously worked forluxury group LVMH as managingdirector of Christian Dior Couture.

Jimmy Choohires new CE

BY KASMIRA JEFFORD

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BUSINESS leaders and MPs yesterday criticised the governments draftEnergy Bill, saying that in its currentform it will fail to provide a secureand affordable supply of energy.

The bill does not bring the clarity and certainty that investors require.

This could mean a higher cost of capi-tal and potentially higher bills, saidCorin Taylor, senior economic adviserat the Institute of Directors.

Clean and affordable replacementsfor our ageing coal andnuclear stations areurgently needed, andunless the bill is sub-stantially improved, thegovernment will haveto go back to the draw-ing board, he added. A report by the House of

Commons energy and cli-mate change commit-tee, released

y e s t e r d a y ,attacked Treasury intervention inthe legislation,

which aims to

Business grouslams plan forenergy reform

BY JAMES WATERSON ensure Britain has a secure supply of low-carbon energy. The report says the governments

decision to backtrack on a pledge toguarantee loans for energy projects

which would have reduced borrowingcosts will push up bills and put off potential investors in nuclear genera-tors and off-shore wind farms.

Committee chairman Tim Yeo, whosits on the boards of several renewableenergy companies, said the bill wouldnot attract enough investment tomeet future needs: Nobody wants tosee a blank cheque written out forgreen energy, but the governmentmust provide investors with morecertainty about exactly how muchmoney will be available. The Department of Energy and

Climate Change has estimated thatup to 110bn of investment in new electricity generation and transmis-

sion infrastructure is likely to be needed by 2020, requir-ing the current rate of investment to double.

Rothschild blames deal droughtfor lower income from advisoryROTHSCHILD, the centuries old

banking dynasty, has posted a nine

per cent drop in its advisory and banking business due to a slowdownin global M&A activity last year.

Results from the family firmsholding company, Paris Orleans,show revenues for its GlobalFinancial Advisory and CorporateBanking arms dropped to 768.1m(600.6m) for the year ending March2012, down from 848.2m in2010/11.

The company blamed concerns

BY MICHAEL BOW over the Eurozone and worseningeconomic conditions since July 2011for a slowdown in global M&A

business activity.

The groups net banking income was down six per cent year on yearoverall but its private equity businessheld up well, increasing net income37 per cent from 57.2m to 78.5m.

The firm, established by Mayer Amschel Rothschild in 1798, is notedfor its long standing family ownership structure, withRothschilds great, great, greatgrandson Baron David de Rothschildstill serving as group chairman.

Its advisory firm now has around1,000 advisers in 40 countries.

Figures from Rothschild shows itadvised on 45 global M&A deals

between March 2011 and March2012, including the $11.3bn (7.2bn)French telecom tie up between

Vivendi and SFR in April 2011.Since the end of March 2012, it has

advised on a further 14 large deals,including Bright Foods $1.9bn stakein Weetabix.

Figures released from KPMG yesterday show M&A deals are down12 per cent since July 2011, with deal

values down 18 per cent.

RUSSIA BECOMES 156TH MEMBER

Tim Yeo was a minister inJohn Majors government

BUSINESS confidence is on the upin July, after dipping sharply into

January, according to a report fromLloyds TSB today.

The balance of confidence positive responses minus negativeresponses grew to 12 per cent in

July, compared to just eight percent in January. But aside from

January 2012, the figure has notfallen below 12 per cent since July 2009, when it was at minus threeper cent. It is encouraging, after atough first half, to see that smalland medium enterprises areexhibiting a lift in confidence, said

Lloyds commercial managingdirector David Oldfield.

Better outlookfor companiesBY BEN SOUTHWOOD

THE F ORUM: Page 18nn

TUESDAY 24 JULY 201210 NEWS cityam.com

Russia formally notified the World Trade Organisation that it had ratified itsmembership agreement yesterday, meaning it will on 22 August become the 156thmember to the trade rules club. President Vladimir Putin (above) signed the bill at theweekend. Russias $1.9 trillion GDP had made it the largest economy outside the group

PRIVATE equity firms Carlyle Groupand BC Partners have teamed upand are in advanced talks to buy United Technologies industrial

businesses, according to threepeople familiar with the matter, ina deal that could be valued at morethan $3.5bn.

The private equity consortiumhas emerged as the leadingcandidate to buy the pump andcompressor businesses withinUnited Tech's Hamilton Sundstrandsubsidiary, and a deal may come inthe near future, the people said.

However, United Tech could still

turn to other suitors, such as TPGCapital, which also put in a bid.

Private equiteyes up UT uBY CITY A.M. REPORTER

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PHILIPS Electronics surpassed expec-tations yesterday by posting a five percent sales rise and a 167m (130m)net profit, in a sign that the manu-facturers aggressive cost-cutting andrestructuring operation is reapingrewards. The Dutch firms 5.9bn revenue in

the three months to July was driven by strong performances in its health-care and lighting divisions.

Chief executive Frans van Houtensaid Philips is looking at variousmodels for its consumer electronicsarm, which has struggled to compete

with cheaper Asian imports.There is no denying that the glob-

al economy is weaker now than it was just three months ago, especially in Europe, van Houten said. Philipssales in Europe and North Americahave dipped, although demand inemerging markets has risen and now makes up 35 per cent of its revenue. The worlds largest lighting manu-

facturer reported six per cent growthin its lighting division, and a sevenper cent increase in healthcare sales.Profits were stronger than expected,

Cuts pay off forPhilips as salesbeat forecasts

BY JAMES TITCOMB following a 1.3bn loss in the sameperiod last year.

Shares in the company rose by morethan four per cent on yesterdaysnews, with earnings 17 per cent bet-ter than analysts had predicted.

Since van Houten took charge of Philips in 2010, the firm hasembarked on an 800m cost-savingprogramme including cutting 4,500

jobs and selling its struggling TV divi-sion. Van Houten said the relentlessexecution of its spending cutsenabled Philips to continue on thepath to achieve our 2013 mid-termfinancial targets.

ING analyst Sjoerd Ummels calledthe results very strong.

Amazon keeps lionsshare of UK marketONLINE retail giant Amazon has

built up its spot at the top of the

UK entertainment market, largely at the expense of supermarketrivals and specialists like HMV,according to research published

yesterday.Kantar Worldpanel figures for

the 12 weeks to 10 June show that Amazon strengthened its marketshare by 3.2 percentage points,

boosted by strong growth in ebook sales and in digital music.

iTunes has also been able to

BY KASMIRA JEFFORD capitalise on the growth of digitalmusic sales, increasing its marketshare by 2.8 percentage points.

Amazon has grown its market

share considerably since last yearand now has a convincing lead overHMV, which has again seen year-on-

year losses, said Fiona Keenan,consumer insight director.

HMV, which secured a cruciallifeline from its banks in January and put its live music arm up forsale in a bid to raise funds, saw itsmarket share slip 0.8 percentagepoints to 16.6 per cent, though itremains in second place. S O

U R C E :

K A N T A R

*FIGURES SHOWING CHANGE ARE COMPARED TO ONE YEAR EARLIER

Koninklijke Philips Electronics

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ONLINE bookie 32Red saw a 50 percent jump in turnover in the firsthalf of the year, a sixth successiveperiod of growth, the company announced yesterday.

The Gibraltar-based firm nowexpects revenues for the year to

beat market forecasts and willlaunch operations in Italy later inthe year.

32Red said revenues of 16.5m were down to a player recruitmentdrive including advertising infootball stadiums. It has signed up

more than 18,000 people to itslucrative casino games this year.

32Red turnoversurges by 50pcBY JAMES TITCOMB

SCOTLAND Yards investigation intonewspaper corruption has extendedto include the publishers of theMirror and Star newspapers, theofficer leading the MetropolitanPolices investigation into illicitpayments revealed yesterday.

Deputy assistant commissionerSue Akers told the Leveson inquiry that Trinity Mirror and ExpressNewspapers were being probed.

Trinity Mirror said they weretaking the matter seriously and co-operating with the police. Express

Newspapers, which owns the Star,did not comment.

More papersin Met probeBY JAMES TITCOMB

TUESDAY 24 JULY 201213NEWScityam.com

GAME3.7%

+0.4%

MARKET SHARE IN THE 12 WEEKS TO 12 JUNE 2012

PLAY.COMASDAMORRISONS

3.3%

change-1.7%change

+2.8%change

+0.4%change

-0.2%change

+3.2%change

-0.3%change

-0.8%change

-3.6%change

iTUNES8.8%

TESCO10.7%

SAINSBURY

5.3%

8.3% 4%

HMV16.6%

AMAZON21.4% PEETS Coffee & Tea said yesterday

it has struck a deal to be acquiredfor about $1bn (644m) by Joh. A.Benckiser, the investment vehicle

for Germanys Reimann family.The sale will give Peets afinancial jolt as it competesagainst larger coffee and tea shopsand will broaden the reach of theReimann coffee business.

Peets, which was founded in1966, is listed on the Nasdaq indexin the United States but will betaken private if the deal succeeds.It will continue to be run by itscurrent management team.

Benckiser buPeets Coffe

BY HARRY BANKS

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AS if ending Britains 99-year waitfor a Tour de France winner and re-popularising the elongated side-

burn were not enough,Bradley Wiggins has also

been credited with boost-ing the nations Olympicfeelgood factor to an all-time high. Wiggos triumph in

Paris prompted anincrease in posi-tive feelingstowards theGames fromBritons on

Twitter to 84 percent, according toresearch by EDF Energy,

which is measuring ourresponse to London 2012on the social network.

Following his victory

on Sunday there was an eight percent rise in the UKs positive feelingstowards the Games from an aver-

age of 66 per cent onSaturday to 74 per cent oncethe Kilburn-raised cyclist hadcrossed the finish line. Wiggins, who will be look-ing to add to his six Olympic

medals when he competesin the road race and indi- vidual time trial, trig-

gered some 50,000tweets with his Tour

win, including mes-sages from the likes of

Eddie Izzard, Sir AlanSugar and recent Wimbledon winner Roger

Federer.

Bradley Wiggins is the firstBritish winner of the Tour

Got A Story? Emathecapitalist@cityam.com

14cityam.com

cityam.com/the-capitTHECAPITALISTTUESDAY 24 JULY 2012

AT LO N D O N 2 0 1 2

DONT be alarmed if you bump into a supremely toned woman with a steely glint in her eye during

your lunchtime stroll arou nd St Pauls Cathedral its probably just Olympic triathlete Helen Jenkins

visiting her favourite City landma rk.Britains Team GB medal hopefuls have been roped

into naming their favourite capital sights as part of aguide put together by British Airways for first-time

visitors to London. And while poster girl Jess Ennis urges tourists to

hit the shops of Oxford Street and gymnast LouisSmith opts for the O2, reigning triathlon worldchampion Jenkins plumps for the more refinedenvirons of Sir Christopher Wrens masterpiece.

Perhaps less surprisingly she also recommendsHyde Park the site of this years Olympic triathlon.

Athletes recommend City hotspots to t

LONDON 2012IMAGE OF THE DAY

THE athletes are in town,their support teams havearrived and now in thesurest sign yet that theOlympics are upon us Canary Wharf is seeing aninflux of luxury yachts asthe worlds richest sportsfans arrive in London for theGames. Among the mega-boats gracing the docks areWestfield chairman FrankLowys 74m Ilona.

Throughout theOlympics, City A.M.

will be publishing its Olympic Image of the Day. If you have a shot you think our readers will like, please email pictures@cityam.com

Wiggins effect:Bradleys Tourwin lifts spirits

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IN BRIEFDialight gets lift as profit grown Shares in lighting products makerDialight soared yesterday after itreported a 21 per cent increase inoperating profit for the first half, andforecast full-year results at thehigher end of market expectations.Group revenue climbed 18.2 per centto 61.1m while pre-tax profits roseto 8.3m from 6.2m. Shares closedup 5.22 per cent, outperforming themarket.

Amplats cuts production targetn Anglo American Platinum, theworld's top platinum producer, saidyesterday it was reducing its full-yearproduction and project spendingtargets, hit by chronic weakness inprices and demand for the preciousmetal. The miner also reported anexpected 78 per cent drop in interimprofit. The miner further cut itsrefined production target for 2012 tobetween 2.4m and 2.5m platinumounces, compared to an initial targetof 2.5m to 2.6m ounces.

Senior gets boost from airlinesn Aero engineer Senior reported a20 per cent increase in first-halfprofit yesterday as customers such asBoeing and Airbus ramped up buildrates to meet hefty order backlogs.The company raised its interimdividend 20 per cent to 1.38p pershare. The company's adjusted pre-tax profit rose to 45.5m forJanuary-June from 38m a yearearlier. Revenue rose 20 per cent to377.2m.

Eurotunnel shares sink as costsrise and flat profits disappointEUROTUNNEL reported flat first-half net profit of 5m (3.9m)

yesterday, but shares in thecompany fell as figures missedanalyst expectations and itstruggled with rising operatingcosts.

The company is betting thatincreased traffic from the OlympicGames in London and relatively strong growth from the Queens

Jubilee celebration in June will helpthe company lift full-year profitsand combat the continent-wideeconomic slowdown.

The firm said that full year

BY CITY A.M. REPORTER results would be strong, withoutproviding further detail.

But analysts were unimpressed with the first-half profit figures,

noting that Eurotunnel struggled tocontrol costs and that operatingprofit in particular disappointed.

Earnings before interest, tax,depreciation and amortisation(Ebitda) rose three per cent to 205mfor the half. Revenues for the periodalso rose 14 per cent to 473m.

Eurotunnel revenue rose on the back of higher traffic, in particularstronger truck traffic, as well ashigher tariffs. The company alsolikely benefited from the

bankruptcy of Channel sea line,

SeaFrance.However, the groups operating

costs rose 20 per cent, due to costsassociated with Europorte, its rail

freight business.

African Barrick Gold PLC

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MOVIE studio DreamWorks Animation has agreed to buy Classic Media, the film company

behind characters including Casperand Lassie, the company announced yesterday.

The $155m (100m) deal willcreate a new DreamWorks Classicsunit, with control of ClassicMedias roster of over 450 filmsand 6,100 episodes of TV shows,including Postman Pat, Noddy andRocky & Bullwinkle.

Classics co-chief executives EricEllenbogen and John Engelman will

Dreamworks buys studio ownerof Casper and Lassie for $155m

BY JAMES TITCOMB run the new division.DreamWorks chief executive

Jeffrey Katzenberg said he would bring the new characters into many of the firms operations, includingfilms, TV shows and theme parks.

Classic Media is currently owned by a subsidiary of US private equity firm GTCR. Based in New York, itowns 450 film titles and more than6,100 episodes of animated and live-action programmes.

DreamWorks, which has seen itsshare price fall in recent years asDVD sales suffer, is the studio

behind box office hits includingShrek and Madagascar.

QATAR Holding, the second-largest shareholder in takeovertarget Xstrata, has added to itsstake in the miner, in its firstpurchase since it made an

unexpected demand for betterterms from suitor Glencore lastmonth.

Qatar spent just under 5m to buy an extra 590,390 shares onFriday at 8.47 each, according toa regulatory filing yesterday,taking its stake to 10.997 per centof the miner and building what isalready the largest holding aftercommodities trader Glencores 34per cent.

Glencore, aiming to build amining and trading powerhouse

Qataris up stake in Xstratasking Glencore for bette

BY CITY A.M. REPORTER by tying up with Xstrata, isoffering 2.8 new shares for every

Xstrata share in a $26bn offer.Qatar, which has largely built its

stake since a takeover bid wasannounced in February, wasexpected to support Glencore but

surprised the market in June by demanding an improved ratio of 3.25.

Glencore and Qatar arecurrently locked in talks.

Xstrata shareholders are due to vote on the deal on 7 Septembermeaning, under UK rules, thatGlencore has until around 24

August if it is to change the termsof the bid.

It could do so later, but wouldhave to reschedule the vote for asecond time.

TUESDAY 24 JULY 201215NEWScityam.com

Casper the Friendly Ghost is one of Classic Medias best known characters

African Barrick tanks as outputfalls and expenses dent takingsMINER African Barrick Gold said

yesterday it was on track to meetits 2012 production targets despiteposting an 11 per cent drop inquarterly production.

Shares in the company dived 16per cent, however, as t he firmadmitted that first-half profitsalmost halved to $65m, as highercosts battered its bottom line.

The Tanzania-focused company posted attributable goldproduction of 153,099 ounces in

the three months to 30 June, 11per cent lower than in the same

BY CITY A.M. REPORTER period last year, after mining lowergrades and having to remove wastematerial at two mines.

Mining higher grades as the yeargoes on will help the company meet its full-year productionguidance, it said, as well as keepingits costs for the year within itstarget range.

The reassurance on full yearguidance comes after the company had posted a 17 per cent drop inoutput in the first three months of the year, which prompted fears itcould miss its full-year production

guidance of 675,000 ounces to725,000 ounces.

The cash cost of producing thegold soared 46 per cent on a perounce sold basis in t he quarter,

African Barrick said.

SHARES in Aquarius Platinum fell by eight per cent during trading yesterday to touch a 12-year low,after the worlds fourth-largestplatinum producer reported a 14per cent drop in quarterly production.

Revenue for the fourth-quarteralso declined 20 per cent, hurt by lower platinum prices, which fellabout 12 per cent during theperiod.

Poor platinum price andindustrial action continues tohamper things and it is clear that

while Aquarius Platinum is

making every effort to protectprofitability they are by no mean

Aquarius drops as strike aand falling prices hit prod

BY CITY A.M. REPORTER out of the woods, NumisSecurities said in a note.

Aquarius noted that averageplatinum dollar prices decreasedin the fourth quarter, withplatinum and palladium fallingsix per cent and eight per c entrespectively, while rhodium fellnine per cent.

It added that its Marikana andEverest mines had been placed oncare and maintenance during thequarter.

The firm also warned that itcould be hit by strike action inthe coming months.

The likelihood of industrialaction over the South African

winter is high, said chief executive Stuart Murray.

PEUGEOT Citroen pledged not tomake any forced redundancies in itsplans to cut eight per cent of itsFrench workforce, after a meeting

with PM Jean-Marc Ayrault yesterday.It intends to cut 8,000 jobs, princi-

pally through closing its Aulnay plantnear Paris, but socialist PresidentFrancois Hollande described the joblosses as unacceptable.

Philippe Varin, chairman of theFrench behemoth, pledged that thefirm would do its utmost to cushionthe blow for workers this may include reducing job numbersthrough attrition or reassignment.

Meanwhile, the French firm alsoannounced plans of a partnership inlight commercial vehicles with the

worlds largest carmaker, Toyota,replacing a similar scheme with Fiat. The partnership will be rolled out

from the second quarter of 2013, when Peugeot Citroen will begin tosupply Toyota with medium size

French PM gets job cuts pledgefrom Peugeot

BY BEN SOUTHWOOD vans, similar to the Peugeot Expertand Citroen Jumpy brands. Toyotatold City A.M. that purchases wereplanned to be around 5,000 to 10,000per year to begin with.

Peugeot Citroen plans to build the vans at its troubled Sevelnord plant, but has threatened to move produc-tion to Vigo if unions cannot agree toa pay freeze, combined with reducedleave, job cuts and more flexiblehours. The firm also seeks support inthe form of tax breaks, from nationalor regional government, in order tohelp keep the plant competitive.

Peugeot SA

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16TUESDAY 24 JULY 2012 cityam.com

Taylor WessingAlix Prentice has been appointedpartner in the law firms financialservices regulatory team. She joins from Cadwalader,Wickersham & Taft, where shewas special counsel in itsfinancial services group. Prenticehas also worked for the FinancialServices Authority.

Allianz Global InvestorsCorinne Crawford has been appointed director in the

European consultant relations group at the assetmanagement firm. She joins from M&G Investments, where

she was a director of consultant relations.

Berwin Leighton PaisnerNomita Nair has been appointed as a partner in the lawfirms Singapore finance practice. She joins from theLondon office of Allen & Overy, and she has over 10 yearsexperience in project financing and energy commercialcontracts. Her career has also included secondments atHSBC and Standard Chartered.

Personal Group HoldingsThe Aim-listed employee benefits provider has appointedDavid Walker to the role of commercial director. He joins

from Dyson, where he was most recently sales director for

Great Britain. Walker has also worked as head of sales anddevelopment manager at BSkyB, and in seniormanagement roles at Barclays Bank.

Deverell SmithDavid Clubb has been appointed chief operating officer atthe recruitment consultancy. He formerly worked for theAdecco Group, and was managing director of Office Angels.

MercerThe human resources consultancy has appointed JaneHealy to the position of client relationship manager. She joins from Polestar Pension Trustees, where she served as

UK pensions manager. Healy also spent over seven years atWhitbread, where she managed its pensions team.

IN BRIEF

LONDONREPORT

Stocks suffefrom euro feon Wall StreUS STOCKS fell for a secondstraight session yesterday, asSpain appeared closer toneeding a national bailoutand poor corporate results weighedon the market. Weak results from McDonalds

added to the cautious tone on WallStreet. Materials stocks were amongthe days weakest, hurt by across-the-

board declines in commoditiesprices.

Still, stocks ended well off the dayslows, rebounding from their initialplunge.

Overall, three stocks fell for every one that rose on the New York Stock Exchange yesterday, a signal that theafternoon rebound was concentratedamong larger-cap shares. On theNasdaq, about four stocks fell forevery one that rose.

McDonalds was the latest earningscasualty among large multinationalcompanies after posting a lower-than-expected profit, citing a slowerglobal economy and a stronger dol-lar. McDonalds stock slid 2.9 percent as the biggest drag on the Dow.Shares of Wendys fell 2.4 per cent. With 23 per cent of S&P 500 compa-

nies having reported results, 67.5 percent have posted earnings aboveexpectations, although many ana-lysts have cut their forecasts inrecent weeks, allowing for easier

beats. Over the past four quarters, 68per cent of companies beat esti-mates. The Dow Jones industrial average

fell 101.11 points, or 0.79 per cent, to12,721.46 at the close. The Standard& Poors 500 Index declined 12.14points, or 0.89 per cent, to 1,350.52.

The Nasdaq Composite Index shed

35.15 points, or 1.2 per cent, to closeat 2,890.15.

BRITAINS top share index plunged

yesterday to its lowest level in three

weeks and fell back into the red forthe year as fresh Eurozone worrieshit banks across the continent, whiletechnical charts pointed to further

weakness over the summer.Eurozone concerns focused on Spain,

whose ten-year sovereign bond yieldsspiked to more than 7.5 per cent, a euro-era high, after a second region looked to

be in line to apply for a central govern-ment bailout. That drove fears Spain might become

the fifth Eurozone member in need of asovereign rescue, spurred worries aboutthe impact of further contagion to Italy and weighed on equity markets across theregion.

Britains FTSE 100 closed at 5,533.87,down 117.90 points, or 2.1 per cent, withno individual stock posting a gain. The

blue chips are now down 0.7 per cent forthe year, going back into negative territo-ry for the first time this month.

Even before yesterdays sharp falls, theFTSE 100s closing Friday level had implied

a contraction in earnings per share of 5.7per cent a year for five years, Thomson

Reuters StarMine data showed, only slight-ly less bearish than the Eurozones lead-ing index, the Euro Stoxx 50.

UK banking shares were among the worst performers, dropping 3.3 per centin line with their European peers, asinvestors fretted about their holdings of Eurozone sovereign debt as well as loan

book exposure in the region.HSBC Holdings , down 3.5 per cent, was

the biggest individual drag, taking about13 points off the FTSE, as its share priceneared a two-month low.

FTSE plummets into red territoryfor 2012 as Europe worries return

BESTof theBROKERSHome Retail Group PLC

17 Jul 18 Jul 19 Jul 20 Jul 23 Jul

p8079787776757473

74.2023 Jul

HOME RETAILNumis has moved theowner of Argos andHomebase from sell toadd citing animprovement in theelectricals marketfollowing the digitalswitchover and latestiPad launch.

DASHBOARDCITY NEW YOREPORT

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FTSE

17 Jul 18 Jul 19 Jul 20 Jul 23 Jul

5,750

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Stagecoach Group PLC

17 Jul 18 Jul 19 Jul 20 Jul 23 Jul

p295

290

285

280

284.0023 Jul

STAGECOACHJefferies has upgradedthe transport firm fromhold to buy andupped its price target to335p, calling the stockthe default choice in thissector. It says the firm iswell placed to wincontracts for UK rail lines.

Land Securities Group PLC

17 Jul 18 Jul 19 Jul 20 Jul 23 Jul

p790

780

770

760

765

775

785762.50

23 Jul

LAND SECURITIESLiberum Capital nowrates the UKs largestlandlord as hold, downfrom buy, havingreduced its expectationsfor growth as the retailproperty market suffers

from consumerstightening their belts.

WHOS SWITCHING JOBS Edited by Tom Welsh

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

CITY MOVES

To appear inCITYMOVESplease email your career updates and pictures to citymoves@cityam.com

in association with

FAST-FOOD chain McDonald'sreported lower than expected quar-terly profit yesterday, hurt by a slow-ing global economy and the impact of astronger dollar.

The company said that net income fell 4.5per cent to $1.35bn (870m), and the impactof the stronger dollar ate into earnings inthe latest quarter, while higher taxes also

weighed on profits.Same-restaurant sales rose 3.6 per cent in

the United States and 3.8 per cent inEurope in the second quarter, helped by advertising promotions. Analysts expected gains of 3.5 per cent in

the US and 2.4 per cent for Europe though the firm warned this pace of

growth was unlikely to continue for therest of the year.

Slowing economyhurts McDonalds

OIL and gas services company Halliburton topped Wall Streets sec-ond quarter profit forecasts yesterday,despite the fall in oil prices.

Profits reached $737m (474.8m) just shy of last years $739m following warnings by chief executive David Lesar that severe short-ages of a crucial hydraulic fracturing fluid

guar would depress profits.Revenue rose 22 per cent to $7.2bn, well

above the $6.96bn analysts had predicted.On Halliburtons's strategic hoarding of guar,

Lesar said that shifting the stockpile is likemoving a pig through a python and that: Isupported the decision and I will take the heatfor it.

The firm kept steady its plans for the year,predicting between $3.6bn and $3.8bn capitalexpenditure.

Halliburton beatsWall Street forecasts

COCA-COLA Enterprises posted dis-appointing lower quarterly earnings

yesterday as it revealed a full-year earn-ings forecast mostly below Wall Streetestimates.

Hurt by cool weather in Europe, a Frenchexcise tax increase and a stronger US dollar,net income fell to $205m (132m) in the sec-ond quarter from $246m a year earlier.

Net sales fell more than eight per cent to$2.21bn, with flat underlying turnover

wiped out by the currency fluctuations.The company does all its business in

Europe, so the strengthening of the American dollar reduces the value of its rev-enue and profit.

The company said it expects to repurchaseat least $600m of its shares by the end of the

year.

Coca-Cola bottler hitby dollars strength

Protest vote for Quintain non-exn Shareholders at Quintain yesterdayapproved a new joint venture withHong Kong investor Henry Cheng Kar-Shun to develop its GreenwichPeninsula site. The developer saw allits motions almost unanimouslyapproved at its annual generalmeeting, the only exception being a17.5 per cent vote against the re-

election of its long standingnon-executive director Martin Meech,also group property director of TravisPerkins. Chairman William Ruckersaid: Martin Meech has served on theboard of Quintain for 12 years andsolely in respect to his length oftenure is no longer regarded to beindependent under certaininterpretations of the corporategovernance guidelines. He addedthat the firm had conducted a reviewand determined that Meech wasindependent in mind and spirit andsupported his re-election.

US corporate results round-up

7/31/2019 cityam 2012-07-24

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IRECENTLY spent a family holiday in a static caravan in northernFrance. As we sat outside with aglass of wine, my wife and I

wondered why the caravan had wheels it seemed unlikely thatthey would need to be moved, and Idoubted they would carry its weight.Perhaps it has something to do withhow permanent residences aretreated in the tax code. In many countries, structures that aremobile (in theory, if not inpractice) are taxed at lower rates andhave weaker regulatory requirements.

This isnt the only example of how tax law can lead to odd outcomes.

When I lived in America, I was

amazed that houses often had large

THE revelation that GeorgeOsborne wants fossil fuels toremain a key and importantsupplier of Britains electricity generation shows he can talk

the talk. But the chancellor willstruggle to give legs to his policy. Hisstatement comes immediately unstuck when you consider how the

Treasury is preparing to lump hugetaxes on such fuels, making them,and the energy they produce, moreand more expensive and Britaineven more uncompetitive in theprocess.

Osbornes rhetoric is not new. Last year he called for a revival in UK man-ufacturing to both help rebalance theeconomy and maintain and develop anew skills base. Addressing the Welsh

Tory Conference, he asked, wouldntit be great if Britain made thingsagain? While Osborne made all theright noises on cutting red tape, these

words have not been matched withaction. Manufacturers and energy intensive industries have faced spi-ralling energy costs. And its about toget worse.

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UK steelmakers can

expect to pay over 280per cent more thancompetitors by 2020

THEFORUM

Twitter: @cityamforum on the web: cityam.com/forum or by email: theforum@cityam.com Agree? Disagree? Got a sharp comment?The Forum wants you to join the debate. Top responses will be reprinted in The F

18 TUESDAY 24 JULY 2012

TONY LODGE

UK energy policies are sabotaindustrys global competitive

Anyone claiming that such costs aredictated by global or international fac-tors, over which the UK has little influ-ence, doesnt know that a series of unilateral policies are now passingthrough parliament which will direct-ly and indirectly cause costs for manu-facturers and heavy industry to soar.

This will cause jobs to be lost andindustry will relocate overseas wherecosts are lower.

Earlier this month, Vince CablesDepartment for Business, Innovationand Skills released a detailed report

which concluded that so-called greenpolicies will make British industry uncompetitive compared with ourmain competitors as early as 2020. Itfound that UK steelmakers already pay more for energy than internation-

al rivals, and they can expect to pay over 280 per cent more than their

American and Russian competitors by 2020. Cement, aluminium, fertiliser,industrial gas, as well as steel produc-ers, will face huge costs as a result of new policies, such as the carbon pricefloor, introduced by the coalition.

Ironically, it was Osborne, at last years Tory conference, who accusedenvironmental regulations of pilingcosts on the energy bills of householdsand companies, and who argued thatthe government should not adoptgreen targets that damage the busi-ness sector. To applause, he pledgedthat were not going to save the plan-et by putting our country out of busi-ness. So lets, at the very least, resolvethat were going to cut our carbonemissions no slower, but also no faster,than our fellow countries in Europe.

However, from 1 April 2013 (poten-tially a very bad joke) carbon emis-sions in the UK from electricity generators and energy intensiveindustry will be taxed at 16 per tonneof carbon dioxide emitted, rising to30 per tonne in 2020. The UK is cur-

rently paying around 7 a tonnethrough the EU Emission TradingScheme, along with all other EUstates. An early casualty of our energy poli-

cy was the March closure of Rio Tintosaluminium smelter at Lynemouth, inthe north east, with the loss of 515

jobs. The company said the smelter

was no longer sustainable due to ris-ing costs and looming legislation. Thecompany will shift aluminium pro-duction and investment overseas

where costs are lower. This is just the beginning.

By imposing new high unilateraltaxes on fuels that are cheap andabundant, like coal and gas, the gov-

ernment cannot claim to have itshands tied by international factors.

And ironically, a carbon price floor will do nothing to help deliver low car- bon electricity. New nuclear plants will get a guaranteed price for theirelectricity through a contract for dif-ference, in any case.

Britain risks becoming a worldleader in energy taxation. Cheap, reli-able and abundant energy is essentialfor the future competitiveness of British industry. It is incoherent toimpose green taxes on manufacturersand then as happened in the budget give money back in the form of sub-sidies. The coalition claims to want tosee a manufacturing-led economicrecovery, but this will only be forth-coming if energy prices are interna-tionally competitive. Unilateral energy taxes will only increase electricity costs and drive vital industries over-seas.

Tony Lodge is a research fellow at theCentre for Policy Studies. His latest pam- phlet, The Atomic Clock How the Coalitionis gambling with Britains energy policy was published earlier this year.

basements at the rear of theproperty, until I learnt thathistorically taxes were based on thenumber of stories at the front of thehouse. My American friends areamazed at how gloomy my Englishcottage is until I tell them thathistorically property taxes were

based on the number of windows. The tax code is never neutral and

can alter behaviour in ways that

legislators never intended. Indeed, I believe this is at the heart of thedebate about tax avoidance.

We commonly hear a distinction between tax evasion (which is legal),and tax avoidance (which isnt).

Those who are guilty of taxavoidance tend to defend themselveson the grounds that they were

within the law. But we shouldntequate legality with morality. InSoviet Russia, Stalin raised taxes toexorbitant levels to deliberately crush the peasant farmers. Undersuch extreme circumstances, taxevasion can be morally justified.

There are actually three ways in which people reduce their tax bills. The first is tax evasion, which is

simple to define because it is illegal

and refers to actions outside the taxcode. The second is tax planning,

which is using the tax code as it isintended. The third is tax gaming,

which is exploiting loopholes withinthe tax code in ways thatpolicymakers had not intended.

This helps clarify that there is animportant difference between, forexample, married couples thatreceive tax credits and comedians

who set up offshore companies totransfer income into loans. At themoment they would both bereferred to as tax avoiders.

Some people may view taxgaming as morally equivalent to taxevasion, and they have a point. Butnote that tax gaming is the

inevitable consequence of too much

tax planning. Loopholes are a suresign that the tax system is toocomplex. If you want to reducegaming, you need to accept lessplanning.

Or to put it another way, one of the costs of tax changes is that youincrease the chances of unintendedconsequences. Treasury ministerDavid Gauke has proposed to nameand shame those who engage in taxgaming, but additional regulationsmay well be counterproductive. The

best type of tax system is neutral,and then HMRC resources can befocused on catching evasion.

Anthony J. Evans is associate professor of economics at ESCP Europe Business School. www.anthonyjevans.com

Twitter: @anthonyjevans

FRONTLINEECONOMICS

ANTHONY J. EVANS

Tax and morality: Complicated laws make gaming the sys

7/31/2019 cityam 2012-07-24

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19

No quick fix[Re: Coalitions lack of courage threatens a triple-dip recession , yesterday]Until Britain makes deep cuts ingovernment expenditure to make room forcuts to taxation, there will be no greatincrease in the spending power ofconsumers. Pumping up quantitative easingand demanding that banks lend more is awaste of time without demand, confidenceand the incentive to invest. And we shouldhave no confidence in the ideas of Ed Ballsand the Labour party. Temporary cuts tonational insurance or VAT will do nothingbut create a temporary surge in demand ifthat. Just look at what happened with thestamp duty holiday. David Peddy, managing director of Surgical Instruments Group Holdings

Banking culture[Re: Is self-regulation the answer to recent banking scandals? , yesterday]Recent banking scandals were, in manyways, entirely predictable. The real issuesare systemic and cultural. Regulation cannotmake people have the right values, ethics orbeliefs. We need bank leaders andemployees to believe that treatingcustomers fairly is right not just to complywith the regulatory process. How can weachieve this? Organisations need tounderstand the invisible assumptions andbeliefs that drive their behaviour. Manyactors have a part to play in this leaders,middle managers, employees and boards.But regulators can have no more than a bitpart in setting the general tone. Paul Sweeney, associate director at Boxwood

PROFESSOR John Kay is rightto try and tackle a culture of short-termism that somelisted companies can getcaught up in, as set out in his

government-backed review of thefinancial sector. The downsides of short-termism

are easy to identify: if investors focustoo much on short-term returns,

boards are left preoccupied with theshare price at the next quarterly trading statement, rather than oninvestment to drive growth for thelong-term. And both investors and

businesses are broadly agreed that astronger focus on long-term per-formance would be a good thing.But shifting a culture of short-ter-mism will require behaviour change

by both parties. There is no silver bullet to achieve this at least nonethat Kay has uncovered in his 100plus page report, which includes apackage of sensible recommenda-tions.

So what should be done?First, culture change can be best

achieved by high-quality engage-ment between boards and investors.

This needs to move beyond corpo-rate governance box-ticking to gen-uine engagement on strategy.Companies will certainly welcomeefforts to get over this hurdle. Thegovernment and regulators can dotheir bit to nudge behaviour in thisdirection through measures in theStewardship Code and the introduc-tion of good practice statements, assuggested by Kay. Codes and the cul-ture of comply or explain have

worked well in the UK, and are bet-ter at driving behaviour change thanlegislation and deeper regulation.

Second, the government shouldtake away some of the perverseincentives that fuel short-term

behaviour. Kay is right to recom-mend that it should stop the

TOP TWEETSSpain bans short selling for three months inthe hope that a ban on telling the truth willchange the truth.@OliverCooper

The endgame of the Eurozone is starting:Greece will exit by 2013 while Italy andSpain will need proper help from the ECB.@Nouriel

Is it really lack of courage, or more likelywilful political dogma that is hampering thecoalition in its economic policy?@pjpcfp

UK Sunday trading laws are ridiculous. If youwant a day of rest for religious purposes thenhave one. But dont demand I rest with you.@Will_Hoe

Will Italy and Spains decision to ban shortselling have any serious effect whatsoever?

YESThis move by Spanish and Italian regulators was widely expected, asmany others have used similar bans in recent years, hoping to stabilisevolatile markets or support plunging stock prices. Unfortunately, banson short selling dont seem to do either, at least not for long. Apartfrom some hard-to-verify bounces on the announcement, prices ofstocks supposedly protected by the ban continue to move in line withhow they would have without the ban. Why? Because short sellersarent really driving the market. It is news about the condition of com-panies and economies that pushes prices around. If banning short sell-ers were costless, this lack of effect would not be a problem. But bansare costly. By reducing liquidity they increase the cost of trading foreveryone in the market, whether a buyer or a seller. And lower tradingvolumes make it harder for markets to do their key job of pricing assetsaccurately.Ian Marsh is professor of finance at Cass Business School.

Ian Marsh

NOCraig Drake

Short selling in the marketplace is crucial for price discovery. Stopthis and you cut off the flow of information on a stock or, in this case,hundreds of stocks and their derivatives. Short selling bans are theequivalent of a used car garage, with a reputation for selling faultycars, announcing that customers can no longer look under thebonnet of cars on the forecourt. Bereft of information, customers erron the side of caution and assume that all cars on the forecourt arelemons. However, we have seen in the past that short selling bans areineffective invest